Poly (NYSE: POLY), a global outfitter of professional-grade audio and video technology, today announced third quarter results for the period ended January 1, 2022.
Highlights for the third quarter include:
The Company delivered GAAP revenues of $410M, while supply chain constraints drove increased backlog across all product categories. The demand environment remains robust, as businesses worldwide prepare for a return to office and adjust to a hybrid work model.
Poly continues to strengthen its strategic alliances with Microsoft, Zoom, and others. This quarter, Poly introduced a series of Microsoft Teams Rooms bundles incorporating Poly’s DirectorAI technology, which intelligently frames in-conference room participants offering a more dynamic and equitable experience for all. These Poly Studio Kits, featuring Dell or Lenovo hardware, are simple to buy, and easy to deploy.
Additionally, the Company is forging new alliances in key, high-growth markets. In China, Poly strengthened its Tencent strategic alliance and achieved Tencent certification for Studio USB, Sync 20/40, and Voyager Focus UC, and expects integration of the Tencent Meeting app onto the Studio X platform later this spring.
The Company announced a multi-year Red Bull Racing sponsorship for the 2022 and 2023 Formula 1 seasons. Under the terms of the sponsorship, Poly will be Red Bull Racing’s exclusive headset and video conferencing hardware supplier and provide Poly technology to fuel the organization’s business communications, in addition to having a logo sponsorship on the team’s communications headsets.
Poly announced the Poly RENEW Program, allowing customers in the U.S. and Canada to trade-in select Poly phones and receive a credit for the purchase of new Poly gear, supporting the environment and their return-to-office strategies.
“Poly continues to benefit from a collaboration demand supercycle,” said Dave Shull, Poly President and CEO. “Offices around the world are under-equipped and filled with legacy communications technologies that are not cloud-enabled, not ready for video, and not adapted to the multiple communications platforms used by their employees and clients. Whether in the office, or with teams operating remotely, every business needs to connect people, partners, and customers – seamlessly. That’s what Poly does.”
“As global supply chain and logistics challenges continue into the new year, we are balancing investments for growth and scale with near-term profitability to ensure we can capitalize on this secular demand environment,” continued Chief Financial Officer Chuck Boynton. “We continue to take steps to optimize our operating model and control what we can, in a volatile environment. We’ve conservatively managed our cash, favorably amended the terms on our undrawn credit facility, and instituted price increases. Taken together, as supply chain disruptions abate, we expect this operating leverage to result in significantly improved financial performance.”
1 For further information on supplemental non-GAAP metrics, refer to the Use of Non-GAAP Financial Information and
Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures sections below.
Business Outlook
Global supply chain pressures, including both semiconductor chip shortages and transportation constraints, have impacted companies worldwide, and we expect we will continue to experience ongoing tightness and volatility in our supply chain, in turn continuing to compromise near-term visibility.
Based on current supply and expected availability of specific components, and assuming no incremental negative effects from COVID or its variants, the Company expects the following full-year results for fiscal 2022 (all amounts assume currency rates remain stable):
GAAP Net Revenue for Full Fiscal Year 2022 of $1.675B to $1.70B
Adjusted EBITDA1 for Full Fiscal Year 2022 of $220M to $230M
Non-GAAP Diluted EPS1,2 for Full Fiscal Year 2022 of $2.45 to $2.65
1 Full-year FY22 Adjusted EBITDA and non-GAAP diluted EPS guidance excludes estimated intangibles amortization expense of $113.8 million. With respect to adjusted EBITDA and diluted EPS guidance, the Company has determined that it is unable to provide quantitative reconciliations of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures with a reasonable degree of confidence in their accuracy without unreasonable effort, as items including stock-based compensation, litigation gains and losses, and impacts from discrete tax adjustments and tax laws are inherently uncertain and depend on various factors, many of which are beyond the Company’s control.
2 Non-GAAP diluted EPS guidance assumes approximately 44 million diluted average weighted shares and a non-GAAP effective tax rate of 7% to 9%.
Conference Call and Earnings Presentation
Poly is providing an earnings presentation in combination with this press release. The presentation is offered to provide shareholders and analysts with additional detail for analyzing results. The presentation will be available in the Investor Relations section of our corporate website at investor.poly.com along with this press release. A reconciliation of our GAAP to non-GAAP results is provided at the end of this press release.
We have scheduled a webcast to discuss third quarter fiscal year 2022 financial results. The webcast will take place today, February 8, 2022, at 5:30 AM (Pacific Time), 8:30 AM (Eastern Time). All interested investors and potential investors in Poly stock are invited to join.
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, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, and non-GAAP diluted EPS. These non-GAAP measures are adjusted from the most directly comparable GAAP measures to exclude certain non-cash transactions and activities that are not reflective of our ongoing core operations, as further described below. We believe the use of each of these non-GAAP measures provides meaningful supplemental information in assessing our operating performance and liquidity across reporting periods on a consistent basis and are used by management in evaluating financial performance and in strategic planning. These non-GAAP measures may differ from those used by other companies and are not intended to be considered in isolation of, or as a substitute for, financial results prepared in accordance with GAAP. Certain prior year amounts have been reclassified for consistency with current year presentation.
Non-GAAP Adjustments
Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018. Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Services revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidance.
Stock compensation expense: Represents the non-cash expense associated with the Company’s grant of stock-based awards to employees and non-employee directors. Restructuring and other related charges: Represents costs associated with restructuring plans and reorganization actions aimed at improving the Company’s overall cost structure, realigning resources consistent with its global strategy, and reducing expenses to enable strategic investments in revenue growth. These costs are not reflective of ongoing operations and are primarily associated with reductions in the Company’s workforce, facility related charges due to the closure or consolidation of offices, and other related costs, including legal and advisory services.
Deferred compensation mark to market: Represents gains and losses driven by the remeasurement of assets and liabilities associated with the Company’s deferred compensation plans. Gains and losses on plan liabilities are recognized within operating expenses, while the offsetting gains and losses on plan assets are recognized within other non-operating income, net. Loss, net on litigation settlements: The Company may be involved in various litigation, claims and proceedings that result in payments or recoveries from such proceedings.
The related gains and losses incurred are excluded as they are not reflective of ongoing operations. Income tax effects: Represents the tax effects of non-GAAP adjustments and other adjustments, depending on the nature of the underlying items. The exclusion of the above-mentioned items eliminates the effect of certain non-recurring and unusual tax items that do not necessarily reflect the Company’s long-term operations. The income tax effects for unusual tax items primarily represents the impact of the discrete tax benefit associated with an IP transfer between wholly-owned subsidiaries, changes in uncertain tax positions, and the full valuation allowance on United States federal and state deferred tax assets.
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