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Plantronics Inc (PLT) Q3 2019 Earnings Conference Call Transcript

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Plantronics Inc  (NYSE: PLT)
Q3 2019 Earnings Conference Call
Feb. 05, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Eileen, and I will be your conference operator today. At this time, I would like to welcome everyone to Plantronics' Quarter Three Fiscal Year 2019 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. Mr. Mike Iburg, you may begin your conference.

Mike Iburg -- Vice President, Investor Relations

Thank you, Eileen. Welcome to Plantronics' financial results conference call to the third quarter of fiscal year 2019. My name is Mike Iburg, Head of Investor Relations, and joining me today are Joe Burton, Plantronics' President and CEO; and Pam Strayer, Plantronics' Executive Vice President and CFO.

The information presented and discussed today includes forward-looking statements, which are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The risks and uncertainties related to such statements are detailed in our most recent 10-Q, 10-K and today's press release.

On July 2nd, 2018, Plantronics completed the acquisition of Polycom, which is reflected in the results we will discuss today. We are providing GAAP and non-GAAP revenue guidance, along with the impact of the purchase accounting adjustments to revenue. However, all other guidance is provided on a non-GAAP basis.

During today's call, we will primarily be discussing non-GAAP metrics related to revenue, gross margin, operating expenses, operating income, net income and earnings per share. Non-GAAP net revenue in the December quarter excludes the impact of $29 million of purchase accounting adjustments.

We believe non-GAAP revenue provides meaningful supplemental information regarding how management views the performance of the business and underlying performance of our individual product categories. Non-GAAP net revenue, as with other non-GAAP metrics discussed, should be considered a supplement to, rather than in isolation of, or as a substitute for, or superior to our results prepared on a GAAP basis.

Unless otherwise noted, comparisons of our December quarter non-GAAP results are against combined comparative results in the prior year quarter. Combined comparative results refer to the prior year non-GAAP results of both Plantronics and Polycom as if they had been combined during that period. These historical 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 have reconciled these measures with our US GAAP results in our earnings press release and earnings presentation, which are available, along with a recording of today's call, in the Investor Relations section of our corporate website at investor.plantronics.com.

For Plantronics' third quarter fiscal year 2019, GAAP net revenues were $502 million and non-GAAP revenues for the third quarter were $531 million. Plantronics' GAAP gross margin was 42.9% and non-GAAP gross margin was 51.5%.

GAAP operating loss was a loss of $24.7 million and non-GAAP operating income was $93.2 million. GAAP operating margins were negative 4.9% and non-GAAP operating margins were 17.6%. GAAP diluted earnings per share was $1.06 loss and non-GAAP diluted earnings per share was $1.36.

The difference between our GAAP and non-GAAP results for the third quarter provided today consists primarily of purchase accounting adjustments, intangibles amortization, acquisition and integrated-related fees, stock-based compensation, and restructuring, all net of any associated tax impact and discrete tax adjustments. Please refer to the use of non-GAAP information and GAAP to non-GAAP reconciliation tables in our earnings press release and earnings presentation published today for additional details.

With that, I will now turn the call over to Joe.

Joe Burton -- President and Chief Executive Officer

Good afternoon, everyone, and thanks for joining us today. I wanted to take this opportunity to provide a brief overview of the quarter before we open the call to Q&A.

This has been an exciting quarter for Plantronics. I am incredibly proud of the progress we've made integrating Polycom and Plantronics, delivering against our product road map, and achieving our financial goals. The results we'll discuss today and the milestones we have achieved to date demonstrate how we are executing against our strategy and the significant opportunities we see ahead for our company.

Enterprise communications and collaboration continues to be a thriving and evolving global market. While on-premise legacy providers dominated the enterprise communications market just a few years ago, we continue to see a massive transition toward cloud-based UC&C service providers.

This transition means the endpoint plays a more critical role than ever. Today's customers demand UC&C endpoints that provide seamless interoperability and enterprise-grade quality. These endpoints must offer an intuitive user interface and simple remote IT management capabilities across an increasingly diverse set of platforms and ecosystems.

Importantly, we are uniquely positioned to serve this growing market. We are focused on leveraging our portfolio of hardware and software to increase productivity and simplify our customers' and partners' experience. Let me take a few minutes to walk you through our product portfolio.

Desktop phones and conferencing, both had a great quarter, growing 11% on a combined basis. Our Trio family of conference room phones continues to set the bar for audio conferencing, growing nearly 50% year-over-year. On the desktop side, our recently introduced VVX x50 family of desktop phones grew nearly 70% sequentially and helped propel our total desktop phone growth to 11%.

The rapid growth of the x50 family was accelerated by the ability to leverage Polycom's PDMS cloud solution that enables remote management, configuration and provisioning. We see PDMS-enabled x50 series phones as the obvious choice for small or medium-size customers. The combined offering delivers the high-quality customers demand at a compelling price point and allows the service provider to reduce the strain on the small IT departments through remote management, simplifying the end-user experience.

Video products declined year-over-year as expected. As video mixing and infrastructure moves to the cloud, our legacy video platform revenues, which we do not view as a strategic part of our road map, continue to shrink as we expected. While our core video endpoint category is also in transition, we see significant opportunity in this market and expect to see future growth by continuing to provide best-in-class solutions for any size meeting space.

To that end, we recently launched Polycom Studio, the first in a family of video solutions designed specifically for huddle rooms and small conference rooms where plug-and-play simplicity and ease of use are critical. The huddle room video space is growing rapidly as only 2% of the estimated 32 million global huddle rooms are currently video enabled.

We also continue to remain focused on providing the best-in-class video experiences for mid-size and larger conference rooms. In collaboration with HP Inc., utilizing the Polycom Trio EagleEye camera and HP's Elite Slice, we have launched a solution set enabling native Microsoft Teams integration for customers seeking a high-quality simple user experience in their larger conference rooms.

Within our headset business, UC headsets had another strong quarter of double-digit growth with enterprise headsets growing 3% overall. This was another record-setting quarter for UC headset revenues, and for the first time in our history, UC headset revenue was more than half of the total enterprise headset business. We continue to bring innovative UC headsets to market, most recently introducing the wireless Voyager 4200 and Savi 8200, expanding our award-winning portfolio of headsets that address the unique needs of our customers.

Consumer headsets had a great quarter with both stereo and gaming growing about 70% year-over-year as we continue to bring new products with cutting-edge design, features and audio quality to the consumer market. The recently introduced RIG PRO 500 gaming headset and the BackBeat FIT 3100 True, a wireless fitness headset, were clear winners during the holiday shopping season. In both stereo and gaming, nearly half of all revenues in the quarter came from recently introduced products that are seeing great traction in the market.

In addition to relying on our market leadership and hardware endpoints, customers around the globe continue to expand their use of software, analytics and acoustic management services. These cloud-based solutions leverage data gathered from our endpoints to provide critical insights and enhance productivity. We recently announced that our Polycom PDMS cloud solution has been adopted by over 250 service providers around the world in its first five months of availability. PDMS allows service providers and enterprises to remotely manage Polycom endpoints, saving time and money.

We've also released the latest version of Plantronics Manager Pro, incorporating features and data insights from Habitat Soundscaping and expanding the support of two additional devices.

Before I turn the call over to Pam, I want to emphasize that we are incredibly pleased to welcome Tom Puorro to our leadership team as Executive Vice President and General Manager of Group Systems where he will oversee audio and video collaboration solutions. Tom is a UC expert and an industry veteran who brings over 25 years' experience, most recently as VP and GM of Cisco's unified communications technology group. Our ability to recruit and retain top industry talent like Tom is a testament to the strength of the Company and the exciting opportunities that are ahead of us.

With that, I'll turn the call over to Pam who will go into more detail on our Q3 financials and integration process. Pam?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Thanks Joe. Moving to our financial results, we had a strong quarter and met or exceeded our guidance targets across the board. Excluding purchase accounting of $29 million, we achieved non-GAAP revenues of $531 million, growing $13 million year-over-year and above the midpoint of our guidance range. As Joe noted, we are seeing strength across each of our audio categories, with greater than 10% growth in UC, consumer headsets, open desks -- Open SIP desk phones and audio conferencing endpoints.

In the video category, we have made solid progress toward refreshing the video endpoint business. We've been hard at work updating our compatibility and offerings to ensure we can fully participate in the Skype to Teams transition and adding strong leadership to the Group Systems business with Tom Puorro, who brings a fresh perspective and extensive industry knowledge. These steps, combined with our entry into the huddle room video market, create new growth potential for our video category and bring us closer to our long-term total revenue growth target of 5% to 8%.

On the profitability side, we saw non-GAAP gross margins of 51.5%, reflecting our typical December quarter decline due to product mix. The addition of the higher-margin Polycom categories led to an increase in non-GAAP gross margin of 70 basis points over the 50.8% in the prior year stand-alone Plantronics quarter. However, on a combined comparative basis, we saw gross margin decline of 170 basis points, primarily due to the impact of the global MLCC shortage. The impact of these costs has begun to decline, and we expect that trend to continue through June 2019.

Non-GAAP operating income was $93 million, or 17.6% of revenues. This was at the high end of our guidance range and more than double the prior year's stand-alone quarter, demonstrating the immediately accretive power of the Polycom acquisition.

Non-GAAP diluted EPS was $1.36, just above the high end of our guidance range, and EBITDA for the quarter was $105 million with trailing 12-month EBITDA of approximately $400 million.

We closed the December quarter with $342 million of cash and investments and generated $47 million of cash flow from operations even while funding restructuring and integration programs. This is a testament to the significant cash generation capabilities of these two businesses. We expect to make debt repayments totaling $100 million in the current March quarter and have already completed half of that in January.

Additionally, as of the close of market yesterday, we repurchased 347,000 shares for a total value of $12.6 million since reinitiating the share repurchase program in November.

We have updated our long-term operating model to include annualized targets for EBITDA and operating cash flow, which we expect to be over $500 million and $300 million, respectively. Once we have achieved our steady state, we expect this will add -- enable further leverage reduction, enhancing both our cash generation and EPS accretion.

Finally, turning to integration, we remain on target for our year-one cost synergies of $85 million, having achieved approximately $45 million in total annualized run rate cost synergies to date, including some actions we've taken in January. We expect to achieve an additional $13 million of run rate synergy capture in the March quarter for a total annualized run rate cost synergy capture of $58 million by the end of March quarter.

The synergies achieved thus far have primarily been from operating expenses. But the new calendar year also marks the start of our supply chain and logistics consolidation, which we expect to reduce cost of goods sold going forward. We anticipate these COGS synergies will have a modest impact in the March quarter as we work through inventory purchased against contract pricing from last year. We plan to provide an update on our next earnings call about our expectations for COGS savings in the June quarter.

As we look to the future, we believe the opportunity in front of us is bigger than ever. Our strong third quarter performance reaffirms our belief that Plantronics and Polycom are truly better together. We look forward to providing our customers and partners with the best collaboration tools, whether they're at a desk, in a conference room, on the road, or at the gym.

Thank you again for joining us this afternoon. Please look to our Investor Relations website at investor.plantronics.com for our full set of earnings materials.

And with that, we can open the call for questions. I'll turn it back to you, Eileen.

Questions and Answers:

Operator

Thank you, ma'am. (Operator Instructions)

Your first question comes from the line of Mike Latimore from Northland Capital Markets. Please ask your question.

Mike Latimore -- Northland Capital Markets -- Analyst

Hi, thanks. Things are very good there. That's excellent. In terms of kind of the headset business, can you talk a little bit about the ecosystem there? Microsoft and their evolution to Teams and cloud, how is that influencing kind of the headset business and, I guess, secondarily the phone business?

Joe Burton -- President and Chief Executive Officer

Yeah. I guess I'll start Mike. Thanks for the question. You said it sounds like fun here. It is fun, we're having a great time. It's a really exciting time to be in the business. So on the headsets with Teams, a quarter or two ago, we talked a little bit about a slight pause while we were working through the Skype for Business to Teams transition in the industry. We see that as broadly behind us, so we're seeing business clip along very well.

As you know, Mike, and others, when someone moves to a cloud-based deployment like Microsoft Teams or Microsoft Skype, we actually see a really great headset attached. So strong business with Microsoft, both on Skype and on Teams, on the headset side and certainly on the phone side as well. So no concerns in the business there. As Microsoft succeeds, we go right with it.

Mike Latimore -- Northland Capital Markets -- Analyst

Great. And then operating cash flow, if you were to just look at operating cash flow in the quarter and sort of take out the onetime items, the restructuring and whatever charges, what would have operating cash flow been in the quarter ex those kind of onetime things?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

I don't have that in front of me right now, but I think the EBITDA of $105 million in the quarter is probably a good proxy for that. It was a year-over-year increase even on a combined comparative basis, to give you some idea of how that looks.

Mike Latimore -- Northland Capital Markets -- Analyst

Great. And in the slides, it says -- I think it says you expect the video endpoints business to stabilize, I think, over the next few quarters. Is that because of the new huddle room products or is that more on the traditional products?

Joe Burton -- President and Chief Executive Officer

It's a combination of both, Mike. So certainly in the traditional high-end rooms, make no mistake about it, that maintains -- that remains a big market. People are refreshing and building big conference rooms, boardrooms and so forth just like before. And both our current and future products in that space will keep us at the top of the market. So while it isn't growing tremendously, we see the high-end market remaining essentially flat, minus a few percent plus a few percent based -- depending on the quarter, and then just the tremendous upside on the huddle room. So huddle room, as we said, 2% penetrated into 30 million plus rooms.

We just came out with the Polycom Studio, the first of several huddle room and small conference room products we'll have over the next few quarters. And frankly, the response from the industry has just been tremendous. If you get out there and look at the analyst reports that have been written, cruise around Twitter and look for #PolycomStudio, you'll just see fantastic, fantastic early reviews on that product. I think we're really delivering what people want and nobody else in the industry has delivered; incredible video, incredible audio, stupid simple -- when I got mine at home, literally it had two cables. I connected it in three minutes without touching the instruction manual and then still enterprise-grade manageability. So nobody has provided that in -- that ease-of-use plus manageability that I've seen. So we see huddle room really turbocharging the growth rate over the next few quarters with the high-end rooms stabilizing.

Mike Latimore -- Northland Capital Markets -- Analyst

Yeah, I got it. I'm all for stupid simple. I like that. My last one, the Trio, it sounds like that's doing very well. Is that sold into huddle rooms as well?

Joe Burton -- President and Chief Executive Officer

Yeah, you bet. The Trio is a great product. I'm talking to you on one right now. When you can't miss, you get on the Trio here at Plantronics and Polycom. So the Trio is a really interesting product. So it's, of course, our award-winning audio conferencing product suitable for a big conference room where you want to put 8, 10, 12 people around a table with remote mics, suitable for being in a huddle room. And the really interesting piece is, you drop the Trio into a huddle room and it creates a fantastic audio conferencing device, but you add on the Trio Media Kit and it actually brings in a fantastic Polycom video camera and such where now I have one touch voice and video conferencing into the huddle room as well.

So our Trio revenues are -- we count them as audio, but there's audio, there's a little bit of video in there, and we really already see our huddle room as being Trio audio, Trio plus media kit for a great huddle room video experience, and now the Polycom Studio as yet a third really, really good option, and even more to come in the future.

Mike Latimore -- Northland Capital Markets -- Analyst

Great. Thanks a lot. Congratulations.

Mike Iburg -- Vice President, Investor Relations

Thanks, Mike.

Joe Burton -- President and Chief Executive Officer

Yeah. Thanks, Mike.

Operator

Your next question comes from the line of Greg Burns from Sidoti & Company. Please ask your question.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Hi. I was just wondering if you can maybe give us a little bit more color on the 4Q revenue guide, maybe kind of your expectations for each side of the business that are considered in that guidance. Thanks.

Joe Burton -- President and Chief Executive Officer

Do you want to start, Pam, or...

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Sure. I can talk a little bit about trends. I think for our Q4 guidance at midpoint of $490 million, there's a couple of trends that we expect to continue. First of all, the December quarter is, of course, a high point for consumer. March quarter is typically the seasonal low point for both Plantronics and Polycom. For the coming March quarter, we're expecting year-over-year FX impact to the top line -- negative impact of about $6 million. And the midpoint of our guidance shows a slight increase over the prior year even given this FX headwind. Adjusting for FX, for the total FY 2019 full year, growth will be about 3% at the midpoint.

It's also helpful to look at enterprise and consumer separately. As I said, December is a high consumer quarter, and so we expect roughly a $20 million decline from December to March just because of the holiday season ending. The other half of the decline will be from our enterprise categories, which also have some seasonality in it typically. There's generally some sequential decline from December to March quarter but less than 5%, just based on project rush (ph) opportunities at the end of December that aren't there in March.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. And then I guess the view for the Polycom side of the business is similar to what has been in the last few quarters, flat to down a few percent?

Joe Burton -- President and Chief Executive Officer

Well, I think it's a little unfair to say that about the Polycom business in general. So first of all, I think, Pam was talking to the whole business when she said that. That is the combined business. On Polycom, what we've seen over the last few quarters, or I guess across all of our product categories, we've seen nice growth in consumer headsets, nice growth in enterprise headsets, nice growth in audio conferencing phones and in desktop phones. The only area that we've really seen any decline to speak of is on the video business, which is a combination of infrastructure where we are -- that we consider important but not strategic, we were projecting a decline, and then video endpoints where we really are in a little bit of a decline while we bring our huddle room products online. And then we expect to see mid to long-term growth in audio as well -- or pardon me, on video endpoints as well.

So the only area that I think we expect to see year-on-year declines in any meaningful way -- and correct me if I'm wrong, Pam -- is in video which will look like the last couple of quarters. And then get a quarter or two out, and we expect that to really be improving.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. And what percent of that video business is still the platform revenue?

Joe Burton -- President and Chief Executive Officer

I remember, Pam, but it's a relatively small percentage. But she's looking really quick here.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. While she looks, I'll just...

Joe Burton -- President and Chief Executive Officer

Yeah. We'll get back with you on it, but it is a decreasing piece of it on the platform side. We'll either circle back in the call or we'll let you know afterwards. Yeah.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. And then on the consumer business, I guess there might be some concern about the sustainability there, particularly around the gaming. What's your view on your -- the consumer business overall and maybe how gaming is contributing to that growth? Thanks.

Joe Burton -- President and Chief Executive Officer

As we stated, we've really had great a great year in consumer in general with more than 70% up both in the consumer stereo and the consumer gaming business year-on-year. In general, gaming seems to be up as we've talked about over the last couple of calls. Our competitors are up, we're up. We're just having a great -- sorry, I lost my train for a minute. We're doing very well in gaming based on new products, plus the melee-type games that are out there like Fortnite and others. We see gaming continuing to be strong. However, as we've talked about on the last couple of quarters, we're going to be prudent there. We would rather risk missing a little growth than winding up with the warehouse follow of it -- of the two. So we're going to participate in gaming where we're sure we can win.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay, great. And then, lastly...

Pamela Strayer -- Executive Vice President and Chief Financial Officer

And back your platform question, when you include services attached, it's roughly about 8% of total combined revenue for the Company.

Joe Burton -- President and Chief Executive Officer

So infrastructure product and services may be 8%.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay, perfect. Okay. And then, in terms of the capital allocation, I appreciate the balanced approach you're taking. What's your view on the leverage for the Company? Do you have a target you're trying to get this to over a certain time frame? Can you maybe help us out there because it looks like, based on what you did this quarter and your guidance, you should be generating some pretty substantial free cash flow as a combined company? Thank you.

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. Thanks for that. So we are still very committed to deleveraging the Company. It's our top priority. We expect to be below 3:1 gross EBITDA to debt by -- within 24 months of the acquisition close. We were able to pay down significant debt this quarter. The timing of future payments is really going to depend on other cash flow needs, primarily integration and restructuring activities that are yet to be done, including some facilities work and things which could take some cash. So I hesitate to forecast anything other than what we've put out there already within 24 months. But like I said, the Company generates a tremendous amount of cash flow, and so I'm optimistic about deleveraging that as quickly as we can.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay, great. Thank you.

Mike Iburg -- Vice President, Investor Relations

Thanks, Greg. Operator, next question?

Operator

Your next question comes from the line of David Eller from Wells Fargo. Please ask your question.

David Eller -- Wells Fargo -- Analyst

Hi, good afternoon. Thanks for taking my questions. When I look at the Q4 midpoint of guidance, it looks like you're calling for revenue down 8%, operating income down 11%, and again, this is all from kind of the December quarter, and EPS down 15%. Can you talk about some of the drivers there? Is the margin degradation, is that just a reflection of fixed cost on lower sales or are there other items baked in there as well?

Joe Burton -- President and Chief Executive Officer

So, Pam, we usually talk about this not so much quarter-over-quarter. In particular, this one is year-on-year. We have the very large December quarter typically followed by a pretty good tail off in this quarter. So I don't know, Pam, year-over-year, what's it look like or is this any different than a typical seasonality for us?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. So I guess I'll start with quarter-over-quarter. So yes, revenue is coming down. We talked about that a little bit because we're coming out of the consumer holiday season and some other seasonality that we have in the top line. Our gross margins are expected to bounce back up quarter-over-quarter as a result of better product mix in the March quarter. We won't have as much consumer revenue, so we expect our gross margins to come back probably a couple of hundred basis points.

Year-over-year, on a combined basis, gross margin will still be down a bit because of continued MLCC costs and headwinds there, although, like I said, that gets better over time. OpEx, we're forecasting that to be relatively flat, slightly up. So your -- the decreases in profitability sound a bit high to me given all of that when really I think quarter-over-quarter the only thing that's decline is the top line, and all the other profit measures are going to be going up.

David Eller -- Wells Fargo -- Analyst

Got you. And then you introduced obviously today the long-term EBITDA target. You expect to be in excess of $500 million. Can you talk about expectations of what the timeline would look like to achieve that?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. So when we put out our long-term operating target, we put out our top line growth rate as part of that target, as well as profitability measures, now adding EBITDA and cash flow. All of those targets, we're really talking about getting there by our fiscal year '21, which starts on April 1st, 2020. So we expect another year here of some product investments, some additional synergies and continued integration execution. And that should set us up for a strong 2021 where we expect to be within those targets that we've put out.

David Eller -- Wells Fargo -- Analyst

Okay. And then you also included the $300 million of operating cash flow. I'm guessing that's just referring to kind of the cash flows from operating activities on your cash flow statement. If I think about kind of a CapEx number in the $35 million kind of ballpark going forward, I think that would imply something on the lines of kind of $250 million or so of kind of free cash flow generation ability. Is that kind of in the level where you're expecting, kind of that high $200 million type level kind of in the future?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. I think your numbers make sense, yeah. I think that's right.

David Eller -- Wells Fargo -- Analyst

And then the last question from me, and I'll turn it back. But it looks like you -- you mentioned the 170 bps of gross margin pressure. I think you attributed most all of it to the MLCC pressure. Were there any other items in there that kind of affected gross margin in the quarter, whether it be mix or freight for consumer -- for gaming headsets or anything like that?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. So there's definitely going to be an impact there from product mix. Like we said, MLCC is probably the single largest thing that's impacting it, but as always, our product mix shift, especially during a December quarter, will bring down gross margins by quite a bit. And that's a trend that, over the long term, will continue as we see revenues kind of shift from video and core headsets to desktop phones and UC headsets. But in the December quarter, offsetting some of that product mix, we do have some cost savings that's offsetting that, a little bit of E&O improvement and the like, but they're primarily small put and takes after MLCC.

David Eller -- Wells Fargo -- Analyst

Got you. And then just one last question from me, sorry. The $50 million term loan payment and then the $50 million additional payment, can you just talk about your anticipation for kind of the cadence of that paydown as we go throughout the rest of calendar 2019?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

For the rest of the calendar 2019, yeah, I hesitate to forecast any cash -- additional cash flow payments after March. Like I said, we've got some additional restructuring and integration work that has to be done, which is going to take some cash, so it's tough to predict at this point. But we're going to continue to make that a priority. And given the cash flows that the Company generates, I expect to be able to make more payments this calendar year. It's just hard for me to predict right now when or how much.

David Eller -- Wells Fargo -- Analyst

Great. Thank you so much for the color.

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Sure. Thanks.

Mike Iburg -- Vice President, Investor Relations

Thanks, David.

Operator

Your next question comes from the line of Mike Latimore from Northland Capital Markets. Please ask your question.

Mike Latimore -- Northland Capital Markets -- Analyst

Yeah, thank you. I just want to clarify on the long-term targets that you set out there. Is that -- are you anticipating that would be for the full year fiscal 2021 or that you would reach those kinds of targets kind of run rate sometime during fiscal 2021?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Probably sometime during fiscal 2021, maybe toward the end after we're really through our product portfolio updates.

Mike Latimore -- Northland Capital Markets -- Analyst

Got it. And then, can you give any color on just on a regional basis, are you seeing any sort of emerging trends, positive or negative, any -- in kind of the bigger regions that you break out?

Joe Burton -- President and Chief Executive Officer

Mike, not particularly. Obviously, the competitive dynamics are a little different across Americas, Asia-Pac and EMEA, but nothing really substantial. We tend to see -- actually, I think the last couple of quarters have been quite uniform overall, so no trends that are really worth talking about.

Pamela Strayer -- Executive Vice President and Chief Financial Officer

I guess, one thing I would call out is the Americas is a high -- is where most of our consumer revenues come from. So as consumer weakens or grows, that's really going to impact the Americas disproportionately to other regions, just keeping that in mind.

Joe Burton -- President and Chief Executive Officer

But on the enterprise side though it's amazingly similar right now across the regions.

Mike Latimore -- Northland Capital Markets -- Analyst

Got it. And the -- in terms of the gaming headsets, is it -- are those over half consumer revenue yet or are they still under half?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

They're still under half. Gaming, I think, is roughly 20% to 30% of total consumer revenue.

Mike Iburg -- Vice President, Investor Relations

A little bit more in the December quarter, but roughly half -- sorry, roughly probably 30 percent-ish.

Joe Burton -- President and Chief Executive Officer

Yes.

Mike Latimore -- Northland Capital Markets -- Analyst

Okay got it. And then just last, on the huddle room opportunity, does that require sort of new channel development? Or do you feel like you already have those channels for that market?

Joe Burton -- President and Chief Executive Officer

You know, Mike, this is actually a place where we really are better together, if you will. So probably the high end of huddle, meaning if somebody was deploying 500 huddle rooms, then they probably want a channel that looks an awful lot like Polycom already has, our world-class sales engineers that can help plan a deployment, system management and so forth.

For somebody looking to do dozens or less of huddle rooms, boy, it looks an awful lot like a Plantronics channel. It looks like a channel fulfilled thing that we know how to do well. So we've really been going through making sure we understand when does it flow through kind of a traditional Polycom model, when does it flow through Plantronics, but we think we got that sorted out and there is no new development to do. We've got them both.

Mike Latimore -- Northland Capital Markets -- Analyst

Okay, perfect. And I guess last one would be, Pam, you said you thought (ph) you might make some additional debt payments in, I guess, calendar 2019, you just don't know the timing or size. Is that how you -- so you do think you'll be payments, you just don't know the timing or size at this point?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah, that's right. I think the cash flow generation in this business is strong. I think I'll be able to continue to pay down the debt yet this calendar year but the timing and amounts are still tough to forecast.

Mike Latimore -- Northland Capital Markets -- Analyst

Okay, thank you.

Mike Iburg -- Vice President, Investor Relations

Thanks, Mike.

Operator

Your next question comes from the line of Jeff Feinberg from Feinberg Investments.

Jeff Feinberg -- Feinberg Investments. -- Analyst

Thank you very much. I just want to make sure that I understood, what was the nine-month non-GAAP EPS please so I can get a sense of the run rate with the Q4 guidance that you have there?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Nine months non-GAAP EPS. Hold on, just one minute.

Joe Burton -- President and Chief Executive Officer

Yeah. Didn't have that when (multiple speakers) but it's around here. it's around here. Give us one second. We're really close. So it looks like, Pam, I believe the nine months ending December 31, the non-GAAP diluted earnings per share was $3.68.

Jeff Feinberg -- Feinberg Investments. -- Analyst

Okay. And I'm sorry, what was the number for Q4, the guide, the non-GAAP EPS?

Mike Iburg -- Vice President, Investor Relations

The midpoint of the guide would be $1.15.

Jeff Feinberg -- Feinberg Investments. -- Analyst

Okay. So we're talking about, on a non-GAAP basis, $4.83 of it. So that's current fiscal year if I'm doing the math correctly?

Joe Burton -- President and Chief Executive Officer

Yeah.

Jeff Feinberg -- Feinberg Investments. -- Analyst

Thank you very much. And just to understand ballpark how does that triangulate when you get to your target looking at 18 to 24 months, if you get the $500 million EBITDA, roughly, do you have a sense what that would equal in EPS?

Joe Burton -- President and Chief Executive Officer

What's EPS look like a year or two out, if you will?

Jeff Feinberg -- Feinberg Investments. -- Analyst

Yeah, exactly. What would be the corollary to the $500 million EBITDA?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. I'd say it's going to be north of $6 a share.

Joe Burton -- President and Chief Executive Officer

Yeah.

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Roughly.

Jeff Feinberg -- Feinberg Investments. -- Analyst

Okay, fantastic. And then finally, just trying to understand the underlying business, what's the key to getting to that $500 million looking at 18 to 24 months? How much of that ballpark would be cost saves, which are obviously well within your control versus debt paydown, also well within your control?

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Yeah. So you mentioned two of the big things. We'll continue to execute against our synergy targets and we're on track for those. It will also require us some top line revenue growth, a little bit higher than what we've been experiencing at 3%. So we're -- like Joe talked about, we're expecting the huddle room video to really help with our growth. We've got UC growth rates that are still pretty strong and are now a larger part of our enterprise headset business. And there's other products coming out that's going to help that growth rate.

Joe Burton -- President and Chief Executive Officer

Yeah. I think the good news on that, Pam, is I would summarize it as what's required is good execution that the market will support. We've got to come out with some product refreshes that are solid and already planned. We know how to do it. We need to get our fair share in the huddle market, while maintaining our fair share in some other markets and it comes. No miracle required, all stuff that's within our control.

Operator

(Operator Instructions) There are no further questions at this time. You may continue.

Mike Iburg -- Vice President, Investor Relations

Thank you, Eileen. Thank you for joining us today. We look forward to discussing our fourth quarter and full year fiscal 2019 results on our next conference call currently scheduled for early May. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Duration: 44 minutes

Call participants:

Mike Iburg -- Vice President, Investor Relations

Joe Burton -- President and Chief Executive Officer

Pamela Strayer -- Executive Vice President and Chief Financial Officer

Mike Latimore -- Northland Capital Markets -- Analyst

Gregory Burns -- Sidoti & Company, LLC -- Analyst

David Eller -- Wells Fargo -- Analyst

Jeff Feinberg -- Feinberg Investments. -- Analyst

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