Plantronics’ (PLT) CEO Kenneth Kannappan on Q1 2015 Results – Earnings Call Transcript

Now for some balance sheet and cash flow highlights. We finished the quarter with $437 million in cash and investments on our balance sheet, and generated over $29 million in cash flow from operations during the period. Of the $437 million in cash and investments at quarter end, approximately $11 million was domestic. We used $12.4 million to repurchase shares during the quarter. Our DSO was 63 days, up from 54 days at the end of Q1 of the prior year. The increase was due in part to less time and focus spent during the quarter on customer collection activities as a result of our ERP implementation in the quarter. We estimate that our ERP focus increased DSO by approximately 7 days. In addition, the timing of billings within the quarter added approximately 3 days to our DSO compared to the same quarter in the prior year.

It should be noted that we are a book-and-ship model with 48-hour delivery targets. As a result, billings linearity trends are driven by relatively short-term fluctuations in demand and seasonality in our business. Backlog numbers and billings linearity should not be used as an indicator, nor are they reflective of any long-term business trends or significant fluctuations in business demand.

Turning to our capital expenditures. Our Q1 investment was approximately $7 million, and slightly over 3% of net revenues. Expenditures include a large deposit on the construction of a new smart working facility in our European headquarters in the Netherlands, Santa Cruz facility improvements and equipment and tooling for our operations. Depreciation expense on a GAAP basis for Q1 was $4.6 million, up $0.6 million from the prior year.

Now turning to the outlook. We believe that total net revenues for our second fiscal year — second fiscal quarter ending in September, will be in the range of $210 million to $220 million. This focus assumes growth — this forecast assumes gross margins to be approximately flat to slightly up from the current quarter. Depending on revenue mix and other factors, we believe our GAAP operating income will be approximately $35 million to $40 million, and non-GAAP operating income of approximately $42 million to $47 million. The GAAP reconciling items we expect in the second quarter include approximately $7 million in stock-based comp expense and purchase accounting amortization before tax. Although the low end of this non-GAAP operating margin range is just below our long-term targeted range, we do expect to make up for this with a higher profitability in the second half of the year. Our guidance includes an expected spend of approximately $1.9 million on GN litigation in Q2.

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As a reminder, we are including GN litigation costs as part of our non-GAAP results based in our policy for non-GAAP reporting. The GN lawsuit is in the discovery phase and the impact to operating income from the associated legal expenses is particularly difficult to forecast. Actual expenses can vary significantly from our forecast.

Similar to last quarter, included in our non-GAAP guidance is a $2 million benefit to operating expenses, which we will receive as part of a binding agreement with one of our competitors to dismiss litigation. In addition, we’ve recently settled a second separate lawsuit in our favor. As a result, our non-GAAP guidance also includes this benefit that is expected to be $2.2 million and will be recorded as a reduction to our operating expenses in the second quarter. Our non-GAAP tax rate for the quarter is expected to be 27%, and we are anticipating a full year tax rate of 27%.

Based on all of the above, in the second quarter, we expect GAAP EPS of $0.60 to $0.68 per share and non-GAAP EPS to be $0.72 to $0.80 per share, on average diluted shares outstanding of approximately $42.5 million.

With that, I’ll open the call for questions.

Question-and-Answer Session


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