ShoreTel, Inc. (SHOR)

Q4 2012 Earnings Results Conference

August 14, 2012 05:00 PM ET


Peter Blackmore - CEO, President and Director

Michael E. Healy - CFO, Principal Accounting Officer and SVP

Kevin Gavin - Chief Marketing Officer

Tonya Chin – Director of Investor Relations


Sanjiv Wadhwani - Stifel, Nicolaus & Co., Inc., Research Division

Sanjith Singh - Wedbush Securities Inc., Research Division

Dmitry Netis – William Blair & Company, L.L.C

Michael Latimore - Northland Capital Markets, Research Division

Gregory Burns - Sidoti & Company, LLC

Christian Schwab - Craig-Hallum Capital Group



Good day and welcome to the ShoreTel Fourth Quarter 2012 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tonya Chin. Please go ahead.

Tonya Chin

Hello and thanks for joining us today as we report our fourth quarter and fiscal year 2012 financial results. Joining me on the call today are ShoreTel's CEO, Peter Blackmore; and Chief Financial Officer, Mike Healy. Additionally, Kevin Gavin, Chief Marketing Officer is joining us for participation in our question-and-answer 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 revenue, 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 the forward-looking statements can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, its 10-Q for the quarter ended March 31, 2012 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’ll 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, other adjustments and the related tax impacts. During today’s call we will be discussing both our fourth quarter and full fiscal year 2012 results.

And finally, ShoreTel management is planning on attending the Mizuho Securities USA Technology Summit on September 11th in Boston and the Deutsche Bank 2012 dbAccess Technology Conference in Las Vegas on September ‘12. And we have to see there.

Now I will turn the call over to Peter.

Peter Blackmore

Thank you, Tonya. Before Mike discusses the financial results and metrics, I would like to share a few highlights of the quarter and the year and our strategy heading into the fiscal 2013. I’m proud of the teams’ accomplishments for the quarter, which kept off a significant year for ShoreTel.

During the fourth quarter, we delivered revenue growth of 39% with revenue of $78.5 million, which was above our guided range of $72 million to $77 million. In fiscal 2012, our revenue rose to $246.6 million, a 23% increase over the last year. Even if you exclude the revenue from our M5 acquisition. Our growth was a healthy 15.5% year-over-year, which I’m confident we will be better than the overall IP Telephony market share when we see the final results for June. And we delivered non-GAAP operating profit for both the quarter and the year.

I shall now spend a few minutes discussing the results of our premise business. Our premise revenue of $64.2 million grew 17% sequentially and 14% year-over-year. In addition, the fourth quarter was our best ever in the government and education sector with revenues growing 38% sequentially over the third quarter.

With the budget constraints that these organizations face today, this is solid evidence of ShoreTel’s compelling value proposition, which resonates very well with resource constrained customers. Additionally, our pipeline remained strong throughout the quarter, an encouraging signal as we head into our new fiscal year. Despite the macroeconomic uncertainty, we drove continued growth and captured market share.

Based on the latest data from Synergy Research, for the quarter ended March 31, 2012, based on revenue in the U.S. enterprise IP Telephony market, we achieved our largest quarterly gain ever growing a 120 basis points in one quarter to 7.7%. This progress further solidified our number three position in the marketplace.

And in our sweet spot, the pure IP U.S. telephony market with less than 5,000 users, we displaced Avaya to secure the number two position. Even in Europe, where economic concerns continue, we grew our market share. With regard to our partners, we saw most of our sequential increase coming from our regional partners as well as strength from all of our international locations, which helped to drive our better than expected results.

Additionally, Ingram Micro, our newest value added distributor ramped up well with revenues growing over $1 million from our third fiscal quarter. In the last few months we made important changes to our sales organization to further drive growth and enhance our focus on both our domestic and international markets. In fact our results this quarter indicate that these changes are already making a positive impact. I’ve been heavily involved in this process and I’m confident that these steps will help improve so its productivity.

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