Polycom, Inc. (Nasdaq: PLCM) today reported second
quarter 2016 revenues of $288 million. On a GAAP basis, Polycom
reported a net loss of $10 million, or 7 cents per share for the
second quarter 2016. On a non-GAAP basis, Polycom reported net
income of $29 million and earnings of 21 cents per diluted share.
Polycom’s quarterly reconciliation of GAAP to non-GAAP performance
is provided in the tables at the end of this press release.
“Polycom delivered solid operating performance despite a more
challenging top line,” said Peter Leav, President and Chief
Executive Officer. “Asia Pacific posted strong sequential growth,
driven by higher revenues in China and Australia.”
($ in millions, except per share data)
Q2 2016 Revenues $ 287.8 GAAP gross
profit margin 56.0 % GAAP operating expenses $ 162.7 GAAP operating
margin (0.5 )% GAAP EPS $ (0.07 ) Non-GAAP gross profit
margin 57.4 % Non-GAAP operating expenses $ 128.7 Non-GAAP
operating margin 12.7 % Non-GAAP EPS $ 0.21
“Polycom continued to exhibit sound financial management,” said
Laura Durr, Chief Financial Officer. “We continue to generate
positive operating cash flow and ended the quarter with $722
million in cash and investments.”
On a comparative basis, consolidated financial results were:
($ in millions, except per share data)
Q2 2016 Q1 2016
Q2 2015
Quarter-Over-Quarter Change
Year-Over-Year Change Revenues $ 287.8 $ 290.1 $ 316.6
(1 )% (9 )% GAAP net (loss) income $ (10.0 ) $ 3.3 $
19.6 (403 )% (151 )% GAAP EPS $ (0.07 ) $ 0.02 $ 0.14 (450 )% (150
)% Non-GAAP net income $ 29.4 $ 25.7 $ 29.9 14 % (2 )% Non-GAAP EPS
$ 0.21 $ 0.19 $ 0.22 11 % (5 )%
The Americas declined both sequentially and year-over-year.
Sequential and year-over-year results for EMEA were primarily
impacted by foreign exchange. Asia Pacific grew sequentially as a
result of growth in China and Australia, but was down on a
year-over-year basis.
In terms of product category results, UC Group revenues declined
sequentially and year-over-year, primarily as a result of lower UC
Group revenues in the Americas and EMEA regions. UC Personal
revenue increased sequentially and year-over-year. UC Platform
revenue grew sequentially as a result of China, which had higher
overall revenue this quarter.
On a geographic basis, consolidated revenues were comprised
of:
($ in millions) Q2 2016
Q1 2016 Q2
2015 Quarter-Over-Quarter Change
Year-Over-Year Change Americas $ 142.0 $ 155.5 $ 158.3
(9 )% (10 )% % of total revenues
49 % 54 % 50 % Europe, Middle East & Africa
(EMEA)
72.7 73.5 80.9 (1 )% (10 )% % of total revenues 25 % 25 % 26 % Asia
Pacific 73.1 61.1 77.4 20 % (6 )% % of total revenues 26 %
21 % 24 % Totals * $ 287.8 $ 290.1 $ 316.6 (1 )% (9
)%
* may not foot due to rounding
By product category, inclusive of its service component,
consolidated revenues were comprised of:
($ in millions) Q2
2016 Q1 2016
Q2 2015 Quarter-Over-Quarter
Change Year-Over-Year Change UC
Group Systems $ 171.4 $ 178.9 $ 195.2 (4 )% (12 )% %
of total revenues 60 % 62 % 62 % UC Personal Devices 68.8 67.8 66.8
1 % 3 % % of total revenues 24 % 23 % 21 % UC Platform 47.6 43.4
54.6 10 % (13 )% % of total revenues 16 % 15 %
17 % Totals * $ 287.8 $ 290.1 $ 316.6 (1 )% (9 )%
* may not foot due to rounding
In the second quarter of 2016, Polycom generated a total of $19
million in operating cash flow. Cash and investments at the end of
the second quarter of 2016 totaled $722 million, of which
approximately $297 million is located in the United States. Net of
existing debt, cash and investments at the end of the second
quarter of 2016 totaled $490 million.
Forward Looking Statements and Risk
Factors
This release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, including statements regarding
future profitability and operating cash flow. These forward-looking
statements are subject to risks and uncertainties that may cause
actual results to differ materially, including the impact on our
business of the recent announcement regarding the proposed
acquisition of Polycom by entities affiliated with Siris Capital
Group, LLC, the impact of competition on our product sales and on
our customers and partners, and any resulting loss of business; the
impact of increased competition due to consolidation in our
industry or competition from companies that are larger or that have
greater resources than we do; potential fluctuations in results and
future growth rates; risks associated with global economic
conditions and external market factors; the market acceptance of
our products and changing market demands, including demands for
differing technologies or product and services offerings; our
ability to successfully implement process improvements and cost
containment initiatives; changes to our strategic areas of focus
and investment; our ability to successfully integrate our
acquisitions into our business; possible delays in the development,
availability and shipment of new products due to engineering,
manufacturing or other delays; increasing costs and the
availability of capital; changes in key sales and other personnel
that may cause disruption to the business; the impact of
restructuring actions; and the impact of global conflicts that may
adversely impact our business. Many of these risks and
uncertainties are discussed in our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016, and in other reports filed by
Polycom with the SEC. Polycom disclaims any intent or obligations
to update these forward-looking statements.
GAAP to non-GAAP
Reconciliation
To supplement our consolidated financial statements presented on
a GAAP basis, Polycom uses non-GAAP measures of operating results,
net (loss) income and (loss) income per share, which are adjusted
to exclude certain costs, expenses, gains and losses we believe
appropriate to enhance an overall understanding of our past
financial performance and also our prospects for the future. These
adjustments to our current period GAAP results are made with the
intent of providing both management and investors a more complete
understanding of Polycom’s underlying operational results and
trends and our marketplace performance. The non-GAAP results are an
indication of our baseline performance before gains, losses, or
other charges that are considered by management to be outside of
our core operating results. In addition, these adjusted non-GAAP
results are among the primary indicators management uses as a basis
for our planning and forecasting of future periods. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for net (loss) income or
diluted net (loss) income per share prepared in accordance with
GAAP in the United States.
About Polycom
Polycom helps organizations unleash the power of human
collaboration. More than 400,000 companies and institutions
worldwide defy distance with secure video, voice and content
solutions from Polycom to increase productivity, speed time to
market, provide better customer service, expand education and save
lives. Polycom and its global partner ecosystem provide flexible
collaboration solutions for any environment that deliver the best
user experience, the broadest multi-vendor interoperability and
unmatched investment protection. Visit www.polycom.com or connect
with us on Twitter, Facebook and LinkedIn to learn more.
© 2016 Polycom, Inc. All rights reserved. POLYCOM®, the Polycom
logo, and the names and marks associated with Polycom’s products
are trademarks and/or service marks of Polycom, Inc. and are
registered and/or common law marks in the United States and various
other countries. All other trademarks are property of their
respective owners.
POLYCOM, INC.
Condensed Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended Six Months Ended June
30,
2016
June 30,
2015
June 30,
2016
June 30,
2015
Revenues: Product revenues $ 201,715 $ 221,896 $ 404,975 $ 455,583
Service revenues 86,064 94,679 172,879
191,692 Total revenues 287,779 316,575 577,854
647,275 Cost of revenues: Cost of product revenues 94,029
95,752 189,084 197,021 Cost of service revenues 32,478
34,898 63,669 71,509 Total cost of revenues
126,507 130,650 252,753 268,530 Gross
profit 161,272 185,925 325,101 378,745
Operating expenses: Sales and marketing 82,505 89,433 161,968
180,292 Research and development 43,981 46,545 87,051 95,882
General and administrative 20,291 22,269 40,401 43,436 Amortization
of purchased intangibles 2,017 2,417 4,217 4,834 Restructuring
costs 6,007 343 13,509 367 Transaction-related costs 7,887
— 12,131 — Total operating expenses
162,688 161,007 319,277 324,811 Operating
(loss) income (1,416 ) 24,918 5,824 53,934 Interest and other
income (expense), net Interest expense (1,668 ) (1,523 ) (3,305 )
(3,007 ) Other income (expense), net 1,966 1,345
2,835 1,367 Interest and other income (expense), net
298 (178 ) (470 ) (1,640 ) (Loss) income before provision for
income taxes (1,118 ) 24,740 5,354 52,294 Provision for income
taxes 8,879 5,093 12,016 11,449 Net
(loss) income $ (9,997 ) $ 19,647 $ (6,662 ) $ 40,845 Basic
net (loss) income per share $ (0.07 ) $ 0.15 $ (0.05 ) $ 0.30
Diluted net (loss) income per share $ (0.07 ) $ 0.14 $ (0.05
) $ 0.30 Number of shares used in computation of net (loss)
income per
share:
Basic 135,700 134,057 134,934 134,417
Diluted 135,700 137,347 134,934 138,290
Note: As a result of the GAAP net loss in some of the periods
presented, all potentially issuable common shares for those periods
have been excluded from the diluted shares used in the computation
of GAAP earnings per share as their effect is anti-dilutive.
POLYCOM, INC.
Reconciliation of GAAP to Non-GAAP Net
(Loss) Income
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended Six Months Ended June
30,
2016
March 31,
2016
June 30,
2015
June 30,
2016
June 30,
2015
GAAP net (loss) income $ (9,997 ) $ 3,335 $ 19,647 $ (6,662 ) $
40,845 Amortization of purchased intangibles 2,117 2,300 2,517
4,417 5,591 Restructuring costs 6,007 7,502 343 13,509 367
Transaction-related costs 7,887 4,244 — 12,131 — Stock-based
compensation expense 21,606 11,480 9,711 33,087 18,943 Effect of
stock-based compensation on warranty rates 235 106 80 341 133 Costs
associated with CEO separation and related SEC
investigation
— — 64 — 399 Income tax effect of non-GAAP exclusions 1,532
(3,283 ) (2,415 ) (1,752 ) (4,096 )
Non-GAAP net income $ 29,387 $ 25,684 $ 29,947 $ 55,071 $ 62,182
GAAP net (loss) income per share: Basic $ (0.07 ) $ 0.02 $ 0.15 $
(0.05 ) $ 0.30 Diluted $ (0.07 ) $ 0.02 $ 0.14 $ (0.05 ) $ 0.30
Non-GAAP net income per share: Basic $ 0.22 $ 0.19 $ 0.22 $ 0.41 $
0.46 Diluted $ 0.21 $ 0.19 $ 0.22 $ 0.40 $ 0.45 Number of shares
used in computation of GAAP net (loss)
income per share:
Basic 135,700 134,168 134,057 134,934
134,417 Diluted 135,700 137,292 137,347
134,934 138,290 Number of shares used in computation
of non-GAAP net
income per share:
Basic 135,700 134,168 134,057 134,934
134,417 Diluted 138,012 137,292 137,347
137,652 138,290
Note: As a result of the GAAP net loss in some of the periods
presented, all potentially issuable common shares for those periods
have been excluded from the diluted shares used in the computation
of GAAP earnings per share as their effect is anti-dilutive.
POLYCOM, INC.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
June 30,
2016
December 31,
2015
ASSETS Current assets Cash and cash equivalents $ 576,516 $
435,093 Short-term investments 126,238 184,242 Trade receivables,
net 154,212 187,888 Inventories 96,748 89,392 Prepaid expenses and
other current assets 50,118 52,852 Total current
assets 1,003,832 949,467 Property and equipment, net 93,123 101,853
Long-term investments 18,788 46,484 Goodwill and purchased
intangibles, net 568,307 572,840 Deferred taxes 86,659 89,865 Other
assets 20,994 21,738 Total assets $ 1,791,703 $
1,782,247
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $ 78,444 $ 73,472 Accrued payroll and
related liabilities 32,977 38,781 Taxes payable 2,130 4,342
Deferred revenue 174,119 170,559 Current portion of long-term debt
5,717 5,717 Other accrued liabilities 74,607 85,095
Total current liabilities 367,994 377,966 Long-term deferred
revenue 83,272 86,191 Taxes payable 10,382 9,983 Deferred taxes —
135 Long-term debt 225,940 228,799 Other non-current liabilities
24,074 25,964 Total liabilities 711,662 729,038
Stockholders' equity 1,080,041 1,053,209 Total
liabilities and stockholders' equity $ 1,791,703 $ 1,782,247
POLYCOM, INC.
Condensed Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
2016
June 30,
2015
Cash flows from operating activities: Net (loss) income $ (6,662 )
$ 40,845 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation and amortization
23,663 27,210 Amortization of purchased intangibles 4,417 5,629
Amortization of capitalized software development costs for products
to be sold 2,140 1,354 Amortization of debt issuance costs 267 266
Amortization of discounts and premiums on investments, net 645
1,090 Write-down of excess and obsolete inventories 5,477 6,810
Stock-based compensation expense 33,087 18,943 Excess tax benefits
from stock-based compensation expense (1,405 ) (3,487 ) Loss on
disposal of property and equipment 175 544 Changes in assets and
liabilities: Trade receivables 33,601 8,245 Inventories (12,880 )
(6,791 ) Deferred taxes (4,435 ) (2,744 ) Prepaid expenses and
other assets 2,362 4,960 Accounts payable 4,058 (19,229 ) Taxes
payable 5,296 9,663 Other accrued liabilities and deferred revenue
(17,540 ) (30,160 ) Net cash provided by operating
activities 72,266 63,148 Cash flows from investing
activities: Purchases of property and equipment (13,508 ) (23,922 )
Capitalized software development costs for products to be sold
(1,446 ) (2,311 ) Purchases of investments (78,222 ) (107,675 )
Proceeds from sale of investments 13,937 6,892 Proceeds from
maturities of investments 149,699 97,187 Net cash
provided by (used in) investing activities 70,460
(29,829 ) Cash flows from financing activities: Proceeds from
issuance of common stock under employee option and stock
purchase plans
10,811 12,528 Payments on debt (3,126 ) (3,125 ) Purchase and
retirement of common stock under share repurchase plan — (64,999 )
Purchase and retirement of common stock for tax withholdings on
vesting of employee
stock-based awards
(9,772 ) (11,769 ) Excess tax benefits from stock-based
compensation expense 1,405 3,487 Net cash used in
financing activities (682 ) (63,878 ) Effect of
exchange rate changes on cash and cash equivalents (621 )
— Net increase (decrease) in cash and cash equivalents
141,423 (30,559 ) Cash and cash equivalents,
beginning of period 435,093 443,132 Cash and cash
equivalents, end of period $ 576,516 $ 412,573
POLYCOM, INC.
Selected Summary Data
(In millions except per share amounts
and headcount)
(Unaudited)
June 30,
2016
March 31,
2016
June 30,
2015
Balance Sheet Highlights Cash and investments $ 722 $ 713 $
660 Number of shares outstanding 136 136 133 Cash and investments
per share $ 5.31 $ 5.26 $ 4.95 Debt $ 232 $ 233 $ 237 Operating
cash flow - quarterly $ 19 $ 53 $ 33 Operating cash flow - trailing
12 months $ 129 $ 142 $ 188 DSO (Days Sales Outstanding) 49 51 46
Inventory turns - GAAP 5.2 5.1 5.2 Inventory turns - non-GAAP 5.1
5.1 5.2 Deferred revenue $ 257 $ 263 $ 260 Share repurchases:
Quarter-to-date share repurchases - shares — — 1.9 Quarter-to-date
share repurchases - dollars $ — $ — $ 25 Year-to-date share
repurchases - shares — — 4.8 Year-to-date share repurchases -
dollars $ — $ — $ 65 Ending headcount 3,176 3,275 3,553
For the Three
Months Ended June 30,
2016
March 31,
2016
June 30,
2015
Income Statement Highlights GAAP: Revenues $ 288 $
290 $ 317 Gross margin 56.0 % 56.5 % 58.7 % Operating expenses $
163 $ 157 $ 161 Operating margin (0.5 )% 2.5 % 7.9 % Diluted EPS $
(0.07 ) $ 0.02 $ 0.14
Non-GAAP: Revenues $ 288 $ 290 $ 317
Gross margin 57.4 % 57.2 % 59.2 % Operating expenses $ 129 $ 133 $
150 Operating margin 12.7 % 11.3 % 11.9 % Diluted EPS $ 0.21 $ 0.19
$ 0.22
POLYCOM, INC.
Reconciliations of GAAP Measures to
Non-GAAP Measures
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended June
30,
2016
March 31,
2016
June 30,
2015
June 30,
2016
June 30,
2015
GAAP cost of revenues used in inventory turns $ 126,507 $
126,246 $ 130,650 $ 252,753 $ 268,530 Stock-based compensation
expense (3,506 ) (1,892 ) (1,382 ) (5,398 ) (3,645 ) Effect of
stock-based compensation expense on warranty rates (235 ) (106 )
(80 ) (341 ) (133 ) Amortization of purchased intangibles
(100 ) (100 ) (100 ) (200 ) (757 )
Non-GAAP cost of revenues used in inventory turns $ 122,666
$ 124,148 $ 129,088 $ 246,814 $ 263,995
GAAP gross profit $
161,272 $ 163,829 $ 185,925 $ 325,101 $ 378,745 Stock-based
compensation expense 3,506 1,892 1,382 5,398 3,645 Effect of
stock-based compensation expense on warranty rates 235 106 80 341
133 Amortization of purchased intangibles 100 100
100 200 757
Non-GAAP gross profit $
165,113 $ 165,927 $ 187,487 $ 331,040 $ 383,280
Non-GAAP gross
margin 57.4 % 57.2 % 59.2 % 57.3 % 59.2 %
GAAP sales
and marketing expense $ 82,505 $ 79,463 $ 89,433 $ 161,968 $
180,292 Stock-based compensation expense (7,550 )
(3,743 ) (2,698 ) (11,293 ) (5,311 )
Non-GAAP sales and marketing expense $ 74,955 $ 75,720 $
86,735 $ 150,675 $ 174,981
Non-GAAP sales and marketing expense
as a percent of revenues 26.0 % 26.1 % 27.4 % 26.1 % 27.0 %
GAAP research and development expense $ 43,981 $
43,070 $ 46,545 $ 87,051 $ 95,882 Stock-based compensation expense
(4,912 ) (2,029 ) (1,915 ) (6,941 )
(4,488 )
Non-GAAP research and development expense $
39,069 $ 41,041 $ 44,630 $ 80,110 $ 91,394
Non-GAAP research and
development expense as a percent of
revenues
13.6 % 14.1 % 14.1 % 13.9 % 14.1 %
GAAP general and
administrative expense $ 20,291 $ 20,110 $ 22,269 $ 40,401 $
43,436 Stock-based compensation expense (5,638 ) (3,816 ) (3,716 )
(9,455 ) (5,499 ) Costs associated with CEO separation and related
SEC
investigation
— — (64 ) — (399 )
Non-GAAP
general and administrative expense $ 14,653 $ 16,294 $ 18,489 $
30,946 $ 37,538
Non-GAAP general and administrative expense as a
percent of
revenues
5.1 % 5.6 % 5.8 % 5.4 % 5.8 %
GAAP total operating
expenses $ 162,688 $ 156,589 $ 161,007 $ 319,277 $ 324,811
Stock-based compensation expense (18,100 ) (9,588 ) (8,329 )
(27,689 ) (15,298 ) Amortization of purchased intangibles (2,017 )
(2,200 ) (2,417 ) (4,217 ) (4,834 ) Restructuring costs (6,007 )
(7,502 ) (343 ) (13,509 ) (367 ) Transaction-related costs (7,887 )
(4,244 ) — (12,131 ) — Costs associated with CEO separation and
related SEC
investigation
— — (64 ) — (399 )
Non-GAAP
total operating expenses $ 128,677 $ 133,055 $ 149,854 $
261,731 $ 303,913
Non-GAAP total operating expenses as a percent
of revenues 44.7 % 45.9 % 47.3 % 45.3 % 47.0 %
GAAP
operating (loss) income $ (1,416 ) $ 7,240 $ 24,918 $ 5,824 $
53,934 Stock-based compensation expense 21,606 11,480 9,711 33,087
18,943 Effect of stock-based compensation expense on warranty rates
235 106 80 341 133 Amortization of purchased intangibles 2,117
2,300 2,517 4,417 5,591 Restructuring costs 6,007 7,502 343 13,509
367 Transaction-related costs 7,887 4,244 — 12,131 — Costs
associated with CEO separation and related SEC
investigation
— — 64 — 399
Non-GAAP
operating income $ 36,436 $ 32,872 $ 37,633 $ 69,309 $ 79,367
Non-GAAP operating margin 12.7 % 11.3 % 11.9 % 12.0 % 12.3 %
POLYCOM, INC.
Summary of Stock-Based Compensation
Expense
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended June
30,
2016
June 30,
2015
June 30,
2016
June 30,
2015
Cost of product revenues $ 1,133 $ 505 $ 1,914 $ 1,460 Cost of
service revenues 2,373 877 3,484 2,185
Stock-based compensation expense in total cost of revenues
3,506 1,382 5,398 3,645 Sales and marketing
7,550 2,698 11,293 5,311 Research and development 4,912 1,915 6,941
4,488 General and administrative 5,638 3,716
9,455 5,499 Stock-based compensation expense in operating
expenses 18,100 8,329 27,689 15,298
Total stock-based compensation expense $ 21,606 $ 9,711 $ 33,087 $
18,943
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version on businesswire.com: http://www.businesswire.com/news/home/20160721006212/en/
Investor Contact:Polycom, Inc.Laura Graves, 1
408-586-4271laura.graves@polycom.comorPress Contact:Polycom,
Inc.Cameron Craig, 1 408-586-3776cameron.craig@polycom.com
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