Science & Technology
Science and Technology
Science and Technology
Thu, January 22, 2009
Wed, January 21, 2009 Polycom: Polycom Reports Fourth Quarter and Fiscal Year 2008 Earnings
PLEASANTON, CA--(Marketwire - January 21, 2009) - Polycom, Inc. (
Fourth quarter 2008 consolidated net revenues were $263.0 million, compared to $263.3 million for the fourth quarter of 2007. Non-GAAP net income for the fourth quarter of 2008 was $35.2 million, or 42 cents per diluted share. This compares to Non-GAAP net income of $38.5 million, or 42 cents per diluted share, for the fourth quarter of 2007. GAAP net income for the fourth quarter of 2008 was $25.7 million, or 30 cents per diluted share, compared to $22.8 million, or 25 cents per diluted share, for the same period last year.
For the year ended Dec. 31, 2008, net revenues were $1.1 billion, compared to $929.9 million for the year ended Dec. 31, 2007. Non-GAAP net income for the year ended Dec. 31, 2008 was $130.4 million, or $1.49 per diluted share, compared to $128.9 million, or $1.37 per diluted share, for the comparable period of 2007. GAAP net income for the year ended Dec. 31, 2008 was $75.7 million, or 87 cents per diluted share, compared to GAAP net income of $62.9 million, or 67 cents per diluted share, for the same period last year.
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 fourth quarter of 2008 were comprised of:
-- 67 percent video solutions, or $175.9 million (54 percent video communications, or $141.7 million, and 13 percent network systems, or $34.2 million); and -- 33 percent voice communications, or $87.1 million.
This compares to the fourth quarter of 2007, in which consolidated net revenues were comprised of:
-- 63 percent video solutions, or $164.9 million (49 percent video communications, or $129.2 million, and 14 percent network systems, or $35.7 million); and -- 37 percent voice communications, or $98.4 million.
"We are pleased to have surpassed the $1 billion revenue mark in 2008," said Robert Hagerty, Polycom's chairman and CEO. "As the largest company in the Unified Collaboration industry, Polycom generated year-over-year growth in our Video Solutions business, illustrating the resilience of our fast-ROI video offering. With our Voice business showing more sensitivity to the economic environment, Polycom proactively took action in Q4 to reduce our operating cost structure and, as we announced earlier this month, we have implemented a restructuring plan designed to optimize our cost structure as we move into 2009."
"With our rapid pace of innovation and the full breadth of our offering, we believe Polycom is the best positioned in the industry to deliver the cost-savings benefits of video adoption to our customers. Our strategic partnerships with Avaya, Cisco, IBM, Microsoft, and others enable us to provide integrated solutions that capture the full benefits of Unified Collaboration. These partnerships differentiate Polycom as the solutions provider of choice for companies who describe our collaboration solution as a strategic technology investment. In spite of the challenging economy, through our leading solutions and go-to-market strategy and, of course, our improved cost structure, we expect to continue to gain strength competitively in 2009 and to deliver solid operating results," Hagerty concluded.
"Driven by $263.0 million in revenues and strong operating margins, Polycom generated $50.5 million in positive operating cash flow during the fourth quarter," said Michael Kourey, Polycom's senior vice president, finance and administration, and CFO. "Contributing to Polycom's 44th consecutive quarter of positive operating cash flow was the four day year-over-year improvement in DSO to 44 days and a 3 percent sequential reduction in inventories. Polycom exits 2008 with a strong balance sheet, including $324.5 million in cash and investments and no debt."
About Polycom
Polycom, Inc. (
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 resilience of Polycom's video solutions business in the current global economic environment, the optimization of our cost structure in 2009, Polycom as best-positioned in the industry to deliver the cost-savings benefits of video adoption to our customers, and our expectation to continue to gain competitive strength and deliver solid operating results in 2009. 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, potential fluctuations in results and future growth rates, risks associated with general economic conditions, including the impact of the crisis in the worldwide financial markets, the current recession in the United States and negative macroeconomic indicators and recessionary factors globally, 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 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 Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2008, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.
As has been noted on the Company's web site since Jan. 14, 2009, Polycom will hold a conference call today, Jan. 21, 2009, at 5:00 p.m. EDT/2:00 p.m. PT to discuss its fourth quarter earnings. Robert Hagerty, chairman, president and CEO, and Michael Kourey, chief financial officer, 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 800.954.0648; and for callers outside of the US and Canada, by calling 212.231.2900, 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 21411274. 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.
© 2009 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. Non-GAAP Condensed Consolidated Statements of Operations Excluding Stock-based compensation expense, Effect of stock-based compensation expense on warranty rates, Impact to cost of sales from purchase accounting adjustments to inventory, Acquisition-related costs, Purchased in-process research and development costs, Amortization and impairment of purchased intangibles, Restructuring costs, Litigation reserves and payments, Gain (loss) on strategic investments, and Income tax effect of the preceding adjustments (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended -------------------- -------------------- December December December December 31, 31, 31, 31, 2008 2007 2008 2007 --------- --------- --------- --------- Revenues: Product revenues $ 222,067 $ 228,129 $ 913,760 $ 806,482 Service revenues 40,976 35,162 155,560 123,426 --------- --------- --------- --------- Total revenues 263,043 263,291 1,069,320 929,908 --------- --------- --------- --------- Cost of revenues: Cost of product revenues 87,072 88,348 357,608 306,139 Cost of service revenues 18,233 16,289 73,003 58,239 --------- --------- --------- --------- Total cost of revenues 105,305 104,637 430,611 364,378 --------- --------- --------- --------- Gross profit 157,738 158,654 638,709 565,530 --------- --------- --------- --------- Operating expenses: Sales and marketing 70,426 64,572 292,239 229,845 Research and development 28,051 32,624 125,445 126,529 General and administrative 13,334 13,344 52,153 50,516 --------- --------- --------- --------- Total operating expenses 111,811 110,540 469,837 406,890 --------- --------- --------- --------- Operating income 45,927 48,114 168,872 158,640 Interest income, net 1,180 3,859 7,938 18,646 Other expense, net (3,247) (389) (5,512) (738) --------- --------- --------- --------- Income before provision for income taxes 43,860 51,584 171,298 176,548 Provision for income taxes 8,698 13,044 40,940 47,668 --------- --------- --------- --------- Non-GAAP net income $ 35,162 $ 38,540 $ 130,358 $ 128,880 ========= ========= ========= ========= Basic net income per share $ 0.42 $ 0.43 $ 1.52 $ 1.42 ========= ========= ========= ========= Diluted net income per share $ 0.42 $ 0.42 $ 1.49 $ 1.37 ========= ========= ========= ========= Weighted average shares outstanding for basic net income per share 83,301 89,839 85,616 90,878 ========= ========= ========= ========= Weighted average shares outstanding for diluted net income per share 84,338 92,521 87,246 94,391 ========= ========= ========= ========= Use of Non-GAAP Financial Information 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. POLYCOM, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended -------------------- -------------------- December December December December 31, 31, 31, 31, 2008 2007 2008 2007 --------- --------- --------- --------- Revenues: Product revenues $ 222,067 $ 228,129 $ 913,760 $ 806,482 Service revenues 40,976 35,162 155,560 123,426 --------- --------- --------- --------- Total revenues 263,043 263,291 1,069,320 929,908 --------- --------- --------- --------- Cost of revenues: Cost of product revenues 90,736 92,614 374,119 322,988 Cost of service revenues 18,652 17,216 76,179 61,599 --------- --------- --------- --------- Total cost of revenues 109,388 109,830 450,298 384,587 --------- --------- --------- --------- Gross profit 153,655 153,461 619,022 545,321 --------- --------- --------- --------- Operating expenses: Sales and marketing 71,971 68,073 303,436 242,510 Research and development 29,397 36,072 135,288 139,011 General and administrative 14,178 16,113 60,201 60,994 Acquisition-related costs - 1,118 162 4,258 Purchased in-process research and development - - - 9,400 Amortization of purchased intangibles 1,686 5,323 7,098 11,546 Restructuring costs 1,480 197 10,316 410 Litigation reserves and payments - - 7,401 - --------- --------- --------- --------- Total operating expenses 118,712 126,896 523,902 468,129 --------- --------- --------- --------- Operating income 34,943 26,565 95,120 77,192 Interest income, net 1,180 3,859 7,938 18,646 Loss on strategic investments - - - (7,400) Other expense, net (3,247) (389) (5,512) (738) --------- --------- --------- --------- Income before provision for income taxes 32,876 30,035 97,546 87,700 Provision for income taxes 7,170 7,234 21,850 24,819 --------- --------- --------- --------- Net income $ 25,706 $ 22,801 $ 75,696 $ 62,881 ========= ========= ========= ========= --------- --------- --------- --------- Basic net income per share $ 0.31 $ 0.25 $ 0.88 $ 0.69 ========= ========= ========= ========= --------- --------- --------- --------- Diluted net income per share $ 0.30 $ 0.25 $ 0.87 $ 0.67 ========= ========= ========= ========= Weighted average shares outstanding for basic net income per share 83,301 89,839 85,616 90,878 ========= ========= ========= ========= Weighted average shares outstanding for diluted net income per share 84,338 92,521 87,246 94,391 ========= ========= ========= ========= POLYCOM, INC. GAAP to Non-GAAP Reconciliation (In thousands, except per share amounts) (Unaudited) Three Months Ended ----------------------------------- December 31, 2008 ----------------------------------- GAAP Excluded Non-GAAP --------- --------- --------- Revenues: Product revenues $ 222,067 $ - $ 222,067 Service revenues 40,976 - 40,976 --------- --------- --------- Total revenues 263,043 - 263,043 --------- --------- --------- Cost of revenues: Cost of product revenues 90,736 3,664 (a) 87,072 Cost of service revenues 18,652 419 (b) 18,233 --------- --------- --------- Total cost of revenues 109,388 4,083 105,305 --------- --------- --------- Gross profit 153,655 (4,083) 157,738 --------- --------- --------- Operating expenses: Sales and marketing 71,971 1,545 (b) 70,426 Research and development 29,397 1,346 (b) 28,051 General and administrative 14,178 844 (b) 13,334 Acquisition-related costs - - - Amortization of purchased intangibles 1,686 1,686 - Restructuring costs 1,480 1,480 - Litigation reserves and payments - - - --------- --------- --------- Total operating expenses 118,712 6,901 111,811 --------- --------- --------- Operating income 34,943 (10,984) 45,927 Interest income, net 1,180 - 1,180 Gain (loss) on strategic investments - - - Other expense, net (3,247) - (3,247) --------- --------- --------- Income before provision for income taxes 32,876 (10,984) 43,860 Provision for income taxes 7,170 (1,529) 8,698 --------- --------- --------- Net income $ 25,706 $ (9,455) $ 35,162 ========= ========= ========= Basic net income per share $ 0.31 $ (0.11) $ 0.42 ========= ========= ========= Diluted net income per share $ 0.30 $ (0.12) $ 0.42 ========= ========= ========= Weighted average shares outstanding for basic net income per share 83,301 83,301 ========= ========= Weighted average shares outstanding for diluted net income per share 84,338 84,338 ========= ========= Twelve Months Ended ----------------------------------- December 31, 2008 ----------------------------------- GAAP Excluded Non-GAAP --------- --------- --------- Revenues: Product revenues $ 913,760 $ - $ 913,760 Service revenues 155,560 - 155,560 --------- --------- --------- Total revenues 1,069,320 - 1,069,320 --------- --------- --------- Cost of revenues: Cost of product revenues 374,119 16,511 (c) 357,608 Cost of service revenues 76,179 3,176 (b) 73,003 --------- --------- --------- Total cost of revenues 450,298 19,687 430,611 --------- --------- --------- Gross profit 619,022 (19,687) 638,709 --------- --------- --------- Operating expenses: Sales and marketing 303,436 11,197 (b) 292,239 Research and development 135,288 9,843 (b) 125,445 General and administrative 60,201 8,048 (b) 52,153 Acquisition-related costs 162 162 - Amortization of purchased intangibles 7,098 7,098 - Restructuring costs 10,316 10,316 - Litigation reserves and payments 7,401 7,401 - --------- --------- --------- Total operating expenses 523,902 54,065 469,837 --------- --------- --------- Operating income 95,120 (73,752) 168,872 Interest income, net 7,938 - 7,938 Gain (loss) on strategic investments - - - Other expense, net (5,512) - (5,512) --------- --------- --------- Income before provision for income taxes 97,546 (73,752) 171,298 Provision for income taxes 21,850 (19,090) 40,940 --------- --------- --------- Net income $ 75,696 $ (54,662) $ 130,358 ========= ========= ========= Basic net income per share $ 0.88 $ (0.64) $ 1.52 ========= ========= ========= Diluted net income per share $ 0.87 $ (0.62) $ 1.49 ========= ========= ========= Weighted average shares outstanding for basic net income per share 85,616 85,616 ========= ========= Weighted average shares outstanding for diluted net income per share 87,246 87,246 ========= ========= (a) Excluded amount includes $3,331 related to the amortization of purchased intangibles for core and existing technologies, $276 for stock-based compensation expense recorded in accordance with SFAS 123R, "Share-Based Payment," during the period and $57 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 includes $13,691 related to the amortization of purchased intangibles for core and existing technologies, $2,378 for stock-based compensation expense recorded in accordance with SFAS 123R, "Share-Based Payment," during the period and $442 related to the effect of stock-based compensation on warranty expense rates. POLYCOM, INC. GAAP to Non-GAAP Reconciliation (In thousands, except per share amounts) (Unaudited) Three Months Ended ----------------------------------- December 31, 2007 ----------------------------------- GAAP Excluded Non-GAAP --------- --------- --------- Revenues: Product revenues $ 228,129 $ - $ 228,129 Service revenues 35,162 - 35,162 --------- --------- --------- Total revenues 263,291 - 263,291 --------- --------- --------- Cost of revenues: Cost of product revenues 92,614 4,266 (a) 88,348 Cost of service revenues 17,216 927 (b) 16,289 --------- --------- --------- Total cost of revenues 109,830 5,193 104,637 --------- --------- --------- Gross profit 153,461 (5,193) 158,654 --------- --------- --------- Operating expenses: Sales and marketing 68,073 3,501 (b) 64,572 Research and development 36,072 3,448 (b) 32,624 General and administrative 16,113 2,769 (b) 13,344 Acquisition-related costs 1,118 1,118 - Purchased in-process research and development - - - Amortization of purchased intangibles 5,323 5,323 - Restructuring costs 197 197 - --------- --------- --------- Total operating expenses 126,896 16,356 110,540 --------- --------- --------- Operating income 26,565 (21,549) 48,114 Interest income, net 3,859 - 3,859 Loss on strategic investments - - - Other expense, net (389) - (389) --------- --------- --------- Income before provision for income taxes 30,035 (21,549) 51,584 Provision for income taxes 7,234 (5,810) 13,044 --------- --------- --------- Net income $ 22,801 $ (15,739) $ 38,540 ========= ========= ========= --------- --------- --------- Basic net income per share $ 0.25 $ (0.18) $ 0.43 ========= ========= ========= --------- --------- --------- Diluted net income per share $ 0.25 $ (0.17) $ 0.42 ========= ========= ========= Weighted average shares outstanding for basic net income per share 89,839 89,839 ========= ========= Weighted average shares outstanding for diluted net income per share 92,521 92,521 ========= ========= Twelve Months Ended ----------------------------------- December 31, 2007 ----------------------------------- GAAP Excluded Non-GAAP --------- --------- --------- Revenues: Product revenues $ 806,482 $ - $ 806,482 Service revenues 123,426 - 123,426 --------- --------- --------- Total revenues 929,908 - 929,908 --------- --------- --------- Cost of revenues: Cost of product revenues 322,988 16,849 (c) 306,139 Cost of service revenues 61,599 3,360 (b) 58,239 --------- --------- --------- Total cost of revenues 384,587 20,209 364,378 --------- --------- --------- Gross profit 545,321 (20,209) 565,530 --------- --------- --------- Operating expenses: Sales and marketing 242,510 12,665 (b) 229,845 Research and development 139,011 12,482 (b) 126,529 General and administrative 60,994 10,478 (b) 50,516 Acquisition-related costs 4,258 4,258 - Purchased in-process research and development 9,400 9,400 - Amortization of purchased intangibles 11,546 11,546 - Restructuring costs 410 410 - --------- --------- --------- Total operating expenses 468,129 61,239 406,890 --------- --------- --------- Operating income 77,192 (81,448) 158,640 Interest income, net 18,646 - 18,646 Loss on strategic investments (7,400) (7,400) - Other expense, net (738) - (738) --------- --------- --------- Income before provision for income taxes 87,700 (88,848) 176,548 Provision for income taxes 24,819 (22,849) 47,668 --------- --------- --------- Net income $ 62,881 $ (65,999) $ 128,880 ========= ========= ========= --------- --------- --------- Basic net income per share $ 0.69 $ (0.73) $ 1.42 ========= ========= ========= --------- --------- --------- Diluted net income per share $ 0.67 $ (0.70) $ 1.37 ========= ========= ========= Weighted average shares outstanding for basic net income per share 90,878 90,878 ========= ========= Weighted average shares outstanding for diluted net income per share 94,391 94,391 ========= ========= (a) Excluded amount includes $3,343 related to the amortization of purchased intangibles for core and existing technologies, $733 for stock-based compensation expense recorded in accordance with SFAS 123R, "Share-Based Payment," during the period and $190 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 includes $10,860 related to the amortization of purchased intangibles for core and existing technologies, $2,674 for stock-based compensation expense recorded in accordance with SFAS 123R, "Share-Based Payment," during the period, $851 related to the effect of stock-based compensation on warranty expense rates and $2,464 related to purchase accounting adjustments made to inventory. POLYCOM, INC. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) December 31, December 31, 2008 2007 ------------- ------------- ASSETS Current assets Cash and cash equivalents $ 165,669 $ 279,560 Investments 152,407 62,663 Trade receivables, net 126,497 138,133 Inventories 89,730 71,106 Deferred taxes 29,295 43,295 Prepaid expenses and other current assets 34,207 23,104 ------------- ------------- Total current assets 597,805 617,861 Property and equipment, net 77,294 57,610 Long-term investments 6,420 32,340 Goodwill 495,083 504,955 Purchased intangibles, net 65,369 86,423 Deferred taxes 19,415 8,062 Other assets 16,298 14,687 ------------- ------------- Total assets $ 1,277,684 $ 1,321,938 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 57,731 $ 75,802 Accrued payroll and related liabilities 28,711 29,518 Taxes payable - 3,790 Deferred revenue 69,238 59,130 Other accrued liabilities 58,402 48,814 ------------- ------------- Total current liabilities 214,082 217,054 Non-current liabilities Deferred revenue 43,285 27,853 Taxes payable 35,878 34,899 Deferred taxes 2,638 4,709 Other long-term liabilities 13,459 13,429 ------------- ------------- Total liabilities 309,342 297,944 Stockholders' equity 968,342 1,023,994 ------------- ------------- Total liabilities and stockholders' equity $ 1,277,684 $ 1,321,938 ============= ============= POLYCOM, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Twelve Months Ended ------------------------ December 31, December 31, 2008 2007 ----------- ----------- Cash flows from operating activities: Net income $ 75,696 $ 62,881 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,507 24,502 Amortization of purchased intangibles 20,798 22,406 Provision for doubtful accounts 1,665 370 Provision for excess and obsolete inventories 3,775 264 Non-cash stock based compensation 34,635 41,659 Excess tax benefits from stock-based compensation (4,526) (15,505) Loss on strategic investments - 7,400 Purchase of in-process research and development - 9,400 Write down of investments other than temporarily impaired 981 - Loss on disposals of property and equipment 478 175 Changes in assets and liabilities, net of the effect of acquisitions: Trade receivables 10,145 (41,689) Inventories (22,399) (3,743) Deferred taxes 1,133 6,893 Prepaid expenses and other assets (10,834) (5,736) Accounts payable (18,018) 12,716 Taxes payable 2,794 10,742 Other accrued liabilities 41,801 16,780 ----------- ----------- Net cash provided by operating activities 166,631 149,515 ----------- ----------- Cash flows from investing activities: Purchase of property and equipment (47,457) (30,050) Purchases of investments (451,833) (380,598) Proceeds from sale and maturity of investments 384,381 544,113 Net cash paid in purchase acquisitions - (275,917) ----------- ----------- Net cash used in investing activities (114,909) (142,452) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock under employee option and stock purchase plans 52,461 66,474 Repurchase of common stock (222,600) (125,850) Excess tax benefits from stock-based compensation 4,526 15,505 ----------- ----------- Net cash used in financing activities (165,613) (43,871) ----------- ----------- Net decrease in cash and cash equivalents (113,891) (36,808) Cash and cash equivalents, beginning of period 279,560 316,368 ----------- ----------- Cash and cash equivalents, end of period $ 165,669 $ 279,560 =========== ===========
