EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

Investor Contact:    Michael R. Kourey, CFO   
   Polycom, Inc.   
   925-924-5742   
   mkourey@polycom.com   
Press Contact:    Caroline Japic   
   Polycom, Inc.   
   408-474-2265   
   caroline.japic@polycom.com   

Polycom Reports First Quarter 2010 Earnings

Q1 Revenue Growth of 23 Percent Year-over-Year to a Record $276 Million

PLEASANTON, Calif. April 21, 2010 Polycom, Inc. (Nasdaq: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the first quarter ended March 31, 2010.

First quarter 2010 consolidated net revenues were a record $276 million, compared to $225 million for the first quarter of 2009. GAAP net income for the first quarter of 2010 was $5 million, or 6 cents per diluted share, compared to $8 million, or 10 cents per diluted share, for the same period last year.

Non-GAAP net income for the first quarter of 2010 was $25 million, or 29 cents per diluted share. This compares to Non-GAAP net income of $23 million, or 27 cents per diluted share, for the first quarter of 2009.

The reconciliation between GAAP net income and Non-GAAP net income is provided in the tables at the end of this release.

On a product line basis, consolidated net revenues for the first quarter of 2010 were comprised of:

 

 

69 percent video solutions, or $189 million (53 percent video communications, or $146 million, and 16 percent network systems, or $43 million); and

 

 

31 percent voice communications, or $87 million.

On a product line basis, consolidated net revenues for the first quarter of 2009 were comprised of:

 

 

69 percent video solutions, or $156 million (55 percent video communications, or $124 million, and 14 percent network systems, or $32 million); and

 

 

31 percent voice communications, or $69 million.

“We believe Polycom’s improving growth trajectory, particularly over the past two quarters, validates the key thesis points of our strategic investment plan. Specifically, Polycom generated record revenues in the first quarter of 2010, the Company’s fourth consecutive quarter of sequential growth and second consecutive quarter of growth on a year-over-year basis,” said Robert Hagerty, Polycom chairman and CEO. “In particular, we have already gained significant traction with our go-to-market initiative, recruiting top talent and increasing productivity at higher than anticipated rates. Also, although early in the cycle, we are beginning to see positive results from our new strategic partnerships. We also announced a new relationship with HP that promises to yield significant customer wins over the coming quarters. In fact, we see the Polycom Open Collaboration Network as a key mechanism to galvanize the growth of our integrated and unparalleled solution.”


“Product innovation also continued at a fast pace in the first quarter of 2010. For instance, we announced breakthroughs in both the user experience of our HD video solutions and in reducing the total cost of ownership (TCO). With our new H.264 High Profile software, we have cut the bandwidth requirements for 1080p HD video approximately in half, dramatically improving TCO for our customers and further enhancing the already robust return on investment of our solutions. Finally, we gained US government UC APL certification for our RMX network platform and we launched our CMA Desktop video solution for the Apple Mac. Bottom line, we have an extraordinary team, our execution against the strategic investment plan is on-target, and we believe we are positioned well to seize the tremendous market opportunity in the unified collaboration space over time,” concluded Hagerty.

“In the first quarter, strong customer demand drove sharp year-over-year growth in revenues, backlog and deferred revenues,” said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. “As a result of this strong operating performance and working capital management, we generated positive operating cash flow of $21 million, representing Polycom’s 49th consecutive quarter of positive operating cash flow. We exited Q1 with $470 million in cash and investments and no debt.”

About Polycom

Polycom, Inc. (Nasdaq: PLCM) is the global leader in telepresence, video, and voice solutions and a visionary in communications that empower people to connect and collaborate everywhere. Please visit www.polycom.com for more information.

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 the validation of and future execution against the Company’s strategic investment plan and new strategic partnerships, expected customer wins from our new strategic partnerships, including the recently-announced HP relationship, the Polycom Open Collaboration Network as a means of stimulating future growth of our solution, and the Company as being well positioned to capture the market opportunity in the Unified Collaboration space. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the fact that the Company’s strategic investment plan may not yield the intended results or may take longer than originally anticipated to achieve such results, 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, the market acceptance of Polycom’s products and changing market demands, including demands for differing technologies or product and services offerings, possible delays in the development, availability and shipment of new products, increasing costs and differing uses of capital, changes in key personnel and our sales organization that may cause disruption to the business, the impact of recent restructuring actions, and the impact of global conflicts such as those in the Middle East that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2009, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.


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.

As has been noted on the Company’s web site since April 14, 2010, Polycom will hold a conference call today, April 21, 2010, at 5 p.m. EST/2 p.m. PST to discuss its first quarter earnings. Robert Hagerty, chairman, president and CEO, Michael Kourey, chief financial officer, and Andrew Miller, executive vice president of global field operations, will host the conference call. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, by calling 800.897.4662; and for callers outside of the US and Canada, by calling 303.223.0120, with the passcode being 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 21465070. A replay of the call will also be maintained on our website for twelve months at www.polycom.com under Investor Relations – Earnings Calls-Archives.

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.

© 2010 Polycom, Inc. All rights reserved. POLYCOM®, 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  
     March 31, 2010  
     GAAP     Excluded     Non-GAAP  

Revenues:

      

Product revenues

   $ 228,057      $ —        $ 228,057   

Service revenues

     48,097        —          48,097   
                        

Total revenues

     276,154        —          276,154   
                        

Cost of revenues:

      

Cost of product revenues

     92,549        4,254  (a)      88,295   

Cost of service revenues

     24,286        1,179  (b)      23,107   
                        

Total cost of revenues

     116,835        5,433        111,402   
                        

Gross profit

     159,319        (5,433     164,752   
                        

Operating expenses:

      

Sales and marketing

     90,916        6,291  (b)      84,625   

Research and development

     33,905        3,082  (b)      30,823   

General and administrative

     15,982        2,497  (b)      13,485   

Amortization of purchased intangibles

     1,440        1,440        —     

Restructuring costs

     1,749        1,749        —     
                        

Total operating expenses

     143,992        15,059        128,933   
                        

Operating income

     15,327        (20,492     35,819   

Interest and other income (expense), net

     (8,581     (6,530 ) (c)      (2,051
                        

Income before provision for income taxes

     6,746        (27,022     33,768   

Provision for income taxes

     1,335        (7,103     8,438   
                        

Net income

   $ 5,411      $ (19,919   $ 25,330   
                        

Basic net income per share

   $ 0.06      $ (0.24   $ 0.30   
                        

Diluted net income per share

   $ 0.06      $ (0.23   $ 0.29   
                        

Weighted average shares outstanding for basic net income per share

     84,665          84,665   
                  

Weighted average shares outstanding for diluted net income per share

     87,364          87,364   
                  

 

(a) Excluded amount includes $3,364 related to the amortization of purchased intangibles for core and existing technologies, $770 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $120 related to the effect of stock-based compensation on warranty expense rates.
(b) Excluded amount represents stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period.
(c) Excluded amount represents loss recognized during the period on preferred securities considered to be other than temporarily impaired.


POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended  
     March 31, 2009  
     GAAP     Excluded     Non-GAAP  

Revenues:

      

Product revenues

   $ 183,294      $ —        $ 183,294   

Service revenues

     42,116        —          42,116   
                        

Total revenues

     225,410        —          225,410   
                        

Cost of revenues:

      

Cost of product revenues

     78,007        5,036  (a)      72,971   

Cost of service revenues

     20,469        753  (b)      19,716   
                        

Total cost of revenues

     98,476        5,789        92,687   
                        

Gross profit

     126,934        (5,789     132,723   
                        

Operating expenses:

      

Sales and marketing

     66,233        1,900  (b)      64,333   

Research and development

     28,453        1,873  (b)      26,580   

General and administrative

     13,589        1,875  (b)      11,714   

Amortization of purchased intangibles

     1,464        1,464        —     

Restructuring costs

     6,417        6,417        —     
                        

Total operating expenses

     116,156        13,529        102,627   
                        

Operating income

     10,778        (19,318     30,096   

Interest and other income (expense), net

     (281     —          (281
                        

Income before provision for income taxes

     10,497        (19,318     29,815   

Provision for income taxes

     2,472        (4,833     7,305   
                        

Net income

   $ 8,025      $ (14,485   $ 22,510   
                        

Basic net income per share

   $ 0.10      $ (0.17   $ 0.27   
                        

Diluted net income per share

   $ 0.10      $ (0.17   $ 0.27   
                        

Weighted average shares outstanding for basic net income per share

     83,625          83,625   
                  

Weighted average shares outstanding for diluted net income per share

     84,250          84,250   
                  

 

(a) Excluded amount includes $3,326 related to the amortization of purchased intangibles for core and existing technologies, $1,050 related to past license fee claims, $548 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $112 related to the effect of stock-based compensation on warranty expense rates.
(b) Excluded amount represents stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period.


POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     March 31,
2010
   December 31,
2009

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 293,154    $ 331,098

Short-term investments

     169,446      123,686

Trade receivables, net

     135,165      132,813

Inventories

     82,930      76,863

Deferred taxes

     23,807      23,824

Prepaid expenses and other current assets

     29,418      24,299
             

Total current assets

     733,920      712,583

Property and equipment, net

     89,046      81,252

Long-term investments

     7,347      12,687

Goodwill

     493,207      495,299

Purchased intangibles, net

     41,078      46,255

Deferred taxes

     23,975      23,943

Other assets

     16,027      13,882
             

Total assets

   $ 1,404,600    $ 1,385,901
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities

     

Accounts payable

   $ 90,270    $ 87,233

Accrued payroll and related liabilities

     21,893      23,707

Taxes payable

     —        617

Deferred revenue

     87,287      79,504

Other accrued liabilities

     41,183      52,360
             

Total current liabilities

     240,633      243,421

Non-current liabilities

     

Long-term deferred revenue

     47,992      46,787

Taxes payable

     22,640      27,111

Deferred taxes

     2,550      2,702

Other long-term liabilities

     12,478      12,027
             

Total liabilities

     326,293      332,048

Stockholders’ equity

     1,078,307      1,053,853
             

Total liabilities and stockholders’ equity

   $ 1,404,600    $ 1,385,901
             


POLYCOM, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended  
     March 31,
2010
    March 31,
2009
 

Revenues:

    

Product revenues

   $ 228,057      $ 183,294   

Service revenues

     48,097        42,116   
                

Total revenues

     276,154        225,410   
                

Cost of revenues:

    

Cost of product revenues

     92,549        78,007   

Cost of service revenues

     24,286        20,469   
                

Total cost of revenues

     116,835        98,476   
                

Gross profit

     159,319        126,934   
                

Operating expenses:

    

Sales and marketing

     90,916        66,233   

Research and development

     33,905        28,453   

General and administrative

     15,982        13,589   

Amortization of purchased intangibles

     1,440        1,464   

Restructuring costs

     1,749        6,417   
                

Total operating expenses

     143,992        116,156   
                

Operating income

     15,327        10,778   

Interest and other income (expense), net

     (8,581     (281
                

Income before provision for income taxes

     6,746        10,497   

Provision for income taxes

     1,335        2,472   
                

Net income

   $ 5,411      $ 8,025   
                

Basic net income per share

   $ 0.06      $ 0.10   
                

Diluted net income per share

   $ 0.06      $ 0.10   
                

Weighted average shares outstanding for basic net income per share

     84,665        83,625   
                

Weighted average shares outstanding for diluted net income per share

     87,364        84,250   
                


POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Months Ended  
     March 31,
2010
    March 31,
2009
 

Cash flows from operating activities:

    

Net income

   $ 5,411      $ 8,025   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     9,243        7,863   

Amortization of purchased intangibles

     4,804        4,797   

Provision for doubtful accounts

     —          247   

Provision for excess and obsolete inventories

     716        1,517   

Non-cash stock based compensation

     13,819        6,949   

Excess tax benefits from stock-based compensation

     (3,731     —     

Write down of investments other than temporarily impaired

     6,530        —     

Loss on disposals of property and equipment

     61        10   

Changes in assets and liabilities, net of the effect of acquisitions:

    

Trade receivables

     (2,352     13,089   

Inventories

     (6,783     1,096   

Deferred taxes

     (528     1,175   

Prepaid expenses and other assets

     (8,228     1,778   

Accounts payable

     3,037        (5,437

Taxes payable

     1,359        (737

Other accrued liabilities and deferred revenue

     (2,674     (13,539
                

Net cash provided by operating activities

     20,684        26,833   
                

Cash flows from investing activities:

    

Purchases of property and equipment

     (16,998     (8,548

Purchases of investments

     (108,862     (158,045

Proceeds from sale and maturity of investments

     70,464        130,600   
                

Net cash used in investing activities

     (55,396     (35,993
                

Cash flows from financing activities:

    

Proceeds from issuance of common stock under employee option and stock purchase plans

     19,720        6,404   

Repurchase of common stock

     (26,683     (7,828

Excess tax benefits from stock-based compensation

     3,731        —     
                

Net cash used in financing activities

     (3,232     (1,424
                

Net decrease in cash and cash equivalents

     (37,944     (10,584

Cash and cash equivalents, beginning of period

     331,098        165,669   
                

Cash and cash equivalents, end of period

   $ 293,154      $ 155,085