Plantronics, Inc.

Good day and thank you for standing by. Welcome to the Poly Q2 fiscal year 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, press star 0. I would now like to turn the conference over to your speaker today, Mr. Mike Ibert. Please go ahead.

Thanks, Operator. Welcome to Polly's Financial Results Conference Call from the second quarter of fiscal year 2022. My name is Mike Iberg, Head of Investor Relations, and joining me today are Dave Scholl, President and CEO, Grant Hoffman, Executive Vice President and Chief Supply Chain Officer, and Chuck Boynton, Executive Vice President and CFO. The information presented and discussed today includes forward-looking statements, which are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The risks and uncertainties related to such statements are detailed in our most recent 10Q, 10K, and today's press release and earnings presentation. You should also refer to the materials we provide today for an explanation of the non-GAAP financial measures discussed on this call, along with a reconciliation of those measures to the nearest applicable GAAP measures. Those non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and previously reported results, and as a basis for planning and forecasting future periods. All of our earnings materials are posted on our investor relations website at investor.polly.com. With that, I will now turn the call over to Dave.

Thanks, Mike. Good afternoon from California, and thanks for joining us from wherever you work. Today, Chuck and I are joined by Grant Hoffman here in our Santa Cruz office. Polly delivered another quarter of solid financial results. Chuck will provide more detail, but the headline numbers are as follows. GAAP revenues of $419 million were up 2% year-over-year. Adjusted EBITDA of $62 million and non-GAAP EPS of 77 cents were above the guidance ranges, but represent a year-over-year decline of 11% and 17%, respectively. Gross margins of 47.2% represent a 240 basis point sequential improvement and reflect a favorable product mix, offset by the temporary but ongoing pressures created by global supply chain issues, primarily volatile component prices and transportation costs. Demand remains strong, and Poly gained significant market share from our competitors in key video markets. Stepping back, I should first say that everyone at Poly has done a tremendous job helping our business and our customers navigate one of the most difficult and uncertain business environments in memory. Second, what is encouraging is that from our perspective, the demand side of our business remains fully intact. Since the beginning of the pandemic, we've said that the way businesses and people communicate and the gear, infrastructure, and services they need to work productively and effectively has changed permanently. Demand for polygear is up substantially. Our sales pipeline has increased 64% year-over-year, mainly due to increasing demand for video collaboration solutions as companies prepare to return to office. This pipeline is also converting to tangible demand. Our order backlog increased by $60 million quarter-over-quarter. Based on conversations with dozens of our customers over the past couple of months, I am convinced that as companies return to the office, they are going to aggressively build out their meeting spaces, whether large boardrooms or small personal focus rooms with video and audio collaboration solutions. Our recent survey of over 7,000 hybrid workers from half a dozen European countries and the United Arab Emirates confirms this strong demand. 82% of respondents intend to spend at least one day a week working from home in the future, with 54% planning to split their time evenly between office and home. One of the drivers for this shift is the emergence of anytime working, whereby employees have greater autonomy over when they do their work. According to our research, more than two-thirds of employees Say the, quote, normal nine-to-five day has been replaced by any time working. Research from Accenture published earlier this year shows that 83% of employees prefer a hybrid work model, looking to work remotely between 25% to 75% of the time. This return to the office is beginning now. According to independent research from CASEL, since the start of the pandemic, office occupancy rates in the top 10 U.S. metro area markets have more than doubled since their pandemic lows in March of last year and currently stand at roughly 37%. What does this all mean? Employers need to prepare their workplace communications for an increasing return to the office, and they need to be prepared to manage more hybrid video meetings than ever. When it comes to on-premises infrastructure, the majority of our customers are first focused on refreshing meeting spaces, especially large rooms as they return to the office. And most are considering building out all of their spaces to ensure that they create the best hybrid meeting experiences available. because of the, quote, two truths that I've talked about before. Number one, every meeting is moving to video. Number two, at least one person in every meeting will be remote. I've been meeting regularly with our customers, both individually and in groups, and they have been clear. They understand that Polly intends to own hybrid work and the return to office, and they're looking for our guidance and expertise as they prepare their own businesses for the future of work. That's an advantage for us because as a company, Poly has always existed to serve the enterprise. We have sales teams and service pros in place that have spent years helping solve for the largest and most demanding communications and collaboration applications in the world, banking, healthcare, and governments, just to name a few. Our ability to provide insights and advice is a key differentiator. It puts us in a position of strength. I believe it's one of the key factors in Poly taking market share. Demand is strong for Poly, but right now is about as complicated a time to operate in as there has ever been. Three months. Knows that globally, supply chain pressures continue to have a disruptive impact. For some time now, we've been direct and detailed about the supply chain challenges we face, as well as the initiatives that we put in place to help manage them. And I can tell you that every single day I'm on the phone with our Chief Supply Chain Officer, Grant Hoffman. While I'm sure that Grant wouldn't mind a break, I will say that after these calls, I have renewed confidence that our supply modernization strategy, both in the near and long term, is working. And we expect that it will pay significant dividends going forward in terms of efficiencies and profit margins. Rather than speak for Grant, we're going to have him speak directly with you, which I think will offer valuable insights into how Poly is managing and adapting to component and logistics challenges and how we'll be positioned once these temporary pressures ease. Grant, over to you. Thanks, Dave.