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Plantronics Announces Third Quarter Fiscal Year 2019 Financial Results

Growth in Desktop Phones, Audio Conferencing, and Headsets Drive Strong Financial Results;  Company Leverages Polycom Acquisition to Expand Into Large New Category - the Huddle Room

SANTA CRUZ, Calif., Feb. 05, 2019 (GLOBE NEWSWIRE) -- Plantronics, Inc. (PLT) today announced third quarter results for the period ending December 31, 2018. On July 2, 2018, Plantronics completed the acquisition of Polycom, which is reflected in these results.  Highlights of the third quarter include the following (in millions, except percent and per share data, comparisons are against Plantronics' third quarter Fiscal Year 2018):

  GAAP YoY Change     Non-GAAP1 YoY Change
Revenue $501.7  +122%   Revenue $530.6  +134%
GM%  42.9% -750 bps   GM%  51.5% +70 bps
Op Inc $ ($24.7) -167%   Op Inc $ $93.2  +108%
Diluted EPS ($1.06) -31%   Diluted EPS $1.36  +34%
Op CF $46.7  +59%   EBITDA $105.5  +111%

Performance Against November 6, 2018 Guidance

  Q3 FY19 Actual Results Performance Q3 FY19 Guidance Range2
GAAP Net Revenue $502M Exceeded Midpoint $481M - $511M
Non-GAAP Net Revenue $531M Exceeded Midpoint $510M - $540M
Non-GAAP Operating Income $93M At High End $79M - $94M
Non-GAAP Diluted EPS $1.36 Exceeded Range $1.10 - $1.35

“We continue to make progress on our ongoing product roadmap, integration plans, and financial goals, meeting or exceeding our guidance targets, with operating income and EBITDA more than doubling as result of the acquisition,” said Joe Burton, President and Chief Executive Officer. “The launch of Polycom Studio, the first in a family of multi-media video solutions designed specifically for the Huddle Room, is just one example of how we are leveraging our innovative engineering and design to address specific customer needs in this fast-growing segment of the UC&C market.”

“We remain on track to deliver on our cost synergy targets and are pleased by the $45M of run-rate annualized cost synergies achieved to date as we continue to execute on our integration plans,” said Pam Strayer, Executive Vice President and Chief Financial Officer. “Revenue growth in desktop phones, audio conferencing, and headsets, coupled with expense reductions drove strong profitability for the third quarter.”

                                                  
1For further information on supplemental non-GAAP metrics refer to the Use of Non-GAAP and Comparative Information and Unaudited Reconciliations GAAP Measures to Non-GAAP Measures sections below.

2Non-GAAP guidance ranges shown here have been adjusted to exclude the $28.9 million impact of purchase accounting related to recording deferred revenue at fair value at the time of the acquisition.

Highlights for the Third Quarter of Fiscal Year 2019

  • Double-digit revenue growth in Desktop Phones, Audio Conferencing, UC Headsets, and Consumer Headsets. The rapid adoption of recently introduced products, such as the VVX x50 family of Open SIP desktop phones, were strong contributors to revenue growth.
     
  • The Company announced Polycom Studio, the first in a family of video solutions designed specifically for huddle rooms and smaller conference rooms.  This plug-and-play USB video bar delivers board-room quality to smaller meeting spaces with robust features, plug-and-play simplicity, and great value. The Company expects to announce new additions to this portfolio in the next several months.
     
  • Tom Puorro has joined the Company as Executive Vice President, General Manager, Group Systems. In this role, Puorro will have responsibility for all aspects of voice and video group solutions. Puorro joins Plantronics from Cisco, where he most recently served as VP & GM of Cisco's Unified Communications Technology Group.
     
  • In January 2019, the Company made a debt repayment of $50 million on its outstanding Term Loan B and expects to make an additional $50 million repayment by the end of the current March quarter.  In addition, as of yesterday's close of market, the Company has repurchased 347 thousand shares of common stock at a total cost of $12.6 million since re-initiating the share repurchase program in November.
     
  • As of December 31, 2018, the Company had achieved a total of $26 million in annual run-rate synergy capture. Through subsequent actions in January, the Company has captured an additional $19 million as of today's date, for a total of $45 million since the close of the Polycom acquisition. With over half of the first-year cost synergies completed to date, the Company is on track to achieve its first-year cost synergy commitment of $85M on-time and on-target. As of the most recent quarter-end, the Company's trailing twelve month EBITDA was approximately $400 million on a combined comparative basis.

Plantronics Announces Quarterly Dividend of $0.15

The Plantronics Board of Directors has declared a quarterly cash dividend of $0.15 per common share, to be paid on March 8, 2019, to all shareholders of record as of the close of market on February 20, 2019.

Business Outlook

The following statements are based on the Company's 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 the Company's expectations.

Plantronics currently expects the following range of financial results for the fourth quarter of Fiscal Year 2019 (all amounts assuming currency rates remain stable):

  • GAAP net revenues of $456 million to $486 million, which are expected to be reduced by $19 million due to purchase accounting adjustments. Excluding these adjustments, non-GAAP net revenues are expected to be $475 to $505 million.
    • Changes in foreign currency rates are expected to negatively impact net revenue by approximately $6 million in the March quarter compared to the prior year. Excluding this impact, non-GAAP net revenues are forecasted to grow $9 million or 2% at the midpoint of the guidance range.
  • Non-GAAP operating income of $75 million to $90 million.
  • Assuming a non-GAAP tax rate of 19.5% to 20.5% and approximately 40 million diluted average weighted shares outstanding:
    • Non-GAAP diluted EPS of $1.00 to $1.30.

With respect to Plantronics operating income and diluted EPS guidance, the Company has determined that it is unable to provide quantitative reconciliations of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures with a reasonable degree of confidence in their accuracy without unreasonable effort, as items including stock based compensation, acquisition and integration costs, litigation gains and losses, and impacts from discrete tax adjustments and tax laws are inherently uncertain and depend on various factors, many of which are beyond the Company's control.

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

Conference Call and Prepared Remarks

Plantronics is providing an earnings presentation in combination with its press release. The presentation is offered to provide shareholders and analysts with additional detail for analyzing results in advance of the quarterly conference call. The presentation will be available in the Investor Relations section of our corporate website at investor.plantronics.com along with this press release. A reconciliation of our GAAP to non-GAAP and historical combined comparative results is provided at the end of this press release.

We have scheduled a conference call to discuss third quarter of Fiscal Year 2019 financial results. The conference call will take place today, February 5, 2019, at 2:00 PM (Pacific Time). All interested investors and potential investors in Plantronics 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.

The conference call will also be simultaneously webcast and can be accessed from the Investor Relations section of our website. A replay of the call with the conference ID #55437194 will be available until April 4, 2019 at (855) 859-2056 for callers from North America and at (404) 537-3406 for all other callers.

Use of Non-GAAP and Combined Comparative Financial Information

To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP, and where applicable, combined comparative measures of operating results, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS, which exclude certain unusual or non-cash expenses and charges that are included in the most directly comparable GAAP measure. These unusual or non-cash expenses and charges include the effect, where applicable, of purchase accounting on deferred revenue and inventory, stock-based compensation, acquisition related expenses, purchase accounting amortization and adjustments, restructuring and other related charges and credits, asset impairments, executive transition charges, and the impact 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 tax credit adjustments, and the impact of tax law changes. We exclude these amounts from our non-GAAP and combined comparative measures primarily because management does not believe they are consistent with the development of our target operating model. Combined comparative results refer to the results for periods prior to the Plantronics and Polycom combination, which were prepared by combining the non-GAAP results of as if they had been combined during that period. These prior period results are presented on a non-GAAP as-reported basis, with immaterial adjustments to align the treatment of non-GAAP adjustments for comparative purposes. We believe that the use of non-GAAP and combined comparative financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our historical and long-term target operating model goals as well as our performance as a combined company. We believe presenting non-GAAP net revenue provides meaningful supplemental information regarding how management views the performance of the business and underlying performance of our individual product categories. We believe that both management and investors benefit from referring to these non-GAAP and combined comparative financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP and combined comparative financial measures are not meant to be considered in isolation of, or as a substitute for, or superior to, net revenues, gross margin, operating expenses, operating income, operating margin, net income or EPS prepared in accordance with GAAP.

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) our expectations regarding our ability to successfully achieve anticipated integration synergies; (ii) our expectations for product announcements and releases; (iii) our estimates concerning debt reduction actions and timing; (iv) estimates of GAAP and non-GAAP financial results for the fourth quarter of Fiscal Year 2019, including net revenues, purchase accounting adjustments, operating income, tax rates,  the impact of foreign exchange rates on revenues, and diluted weighted average shares outstanding and diluted EPS, 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 in the Enterprise market from UC&C adoption could be adversely affected by a variety of factors including the following: (i) as UC&C becomes more widely adopted, the risk that competitors will offer solutions that will effectively commoditize our products which, in turn, will reduce the sales prices for those products; (ii) our plans are dependent upon adoption of our UC&C solution by major platform providers and strategic partners such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc.,  Alcatel-Lucent, and Huawei, 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) failure of UC&C solutions generally, or our solutions in particular, to be adopted with the breadth and speed we anticipate; (vi) our sales model and expertise must successfully evolve to support complex integration of hardware, software, and services with UC&C infrastructure consistent with changing customer purchasing expectations; (vii) as UC&C 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; (viii) sales cycles for more complex UC&C deployments are longer as compared to our traditional Enterprise products; (ix) our inability to timely and cost-effectively adapt to changing business 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&C products are and will be integrated;
  • regarding the Polycom acquisition: (i) we may be unable to integrate Polycom's business within our own in a timely and cost-efficient manner or do so without adversely impacting operations, including new product launches; (ii) expected synergies or operating efficiencies may fail to materialize in whole or part or may not occur within expected time-frames; (iii) the acquisition may adversely impact ours or Polycom's relationships with respective customers, suppliers and strategic partners and their operating results and businesses generally (including the diversion of management time on transaction-related issues); (iv) each company may be unable to retain and hire all or a portion of their respective key personnel; (v) legal and regulatory enforcement matters that are pending at Polycom may adversely impact the results of the combined company; (vi) our increased leverage as a result of the transaction will be substantially greater than prior to the acquisition which may pose risks, including reduced flexibility to make changes in our operations in response to business or economic conditions, increased borrowing costs, as well as penalties or costs should we fail to comply with terms of the financial agreements such as debt ratios and financial and operation performance targets; (vii) negative effects on the market price of our common stock as a result of the transaction, particularly in light of the issuance of our stock in the transaction; (viii) our financial reporting including those resulting from the adoption of new accounting pronouncements and associated system implementations in the context of the transaction, our ability to forecast financial results of the combined company and that we may be unable to successfully integrate our reporting system causing an adverse impact to our ability to make timely and accurate filings with the SEC and other domestic and foreign governmental agencies; (ix) the potential impact of the transaction on our future tax rate and payments based on the consolidation global entity and our ability to quickly integrate foreign operations; (x) the challenges of integrating the supply chains of the two companies; and (xi) the potential that our due diligence did not uncover risks and potential liabilities of Polycom;
  • 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;
  • new or greater tariffs on our products;
  • 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 9, 2018 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
  • Unaudited Reconciliations of GAAP Measures to Trailing Twelve Months EBITDA
  • Unaudited Reconciliations of GAAP Measures to Non-GAAP Combined Comparative Measures

About Plantronics

Plantronics is an audio pioneer and a leader in the communications industry. Plantronics technology creates rich, natural, people-first audio and collaboration experiences so good ideas can be shared and heard-wherever, whenever and however they happen. The company’s portfolio of integrated communications and collaboration solutions spans headsets, software, desk phones, audio and video conferencing, analytics and services. Our solutions are used worldwide by consumers and businesses alike and are the leading choice for every kind of workspace. For more information visit plantronics.com.

Plantronics and Polycom are registered trademarks 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 95060
831-426-6060 / Fax 831-426-6098

PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                   
    Three Months Ended   Nine Months Ended  
    December 31,   December 31,  
    2017   2018   2017   2018  
Net Revenues:                  
Net product revenues   $ 226,534     $ 445,441     $ 640,760     $ 1,102,012    
Net services revenues       56,228         104,035    
Total net revenues   226,534     501,669     640,760     1,206,047    
Cost of revenues:                  
Cost of product revenues   112,409     259,673     315,720     676,616    
Cost of service revenues       26,859         51,822    
Total cost of revenues   112,409     286,532     315,720     728,438    
Gross profit   114,125     215,137     325,040     477,609    
Gross profit %   50.4 %   42.9 %   50.7 %   39.6 %  
Operating expenses:                  
Research, development, and engineering   21,257     59,661     62,402     140,409    
Selling, general, and administrative   56,196     168,053     170,125     406,553    
(Gain) loss, net from litigation settlements   (15 )       (295 )   (30 )  
Restructuring and other related charges (credits)   (84 )   12,130     2,438     20,711    
Total operating expenses   77,354     239,844     234,670     567,643    
Operating income   36,771     (24,707 )   90,370     (90,034 )  
Operating income %   16.2 %   (4.9 )%   14.1 %   (7.5 )%  
                   
Interest expense   (7,341 )   (25,032 )   (21,904 )   (56,252 )  
Other non-operating income, net   2,490     125     5,230     3,731    
Income before income taxes   31,920     (49,614 )   73,696     (142,555 )  
Income tax expense (benefit)   81,424     (7,880 )   84,419     (28,583 )  
Net income (loss)   $ (49,504 )   $ (41,734 )   $ (10,723 )   $ (113,971 )  
                   
% of net revenues   (21.9 )%   (8.3 )%   (1.7 )%   (9.4 )%  
                   
Earnings per common share:                  
Basic   $ (1.54 )   $ (1.06 )   $ (0.33 )   $ (3.08 )  
Diluted   $ (1.54 )   $ (1.06 )   $ (0.33 )   $ (3.08 )  
                   
Shares used in computing earnings per common share:                  
Basic   32,075     39,314     32,384     37,063    
Diluted   32,075     39,314     32,384     37,063    
                   
Effective tax rate   255.1 %   15.9 %   114.6 %   20.1 %  


PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
 
UNAUDITED CONSOLIDATED BALANCE SHEETS
    March 31,   December 31,  
    2018   2018  
ASSETS          
Cash and cash equivalents   $ 390,661     $ 328,156    
Short-term investments   269,313     13,422    
Total cash, cash equivalents, and short-term investments   659,974     341,578    
Accounts receivable, net   152,888     363,837    
Inventory, net   68,276     160,219    
Other current assets   18,588     48,229    
Total current assets   899,726     913,863    
Property, plant, and equipment, net   142,129     212,138    
Goodwill   15,498     1,272,619    
Purchased intangibles, net       871,599    
Deferred tax assets   17,950     4,741    
Other assets   1,584     22,821    
Total assets   $ 1,076,887     $ 3,297,781    
LIABILITIES AND STOCKHOLDERS' EQUITY          
Accounts payable   $ 45,417     $ 146,067    
Accrued liabilities   80,097     452,194    
Total current liabilities   125,514     598,261    
Long-term debt, net of issuance costs   492,509     1,727,660    
Long-term income taxes payable   87,328     93,150    
Other long-term liabilities   18,566     134,492    
Total liabilities   723,917     2,553,563    
Stockholders' equity   352,970     744,218    
Total liabilities and stockholders' equity   $ 1,076,887     $ 3,297,781    
           


PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   
    Three Months Ended   Nine Months Ended  
    December 31,   December 31,  
    2017   2018   2017   2018  
Cash flows from operating activities                  
Net Income   $ (49,504 )   $ (41,734 )   $ (10,723 )   $ (113,971 )  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization   5,151     55,117     15,894     142,763    
Amortization of debt issuance cost   362     1,419     1,087     3,188    
Stock-based compensation   8,029     11,719     26,047     30,709    
Deferred income taxes   6,106     (21,931 )   10,490     (39,987 )  
Provision for excess and obsolete inventories   1,113     2,073     2,013     4,881    
Restructuring charges (credits)   (84 )   12,130     2,438     20,711    
Cash payments for restructuring charges   (482 )   (3,827 )   (2,911 )   (11,222 )  
Other operating activities   496     60     (645 )   9,070    
Changes in assets and liabilities:                  
Accounts receivable, net   (4,399 )   (12,075 )   (3,153 )   (35,938 )  
Inventory, net   (3,733 )   (5,362 )   (9,577 )   11,018    
Current and other assets   1,473     33,149     (3,066 )   30,456    
Accounts payable   (422 )   (4,108 )   2,783     16,519    
Accrued liabilities   (6,307 )   33,172     (15,695 )   72,677    
Income taxes   74,277     (13,110 )   66,387     (21,631 )  
Cash provided by operating activities   $ 32,076     $ 46,693     $ 81,369     $ 119,243    
                   
Cash flows from investing activities                  
Proceeds from sale of investments   23,516     1,159     54,411     125,799    
Proceeds from maturities of investments   40,328         146,989     131,017    
Purchase of investments   (98,891 )   (162 )   (232,840 )   (698 )  
Acquisitions, net of cash acquired       8,001         (1,642,241 )  
Capital expenditures   (2,651 )   (8,613 )   (9,403 )   (16,148 )  
Cash provided by (used for) investing activities   $ (37,698 )   $ 385     $ (40,843 )   $ (1,402,271 )  
                   
Cash flows from financing activities                  
Repurchase of common stock   (13,693 )   (4,780 )   (52,915 )   (4,780 )  
Employees' tax withheld and paid for restricted stock and restricted stock units   (397 )   (521 )   (11,186 )   (13,863 )  
Proceeds from issuances under stock-based compensation plans   1,496     53     13,446     14,925    
Proceeds from debt issuance, net               1,244,713    
Payment of cash dividends   (4,951 )   (5,971 )   (15,008 )   (16,953 )  
Cash provided by (used for) financing activities   $ (17,545 )   $ (11,219 )   $ (65,663 )   $ 1,224,042    
Effect of exchange rate changes on cash and cash equivalents   344     1,211     3,460     (3,519 )  
Net increase in cash and cash equivalents   (22,823 )   37,070     (21,677 )   (62,505 )  
Cash and cash equivalents at beginning of period   303,116     291,086     301,970     390,661    
Cash and cash equivalents at end of period   $ 280,293     $ 328,156     $ 280,293     $ 328,156    
                   


PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
($ in thousands, except per share data)
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
                 
  Three Months Ended   Nine Months Ended  
  December 31,   December 31,  
  2017   2018   2017   2018  
                 
GAAP Net Revenues $ 226,534     $ 501,669     $ 640,760     $ 1,206,047    
Deferred revenue purchase accounting $     $ 28,923     $     $ 65,508    
Non-GAAP Net Revenues $ 226,534     $ 530,592     $ 640,760     $ 1,271,555    
                 
GAAP Gross profit $ 114,125     $ 215,137     $ 325,040     $ 477,609    
Purchase accounting amortization     27,575         83,243    
Inventory valuation adjustment             30,395    
Deferred revenue purchase accounting     28,923         65,508    
Acquisition and integration fees     404         621    
Stock-based compensation 917     1,067     2,709     3,103    
Other adjustments1         1,585        
Non-GAAP Gross profit $ 115,042     $ 273,106     $ 329,334     $ 660,479    
Non-GAAP Gross profit % 50.8 %   51.5 %   51.4 %   51.9 %  
                 
GAAP Research, development, and engineering $ 21,257     $ 59,661     $ 62,402     $ 140,409    
Stock-based compensation (2,049 )   (2,887 )   (6,158 )   (7,877 )  
Acquisition and integration fees     (95 )       (151 )  
Purchase accounting amortization         (80 )      
Non-GAAP Research, development, and engineering $ 19,208     $ 56,679     $ 56,164     $ 132,381    
                 
GAAP Selling, general, and administrative $ 56,196     $ 168,053     $ 170,125     $ 406,553    
Acquisition and integration fees     (21,775 )       (53,558 )  
Purchase accounting amortization     (15,278 )       (30,557 )  
Stock-based compensation (5,063 )   (7,765 )   (17,180 )   (19,729 )  
Other adjustments2         (549 )      
Non-GAAP Selling, general, and administrative $ 51,133     $ 123,235     $ 152,396     $ 302,709    
                 
GAAP Operating expenses $ 77,354     $ 239,844     $ 234,670     $ 567,643    
Acquisition and integration fees     (21,870 )       (53,709 )  
Purchase accounting amortization     (15,278 )   (80 )   (30,557 )  
Stock-based compensation (7,112 )   (10,652 )   (23,338 )   (27,606 )  
Restructuring and other related (charges) credits 84     (12,130 )   (2,438 )   (20,711 )  
Other adjustments         (549 )      
Non-GAAP Operating expenses $ 70,326     $ 179,914     $ 208,265     $ 435,060    
                 


1 Includes immaterial adjustments for loss on sale of assets and write off of indirect tax assets.
2 Includes immaterial adjustments for executive transition costs.


PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
($ in thousands, except per share data)
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONTINUED)
                 
  Three Months Ended   Nine Months Ended  
  December 31,   December 31,  
  2017   2018   2017   2018  
GAAP Operating income $ 36,771     $ (24,707 )   $ 90,370     $ (90,034 )  
Purchase accounting amortization     42,853     80     113,800    
Inventory valuation adjustment             30,395    
Deferred revenue purchase accounting     28,923         65,508    
Acquisition and integration fees     22,274         54,330    
Stock-based compensation 8,029     11,719     26,047     30,709    
Restructuring and other related charges (credits) (84 )   12,130     2,438     20,711    
Other adjustments         2,134        
Non-GAAP Operating income $ 44,716     $ 93,192     $ 121,069     $ 225,419    
                 
GAAP Net income $ (49,504 )   $ (41,734 )   $ (10,723 )   $ (113,971 )  
Purchase accounting amortization     42,853     80     113,800    
Inventory valuation adjustment             30,395    
Deferred revenue purchase accounting     28,923         65,508    
Acquisition and integration fees     22,274         54,330    
Stock-based compensation 8,029     11,719     26,047     30,709    
Restructuring and other related charges (credits) (84 )   12,130     2,438     20,711    
Other adjustments         2,134        
Income tax effect of above items 2,067     (18,036 )   (6,444 )   (56,934 )  
Income tax effect of unusual tax items 72,599   (1 ) (4,028 ) (2 ) 68,938   (3 ) (5,387 ) (2 )
Non-GAAP Net income $ 33,107     $ 54,101     $ 82,470     $ 139,160    
                 
GAAP Diluted earnings per common share $ (1.54 )   $ (1.06 )   $ (0.33 )   $ (3.08 )  
Purchase accounting amortization     1.08         3.01    
Inventory valuation adjustment             0.80    
Deferred revenue purchase accounting     0.73         1.73    
Stock-based compensation 0.25     0.30     0.79     0.81    
Acquisition and integration fees     0.56         1.44    
Restructuring and other related charges (credits)     0.31     0.07     0.55    
Other adjustments         0.07        
Income tax effect 2.29     (0.57 )   1.90     (1.65 )  
Effect of anti-dilutive securities 0.02     0.01         0.07    
Non-GAAP Diluted earnings per common share $ 1.02     $ 1.36     $ 2.50     $ 3.68    
                 
Shares used in diluted earnings per common share calculation:
GAAP 32,075     39,314     32,384     37,063    
non-GAAP 32,496     39,712     32,945     37,819    


1 Excluded amounts represent $74.6 million due to change in tax law, and the release of tax reserves.
2 Excluded amounts represent tax benefits resulting from the release of tax reserves and tax return true-ups.
3 Excluded amounts represent $74.6 million due to change in tax law, tax benefits resulting from the correction of an immaterial error in the first quarter and the release of tax reserves.


PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP COMBINED COMPARATIVE MEASURES
($ in thousands)
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
         
  Three Months Ended   Twelve Months Ended  
  March 31,   June 30,   September 30,   December 31,   December 31,  
  20181   20181   2018   2018   2018  
Plantronics GAAP operating income $ 33,131     $ 20,649     $ (85,976 )   $ (24,707 )   (56,903 )  
Polycom GAAP Operating income2 19,095     12,246     N/A   N/A   31,341    
Combined comparative operating income before adjustments 52,226     32,895     (85,976 )   (24,707 )   (25,562 )  
Deferred revenue purchase accounting         36,585     28,923     65,508    
Inventory valuation adjustment         30,395         30,395    
Acquisition and integration fees 10,660     12,901     26,253     22,274     72,088    
Stock-based compensation 7,912     8,150     10,840     11,719     38,621    
Restructuring and other related charges 179     2,847     7,261     12,130     22,417    
Non-recurring legal-related and other matters3 603     609             1,212    
Depreciation and amortization 29,259     29,233     82,398     55,117     196,007    
                                         
EBITDA $ 100,839     $ 86,635     $ 107,756     $ 105,456     $ 400,686    
                     


1 Polycom results shown in these periods are prior to the close of the acquisition on July 2, 2018. These results are shown here to arrive at combined comparative historical results.
2 Prepared in accordance with U.S. GAAP and Polycom's significant accounting policies as noted in Footnote 1. Basis of Presentation and Footnote 2. Summary of Significant Accounting Policies of exhibit 99.2 in form 8-K/A filed by Plantronics on August, 31, 2018.
3 Includes immaterial adjustments to conform historical Polycom results to Plantronics non-GAAP policy.


PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP COMBINED COMPARATIVE MEASURES
($ in thousands)
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
       
  Three Months Ended
  Three Months Ended  
  December 31,
  March 31,  
  2017
  2018  
       
       
Enterprise Headsets $ 167,640     $ 164,587    
Consumer Headsets 58,894     51,556    
Voice1 105,510     110,590    
Video1 104,190     81,730    
Services1 81,820     78,920    
Combined comparative net revenues $ 518,054     $ 487,383    
       
Plantronics GAAP Gross profit $ 114,125     $ 114,075    
Polycom GAAP gross profit2 160,730     158,569    
Combined comparative gross profit before adjustments $ 274,855     $ 272,644    
Stock-based compensation 917     913    
Purchase accounting amortization     338    
Combined comparative adjusted gross profit $ 275,772     $ 273,895    
Combined comparative adjusted gross profit % 53.2 %   56.2 %  
       
Plantronics GAAP Operating income $ 36,771     $ 33,131    
Polycom GAAP Operating income2 (26,304 )   19,095    
Combined comparative operating income before adjustments $ 10,467     $ 52,226    
Amortization of Polycom Goodwill and intangibles 56,021     14,774    
Stock-based compensation 8,029     7,912    
Acquisition and integration fees 2,783     10,660    
Restructuring and other related (charges) credits 2,974     179    
Non-recurring legal-related and other matters3 977     603    
Combined adjusted operating income $ 81,251     $ 86,354    
Combined adjusted operating profit % 15.7 %   17.7 %  


1 Categories were introduced with the acquisition of Polycom on July 2, 2018. Historical Polycom revenues are shown here to arrive at combined comparative historical net revenues.
2 Prepared in accordance with U.S. GAAP and Polycom's significant accounting policies as noted in Footnote 1. Basis of Presentation and Footnote 2. Summary of Significant Accounting Policies of exhibit 99.2 in form 8-K/A filed by Plantronics on August, 31, 2018.
3 Includes immaterial adjustments to conform historical Polycom results to Plantronics non-GAAP policy.


INVESTOR CONTACT:
Mike Iburg
Vice President, Investor Relations
(831) 458-7533
MEDIA CONTACT:
Shannon Shamoon
Manager, Marketing Buzz and Brand
(831) 201-9142