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Simply Smarter Communications Ken Kannappan, President & CEO Pam Strayer, SVP & CFO Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015

Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

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Page 1: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

Simply Smarter Communications™

Ken Kannappan, President & CEO

Pam Strayer, SVP & CFO

Greg Klaben, VP Investor Relations

Q3 FY15 Financial Results

January 26, 2015

Page 2: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

2

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of

1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements

relating to (i) our estimates of GAAP and non-GAAP financial results for the fourth quarter of fiscal year 2015,

including net revenues, operating income and diluted EPS; (ii) our estimate of weighted average shares outstanding

for the fourth quarter of fiscal year 2015 (iii) our estimates of stock-based compensation and purchase accounting

amortization and other associated tax impacts, as well as the impact of these non-cash expenses on Non-GAAP

operating income and diluted EPS and (iv) our estimates of total addressable market including industry revenue

expectations, UC increase in rates and UC headset sales in addition to other matters discussed in this presentation

that are not purely historical data. Forward-looking statements involve risks and uncertainties that may cause actual

results to differ materially from those contemplated by such statements. We do not assume any obligation to update

or revise any such forward-looking statements, whether as the result of new developments or otherwise, except as

required by applicable law.

The factors that could cause actual results to differ are discussed in our Annual Report on Form 10-K filed with the

Securities and Exchange Commission (“SEC”) on May 16, 2014, in our reports on Form 10-Q and Form 8-K filed with

the SEC as well as our other public disclosures, including our press releases. Please also refer to the Safe Harbor

included in our press release regarding our results for the third quarter of fiscal year 2015 which was filed with the

Securities and Exchange Commission on a Form 8-K on January 26, 2015. The Securities and Exchange

Commission filings and our press releases can be accessed on our website at www.plantronics.com/investor

This presentation may also contain non-GAAP financial information. Management uses this information in its internal

analysis of results and believes that this information may be informative to investors in gauging the quality of our

financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. A

reconciliation between GAAP and Non-GAAP measures for the current quarter and prior year quarter is attached as

an appendix to this document. Other historical reconciliations are available at www.plantronics.com/investor

Forward Looking Statements

Page 3: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

Key Points For Q3 FY15

• Company is executing well; recent currency moves are a significant headwind

• 10% Enterprise Revenue Growth

• Record Consumer Revenues, success in Stereo Bluetooth

• Record Operating Income

• Met EPS estimates despite currency headwind

• Enthusiastic reaction to recently launched products, and

excellent portfolio to launch throughout the year

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4

Q3 FY15 Financial Highlights (Non-GAAP)

Comparisons are to Prior Year Quarter

• Revenue: $231.8 vs. $212.7M, 9% growth

• Gross Margin: 52.0% vs. 52.2%

• Operating Margin: 20.8% vs. 20.7%

• Operating Income: $48.1M vs. $43.9M, 10% growth

• Diluted Earnings per share: $0.79 vs. $0.76, 4% growth

• UC revenue: $53.5M vs. $43.2M, 24% growth

• $484M in cash, cash equivalents and short & long term investments

Use of Non-GAAP Financial InformationTo supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, which are adjusted to exclude certain non-cash expenses and charges from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS, including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because Plantronics’ management does not believe they are part of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our long-term target operating model goals. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation or as a substitute for, or superior to, gross margin, operating income, operating margin, net income or EPS prepared in accordance with GAAP.

Page 5: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

Revenues by Product Group, Q3 FY 2015, YOY Growth

$108.1M

$53.5M

$70.2M Core Enterprise

UnifiedCommunications

Consumer

$231.8 Million Total Revenue

6% Growth 4% Growth

24% Growth

Page 6: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

Revenues by Region, Q3 FY 2015, YOY Growth

$123.1M$63.9M

$28.8M

United StatesEurope & Africa

Asia Pacific

$231.8 Million Total Revenue

11% Growth 9% Growth

8% Growth

8% Growth

Americas$16M

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7

24% Growth in UC Revenues

0

20

40

60

Q1 FY12 Q3 FY12 Q1 FY13 Q3 FY13 Q1 FY14 Q3 FY14 Q1 FY15 Q3 FY15

$ Millions

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8

EPS Met Guidance, Despite Material Currency Headwind

$0.76 $0.77

$0.81$0.79

$0.50

$0.60

$0.70

$0.80

$0.90

Q3 FY14 Q2 FY15 Mid-point Guidance for Q3 FY15 Q3 FY15

Non-GAAP

Page 9: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

* This target model is not a projection for FY15 or any other particular quarter or fiscal period.

**Non-GAAP does not include stock-based compensation, accelerated depreciation and restructuring and other related charges

Target Model* Q3 FY15**

Gross Margin 50 – 52% 52.0%

R & D 8 – 10% 9.0%

S, G & A 21 – 23% 23.0%

Operating Margin 20 – 23% 20.8%

Leverage in Our Long-Term Target Operating Model

Non-GAAP

Use of Non-GAAP Financial InformationTo supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, which are adjusted to exclude certain non-cash expensesand charges from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS, including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these expenses from our non-GAAP measures primarily because Plantronics’ management does not believe they are part of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our long-term target operating model goals. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation or as a substitute for, or superior to, gross margin, operating income, operating margin, net income or EPS prepared in accordance with GAAP.

9

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Q4 FY15 Guidance as of January 26, 2014

• Net Revenues: $205 million to $215 million

• GAAP operating income of $32 million to $37 million

• Non-GAAP operating income of $40 million to $45 million–Excludes ~$8 million of stock-based compensation and purchase

accounting amortization

• Assuming ~43 million diluted average weighted shares outstanding:

• GAAP diluted EPS: $0.55 to $0.63

• The EPS cost of stock-based compensation and purchase accounting amortization, along with the associated tax impacts is expected to be $0.12; and

• Non-GAAP diluted EPS of approximately $0.67 to $0.75

Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its press release announcing its fourth quarter fiscal year 2015 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the fourth quarter fiscal year 2015 will not be based on internal company information and should be assessed accordingly by investors.

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Simply Smarter Communications™

Total Addressable Market

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12

CY 2018ECY 2013E$0

$2,000

$4,000

Growth rates vary with economy, consumer adoption rates, competition and resulting price levels and other factors.

Sources: Frost & Sullivan, Strategy Analytics and company estimates

$2,300

$2,000

$1,000

$1,300

$2.3B

$4.3BIndustry CAGRs

Consumer 8% – 10%

Enterprise 17% - 18%

Overall ~13%Total CAGR ~13%

($M)

WW Industry Revenue Expectations CY13– CY18

$1,000

$3,000

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CY 2018ECY 2013E$0

$1,000

$2,000

Growth rates vary with economy, consumer adoption rates, competition and resulting price levels and other factors.

Sources: Frost & Sullivan and company estimates

WW Enterprise Revenue ($M)

$1,549

$763

$300

$727

$1 B

$2.3B

Industry CAGRs (approximations)

Core Enterprise 1%

Unified Communications

38% - 40%

Overall 17% - 18%

Enterprise WW Industry Revenue Expectations CY13– CY18

$2,500

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94M Active UC Voice Licenses

60% UC Headset Attach Rate

56M Audio Endpoints

22M UC Audio Devices Sold

$1.5B UC Audio Device Market

Revenue

2018 UC Industry Installed Base

2018 UC Industry Headset Sales

Sources: Frost & Sullivan and company estimates

UC Headset Model Logic – CY 2018

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151/26/2015 151/26/2015

Investing in High Growth

Markets

A Leverageable Long-term Business Model

Continuous Return of Cash to

Stockholders

Driving Value Creation

15

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1616

Promising Opportunities in All Product Categories

1. Unified Communications

2. Contact Center

3. Consumer Stereo

4. Core Enterprise

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1) The Unified Communications Opportunity

17

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UC Opens the Market to Infrequent Phone Users

6% 94%

94% of Worldwide Knowledge WorkersDO NOT use Headsets

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UC Increases Headset Attach Rates

Current EstimatedAttach Rate: 6%

Early Adopter Market Phase Attach Rate:

(Traditional + UC): 13%

2013: 425M Knowledge Workers 2018: 450M Knowledge Workers

Calendar Year

Audio Device Attach Rate to Office Workers

Growth rates vary with economy, consumer adoption rates, competition and resulting price levels and other factors.

Sources: Frost & Sullivan and company estimates

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90% of Enterprises Are Moving to UC

80% Headset Attach Rate to Softphones

20

UC Headset Market to be ~$1.5B* in CY18

*Frost & Sullivan

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2) Upgrades in the Contact CenterIntelligence & Innovation

21

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2222

The Contact Center Evolution is Just Beginning

*Frost & Sullivan

Cloud Based CC is Growing Rapidly

Contact Center Agent Growth Rate Continues at ~ Global GDP*

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EncorePro 500 Series

• Lightest in class

• Improved intelligibility

• Proprietary microphone

• Improved noise-cancellation

• Wideband audio

• Improved comfort & fit

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New Plantronics Digital Adapter Series

DA90 DA80 DA70

Plantronics Spokes Software

Bringing Intelligence

to Customer Service

• Cross Talk Detection

• Mute Detection

• SmartLock

• Asset Management

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25252525

YOU HAVEBEEN

LOGGED OFF

MEETING INITIATED:CARL WILL BE LATE

CROSS-TALKDETECTED

MUTE DETECTED:MANAGEMENT NOTIFIED

BLOOD PRESSURE /PULSE/ VOICE

TONE MONITORING

Looking Ahead: Intelligent Enterprise & Contact Center

VP WITH PROPERLEVEL OF APPROVAL

AUTHORITY ISNOW AVAILABLE:

PROVIDE LOCATION OR CALL?

Page 26: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

3) Consumer Stereo Bluetooth

26

Page 27: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

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Global Bluetooth Stereo Headset Sales

Source: Strategy Analytics, Nov 2013

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

19.0

15.7

13.1

10.7

8.6

6.8

5.55.7

4.43.93.4

0.80.3

0.0

(Millions of Units)

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New Stereo Bluetooth: Backbeat FIT & Backbeat PRO

Our new stereo products have superb wireless audio, long

battery life, and multi-device connectivity that keeps users

connected while on the go.

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4) Core Enterprise is Driven by Job Turnover

29

Page 30: Q3 FY15 Financial Results...2015/01/01  · Greg Klaben, VP Investor Relations Q3 FY15 Financial Results January 26, 2015 2 This presentation contains forward-looking statements within

The Number of Quits Divided by Total Layoffs and Discharges

30

Higher Job Turnover Drives Core Enterprise

1.6

1.4

1.2

1

Source: US Labor Department

1.8

1/13 3/13 5/13 7/13 9/13 11/13 1/14 11/14

Current Turnover is Below Pre-recession Peak of Approximately 2

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Service & Support

Relationships Innovation

31

Why We Win

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