/EINPresswire.com/ -- SANTA CRUZ, CA --(Marketwired - November 01, 2016) - Plantronics, Inc. (NYSE: PLT) today announced second quarter fiscal year 2017 financial results. Highlights of the second quarter include the following (comparisons are against the second quarter of fiscal year 2016);

• Net revenues were $216.2 million, an increase of 0.5% compared with $215.0 million, and within our guidance range of $215 million to $225 million
• GAAP gross margin was 51.1% compared with 51.6%
  • Non-GAAP gross margin was 51.4% compared with 52.0%
• GAAP operating income was $32.0 million compared with $34.1 million
  • Non-GAAP operating income was $42.3 million compared with $43.0 million
• GAAP diluted earnings per share ("EPS") was $0.63 compared with $0.52, and above our guidance range of $0.51 to $0.61
  • Non-GAAP diluted EPS was $0.82 compared with $0.70, and within our guidance range of $0.73 to $0.83

A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.

"We continue to execute well and we are on track for Non-GAAP operating margin improvement in fiscal year 2017, compared with the prior year," stated Joe Burton, President and CEO. "Our key objectives are to accelerate revenue and profit growth while strategically investing in new opportunities."

"Our focus on cost controls resulted in an additional quarter in which our operating expenses increased at a rate lower than revenues, and when combined with a significant reduction in our shares outstanding, resulted in 17% EPS growth," stated Pam Strayer, Senior Vice President and Chief Financial Officer. "Our total cash position grew to $554 million and our cash flow from operations was $65.8 million year-to-date compared to $66.4 million in the prior year-to-date period."

Financial Highlights for Q2 and Year-to-Date Fiscal 2017:

Revenue

Total net revenues for the second quarter of FY17 of $216.2 million were up 0.5%, or $1.2 million compared to the second quarter last year. Enterprise net revenues of $154.5 million were down 4%, or $5.9 million, driven by a decline in our Core Enterprise revenues, partially offset by revenue growth in the low teens in our UC revenues. Consumer net revenues were $61.6 million, up 13%, or $7.1 million, driven by increases in our stereo Bluetooth and gaming product revenues.

Total net revenues for the first half of FY17 of $439.3 million were up 4% or $17.9 million compared to the first half of FY16. This increase was driven by growth in our Consumer product revenues which increased 18% or $19.7 million, slightly offset by a decline in Enterprise net revenues of 1% or $1.8 million. The decrease in Enterprise revenues was driven by declines in core Enterprise and almost entirely offset by 18% growth in UC revenues.

Revenues in the Americas region were up 1%, or $1.1 million for the quarter, and up 5%, or $14.2 million year-to-date. Revenues in the Europe and Africa region were down 1%, or $0.3 million for the quarter, and up 4%, or $3.7 million year-to-date. The Asia Pacific region was up 1%, or $0.4 million for the quarter, and flat year-to-date.

Gross Margin

Our Q2 FY17 GAAP gross margin was 51.1%, a decrease of 50 basis points compared to the prior year quarter. Our GAAP gross margin for the first half of FY17 was 50.9%, a decrease of 90 basis points compared to the prior year period.

Our Q2 FY17 Non-GAAP gross margin was 51.4%, a decrease of 60 basis points compared to the prior year quarter. Our Non-GAAP gross margin for the first half of FY17 was 51.3%, a decrease of 90 basis points compared to the prior year period.

The decreases in GAAP and Non-GAAP gross margins for both periods were primarily due to a higher mix of revenues from Consumer and UC products partially offset by lower material costs and the favorable effect of the non-recurrence of a $3.6 million revenue adjustment taken in the year ago quarter.

Operating Expenses

Total GAAP operating expenses for Q2 FY17 were $78.5 million, up 2.1%, or $1.6 million compared to Q2 FY16. Total GAAP operating expenses for the first half of FY17 were $160.3 million.

Total Non-GAAP operating expenses for Q2 FY17 were $69.0 million, which is flat compared to Q2 FY16. Total Non-GAAP operating expenses in the first half of FY17 including litigation gains and losses were $144.2 million, up 3.4%, or $4.7 million.

The year-to-date increases in GAAP and Non-GAAP operating expenses was driven primarily by a $5 million litigation charge related to sanctions in the GN anti-trust case taken in the first quarter. Excluding gains and losses from litigation settlements and GAAP-only charges/credits for executive transition costs and restructuring adjustments, both GAAP and Non-GAAP operating expenses declined slightly compared to 4% growth in revenues due to cost reduction efforts taken earlier in the calendar year.

Operating Income

GAAP operating income for the second quarter of FY17 was $32.0 million, a decrease of 6.3%, or $2.1 million. As a percentage of revenues, GAAP operating income for the second quarter was 14.8%, compared to 15.9% in the year ago quarter. GAAP operating income for the first half of FY17 was $63.2 million, a decrease of 0.4%, or $0.3 million. As a percentage of revenues, GAAP operating income for the first half of FY17 was 14.4%, compared to 15.1% in the first half of FY16.

Non-GAAP operating income for the second quarter was $42.3 million, a decrease of 1.7%, or $0.7 million. As a percentage of revenue, Non-GAAP operating income for the second quarter was 19.6%, compared to 20.0% in the year ago quarter. Non-GAAP operating income for the first half of FY17 was $80.9 million, an increase of 0.6%, or $0.5 million. As a percentage of revenue, Non-GAAP operating income for the first half of the year was 18.4%, compared to 19.1% in the first half of FY16.

The year over year decrease in GAAP operating income was driven primarily by the impact of executive transition costs recorded in the quarter and a decrease in gross margin, described above. The year over year decrease in Non-GAAP operating income was driven primarily by a decrease in gross margin, driven primarily by product mix shift described above. The year-to-date decreases in GAAP and Non-GAAP operating income were driven primarily by a decrease in gross margin (discussed above).

Earnings Per Share

GAAP EPS for the quarter was $0.63, up $0.11 and 21.2% from the prior year quarter. GAAP EPS for the first half of FY17 was $1.24, up $0.17 and 15.9% from the first half of FY16.

Non-GAAP EPS for the quarter was $0.82, up $0.12 and 17.1% from the prior year quarter. Non-GAAP EPS for the first half of FY17 was $1.58, up $0.22 and 16.2% from the first half of FY16.

GAAP and Non-GAAP EPS was positively impacted by $0.03 as a result of share repurchases made over the past year. We repurchased approximately 170,000 shares in the quarter and spent approximately $8 million for share repurchases. Year-to-date GAAP and Non-GAAP EPS was positively impacted by $0.17 as a result of share repurchases made over the past year. We repurchased approximately 613,000 shares and paid approximately $27 million on share repurchases year-to-date.

Balance Sheet and Cash Flow Highlights

We finished the second quarter of FY17 with $554 million in cash and investments on our balance sheet and generated $36 million in cash flow from operations during the quarter. Our cash flow from operations was higher than the $23 million we recorded in Q2 FY16, primarily due to a shorter cash conversation cycle and higher net income (after adjusting for non-cash items).

Of the $554 million in cash and investments at the end of the second quarter of FY17, $28 million was domestic. We used approximately $8 million to repurchase shares of our common stock during the quarter.

Capital Expenditures were $7 million for the quarter and our most significant investments were related to upgrades and improvements to our manufacturing capabilities, as well as our new European headquarters facility in the Netherlands, which opened in October. For the full fiscal year, we are expecting to invest between $25 million and $30 million in capital expenditures. Our long-term expectation for capital expenditures is approximately 2.5% of revenues.

Plantronics Announces Quarterly Dividend of $0.15

We are also announcing that we have declared a quarterly dividend of $0.15 per common share, to be paid on December 9, 2016 to all shareholders of record as of the close of business on November 18, 2016.

Completion of Prior 1,000,000 Share Repurchase Program

We recently completed our 1,000,000 share repurchase program announced on February 1, 2016, and have commenced repurchasing shares under the additional 1,000,000 repurchase program announced on August 2, 2016.

Upcoming Events

Plantronics will be presenting at the Raymond James Conference on December 8th. Information on how to access the presentation webcast can be found at investor.plantronics.com under Upcoming Events.

Business Outlook

The following statements are based on our 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 our expectations.

We have a "book and ship" business model whereby we fulfill the majority of orders received within 48 hours of receipt of those orders. However, our backlog is occasionally subject to cancellation or rescheduling by our customers on short notice with little or no penalty. Therefore, there is a lack of meaningful correlation between backlog at the end of a fiscal period and net revenues in a succeeding fiscal period.

Our business is inherently difficult to forecast, particularly with continuing uncertainty in regional economic conditions and currency fluctuations, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize.

Subject to the foregoing, we currently expect the following range of financial results for the third quarter of fiscal year 2017 (all amounts assuming currency rates remain stable):

• Net revenues of $227 million to $237 million;
• GAAP operating income of $32 million to $37 million;
• Non-GAAP operating income of $40 million to $45 million, excluding the impact of $8 million from stock-based compensation.
• Assuming approximately 33 million diluted average weighted shares outstanding:
  • GAAP diluted EPS of $0.57 to $0.67;
  • Non-GAAP diluted EPS of $0.77 to $0.87; and
• Cost of stock-based compensation and GAAP only related tax charges to be approximately $0.20 per diluted share.

Please see our updated Investor Relations Presentation available on our corporate website at investor.plantronics.com.

Conference Call and Prepared Remarks

Plantronics is providing a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts with additional time and detail for analyzing results in advance of our quarterly conference call. The remarks will be available in the Investor Relations section of our website along with this press release.

We have scheduled a conference call to discuss second quarter fiscal year 2017 financial results. The conference call will take place today, November 1, 2016 at 2:00 PM (Pacific Time). All interested investors and potential investors in our stock are invited to participate. To listen to the call, please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." The dial-in from North America is (888) 301-8736 and the international dial-in is (706) 634-7260.

A replay of the call with the conference ID #91956764 will be available until December 1, 2016 at (855) 859-2056 or (800) 585-8367 for callers from North America and at (404) 537-3406 for all other callers. The conference call will also be simultaneously webcast in the Investor Relations section of our corporate website at investor.plantronics.com, and the webcast of the conference call will remain available on our website for one month. A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.

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 operating income, non-GAAP net income and non-GAAP diluted EPS which exclude certain non-cash expenses and charges that are included in the most directly comparable GAAP measure. These non-cash charges and expenses include stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, early lease termination charges, and executive transition charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because management does not believe they are part 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 long-term target operating model goals. 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 or as a substitute for, or superior to, gross margin, operating income, operating margin, net income or EPS prepared in accordance with GAAP.

As a company with significant global operations and sales, fluctuations in foreign currency exchange rates may have a material effect on our reported results. Consequently, we also present supplemental metrics as identified in the reconciliation within this release "on a constant currency basis" which excludes the impact of currency exchange rate fluctuations. The constant currency presentation, which is a non-GAAP measure, is intended to supplement our reported operating results and, when considered in conjunction with the corresponding GAAP measures, facilitate a better understanding of changes in the metrics from period to period and core operations. We calculate constant currency percentages by removing any hedge gains or losses from the particular metric in the current period and then converting our current period local currency financial results using the foreign currency exchange rates in effect during the prior year period and comparing these adjusted amounts to the corresponding current period metric.

Safe Harbor

This 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: (i) improving Non-GAAP operating margin in fiscal year 2017 as compared to fiscal year 2016; (ii) our key objectives, in particular accelerating revenue and profit growth while strategically investing in new opportunities; (iii) estimates of GAAP and non-GAAP financial results for the third quarter of fiscal year 2017, including net revenues, operating income and diluted EPS; (iv) our estimates of stock-based compensation and executive transition costs, as well as the impact of these non-cash expenses on Non-GAAP operating income and diluted EPS for the second quarter of fiscal year 2017; and (v) our estimate of weighted average shares outstanding for the third quarter of fiscal year 2017, in addition to other matters discussed in this press release that are not purely historical data. We do not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by such statements. Among the factors that could cause actual results to differ materially from those contemplated are:

• Micro and macro-economic conditions in our domestic and international markets;
• our ability to realize and achieve positive financial results projected to arise from UC adoption could be adversely affected by a variety of factors including the following: (i) as UC becomes more widely adopted, the risk that competitors will offer solutions that will effectively commoditize our headsets which, in turn, will reduce the sales prices for our headsets; (ii) our plans are dependent upon adoption of our UC solution by major platform providers and strategic partners such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc., and Alcatel-Lucent, and our influence over such providers with respect to the functionality of their platforms or their product offerings, their rate of deployment, and their willingness to integrate their platforms and product offerings with our solutions is limited; (iii) delays or limitations on our ability to timely introduce solutions that are cost effective, feature-rich, stable, and attractive to our customers within forecasted development budgets; (iv) our successful implementation and execution of new and different processes involving the design, development, and manufacturing of complex electronic systems composed of hardware, firmware, and software that works seamlessly and continuously in a wide variety of environments and with multiple devices; (v) our sales model and expertise must successfully evolve to support complex integration of hardware and software with UC infrastructure consistent with changing customer purchasing expectations; (vi) as UC becomes more widely adopted we anticipate that competition for market share will increase, particularly given that some competitors may have superior technical and economic resources; (vii) UC solutions generally, or our solutions in particular, may not be adopted with the breadth and speed in the marketplace that we currently anticipate; (viii) sales cycles for more complex UC deployments are longer as compared to our traditional Enterprise products; (ix) UC may evolve rapidly and unpredictably and our inability to timely and cost-effectively adapt to those changes and future requirements may impact our profitability in this market and our overall margins; and (x) our failure to expand our technical support capabilities to support the complex and proprietary platforms in which our UC products are and will be integrated;
• failure to match production to demand 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;
• volatility in prices from our suppliers, including our manufacturers located in China, have in the past and could in the future negatively affect our profitability and/or market share;
• fluctuations in foreign exchange rates;
• with respect to our stock repurchase program, prevailing stock market conditions generally, and the price of our stock specifically;
• the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers;
• additional risk factors including: interruption in the supply of sole-sourced critical components, continuity of component supply at costs consistent with our plans, and the inherent risks of our substantial foreign operations; and
• seasonality in one or more of our product categories.

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 May 16, 2016 and other filings with the Securities and Exchange Commission, as well as recent press releases. The Securities and Exchange Commission filings can be accessed over the Internet at http://www.sec.gov/edgar/searchedgar/companysearch.html.

Financial Summaries

The following related charts are provided:

• Summary Unaudited Condensed Consolidated Financial Statements
• Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures
• Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and Other Unaudited GAAP Data

About Plantronics

Plantronics is a global leader in audio communications for businesses and consumers. We have pioneered new trends in audio technology for over 50 years, creating innovative products that allow people to simply communicate. From Unified Communication solutions to Bluetooth headsets, we deliver uncompromising quality, an ideal experience, and extraordinary service. Plantronics is used by every company in the Fortune 100, as well as 911 dispatch, air traffic control and the New York Stock Exchange. For more information, please visit www.plantronics.com or call (800) 544-4660.

Plantronics is a registered trademark of Plantronics, Inc. The Bluetooth name and the Bluetooth trademarks are owned by Bluetooth SIG, Inc. and are used by Plantronics, Inc. under license. All other trademarks are the property of their respective owners.

PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802

831-426-6060 / Fax 831-426-6098

⁽¹⁾ Excluded amounts represent tax benefits from the release of tax reserves.

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 operating income, non-GAAP net income and non-GAAP diluted EPS which exclude certain non-cash expenses and charges that are included in the most directly comparable GAAP measure. These non-cash charges and expenses include stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, early lease termination charges, and executive transition costs, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because Plantronics' management does not believe they are part 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 long-term target operating model goals. 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 or as a substitute for, or superior to, gross margin, operating income, operating margin, net income or EPS prepared in accordance with GAAP.

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