Plantronics Announces Second Quarter Fiscal Year 2016 Financial Results
Revenues & EPS Exceed Guidance
SANTA CRUZ, CA--(Marketwired - November 05, 2015) - Plantronics, Inc. (NYSE: PLT) today announced second quarter fiscal year 2016 financial results. Highlights of the second quarter include the following (comparisons are against the second quarter of fiscal year 2015):
- Net revenues were $215.0 million compared with $215.8 million, and above our guidance of $202 million to $212 million
- GAAP gross margin was 51.6% compared with 54.6%
◦ Non-GAAP gross margin was 52.0% compared with 54.9%
- GAAP operating income was $34.1 million compared with $37.9 million
◦ Non-GAAP operating income was $43.0 million compared with $45.3 million - GAAP diluted earnings per share ("EPS") was $0.52 compared with $0.65, and above our guidance of $0.39 to $0.47
◦ Non-GAAP diluted EPS was $0.70 compared with $0.77, and above our guidance of $0.58 to $0.66
Q2 Fiscal Year 2016 GAAP Results
Q2 2015 Q2 2016 Change (%)
---------------------------------- -----------
Net revenues $ 215.8 million $ 215.0 million (0.4)%
Operating income $ 37.9 million $ 34.1 million (10.0)%
Operating margin 17.6% 15.9%
Diluted EPS $ 0.65 $ 0.52 (20.0)%
Q2 Fiscal Year 2016 Non-GAAP Results
Q2 2015 Q2 2016 Change (%)
---------------- ---------------- ----------
Operating income $ 45.3 million $ 43.0 million (5.1)%
Operating margin 21.0% 20.0%
Diluted EPS $ 0.77 $ 0.70 (9.1)%
/EINPresswire.com/ -- A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.
"Our stronger than expected second quarter results were driven by improved sales in Enterprise revenues offset by a decline in Consumer revenues and a continued significant currency headwind affecting both product groups," stated Ken Kannappan, President & CEO. "We achieved healthy operating margins while maintaining a significant investment in long-term strategic opportunities. Our new product introductions in major product categories have received a good response from customers and partners."
"In addition to currency headwinds, we recorded an unusually large revenue adjustment of $3.6 million related to our customer discount reserve as a result of increased visibility into the length of time our channel partners take to utilize approved discounts," stated Pam Strayer, Senior Vice President and Chief Financial Officer. "After adjusting for currency as well as this reserve, revenues grew by 5% year over year. Our Adjusted Non-GAAP operating margins for the quarter were 22% and Adjusted Non-GAAP earnings per share grew by 16%. We repurchased $189 million of our common stock in the quarter, using the remainder of the proceeds of our senior notes offering from the June quarter. We ended the quarter with cash, cash equivalents and investments of $506 million. The above Adjusted Non-GAAP metrics are calculated on a constant currency basis and exclude the effect of the reserve adjustment."
Enterprise net revenues were up slightly to $160.5 million in the second quarter of fiscal year 2016 compared with $156.7 million in the second quarter of fiscal year 2015.
Consumer net revenues were $54.5 million in the second quarter of fiscal year 2016, down from $59.1 million in the second quarter of fiscal year 2015, due primarily to a decline in mono Bluetooth demand.
Plantronics Announces Quarterly Dividend of $0.15
We are also announcing that we have declared a quarterly dividend of $0.15 per common share, to be paid on December 10, 2015 to all shareholders of record as of the close of business on November 20, 2015.
Business Outlook
The following statements are based on our current expectations and many of these statements are forward-looking. Actual results are subject to a variety of risks and uncertainties and may differ materially from our expectations.
We have a "book and ship" business model whereby we fulfill the majority of orders received within 48 hours of receipt of those orders. However, our backlog is occasionally subject to cancellation or rescheduling by our customers on short notice with little or no penalty. Therefore, there is a lack of meaningful correlation between backlog at the end of a fiscal period and net revenues in a succeeding fiscal period.
Our business is inherently difficult to forecast, particularly with continuing uncertainty in regional economic conditions and currency fluctuations, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize.
Subject to the foregoing, we currently expect the following range of financial results for the third quarter of fiscal year 2016:
- Net revenues of $225 million to $235 million;
- GAAP operating income of $31 million to $36 million;
- Non-GAAP operating income of $40 million to $45 million, excluding the impact of $9 million from stock-based compensation and purchase accounting amortization from GAAP operating income;
- Assuming approximately 34 million diluted average weighted shares outstanding:
- GAAP diluted EPS of $0.52 to $0.62;
- Non-GAAP diluted EPS of $0.71 to $0.81; and
- Cost of stock-based compensation and purchase accounting amortization to be approximately $0.19 per diluted share.
Please see our updated Investor Relations Presentation available on our corporate website at www.plantronics.com/ir.
Conference Call and Prepared Remarks
Plantronics is providing a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts with additional time and detail for analyzing results in advance of the company's quarterly conference call. The remarks will be available in the Investor Relations section of the Plantronics website in conjunction with the press release.
We have scheduled a conference call to discuss second quarter fiscal 2016 financial results. The conference call will take place today, November 5th, at 2:00 PM (Pacific Time). All interested investors and potential investors in our stock are invited to participate. To listen to the call, please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." The dial-in from North America is (888) 301-8736 and the international dial-in is (706) 634-7260.
A replay of the call with the conference ID # 53970357 will be available until December 5, 2015 at (855) 859-2056 or (800) 585-8367 for callers from North America and at (404) 537-3406 for all other callers. The conference call will also be simultaneously webcast in the Investor Relations section of our corporate website at www.plantronics.com/ir, and the webcast of the conference call will remain available on our website for one month.
A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, which are adjusted to exclude certain non-cash expenses and charges from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS, including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because 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.
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.
We are also presenting additional "Adjusted Non-GAAP" metrics. These metrics are calculated on a constant currency basis and exclude the impact of our Q2 FY16 customer discount reserve adjustment. We have reconciled these Adjusted Non-GAAP metrics within the tables at the end of this press release.
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) estimates of GAAP and non-GAAP financial results for the third quarter of fiscal year 2016, including net revenues, operating income and diluted EPS; (ii) our estimates of stock-based compensation and purchase accounting amortization and other related charges, as well as the impact of these non-cash expenses on Non-GAAP operating income and diluted EPS for the third quarter of fiscal year 2016; and (iii) our estimate of weighted average shares outstanding for the third quarter of fiscal year 2016, in addition to other matters discussed in this press release that are not purely historical data. We do not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by such statements. Among the factors that could cause actual results to differ materially from those contemplated are:
- Micro and macro-economic conditions in our domestic and international markets;
- our ability to realize and achieve positive financial results projected to arise from UC adoption could be adversely affected by a variety of factors including the following: (i) as UC becomes more widely adopted, the risk that competitors will offer solutions that will effectively commoditize our headsets which, in turn, will reduce the sales prices for our headsets; (ii) our plans are dependent upon adoption of our UC solution by major platform providers and strategic partners such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc., and Alcatel-Lucent, and our influence over such providers with respect to the functionality of their platforms or their product offerings, their rate of deployment, and their willingness to integrate their platforms and product offerings with our solutions is limited; (iii) delays or limitations on our ability to timely introduce solutions that are cost effective, feature-rich, stable, and attractive to our customers within forecasted development budgets; (iv) our successful implementation and execution of new and different processes involving the design, development, and manufacturing of complex electronic systems composed of hardware, firmware, and software that works seamlessly and continuously in a wide variety of environments and with multiple devices; (v) our sales model and expertise must successfully evolve to support complex integration of hardware and software with UC infrastructure consistent with changing customer purchasing expectations; (vi) as UC becomes more widely adopted we anticipate that competition for market share will increase, particularly given that some competitors may have superior technical and economic resources; (vii) UC solutions generally, or our solutions in particular, may not be adopted with the breadth and speed in the marketplace that we currently anticipate; (viii) sales cycles for more complex UC deployments are longer as compared to our traditional Enterprise products; (ix) UC may evolve rapidly and unpredictably and our inability to timely and cost-effectively adapt to those changes and future requirements may impact our profitability in this market and our overall margins; and (x) our failure to expand our technical support capabilities to support the complex and proprietary platforms in which our UC products are and will be integrated;
- failure to match production to demand given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges;
- volatility in prices from our suppliers, including our manufacturers located in China, have in the past and could in the future negatively affect our profitability and/or market share;
- fluctuations in foreign exchange rates;
- with respect to our stock repurchase program, prevailing stock market conditions generally, and the price of our stock specifically;
- the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers;
- additional risk factors including: interruption in the supply of sole-sourced critical components, continuity of component supply at costs consistent with our plans, and the inherent risks of our substantial foreign operations; and
- seasonality in one or more of our product categories.
For more information concerning these and other possible risks, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 15, 2015 and other filings with the Securities and Exchange Commission, as well as recent press releases. The Securities and Exchange Commission filings can be accessed over the Internet at http://www.sec.gov/edgar/searchedgar/companysearch.html
Financial Summaries
The following related charts are provided:
- Summary Unaudited Condensed Consolidated Financial Statements
- Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures
- Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and Other Unaudited GAAP Data
About Plantronics
Plantronics is a global leader in audio communications for businesses and consumers. We have pioneered new trends in audio technology for over 50 years, creating innovative products that allow people to simply communicate. From Unified Communication solutions to Bluetooth headsets, we deliver uncompromising quality, an ideal experience, and extraordinary service. Plantronics is used by every company in the Fortune 100, as well as 911 dispatch, air traffic control and the New York Stock Exchange. For more information, please visit www.plantronics.com or call (800) 544-4660.
Plantronics and the logo design are trademarks or registered trademarks of Plantronics, Inc. EncorePro, Voyager and Plantronics are trademarks of Plantronics, Inc. registered in the US and other countries, and Voyager Focus UC is trademark of Plantronics Inc. The Bluetooth name and the Bluetooth trademarks are owned by Bluetooth SIG, Inc. and are used by Plantronics, Inc. under license. All other trademarks are the property of their respective owners.
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PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
2014 2015 2014 2015
----------- ----------- ----------- -----------
Net revenues $ 215,805 $ 215,017 $ 432,467 $ 421,375
Cost of revenues 97,978 104,047 199,930 203,047
----------- ----------- ----------- -----------
Gross profit 117,827 110,970 232,537 218,328
Gross profit % 54.6 % 51.6 % 53.8 % 51.8 %
Research, development and
engineering 23,769 22,609 46,289 45,803
Selling, general and
administrative 60,350 54,296 116,779 109,974
Gain from litigation
settlements (4,150) (31) (6,150) (907)
----------- ----------- ----------- -----------
Total operating expenses 79,969 76,874 156,918 154,870
----------- ----------- ----------- -----------
Operating income 37,858 34,096 75,619 63,458
Operating income % 17.5 % 15.9 % 17.5 % 15.1 %
Interest expense (142) (7,320) (150) (10,061)
Other non-operating income
and (expense), net (543) (2,138) 485 (2,423)
----------- ----------- ----------- -----------
Income before income taxes 37,173 24,638 75,954 50,974
Income tax expense 9,752 6,742 19,861 11,850
----------- ----------- ----------- -----------
Net income $ 27,421 $ 17,896 $ 56,093 $ 39,124
=========== =========== =========== ===========
% of net revenues 12.7 % 8.3 % 13.0 % 9.3 %
Earnings per common share:
Basic $ 0.66 $ 0.53 $ 1.35 $ 1.09
Diluted $ 0.65 $ 0.52 $ 1.32 $ 1.07
Shares used in computing
earnings per common share:
Basic 41,765 33,590 41,692 35,796
Diluted 42,505 34,245 42,560 36,676
Effective tax rate 26.2 % 27.4 % 26.1 % 23.2 %
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PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
UNAUDITED CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------------
March 31, September 30,
2015 2015
--------------------- ---------------------
ASSETS
Cash and cash equivalents $ 276,850 $ 304,836
Short-term investments 97,859 119,607
--------------------- ---------------------
Total cash, cash equivalents
and short-term investments 374,709 424,443
Accounts receivable, net 136,581 139,939
Inventory, net 56,676 57,760
Deferred tax assets 6,564 6,518
Other current assets 28,124 30,464
--------------------- ---------------------
Total current assets 602,654 659,124
Long-term investments 107,590 81,132
Property, plant and equipment,
net 139,413 143,188
Goodwill and purchased
intangibles, net 16,077 15,952
Other assets 10,308 7,791
--------------------- ---------------------
Total assets $ 876,042 $ 907,187
===================== =====================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $ 32,781 $ 43,172
Accrued liabilities 62,041 60,764
--------------------- ---------------------
Total current liabilities 94,822 103,936
Long-term debt, net of issuance
costs - 488,884
Long-term income taxes payable 12,984 12,574
Revolving line of credit 34,500 -
Other long-term liabilities 6,339 8,831
--------------------- ---------------------
Total liabilities 148,645 614,225
Stockholders' equity 727,397 292,962
--------------------- ---------------------
Total liabilities and
stockholders' equity $ 876,042 $ 907,187
===================== =====================
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PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
2014 2015 2014 2015
------------ ------------ ------------ ------------
Cash flows from operating
activities
Net Income $ 27,421 $ 17,896 $ 56,093 $ 39,124
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 4,464 4,833 9,088 9,819
Amortization of debt
issuance cost - 362 - 483
Stock-based
compensation 7,387 8,832 13,692 16,882
Excess tax benefit
from stock-based
compensation (692) (759) (1,684) (3,150)
Deferred income taxes (946) (1,339) 1,769 2,807
Provision for excess
and obsolete
inventories 186 682 565 1,084
Other operating
activities (1,685) (1,500) (1,104) 3,037
Changes in assets and
liabilities:
Accounts receivable,
net 10,999 (11,404) (1,632) (2,825)
Inventory, net (1,136) (2,524) (5,119) (2,166)
Current and other
assets (1,961) 679 (2,931) (2,190)
Accounts payable 2,163 4,058 8,158 9,016
Accrued liabilities (3,251) 6,883 (7,771) 671
Income taxes (456) (3,725) 2,907 (6,144)
------------ ------------ ------------ ------------
Cash provided by
operating
activities 42,493 22,974 72,031 66,448
------------ ------------ ------------ ------------
Cash flows from investing
activities
Proceeds from sale of
investments 15,937 8,454 20,951 24,829
Proceeds from
maturities of
investments 30,375 14,980 81,275 40,405
Purchase of investments (44,358) (17,757) (99,225) (61,591)
Acquisitions, net of
cash acquired (150) - (150) -
Capital expenditures (6,107) (9,126) (13,419) (13,092)
------------ ------------ ------------ ------------
Cash used for
investing activities (4,303) (3,449) (10,568) (9,449)
------------ ------------ ------------ ------------
Cash flows from financing
activities
Repurchase of common
stock (6,479) (188,776) (18,917) (473,220)
Employees' tax withheld
and paid for
restricted stock and
restricted stock units (448) (596) (6,235) (10,499)
Proceeds from issuances
under stock-based
compensation plans 8,592 5,994 11,424 9,071
Proceeds from revolving
line of credit - - - 155,749
Repayments of revolving
line of credit - - - (190,249)
Proceeds from bonds
issuance, net - (1,269) - 488,401
Payment of cash
dividends (6,447) (5,158) (12,836) (10,986)
Excess tax benefit from
stock-based
compensation 692 759 1,684 3,150
Cash used for financing
activities (4,090) (189,046) (24,880) (28,583)
------------ ------------ ------------ ------------
Effect of exchange rate
changes on cash and cash
equivalents (1,121) (1,022) (1,058) (430)
------------ ------------ ------------ ------------
Net increase
(decrease) in cash
and cash equivalents 32,979 (170,543) 35,525 27,986
------------ ------------ ------------ ------------
Cash and cash equivalents
at beginning of period 235,250 475,379 232,704 276,850
------------ ------------ ------------ ------------
Cash and cash equivalents
at end of period $ 268,229 $ 304,836 $ 268,229 $ 304,836
============ ============ ============ ============
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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 Six Months Ended
September 30, September 30,
------------------------- -------------------------
2014 2015 2014 2015
------------ ------------ ------------ ------------
GAAP Gross profit $ 117,827 $ 110,970 $ 232,537 $ 218,328
Stock-based
compensation 668 879 1,203 1,658
------------ ------------ ------------ ------------
Non-GAAP Gross profit $ 118,495 $ 111,849 $ 233,740 $ 219,986
============ ============ ============ ============
Non-GAAP Gross profit % 54.9% 52.0% 54.0% 52.2%
GAAP Research,
development and
engineering $ 23,769 $ 22,609 $ 46,289 $ 45,803
Stock-based
compensation (2,115) (2,619) (3,866) (4,978)
Purchase accounting
amortization (61) (63) (111) (125)
------------ ------------ ------------ ------------
Non-GAAP Research,
development and
engineering $ 21,593 $ 19,927 $ 42,312 $ 40,700
============ ============ ============ ============
GAAP Selling, general
and administrative $ 60,350 $ 54,296 $ 116,779 $ 109,974
Stock-based
compensation (4,604) (5,334) (8,623) (10,246)
------------ ------------ ------------ ------------
Non-GAAP Selling,
general and
administrative $ 55,746 $ 48,962 $ 108,156 $ 99,728
============ ============ ============ ============
GAAP Operating expenses $ 79,969 $ 76,874 $ 156,918 $ 154,870
Stock-based
compensation (6,719) (7,953) (12,489) (15,224)
Purchase accounting
amortization (61) (63) (111) (125)
------------ ------------ ------------ ------------
Non-GAAP Operating
expenses $ 73,189 $ 68,858 $ 144,318 $ 139,521
============ ============ ============ ============
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PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
($ in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS DATA (CONTINUED)
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Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
2014 2015 2014 2015
---------- ---------- ---------- ----------
GAAP Operating income $ 37,858 $ 34,096 $ 75,619 $ 63,458
Stock-based
compensation 7,387 8,832 13,692 16,882
Purchase accounting
amortization 61 63 111 125
---------- ---------- ---------- ----------
Non-GAAP Operating
income $ 45,306 $ 42,991 $ 89,422 $ 80,465
========== ========== ========== ==========
GAAP Net income $ 27,421 $ 17,896 $ 56,093 $ 39,124
Stock-based
compensation 7,387 8,832 13,692 16,882
Purchase accounting
amortization 61 63 111 125
Income tax effect of
above items (2,250) (2,656) (4,050) (4,994)
Income tax effect of
unusual tax items (74)(1) (177)(1) (347)(1) (1,171)(1)
---------- ---------- ---------- ----------
Non-GAAP Net income $ 32,545 $ 23,958 $ 65,499 $ 49,966
========== ========== ========== ==========
GAAP Diluted earnings
per common share $ 0.65 $ 0.52 $ 1.32 $ 1.07
Stock-based
compensation 0.17 0.26 0.32 0.46
Income tax effect (0.05) (0.08) (0.10) (0.17)
---------- ---------- ---------- ----------
Non-GAAP Diluted
earnings per common
share $ 0.77 $ 0.70 $ 1.54 $ 1.36
========== ========== ========== ==========
Shares used in diluted
earnings per common
share calculation 42,505 34,245 42,560 36,676
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(1) Excluded amount represents tax benefits from the release of tax
reserves.
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, which are adjusted to exclude certain non-cash expenses and charges from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS, including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because 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. 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. We are also presenting additional "Adjusted Non-GAAP" metrics. These metrics are calculated on a constant currency basis and exclude the impact of our Q2 FY16 customer discount reserve adjustment. We have reconciled these Adjusted Non-GAAP metrics within the tables at the end of this press release.
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Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures
and other Unaudited GAAP Data
($ in thousands, except per share data)
Q115 Q215 Q315 Q415 Q116 Q216
GAAP Gross
profit $114,710 $117,827 $119,916 $109,166 $107,358 $110,970
Stock-based
compensation 535 668 685 695 779 879
--------- --------- --------- --------- --------- ---------
Non-GAAP Gross
profit $115,245 $118,495 $120,601 $109,861 $108,137 $111,849
========= ========= ========= ========= ========= =========
Non-GAAP Gross
profit % 53.2% 54.9% 52.0% 54.7% 52.4% 52.0%
GAAP Operating
expenses $ 76,949 $ 79,969 $ 79,302 $ 76,314 $ 77,996 $ 76,874
Stock-based
compensation (5,770) (6,719) (6,745) (6,774) (7,271) (7,953)
Purchase
accounting
amortization (50) (61) (64) (63) (62) (63)
--------- --------- --------- --------- --------- ---------
Non-GAAP
Operating
expenses $ 71,129 $ 73,189 $ 72,493 $ 69,477 $ 70,663 $ 68,858
========= ========= ========= ========= ========= =========
GAAP Operating
income $ 37,761 $ 37,858 $ 40,614 $ 32,852 $ 29,362 $ 34,096
Stock-based
compensation 6,305 7,387 7,430 7,469 8,050 8,832
Purchase
accounting
amortization 50 61 64 63 62 63
--------- --------- --------- --------- --------- ---------
Non-GAAP
Operating
income $ 44,116 $ 45,306 $ 48,108 $ 40,384 $ 37,474 $ 42,991
========= ========= ========= ========= ========= =========
Non-GAAP
Operating
income % 20.4% 21.0% 20.8% 20.1% 18.2% 20.0%
GAAP Income
before income
taxes $ 38,781 $ 37,173 $ 38,596 $ 30,701 $ 26,336 $ 24,638
Stock-based
compensation 6,305 7,387 7,430 7,469 8,050 8,832
Purchase
accounting
amortization 50 61 64 63 62 63
--------- --------- --------- --------- --------- ---------
Non-GAAP Income
before income
taxes $ 45,136 $ 44,621 $ 46,090 $ 38,233 $ 34,448 $ 33,533
========= ========= ========= ========= ========= =========
GAAP Income tax
expense $ 10,109 $ 9,752 $ 8,212 $ 4,877 $ 5,108 $ 6,742
Income tax
effect of
above items 1,800 2,250 2,204 2,252 2,338 2,656
Income tax
effect of
unusual tax
items 273 74 2,028 489 994 177
--------- --------- --------- --------- --------- ---------
Non-GAAP Income
tax expense $ 12,182 $ 12,076 $ 12,444 $ 7,618 $ 8,440 $ 9,575
========= ========= ========= ========= ========= =========
Non-GAAP Income
tax expense as
a % of Non-GAAP
Income before
income taxes 27.0% 27.1% 27.0% 19.9% 24.5% 28.6%
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Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP
Measures and other Unaudited GAAP Data (Continued)
($ in thousands, except per share data)
Q115 Q215 Q315 Q415 Q116 Q216
GAAP Net income $ 28,672 $ 27,421 $ 30,384 $ 25,824 $ 21,228 $ 17,896
Stock-based
compensation 6,305 7,387 7,430 7,469 8,050 8,832
Purchase
accounting
amortization 50 61 64 63 62 63
Income tax
effect of
above items (1,800) (2,250) (2,204) (2,252) (2,338) (2,656)
Income tax
effect of
unusual tax
items (273) (74) (2,028) (489) (994) (177)
--------- --------- --------- --------- --------- ---------
Non-GAAP Net
income $ 32,954 $ 32,545 $ 33,646 $ 30,615 $ 26,008 $ 23,958
========= ========= ========= ========= ========= =========
GAAP Diluted
earnings per
common share $ 0.68 $ 0.65 $ 0.71 $ 0.61 $ 0.55 $ 0.52
Stock-based
compensation 0.15 0.17 0.18 0.17 0.21 0.26
Income tax
effect (0.05) (0.05) (0.10) (0.06) (0.09) (0.08)
--------- --------- --------- --------- --------- ---------
Non-GAAP Diluted
earnings per
common share $ 0.78 $ 0.77 $ 0.79 $ 0.72 $ 0.67 $ 0.70
========= ========= ========= ========= ========= =========
Shares used in
diluted
earnings per
common share
calculation 42,466 42,505 42,700 42,482 38,943 34,245
SUMMARY OF UNAUDITED GAAP DATA
($ in thousands)
Net revenues
from
unaffiliated
customers:
Enterprise $152,354 $156,680 $161,591 $148,660 $151,757 $160,468
Consumer 64,308 59,125 70,190 52,102 54,601 54,549
--------- --------- --------- --------- --------- ---------
Total net
revenues $216,662 $215,805 $231,781 $200,762 $206,358 $215,017
========= ========= ========= ========= ========= =========
Net revenues by
geographic area
from
unaffiliated
customers:
Domestic $124,467 $123,697 $123,092 $116,351 $117,578 $123,803
International 92,195 92,108 108,689 84,411 88,780 91,214
--------- --------- --------- --------- --------- ---------
Total net
revenues $216,662 $215,805 $231,781 $200,762 $206,358 $215,017
========= ========= ========= ========= ========= =========
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance Sheet accounts and metrics:
Accounts
receivable, net $150,765 $140,427 $157,322 $136,581 $127,160 $139,939
Days sales
outstanding
(DSO) 63 59 61 61 55 59
Inventory, net $ 60,968 $ 63,551 $ 57,724 $ 56,676 $ 55,918 $ 57,760
Inventory turns 6.7 6.2 7.8 6.5 7.1 7.2
----------------------------------------------------------------------------
Summary of Unaudited Reconciliations of GAAP Measures to Non-
GAAP Measures
($ in millions, except per
share data)
----------------------------------------------------------------------------
Net Revenues Q2'15 ($) Q2'16 ($) Change ($) Change (%)
--------------------------------------- ----------- ------------ -----------
Net Revenues as reported
(GAAP) $ 215.8 $ 215.0 $ (0.8) 0%
Less Hedge Gains - (2.2)
Impact of Year over Year
Foreign Currency Exchange
Rate Movements - 10.5
----------- -----------
Constant Currency Revenues
(Non-GAAP) - 223.3
Impact of Customer Reserve
Adjustment - 3.6
----------- -----------
Adjusted Revenues (Non-GAAP)$ 215.8 $ 226.9 $ 11.1 5%
=========== ===========
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Income Q2'15 ($) Q2'15 (%) Q2'16 ($) Q2'16 (%)
--------------------------------------- ----------- ------------ -----------
Operating Income as reported
(GAAP) $ 37.9 17.6% $ 34.1 15.9%
Stock-based compensation &
Purchase accounting
amortization 7.4 8.9
----------- ------------
Non-GAAP Operating Income 45.3 21.0% 43.0 20.0%
Less Hedge Gains, net - (1.0)
Impact of Year over Year
Foreign Currency Exchange
Rate Movements - 4.3
----------- ------------
Constant Currency Operating
Income (Non-GAAP) - 46.3 20.7%
Impact of Customer Reserve
Adjustment - 3.6
----------- ------------
Adjusted Operating Income
(Non-GAAP) $ 45.3 21.0% $ 49.9 22.0%
=========== ============
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted Earnings per Common
Share ("EPS") Q2'15 ($) Q2'16 ($) Change ($) Change (%)
--------------------------------------- ----------- ------------ -----------
Diluted EPS (GAAP) $ 0.65 $ 0.52 $ (0.13) -20%
Stock-based compensation 0.17 0.26
Income Tax Effect (0.05) (0.08)
----------- -----------
Non-GAAP Diluted EPS 0.77 0.70 (0.07) -9%
Less Hedge Gains, net of
tax - (0.05)
Impact of Year over Year
Foreign Currency Exchange
Rate Movements, net of
tax - 0.16
----------- -----------
Constant Currency Diluted
EPS (Non-GAAP) - 0.81
Impact of Customer Reserve
Adjustment, net of tax - 0.08
----------- -----------
Adjusted Diluted EPS (Non-
GAAP) $ 0.77 $ 0.89 $ 0.12 16%
=========== ===========
----------------------------------------------------------------------------
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(831) 458-7533
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