POLYCOM INC - FORM 8-K - EX-99.1

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8-K - 8-K - POLYCOM INC	plcm-8k_20160126.htm

Exhibit 99.1

Investor Contact:		Laura Graves
		Polycom, Inc.
		1.408.586.4271
		laura.graves@polycom.com

Press Contact:		Michael Rose
		Polycom, Inc.
		1.408.586.3839
		michael.rose@polycom.com

Polycom Announces Financial Results for Fourth Quarter and Fiscal Year 2015

Full Year Operating Margin, Net Income and EPS Grew Year-over-Year

SAN JOSE, Calif. – January 26, 2016 – Polycom, Inc. (Nasdaq: PLCM) today reported fourth quarter 2015 revenues of $317 million, non-GAAP net income of $32 million and non-GAAP earnings per diluted share of 23 cents. GAAP net income for the fourth quarter was $14 million, or 11 cents per diluted share on a GAAP basis. Polycom also reported full year 2015 revenues of $1.3 billion, non-GAAP net income of $123 million and non-GAAP earnings per diluted share of 90 cents. GAAP net income for the full year 2015 was $69 million, or 50 cents per diluted share on a GAAP basis. Polycom’s quarterly and full year financial results, along with a reconciliation of GAAP to non-GAAP performance, are provided in the tables at the end of this press release.

“Polycom reported in-line quarterly performance and continued year-over-year improvement in non-GAAP operating margin,” said Peter Leav, President and Chief Executive Officer. “We are excited with the positive customer feedback and long term opportunities created by our newest product innovations.”

“Polycom worked diligently to improve the flexibility of its financial model in 2015,” said Laura Durr, Chief Financial Officer and Executive Vice President. “These efforts allowed us to significantly improve company operating performance for the second year in a row.” Polycom generated $120 million in operating cash flow and repurchased $90 million in common stock in 2015.

On a comparative basis, consolidated financial results were:

($ in millions, except per share data)	Q4 2015		Q3 2015		Q4 2014		Quarter-Over-Quarter Change			Year-Over-Year Change
Revenues	$	316.8	$	303.1	$	348.9		5	%		(9	)%
Non-GAAP Net Income	$	32.1	$	28.9	$	33.6		11	%		(4	)%
Non-GAAP EPS	$	0.23	$	0.21	$	0.24		10	%		(4	)%
GAAP Net Income	$	14.5	$	13.6	$	20.5		7	%		(29	)%
GAAP EPS	$	0.11	$	0.10	$	0.15		10	%		(27	)%

On a geographic basis, consolidated revenues were comprised of:

($ in millions)	Q4 2015			Q3 2015			Q4 2014			Quarter-Over-Quarter Change			Year-Over-Year Change
Americas	$	153.4		$	148.2		$	165.3			4	%		(7	)%
% of revenues		48	%		49	%		47	%
Europe, Middle East & Africa (EMEA)		84.9			77.3			93.7			10	%		(9	)%
% of revenues		27	%		25	%		27	%
Asia Pacific		78.6			77.7			89.9			1	%		(13	)%
% of revenues		25	%		26	%		26	%
Totals *	$	316.8		$	303.1		$	348.9			5	%		(9	)%

* may not foot due to rounding

By product category, inclusive of its service component, consolidated revenues were comprised of:

($ in millions)	Q4 2015			Q3 2015			Q4 2014			Quarter-Over-Quarter Change			Year-Over-Year Change
UC Group Systems	$	188.1		$	184.9		$	219.2			2	%		(14	)%
% of revenues		59	%		61	%		63	%
UC Personal Devices		69.7			63.3			66.6			10	%		5	%
% of revenues		22	%		21	%		19	%
UC Platform		59.1			55.0			63.1			8	%		(6	)%
% of revenues		19	%		18	%		18	%
Totals *	$	316.8		$	303.1		$	348.9			5	%		(9	)%

* may not foot due to rounding

In Q4 2015, Polycom generated a total of $31 million in operating cash flow. Cash and investments at the end of Q4 2015 totaled $666 million, of which approximately $232 million is located in the United States. Net of existing debt, cash and investments at the end of Q4 2015 totaled $431 million.

Earnings Call Details

Polycom will hold a conference call today, January 26, 2016, at 5:00 p.m. ET/2:00 p.m. PT to discuss fourth quarter 2015 financial results and guidance for the first quarter 2016. You may participate by listening to the webcast at www.polycom.com/investors or, for callers in the United States and Canada; you may participate by calling +1.800.768.9711 and for callers outside of the United States and Canada, by calling +1.303.223.0120. A replay of the call will also be available at www.polycom.com/investors or, for callers in the United States and Canada, at +1.800.633.8284 and, for callers outside of the United States and Canada, at +1.402.977.9140. The access number for the replay is 21803726.

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 the long term opportunities created by our newest product innovations and improving operating performance. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including 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 the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.

Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed and will be delivered on a when and if available basis.

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 income and 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 income or diluted net 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 415,000 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						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Revenues:
Product revenues	$	226,861		$	252,593		$	893,762		$	960,726
Service revenues		89,979			96,332			373,463			384,428
Total revenues		316,840			348,925			1,267,225			1,345,154
Cost of revenues:
Cost of product revenues		102,325			109,880			390,618			406,625
Cost of service revenues		33,397			37,913			137,854			153,520
Total cost of revenues		135,722			147,793			528,472			560,145
Gross profit		181,118			201,132			738,753			785,009
Operating expenses:
Sales and marketing		82,525			99,004			349,732			388,761
Research and development		48,830			48,293			191,456			196,495
General and administrative		22,469			25,711			88,625			99,886
Amortization of purchased intangibles		2,262			2,418			9,495			9,781
Restructuring costs		12,229			3,460			12,809			40,347
Litigation reserves and payments		—			—			—			3,130
Transaction-related costs		574			—			574			156
Total operating expenses		168,889			178,886			652,691			738,556
Operating income		12,229			22,246			86,062			46,453
Interest and other income (expense), net
Interest expense		(1,586	)		(1,489	)		(6,131	)		(5,893	)
Other income (expense), net		1,940			627			4,276			2,455
Interest and other income (expense), net		354			(862	)		(1,855	)		(3,438	)
Income before provision for income taxes		12,583			21,384			84,207			43,015
Provision for (benefit from) income taxes		(1,911	)		902			15,295			956
Net income	$	14,494		$	20,482		$	68,912		$	42,059

Basic net income per share	$	0.11		$	0.15		$	0.52		$	0.31

Diluted net income per share	$	0.11		$	0.15		$	0.50		$	0.30

Number of shares used in computation of net income per share:
Basic		132,545			135,785			133,581			136,801
Diluted		137,203			140,802			137,394			142,005

POLYCOM, INC.

Reconciliation of GAAP to Non-GAAP Net Income

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended									Twelve Months Ended
	December 31, 2015			September 30, 2015			December 31, 2014			December 31, 2015			December 31, 2014
GAAP net income	$	14,494		$	13,573		$	20,482		$	68,912		$	42,059
Amortization of purchased intangibles		2,361			2,499			3,149			10,451			12,816
Restructuring costs		12,229			213			3,460			12,809			40,347
Litigation reserves and payments		—			—			—			—			3,130
Transaction-related costs		574			—			—			574			156
Stock-based compensation expense		12,237			13,959			13,782			45,139			47,960
Effect of stock-based compensation on warranty rates		107			96			84			336			494
Costs associated with CEO separation and related SEC investigation		—			22			208			421			2,159
Income tax effect of non-GAAP exclusions		(9,946	)		(1,451	)		(7,548	)		(15,493	)		(29,093	)
Non-GAAP net income	$	32,056		$	28,911		$	33,617		$	123,149		$	120,028
GAAP net income per share:
Basic	$	0.11		$	0.10		$	0.15		$	0.52		$	0.31
Diluted	$	0.11		$	0.10		$	0.15		$	0.50		$	0.30
Non-GAAP net income per share:
Basic	$	0.24		$	0.22		$	0.25		$	0.92		$	0.88
Diluted	$	0.23		$	0.21		$	0.24		$	0.90		$	0.85
Number of shares used in computation of net income per share:
Basic		132,545			132,944			135,785			133,581			136,801
Diluted		137,203			135,792			140,802			137,394			142,005

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	December 31, 2015		December 31, 2014
ASSETS
Current assets
Cash and cash equivalents	$	435,093	$	443,132
Short-term investments		184,242		185,783
Trade receivables, net		187,888		169,400
Inventories		89,392		100,328
Deferred taxes		—		38,805
Prepaid expenses and other current assets		52,852		60,539
Total current assets		949,467		997,987
Property and equipment, net		101,853		109,195
Long-term investments		46,484		59,197
Goodwill and purchased intangibles, net		572,840		583,798
Deferred taxes		90,515		54,019
Other assets		21,737		25,071
Total assets	$	1,782,896	$	1,829,267
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	73,472	$	108,172
Accrued payroll and related liabilities		38,781		42,901
Taxes payable		4,342		4,056
Deferred revenue		170,559		173,532
Current portion of long-term debt		5,717		5,717
Other accrued liabilities		84,660		86,193
Total current liabilities		377,531		420,571
Long-term deferred revenue		86,191		89,366
Taxes payable		9,983		11,719
Deferred taxes		135		173
Long-term debt		228,799		234,516
Other non-current liabilities		28,111		49,189
Total liabilities		730,750		805,534
Stockholders' equity		1,052,146		1,023,733
Total liabilities and stockholders' equity	$	1,782,896	$	1,829,267

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Twelve Months Ended
	December 31, 2015			December 31, 2014
Cash flows from operating activities:
Net income	$	68,912		$	42,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		51,682			57,412
Amortization of purchased intangibles		10,502			12,891
Amortization of capitalized software development costs for products to be sold		3,102			1,704
Amortization of debt issuance costs		532			533
Amortization of discounts and premiums on investments, net		2,095			1,964
Provision for doubtful accounts		—			600
Write-down of excess and obsolete inventories		12,112			6,532
Stock-based compensation expense		45,139			47,960
Excess tax benefits from stock-based compensation expense		(4,431	)		(3,371	)
Loss on disposal of property and equipment		1,252			5,007
Changes in assets and liabilities:
Trade receivables		(19,022	)		13,479
Inventories		(1,677	)		(3,551	)
Deferred taxes		(6,843	)		(17,792	)
Prepaid expenses and other assets		8,948			(8,456	)
Accounts payable		(31,470	)		19,006
Taxes payable		10,465			9,825
Other accrued liabilities and deferred revenue		(31,749	)		19,624
Net cash provided by operating activities		119,549			205,426
Cash flows from investing activities:
Purchases of property and equipment		(47,562	)		(50,133	)
Capitalized software development costs for products to be sold		(5,144	)		(4,807	)
Purchases of investments		(247,303	)		(269,842	)
Proceeds from sale of investments		18,589			45,492
Proceeds from maturities of investments		240,684			168,328
Net cash used in investing activities		(40,736	)		(110,962	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		21,879			23,729
Payments on debt		(6,250	)		(6,250	)
Purchase and retirement of common stock under share repurchase plan		(89,953	)		(49,981	)
Purchase and retirement of common stock for tax withholdings on vesting of employee stock-based awards		(15,335	)		(14,830	)
Excess tax benefits from stock-based compensation expense		4,431			3,371
Net cash used in financing activities		(85,228	)		(43,961	)
Effect of exchange rate changes on cash and cash equivalents		(1,624	)		—
Net (decrease) increase in cash and cash equivalents		(8,039	)		50,503
Cash and cash equivalents, beginning of period		443,132			392,629
Cash and cash equivalents, end of period	$	435,093		$	443,132

POLYCOM, INC.

Selected Summary Data

(In millions except per share amounts and headcount)

(Unaudited)

	December 31, 2015		September 30, 2015		December 31, 2014
Balance Sheet Highlights
Cash and investments	$	666	$	655	$	688
Number of shares outstanding		133		132		135
Cash and investments per share	$	5.02	$	4.95	$	5.09
Debt	$	235	$	236	$	240
Operating cash flow - quarterly	$	31	$	26	$	91
Operating cash flow - trailing 12 months	$	120	$	180	$	205
DSO (Days Sales Outstanding)		54		47		44
Inventory turns - GAAP		6.1		5.0		5.9
Inventory turns - non-GAAP		6.0		4.9		5.8
Deferred revenue	$	257	$	254	$	263
Share repurchases:
Quarter-to-date share repurchases - shares		—		2.2		1.9
Quarter-to-date share repurchases - dollars	$	—	$	25	$	25
Year-to-date share repurchases - shares⁽¹⁾		7.0		7.0		5.4
Year-to-date share repurchases - dollars	$	90	$	90	$	50
Remaining authorization for share repurchases ⁽²⁾	$	60	$	60	$	150
Ending headcount		3,451		3,511		3,525

	For the Three Months Ended
	December 31, 2015			September 30, 2015			December 31, 2014
Income Statement Highlights
GAAP:
Revenues	$	317		$	303		$	349
Gross margin		57.2	%		59.0	%		57.6	%
Operating expenses	$	169		$	159		$	179
Operating margin		3.9	%		6.6	%		6.4	%
Diluted EPS	$	0.11		$	0.10		$	0.15
Non-GAAP:
Revenues	$	317		$	303		$	349
Gross margin		57.9	%		59.7	%		58.4	%
Operating expenses	$	144		$	144		$	161
Operating margin		12.5	%		12.1	%		12.3	%
Diluted EPS	$	0.23		$	0.21		$	0.24

(1)	The final settlement of shares under prior Accelerated Share Repurchase program was completed in the three month period ended June 30, 2014, for which funds were advanced in the three month period ended December 31, 2013.

(2)	Polycom is not obligated to purchase any specific number of shares under its Share Repurchase Program and the program may be modified, suspended or discontinued at any time.

POLYCOM, INC.

Reconciliations of GAAP Measures to Non-GAAP Measures

(In thousands)

(Unaudited)

	Three Months Ended									Twelve Months Ended
	December 31, 2015			September 30, 2015			December 31, 2014			December 31, 2015			December 31, 2014
GAAP cost of revenues used in inventory turns	$	135,722		$	124,220		$	147,793		$	528,472		$	560,145
Stock-based compensation expense		(1,997	)		(1,986	)		(1,764	)		(7,628	)		(6,756	)
Effect of stock-based compensation expense on warranty rates		(107	)		(96	)		(84	)		(336	)		(494	)
Amortization of purchased intangibles		(99	)		(100	)		(731	)		(956	)		(3,035	)
Non-GAAP cost of revenues used in inventory turns	$	133,519		$	122,038		$	145,214		$	519,552		$	549,860
GAAP gross profit	$	181,118		$	178,890		$	201,132		$	738,753		$	785,009
Stock-based compensation expense		1,997			1,986			1,764			7,628			6,756
Effect of stock-based compensation expense on warranty rates		107			96			84			336			494
Amortization of purchased intangibles		99			100			731			956			3,035
Non-GAAP gross profit	$	183,321		$	181,072		$	203,711		$	747,673		$	795,294
Non-GAAP gross margin		57.9	%		59.7	%		58.4	%		59.0	%		59.1	%

GAAP sales and marketing expense	$	82,525		$	86,915		$	99,004		$	349,732		$	388,761
Stock-based compensation expense		(3,659	)		(4,217	)		(4,496	)		(13,187	)		(14,893	)
Non-GAAP sales and marketing expense	$	78,866		$	82,698		$	94,508		$	336,545		$	373,868
Non-GAAP sales and marketing expense as a percent of revenues		24.9	%		27.3	%		27.1	%		26.6	%		27.8	%

GAAP research and development expense	$	48,830		$	46,744		$	48,293		$	191,456		$	196,495
Stock-based compensation expense		(2,094	)		(2,725	)		(2,995	)		(9,307	)		(10,299	)
Non-GAAP research and development expense	$	46,736		$	44,019		$	45,298		$	182,149		$	186,196
Non-GAAP research and development expense as a percent of revenues		14.8	%		14.5	%		13.0	%		14.4	%		13.8	%

GAAP general and administrative expense	$	22,469		$	22,720		$	25,711		$	88,625		$	99,886
Stock-based compensation expense		(4,487	)		(5,031	)		(4,527	)		(15,017	)		(16,012	)
Costs associated with CEO separation and related SEC investigation		—			(22	)		(208	)		(421	)		(2,159	)
Non-GAAP general and administrative expense	$	17,982		$	17,667		$	20,976		$	73,187		$	81,715
Non-GAAP general and administrative expense as a percent of revenues		5.7	%		5.8	%		6.0	%		5.8	%		6.1	%

GAAP total operating expenses	$	168,889		$	158,991		$	178,886		$	652,691		$	738,556
Stock-based compensation expense		(10,240	)		(11,973	)		(12,018	)		(37,511	)		(41,204	)
Amortization of purchased intangibles		(2,262	)		(2,399	)		(2,418	)		(9,495	)		(9,781	)
Restructuring costs		(12,229	)		(213	)		(3,460	)		(12,809	)		(40,347	)
Litigation reserves and payments		—			—			—			—			(3,130	)
Transaction-related costs		(574	)		—			—			(574	)		(156	)
Costs associated with CEO separation and related SEC investigation		—			(22	)		(208	)		(421	)		(2,159	)
Non-GAAP total operating expenses	$	143,584		$	144,384		$	160,782		$	591,881		$	641,779
Non-GAAP total operating expenses as a percent of revenues		45.3	%		47.6	%		46.1	%		46.7	%		47.7	%

GAAP operating income	$	12,229		$	19,899		$	22,246		$	86,062		$	46,453
Stock-based compensation expense		12,237			13,959			13,782			45,139			47,960
Effect of stock-based compensation expense on warranty rates		107			96			84			336			494
Amortization of purchased intangibles		2,361			2,499			3,149			10,451			12,816
Restructuring costs		12,229			213			3,460			12,809			40,347
Litigation reserves and payments		—			—			—			—			3,130
Transaction-related costs		574			—			—			574			156
Costs associated with CEO separation and related SEC investigation		—			22			208			421			2,159
Non-GAAP operating income	$	39,737		$	36,688		$	42,929		$	155,792		$	153,515
Non-GAAP operating margin		12.5	%		12.1	%		12.3	%		12.3	%		11.4	%

POLYCOM, INC.

Summary of Stock-Based Compensation Expense

(In thousands)

(Unaudited)

	Three Months Ended				Twelve Months Ended
	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Cost of product revenues	$	726	$	635	$	2,917	$	2,463
Cost of service revenues		1,271		1,129		4,711		4,293
Stock-based compensation expense in total cost of revenues		1,997		1,764		7,628		6,756
Sales and marketing		3,659		4,496		13,187		14,893
Research and development		2,094		2,995		9,307		10,299
General and administrative		4,487		4,527		15,017		16,012
Stock-based compensation expense in operating expenses		10,240		12,018		37,511		41,204
Total stock-based compensation expense	$	12,237	$	13,782	$	45,139	$	47,960

POLYCOM INC - FORM 8-K - EX-99.1 - January 26, 2016

Attached files

POLYCOM INC Reports