q4 2018 investor presentation · 2020. 7. 22. · this presentation contains forward-looking...

Earnings PresentationMay 1, 2018

NYSE:PLT

2© Plantronics 2018. All Rights Reserved.

FORWARD LOOKING STATEMENTSThis 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: (i) belief that the closing of the Polycom acquisition as well as other focus

areas will accelerate our strategic vision and result in anticipated market opportunities and other benefits; (ii) our expectations regarding capital allocation,

including Polycom-related debt repayments and timing, dividends and stock repurchases after the closing the Polycom acquisition; (iii) estimates of GAAP

and non-GAAP financial results for Q1 FY19, including net revenues, operating income, shares outstanding and diluted EPS; and (iv) estimates of stock-based

compensation, Polycom-related acquisition costs, effect of participating securities and GAAP-only tax related charges, in addition to other matters discussed

in this presentation that are not purely historical data. Forward-looking statements involve risks and uncertainties that may cause actual results to differ

materially from those contemplated by such 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, except as required by applicable law.

The factors that could cause actual results to differ are discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission(“SEC”) on May 10, 2017, in our reports on Form 10-Q and Form 8-K filed with the SEC as well as our other public disclosures, including our press releases.Please also refer to the Safe Harbor included in our press release regarding our results for Q4 FY18 filed with the SEC on Form 8-K on May 1, 2018. The SECfilings and our press releases can be accessed on our website at investor.plantronics.com.

investor.plantronics.com


USE OF NON-GAAP INFORMATIONTo 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, acquisition related expenses, purchase accounting amortization,

accelerated depreciation, early lease termination charges, restructuring, asset impairments, executive transition costs, and the effect 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 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. A

reconciliation between GAAP and Non-GAAP measures for Q4 FY18 and all other periods presented is attached as an appendix to this document. Other

historical reconciliations are available at investor.plantronics.com.

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 the core operations of the Company. 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.

investor.plantronics.com


OVERVIEW

http://www.plantronics.com/us/product/voyager-3200-uc?gclid=CjwKCAjw3f3NBRBPEiwAiiHxGCkYoxEqt0uyfqy5yAciFaJjhUEAaejjosP6gmSytiSCA1p5JR6WbRoC28AQAvD_BwE


A Compelling Investment Opportunity• Market leader in Enterprise headsets globally, and Mono Bluetooth headsets in the U.S.

• 50+ year history of market leadership, innovation and evolution with the market

• Accelerating strategic vision, expanding portfolio and market opportunity through Polycom acquisition1

• Investing in new secular growth opportunities: Software and Soundscaping

• Solid gross margins of 50% to 52%, met operating margin improvement goals in FY18

• Improved cost structure through multiple cost reduction activities

• Strong history of positive cash flow/free cash flow

• Proven record of capital return to shareholders: approximately $1.5B in past 10 years

• Strong financial position: ~$167M in cash & equivalents, net of debt1 Close of transaction currently anticipated to be early July 2018, subject to regulatory approvals and customary closing conditions

6© Plantronics 2018. All Rights Reserved. 6© Plantronics 2018. All Rights Reserved.

• Founded in 1961, public listing (NYSE: PLT) in 1994

• Technology leader with over 400 engineers and

800 patents, including 223 utility patents

• Award-winning design team with expertise in

human behavior, anatomy, and ergonomics

• Globally recognized manufacturing excellence

Audio Pioneer and Communications

Technology Leader


Plantronics headsets never failed, either in space or on the ground. Which was why Plantronics was the only supplier NASA specified by name. – Gene Krantz, NASA Flight Director during the Gemini and Apollo programs

Eight years later, Plantronics made history when Neil Armstrong walked on the moon and uttered those legendary words: through a Plantronics headset.

It all began in a garage in 1961 when two airline pilots set out to invent an alternative to the conventional headsets of commercial aviation.

“That’s one small step for man, one giant leap for mankind.” – Neil Armstrong

INVESTING FOR GROWTH | OVER 50 YEARS OF R&D INNOVATION

ACTIVATE

• Launched

SaaS model

• Developed

Soundscaping

• Explore

adjacencies

• Cultivated

our Culture

Wave 1.0BUILD

MOMENTIUM

• Build a SaaS

ecosystem

• Launch

Soundscaping

• Expand into new

categories

• Evolve GTM

strategy

Wave 1.1

ACCELERATE

OUR VISION

• Polycom

acquisition close

and integration

• Deliver software

and services

revenue

• Drive profitable

and sustainable

growth

• Foster

innovation

that solves

customer needs

Wave 2.0

C L O U D E N A B L E D

2014

Aviation & Telco Contact Center Office Corded Wireless UC

1964 1983 1992 2006 2010

$50m$100m

$590m$620m

$819m

Software & Services

FY18 FY19 - 22

$881m $856m

Revenue

© Plantronics 2017. All Rights Reserved. 8


PLANTRONICS KEY FOCUS AREAS

IMPROVE PROFITABILITYLong-term Non-GAAP operating margin

target of 20% - 23%1

ADAPT AND LEAD as communications industry migrates to

UCaaS and CCaaS cloud solutions

MONETIZE OPPORTUNITYof mega-trend Open Office spaces and

flexible work policies

CONTINUED INNOVATIONto further leadership in communications

end points, software, analytics, and soundscaping

1 Long-term targets refer to Plantronics as a standalone company and should not be interpreted as guidance for the Polycom acquisition.


Soundscaping

• Intelligent acoustic management service to help customers tackle noise in the open office

• Leverages our excellence in active & passive sound reduction

THE BIG OPPORTUNITIES

• Largest trend in the communications industry• Excellent market position and solid growth• Represents our largest revenue & growth opportunity

Unified Communications

SaaS

• Leveraging data from headsets to provide insights• Simplify and increase management capabilities• Long-term revenue opportunity


NEW PRODUCTS



PLANTRONICS VOYAGER 6200 UC

Professional-grade audio in a versatile Bluetooth®neckband headset with earbuds


Voyager 6200 UCFlexibility and professional-grade audio performance

Active noise canceling

On-demand ANC actively reduces background noise

Passive noise canceling

Comfortable earbuds fitsnugly to block noise

Voice clarity

Superior voice transmission over in-line microphones

Mute alert

Dynamic Mute Alert feature senses and alerts user when talking while muted

One-touch controls

Intuitive call answer/end and mute/play/pause buttons

Freedom to roam

Class 1 Bluetooth® has a wireless

range of up to 30 m/98 ft

Incoming call alert

Neckband vibrates to signal incoming call

Portable storage case for easy storage and portability

Included accessory


BackBeat GO 600 SeriesWireless over-the-ear headphones with

up to 18 hours of listening time.

CONFIDENTIAL


Feature Overview

• All-day wireless listening

Rechargeable battery lets you listen longer with up to 18

hours of power on a single charge

• Immersive audio

Plantronics signature audio delivers rich, balanced sound

whether you’re listening to music, watching movies or taking

a call

• Long-lasting comfort

Noise-isolating earcups fit comfortably over the ears for deep,

rich sound with minimal distraction

CONFIDENTIAL

• EQ profiles

Adjustable EQ settings allow you to choose between

two modes of premium sound: bass boost or balanced

• Contemporary and portable design Sleek, slim earcups

fold flat for easy transport and storage

• On-ear controls

Play/pause, skip tracks, adjust volume and

take calls easily


Voyager 104Comfort, durability, call clarity and extended

talk time - ideal for life on the road

CONFIDENTIAL


Feature Overview

• All-day talk and listenUp to 24 hours of talk time on a single charge, up to 40 days on standby

• High Quality Audio

Wideband audio with noise-cancelling technology in mono

over-the-head wearing style for conversation clarity and

safety

• Long-lasting comfort

Rugged materials with moisture-resistant coating make this

headset durable for the long haul

• Hands Free

Glove-friendly controls and enhanced voice alerts allow you

to adjust settings without distraction

CONFIDENTIAL


FINANCIAL RESULTS



Q4 FY18 SUMMARY FINANCIALS (NON-GAAP)

Q4 2017 Q4 2018 Increase (Decrease)

Revenue1 $209.0M $216.1M 3.4%

Gross Margin 51.9% 53.2% 130 bps

Op. Expense2 $68.7M $67.7M (1.4)%

Op. Income $39.8M $47.3M 18.7%

Op. Margin 19.1% 21.9% 280 bps

Diluted EPS $0.81 $1.05 29.6%

Op. Cash Flow $51.3M $39.8M (22.4)%

1) Includes approximately $4 million of revenues from Clarity business divested in Q1 FY18. Excluding these revenues Q4 FY18 net revenue increased 5.5%. 2) Includes GN litigation related expenses of $0.9 million in Q4 FY17 vs. $0.2 million in Q4 FY18


FY18 SUMMARY FINANCIALS (NON-GAAP)

FY 2017 FY 2018 Increase (Decrease)

Revenue1 $881.2M $856.9M (2.8)%

Gross Margin 50.5% 51.9% 140 bps

Op. Expense2 $283.1M $275.9M (2.5)%

Op. Income $161.5M $168.4M 4.2%

Op. Margin 18.3% 19.6% 130 bps

Diluted EPS $3.17 $3.55 12.0%

Op. Cash Flow $138.0M $121.1M (12.2)%

1) FY17 Includes approximately $18 million of revenues from Clarity business vs. $4 million in FY18. This business was divested in Q1 FY18. Excluding these revenues FY18 net revenue decreased 1.2%. 2) Includes GN litigation related expenses of $10.6 million in FY17 vs. $12.6 million in FY18


QUARTERLY REVENUE BY PRODUCT ($MM)

$161 $155 $163 $168 $165

$48 $49$47

$58$51

$209 $204 $210

$226$216

Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18

Enterprise Consumer


ANNUAL REVENUE BY PRODUCT ($MM)

$588 $619 $627 $629 $650

$231$246 $230 $252 $207

$819$865 $857 $881 $857

FY 14 FY 15 FY 16 FY 17 FY 18

Enterprise Consumer


TOTAL CASH POSITION (Net of Debt)

$436 $448

$521

$116$167

FY 14 FY 15 FY 16 FY 17 FY 18

(1) $500M in 5.50% Senior Notes issued in Q1 FY16

• 90% of offshore cash is denominated in U.S. dollars

• Offshore cash unencumbered by operations

• Revolver Capacity: $100M

• Minimum Domestic Cash Balance Needed to Run Operations: $10M to $20M


LEVERAGE IN OUR LONG-TERM OPERATING MODEL

Non-GAAP TARGET MODEL* Q4 FY18**

Gross Margin 50 – 52% 53.2%

R & D 8 – 10% 9.2%

S, G & A 21 – 23% 22.2%

Operating Margin 20 – 23% 21.9%

* This target model is not a projection for FY19 or any other particular quarter or fiscal period. Long-term targets refer to Plantronics as a standalone company and should not be interpreted as guidance for the Polycom acquisition.

** Non-GAAP metrics presented here for the fourth quarter of Fiscal Year 2018 do not include expenses related to stock-based compensation, acquisition related fees, restructuring and other related charges (credits).


Record Enterprise Revenue in FY18 Met Profitability Goals

• 2.3% and 3.4% increase in Enterprise revenues for the quarter and fiscal year, respectively, driven by the continued growth of our UC product revenues, primarily due to the success of our Blackwire and Voyager product lines

• Consumer returned to growth in the fourth quarter primarily driven byrevenues from gaming products. Decline in Consumer in FY18 primarilydriven by stereo and Clarity divestiture, transition of portfolio isongoing.

• Divestiture of Clarity accounted for almost 30% of total Consumerrevenue decline in the fiscal year

• Cost control initiatives have kept total opex down whileinvestment in innovation increases

• Achieved profitability goals for the year. Including GN Litigationrelated expenses improved FY18 operating margins by 130 basispoints to 19.6%

• Favorable currency tailwinds in the quarter and full year, operatingmargins 100 basis points on a constant currency basis

Continued Positive Cash Flows Strong Long-Term Outlook

• Cash flow from operations was $121 in FY18 maintaining long trackrecord of consistent positive operating cash flows

• Following the close of the Polycom acquisition, managementexpects to prioritize de-leveraging the business using excess freecash flow

• Accelerating strategic vision, expanding portfolio and marketopportunity through Polycom acquisition1

• We are improving product development, accelerating time-to-market, reducing costs, and transforming as the markets shift fromon-premise to in-the-cloud solutions

Q4 AND FY18 KEY TAKEAWAYS

1 Close of transaction currently anticipated to be early July 2018, subject to regulatory approvals and customary closing conditions


Q1 FY19 GUIDANCE (As of May 1, 2018)

Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its press release announcing itsfirst quarter fiscal year 2019 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the first quarter fiscal year 2019 will not be based on internal company information andshould be assessed accordingly by investors.

Q1 FY19 GUIDANCE

Net Revenue $205M - $215M

GAAP Operating Income $17M - $23M

Non-GAAP Operating Income1 $34M - $40M

(1) Excluding the impact of $10 million from stock-based compensation and $7 million from acquisition related costs(2) Excluding stock-based compensation, acquisition related costs, effect of participating securities, and GAAP-only related tax charges of approximately $0.37 per diluted share

GAAP Diluted EPS $0.29 - $0.41

Non-GAAP Diluted EPS2 $0.66 - $0.78

Assuming approximately 34 million diluted average weighted shares outstanding:


Capital Allocation Priorities

Commitment to maintain strong balance sheet1

Prioritize leverage reduction2

Expect to maintain annual dividend of $0.60 per share3

Evaluate opportunistic share repurchase strategy after leverage reduction4


APPENDIX



OPERATING INCOME RECONCILIATION1

($ Millions) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18

GAAP Operating Income $31.3 $32.0 $31.9 $30.0 $125.1 $23.4 $30.2 $36.8 $33.1 $123.5

Stock-Based Compensation $8.4 $7.9 $8.7 $8.5 $33.5 $9.3 $8.8 $8.0 $7.9 $34.0

Acquisition related fees -- -- -- -- -- -- -- -- $6.3 $6.3

Executive Transition Costs -- $2.8 -- -- $2.8 -- $0.5 -- -- $0.5

Restructuring and Other Related Charges

$(1.0) $(0.4) $0.1 $1.2 $(0.1) $2.6 $(0.1) $(0.1) -- $2.5

Loss on Sale of Assets -- -- -- -- -- $0.9 -- -- -- $0.9

Impairment of Indirect Tax Asset

-- -- -- -- -- $0.7 -- -- $0.7

Purchase Accounting Amortization

$0.1 $0.1 $0.1 $0.1 $0.3 $0.1 -- -- -- $0.1

Non-GAAP Operating Income

$38.7 $42.3 $40.7 $39.8 $161.5 $36.9 $39.4 $44.7 $47.3 $168.4

(1) Certain totals may not foot due to immaterial rounding


EBITDA RECONCILIATION1


GAAP Operating Income $31.3 $32.0 $31.9 $30.0 $125.1 $23.4 $30.2 $36.8 $33.1 $123.5

Stock-Based Compensation $8.4 $7.9 $8.7 $8.5 $33.5 $9.3 $8.8 $8.0 $7.9 $34.0

Acquisition related fees -- -- -- -- -- -- -- -- $6.3 $6.3

Executive Transition Costs -- $2.8 -- -- $2.8 -- $0.5 -- -- $0.5

Restructuring and Other Related Charges

$(1.0) $(0.4) $0.1 $1.2 $(0.1) $2.6 -- ($0.1) -- $2.5

Loss on Sale of Assets -- -- -- -- -- $0.9 -- -- -- $0.9

Impairment of Indirect Tax Asset

-- -- -- -- -- $0.7 -- -- $0.7

Depreciation and Amortization2

$5.4 $5.2 $5.4 $5.4 $21.4 $5.4 $5.5 $5.2 $5.3 $21.4

Adjusted EBITDA $44.0 $47.4 $46.1 $45.1 $182.6 $42.3 $44.9 $49.9 $52.6 $189.7

(1) Certain totals may not foot due to immaterial rounding(2) Includes immaterial (gain)/loss for PP&E disposals


FREE CASH FLOW RECONCILIATION1


Cash Provided by Operating Activities

$30.1 $35.7 $20.9 $51.3 $138.0 $12.9 $36.4 $32.1 $39.8 $121.1

Capital Expenditures $(7.6) $(6.6) $(5.4) $(3.6) $(23.2) ($3.1) ($3.7) ($2.7) $(3.1) $(12.5)

Free Cash Flow $22.6 $29.1 $15.5 $47.7 $114.8 $9.8 $32.7 $29.4 $36.7 $108.7



CONSTANT CURRENCY RECONCILIATION (Q4 FY18)1

Net Revenues (in millions) by Region by Product Category

Consolidated Americas E&A APAC Enterprise Consumer

Net Revenues as reported (GAAP) $216.1 $126.0 $66.0 $24.1 $164.6 $51.5

Excluding Hedge (Gain)/Loss 2.2 - 2.2 - 1.8 0.4

Impact of YoY Fx Movements (9.5) - (8.8) (0.7) (7.6) (1.9)

Constant Currency Revenues (Non-GAAP) $208.8 $126.0 $59.4 $23.4 $158.8 $50.0

Gross Profit (in millions) ($) (%)Gross Profit as reported (GAAP) $114.1 52.8%

Stock-based compensation 0.9

Non-GAAP Gross Profit $115.0 53.2%

Excluding Hedge (Gain)/Loss, net 2.2

Impact of YoY Fx Movements (8.7)

Constant Currency Gross Profit (Non-GAAP)

$108.5 51.9%

Operating Expenses (in millions)

Operating Expenses as reported (GAAP) $80.9

Stock-based compensation and Restructuring (7.0)

Acquisition related fees (6.3)

Non-GAAP Operating Expenses $67.7


Constant Currency Operating Expenses (Non-GAAP) $65.5



CONSTANT CURRENCY RECONCILIATION (Q4 FY18)1CONTINUED

Operating Income (in millions) ($) (%)

Operating Income as reported (GAAP) $33.1 15.3%

Stock-based compensation and Restructuring 7.9

Acquisition related Fees 6.3

Non-GAAP Operating Income $47.3 21.9%

Excluding Hedge (Gain)/Loss, net2.2


Constant Currency Operating Income (Non-GAAP)

$43.0 20.6%

Diluted Earnings per Common Share ("EPS")

Diluted EPS (GAAP) $0.29

Stock-based compensation 0.24

Acquisition related fees 0.19

Income tax effect 0.32

Effect of participating securities 0.01

Non-GAAP Diluted EPS $1.05

Excluding Hedge (Gain)/Loss, net of tax 0.09

Impact of Fx Movements, net of tax (0.21)

Constant Currency Diluted EPS (Non GAAP) $0.93


q4 2018 investor presentation · 2020. 7. 22. · this presentation contains forward-looking...

Documents