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Polycom Reports Third Quarter 2011 EarningsPLEASANTON, CA, Oct 19, 2011 (MARKETWIRE via COMTEX) -- Polycom, Inc. (NASDAQ: PLCM), the global leader in standards-based unified communications (UC), today reported its earnings for the third quarter ended September 30, 2011. Third quarter 2011 consolidated net revenues were a record $379 million, compared to $308 million for the third quarter of 2010. GAAP net income for the third quarter of 2011 was $24 million, or 13 cents per diluted share, compared to $17 million, or 10 cents per diluted share, for the same period last year. Non-GAAP net income for the third quarter of 2011 was $48 million, or 26 cents per diluted share, compared to non-GAAP net income of $34 million, or 19 cents per diluted share, for the third quarter of 2010. Note that the share and per share data for all periods presented in this release have been adjusted to reflect the two-for-one stock split that was effective July 1, 2011. The reconciliation between GAAP net income and non-GAAP net income is provided in the tables at the end of this release. On a geographic basis, consolidated net revenues for the third quarter of 2011 were comprised of: -- 52 percent Americas, or $197 million, an increase of 16 percent year-over-year; -- 24 percent Europe, Middle East, and Africa, or $92 million, an increase of 23 percent year-over-year; and -- 24 percent Asia Pacific, or $90 million, an increase of 41 percent year-over-year. "Polycom has clearly emerged as the premier UC provider that delivers customers a seamless and secure video collaboration solution from immersive telepresence to the desktop to the world's leading mobile devices," said Andrew Miller, Polycom president and CEO. "Leveraging the Polycom RealPresence(TM) Platform, we believe that we are best positioned to capture the network effect of video communications being driven by the demand for real-time collaboration in the workplace and social networks. Our powerful software-based cloud and mobility strategy is beginning to take shape as evidenced by our recent partnership and acquisition announcements." "Polycom generated significant Q3 revenue growth in the emerging geographies and the US Federal market," said Michael Kourey, Polycom's executive vice president, finance and administration, and CFO. "In addition, our acquisition of HP's visual collaboration solution is already performing well, securing new, large customers in Q3 for Polycom's leading full UC portfolio. Although partially offset by lower year-over-year revenue growth in the enterprise customer segment, Polycom generated solid operating results, including a 37% increase in net income year-over-year. Net of the strategic acquisitions and stock repurchases in the period, Polycom exited Q3 with $540 million in cash and investments and no debt." Q3 2011 Business Highlights -- Strong revenue growth in emerging geographies -- up over 50 percent year-over-year -- Key certifications and momentum with US Federal sector, growing bookings nearly 40 percent year-over-year -- Polycom Open Collaboration Network(TM) partners generated approximately 26 percent of revenues -- Completed HP Visual Collaboration acquisition with excellent initial results -- Unveiled cloud-based software strategy, bringing secure HD video collaboration to the broadest range of business, video, mobile, and social networking applications -- Announced partnership with Jive Software to integrate Polycom HD video into Jive's social business platform Earnings Call Details Polycom will hold a conference call today, Oct. 19, 2011, at 5 p.m. EDT/2 p.m. PDT to discuss its third quarter earnings. You may participate by viewing the webcast at www.polycom.com/investors or, for callers in the US and Canada, by calling 800.897.4662; and for callers outside of the US and Canada, by calling 212.231.2915. The pass code for the call is "Polycom." A replay of the call will also be available at www.polycom.com or, for callers in the US and Canada, at 800.633.8284; and for callers outside of the US and Canada, at 402.977.9140. The access number for the replay is 21540950. A replay of the call will be available on www.polycom.com for approximately 12 months. Forward Looking Statements This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding future events, future demand for our products, and the future performance of the Company, including statements regarding Polycom as being best positioned to capture the network effect of video communications and the drivers for such demand. 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 for our customers and partners; 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 general economic conditions and external market factors; the market acceptance of Polycom's products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully integrate our acquisitions into our business; possible delays in the development, availability and shipment of new products; increasing costs and differing uses of capital; changes in key personnel that may cause disruption to the business; any disruptive impact to the Company that may result from new executive hires; 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 June 30, 2011, 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. For example, 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 generally accepted accounting principles in the United States. About Polycom Polycom is the global leader in standards-based unified communications (UC) solutions for telepresence, video, and voice, powered by the Polycom RealPresence platform. The RealPresence platform interoperates with the broadest range of business, mobile and social applications and devices. More than 400,000 organizations trust Polycom solutions to collaborate and meet face to face from any location for more productive and effective engagement with colleagues, partners, customers and prospects. Polycom, together with its broad partner ecosystem, provides customers with the best TCO, scalability, and security -- on-premises, hosted or cloud delivered. Visit www.polycom.com or connect with Polycom on Twitter, Facebook, and LinkedIn. Copyright 2011 Polycom, Inc. All rights reserved. POLYCOM(R), the Polycom "Triangles" 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. GAAP to Non-GAAP Reconciliation (In thousands, except per share amounts) (Unaudited) Three Months Ended --------------------------------------- September 30, 2011 --------------------------------------- GAAP Excluded Non-GAAP ---------- ---------- ---------- Revenues: Product revenues $ 302,435 $ - $ 302,435 Service revenues 76,582 - 76,582 ---------- ---------- ---------- Total revenues 379,017 - 379,017 ---------- ---------- ---------- Cost of revenues: Cost of product revenues 121,271 3,657 (a) 117,614 Cost of service revenues 31,164 1,349 (b) 29,815 ---------- ---------- ---------- Total cost of revenues 152,435 5,006 147,429 ---------- ---------- ---------- Gross profit 226,582 (5,006) 231,588 ---------- ---------- ---------- Operating expenses: Sales and marketing 113,108 7,966 (b) 105,142 Research and development 53,589 4,876 (b) 48,713 General and administrative 22,347 5,833 (c) 16,514 Amortization of purchased intangibles 3,009 3,009 - Restructuring costs 1,264 1,264 - Acquisition-related costs 3,578 3,578 - ---------- ---------- ---------- Total operating expenses 196,895 26,526 170,369 ---------- ---------- ---------- Operating income 29,687 (31,532) 61,219 Other income (expense), net (1,298) - (1,298) ---------- ---------- ---------- Income before provision for income taxes 28,389 (31,532) 59,921 Provision for income taxes 4,669 (6,918) (e) 11,587 ---------- ---------- ---------- Net income $ 23,720 $ (24,614) $ 48,334 ========== ========== ========== Basic net income per share $ 0.13 $ (0.14) $ 0.27 ========== ========== ========== Diluted net income per share $ 0.13 $ (0.13) $ 0.26 ========== ========== ========== Weighted average shares outstanding for basic net income per share 177,249 177,249 ========== ========== Weighted average shares outstanding for diluted net income per share 182,519 182,519 ========== ========== Nine Months Ended --------------------------------------- September 30, 2011 --------------------------------------- GAAP Excluded Non-GAAP ---------- ---------- ---------- Revenues: Product revenues $ 889,362 $ - $ 889,362 Service revenues 199,429 - 199,429 ---------- ---------- ---------- Total revenues 1,088,791 - 1,088,791 ---------- ---------- ---------- Cost of revenues: Cost of product revenues 352,922 11,211 (a) 341,711 Cost of service revenues 82,540 2,975 (b) 79,565 ---------- ---------- ---------- Total cost of revenue 435,462 14,186 421,276 ---------- ---------- ---------- Gross profit 653,329 (14,186) 667,515 ---------- ---------- ---------- Operating expenses: Sales and marketing 320,717 19,191 (b) 301,526 Research and development 147,116 10,991 (b) 136,125 General and administrative 61,993 13,048 (c) 48,945 Amortization of purchased intangibles 6,093 6,093 - Restructuring costs 4,739 4,739 - Acquisition-related costs 7,924 7,924 - ---------- ---------- ---------- Total operating expenses 548,582 61,986 486,596 ---------- ---------- ---------- Operating income 104,747 (76,172) 180,919 Other income (expense), net (3,305) (500) (d) (2,805) ---------- ---------- ---------- Income before provision for income taxes 101,442 (76,672) 178,114 Provision for income taxes 15,201 (23,694) (e) 38,895 ---------- ---------- ---------- Net income $ 86,241 $ (52,978) $ 139,219 ========== ========== ========== Basic net income per share $ 0.49 $ (0.30) $ 0.79 ========== ========== ========== Diluted net income per share $ 0.47 $ (0.30) $ 0.77 ========== ========== ========== Weighted average shares outstanding for basic net income per share 176,325 176,325 ========== ========== Weighted average shares outstanding for diluted net income per share 181,816 181,816 ========== ========== (a) For the three months ended September 30, 2011, the excluded amount includes $2,753 related to the amortization of purchased intangibles for core and existing technologies, $767 for stock-based compensation expense recorded during the period and $137 related to the effect of stock-based compensation on warranty expense rates. For the nine months ended September 30, 2011, the excluded amount includes $8,829 related to the amortization of purchased intangibles for core and existing technologies, $2,017 for stock-based compensation expense recorded during the period and $365 related to the effect of stock-based compensation on warranty expense rates. (b) Excluded amount represents stock-based compensation expense recorded during the period. (c) For the three months ended September 30, 2011, the excluded amount includes $5,486 for stock-based compensation expense recorded during the period and $347 for the legal costs related to the indemnification of a former officer of the Company. For the nine months ended September 30, 2011, the excluded amount includes $11,409 for stock-based compensation expense recorded during the period and $1,639 for the legal costs related to the indemnification of a former officer of the Company. (d) Excluded amount represents the impairment of an investment in a private company. (e) For the three months ended September 30, 2011 the excluded amount represents the tax impact on expenses which are excluded in items (a)-(c) above. For the nine months ended September 30, 2011, the excluded amount represents the tax impact on expenses which are excluded in items (a) - (d) above, as well as a $7,487 benefit related to the resolution of a multi-year tax audit. POLYCOM, INC. GAAP to Non-GAAP Reconciliation (In thousands, except per share amounts) (Unaudited) Three Months Ended ---------------------------------------- September 30, 2010 ---------------------------------------- GAAP Excluded Non-GAAP ----------- ---------- ----------- Revenues: Product revenues $ 255,496 $ - $ 255,496 Service revenues 52,573 - 52,573 ----------- ---------- ----------- Total revenues 308,069 - 308,069 ----------- ---------- ----------- Cost of revenues: Cost of product revenues 99,913 4,044 (a) 95,869 Cost of service revenues 25,371 849 (b) 24,522 ----------- ---------- ----------- Total cost of revenues 125,284 4,893 120,391 ----------- ---------- ----------- Gross profit 182,785 (4,893) 187,678 ----------- ---------- ----------- Operating expenses: Sales and marketing 97,214 7,095 (b) 90,119 Research and development 38,278 2,339 (b) 35,939 General and administrative 19,440 4,322 (c) 15,118 Amortization of purchased intangibles 1,406 1,406 - Restructuring costs 3,301 3,301 - Litigation reserves and payments - - - ----------- ---------- ----------- Total operating expenses 159,639 18,463 141,176 ----------- ---------- ----------- Operating income 23,146 (23,356) 46,502 Other income (expense), net 293 249 (d) 44 ----------- ---------- ----------- Income before provision for income taxes 23,439 (23,107) 46,546 Provision for income taxes 6,171 (6,512) 12,683 ----------- ---------- ----------- Net income $ 17,268 $ (16,595) $ 33,863 =========== ========== =========== Basic net income per share $ 0.10 $ (0.10) $ 0.20 =========== ========== =========== Diluted net income per share $ 0.10 $ (0.09) $ 0.19 =========== ========== =========== Weighted average shares outstanding for basic net income per share 170,626 170,626 =========== =========== Weighted average shares outstanding for diluted net income per share 175,968 175,968 =========== =========== Nine Months Ended --------------------------------------- September 30, 2010 --------------------------------------- GAAP Excluded Non-GAAP ---------- ---------- ---------- Revenues: Product revenues $ 728,348 $ - $ 728,348 Service revenues 150,510 - 150,510 ---------- ---------- ---------- Total revenues 878,858 - 878,858 ---------- ---------- ---------- Cost of revenues: Cost of product revenues 291,463 12,310 (a) 279,153 Cost of service revenues 74,390 2,988 (b) 71,402 ---------- ---------- ---------- Total cost of revenues 365,853 15,298 350,555 ---------- ---------- ---------- Gross profit 513,005 (15,298) 528,303 ---------- ---------- ---------- Operating expenses: Sales and marketing 282,491 20,658 (b) 261,833 Research and development 108,423 7,788 (b) 100,635 General and administrative 55,627 13,013 (c) 42,614 Amortization of purchased intangibles 4,267 4,267 - Restructuring costs 6,574 6,574 - Litigation reserves and payments 1,235 1,235 - ---------- ---------- ---------- Total operating expenses 458,617 53,535 405,082 ---------- ---------- ---------- Operating income 54,388 (68,833) 123,221 Other income (expense), net (7,931) (5,324) (d) (2,607) ---------- ---------- ---------- Income before provision for income taxes 46,457 (74,157) 120,614 Provision for income taxes 11,174 (20,111) 31,285 ---------- ---------- ---------- Net income $ 35,283 $ (54,046) $ 89,329 ========== ========== ========== Basic net income per share $ 0.21 $ (0.32) $ 0.53 ========== ========== ========== Diluted net income per share $ 0.20 $ (0.31) $ 0.51 ========== ========== ========== Weighted average shares outstanding for basic net income per share 170,090 170,090 ========== ========== Weighted average shares outstanding for diluted net income per share 175,728 175,728 ========== ========== (a) For the three months ended September 30, 2010, the excluded amount includes $3,321 related to the amortization of purchased intangibles for core and existing technologies, $610 for stock-based compensation expense recorded during the period and $113 related to the effect of stock-based compensation on warranty expense rates. For the nine months ended September 30, 2010, the excluded amount includes $9,996 related to the amortization of purchased intangibles for core and existing technologies, $1,968 for stock-based compensation expense recorded during the period and $346 related to the effect of stock-based compensation on warranty expense rates. (b) Excluded amount represents stock-based compensation expense recorded during the period. (c) For the three months ended September 30, 2010, the excluded amount includes $3,904 for stock-based compensation expense recorded during the period and $418 for severance. legal and other costs associated with the CEO transition in May 2010. For the nine months ended September 30, 2010, the excluded amount includes $9,008 for stock-based compensation expense recorded during the period and $4,005 for severance, legal and other costs associated with the CEO transition in May 2010. (d) For the three months ended September 30, 2010, the excluded amount represents the net gain realized during the period on preferred equity securities for which we previously recognized a loss as the securities were deemed to be other than temporarily impaired. For the nine months ended September 30, 2010, the excluded amount represents the loss recognized during the period on preferred securities considered to be other than temporarily impaired, net of any subsequent realized gains. POLYCOM, INC. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) September 30, December 31, 2011 2010 -------------- -------------- ASSETS Current assets Cash and cash equivalents $ 289,016 $ 324,188 Short-term investments 202,181 170,154 Trade receivables, net 205,968 154,507 Inventories 110,829 113,994 Deferred taxes 33,939 32,357 Prepaid expenses and other current assets 50,292 41,884 -------------- -------------- Total current assets 892,225 837,084 Property and equipment, net 120,532 110,321 Long-term investments 48,345 41,316 Goodwill and purchased intangibles 645,793 519,685 Deferred taxes 16,568 18,388 Other assets 20,884 20,611 -------------- -------------- Total assets $ 1,744,347 $ 1,547,405 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 100,563 $ 90,890 Accrued payroll and related liabilities 35,147 35,222 Deferred revenue 132,071 104,919 Other accrued liabilities 53,013 54,651 -------------- -------------- Total current liabilities 320,794 285,682 Non-current liabilities Deferred revenue 72,600 55,292 Taxes payable 15,285 16,690 Deferred taxes 802 2,057 Other non-current liabilities 12,986 12,714 -------------- -------------- Total liabilities 422,467 372,435 Stockholders' equity 1,321,880 1,174,970 -------------- -------------- Total liabilities and stockholders' equity $ 1,744,347 $ 1,547,405 ============== ============== POLYCOM, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended -------------------- -------------------- September September September September 30, 30, 30, 30, 2011 2010 2011 2010 --------- ---------- --------- --------- Revenues: Product revenues $ 302,435 $ 255,496 $ 889,362 $ 728,348 Service revenues 76,582 52,573 199,429 150,510 --------- ---------- --------- --------- Total revenues 379,017 308,069 1,088,791 878,858 --------- ---------- --------- --------- Cost of revenues: Cost of product revenues 121,271 99,913 352,922 291,463 Cost of service revenues 31,164 25,371 82,540 74,390 --------- ---------- --------- --------- Total cost of revenues 152,435 125,284 435,462 365,853 --------- ---------- --------- --------- Gross profit 226,582 182,785 653,329 513,005 --------- ---------- --------- --------- Operating expenses: Sales and marketing 113,108 97,214 320,717 282,491 Research and development 53,589 38,278 147,116 108,423 General and administrative 22,347 19,440 61,993 55,627 Amortization of purchased intangibles 3,009 1,406 6,093 4,267 Restructuring costs 1,264 3,301 4,739 6,574 Acquisition-related expenses 3,578 - 7,924 - Litigation reserves and payments - - - 1,235 --------- ---------- --------- --------- Total operating expenses 196,895 159,639 548,582 458,617 --------- ---------- --------- --------- Operating income 29,687 23,146 104,747 54,388 Other income (expense), net (1,298) 293 (3,305) (7,931) --------- ---------- --------- --------- Income before provision for income taxes 28,389 23,439 101,442 46,457 Provision for income taxes 4,669 6,171 15,201 11,174 --------- ---------- --------- --------- Net income $ 23,720 $ 17,268 $ 86,241 $ 35,283 ========= ========== ========= ========= Basic net income per share $ 0.13 $ 0.10 $ 0.49 $ 0.21 ========= ========== ========= ========= Diluted net income per share $ 0.13 $ 0.10 $ 0.47 $ 0.20 ========= ========== ========= ========= Weighted average shares outstanding for basic net income per share 177,249 170,626 176,325 170,090 ========= ========== ========= ========= Weighted average shares outstanding for diluted net income per share 182,519 175,968 181,816 175,728 ========= ========== ========= ========= POLYCOM, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended ---------------------------- September 30, September 30, 2011 2010 ------------- ------------- Cash flows from operating activities: Net income $ 86,241 $ 35,283 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 38,732 29,728 Amortization of purchased intangibles 14,943 14,263 Provision for excess and obsolete inventories 6,189 3,337 Non-cash stock based compensation 46,583 42,410 Impairment of private company investments 500 - Excess tax benefits from stock-based compensation (13,330) (6,649) Write down of investments other than temporarily impaired - 6,530 Loss on disposals of property and equipment 738 215 Changes in assets and liabilities, net of the effect of acquisitions: Trade receivables (49,553) (14,621) Inventories 1,261 (34,217) Deferred taxes (1,383) (5,068) Prepaid expenses and other assets (4,705) (24,353) Accounts payable 9,466 19,323 Taxes payable 11,553 3,571 Other accrued liabilities 30,395 31,913 ------------- ------------- Net cash provided by operating activities 177,630 101,665 ------------- ------------- Cash flows from investing activities: Purchases of property and equipment (45,404) (51,816) Purchases of investments (306,199) (291,613) Proceeds from sale of investments 31,687 98,311 Proceeds from maturities of investments 235,412 138,894 Net cash paid in purchase acquisitions (139,041) - ------------- ------------- Net cash used in investing activities (223,545) (106,224) ------------- ------------- Cash flows from financing activities: Proceeds from issuance of common stock under employee option and stock purchase plans 40,495 43,796 Repurchase of common stock (43,082) (69,264) Excess tax benefits from stock-based compensation 13,330 6,649 ------------- ------------- Net cash provided by (used in) financing activities 10,743 (18,819) ------------- ------------- Net decrease in cash and cash equivalents (35,172) (23,378) Cash and cash equivalents, beginning of period 324,188 331,098 ------------- ------------- Cash and cash equivalents, end of period $ 289,016 $ 307,720 ============= ============= Investor Contact: Laura Graves Polycom, Inc. 925.924.5630 [email protected] Press Contact: Shawn Dainas Polycom, Inc. 925.924.5676 [email protected] SOURCE: Polycom mailto:[email protected] mailto:[email protected] |