Plantronics, Inc.

Good morning, my name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Poly Q3 fiscal year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you, Mike Iberg. Head of Investor Relations, you may begin.

Welcome to Poly's financial results conference call for the third quarter of fiscal year 2022. My name is Mike Iberg, Head of Investor Relations, and joining me today are Dave Schull, Poly President and CEO, 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 10-Q, 10-K, and today's presentation and press release. 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 gap measures. These non-gap 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.poly.com. With that, I will now turn the call over to Dave.

Good morning from California, and thanks for joining us from wherever you work. In the context of continued supply chain pressures, Poly delivered solid financial results. The headline numbers are gap revenues of $410 million, while the demand for Poly's products remains incredibly strong. Recall that last quarter, our backlog increased $60 million sequentially. During this third quarter, backlog grew an additional $59 million with increases across each of our main product categories. I will talk more about the specific demand trends and supply chain constraints we see shortly. Adjusted EBITDA was 47 million and non-GAAP EPS was 57 cents. Gross margins were 44.5% and would have been in excess of our long-term target of 50%, but a combination of product mix and continuing supply chain pressures In particular, inflated component and freight costs continue to create temporary pressure. As we look forward to the year ahead, despite ongoing and challenging supply chain issues, it's hard not to be excited about the opportunity in front of us. From our perspective, the pandemic essentially created a three-phase demand cycle. Phase one, which many of you will remember, meant everyone stole their kids' headsets, and ran to the local retailer to buy whatever webcam they could find. This phase benefited a certain kind of company, those companies making commoditized gear with already established retail and e-tail distribution channels. That's not Polly. Phase two, which I have personal experience with, saw us come to fully appreciate that working from home sounds like a luxury until your dog sees a squirrel and starts barking like crazy during your board meeting. During this phase, we realized we needed tools, not toys, to do our jobs. High-quality products, noise blocking, acoustic fencing, and pro-grade optics. Poly makes professional gear, and during this phase, we saw robust sales of headsets and personal video solutions. Phase three is where we are now, and it's where Poly excels. Phase three is the permanent entrenchment of hybrid work. a return to office that must simultaneously anticipate and accommodate remote participation in every meeting, conversation, and decision. Polly's core value derives from the expansion of hybrid work. As more organizations reincorporate office time back into their operations, Polly will increasingly benefit. That's because if the pandemic created a set of temporary pressures, It also set in stone a permanent change in the way we work. Importantly, we don't think the future of work is binary, a choice between fully remote workforces versus everyone back in the office. The future of work is hybrid, which is to say for any given workforce, some percentage of folks will be remote, some percentage of the time, well, the balance will be in the office. These percentages can and will shift, But the simple truth is that the future of work will almost always involve at least one person out of the meeting room and one person in it. At the same time, the pandemic accelerated and amplified two trends in communications and collaboration that Pauli had already identified as key secular shifts. First, every company will move communications to the cloud. And second, every meeting will move to video. The demand implications are huge because it represents a massive generational shift in collaboration and communication spending. It is what I have characterized internally at Poly as a demand super cycle. The reality is that return to the hybrid office means a long-term, durable shift in the demand profile for Poly's products and services. The world's biggest banks, healthcare systems, manufacturers, professional services firms, and governments need to completely overhaul their legacy communications infrastructure. They know they need to be ready for hybrid work taking place inside and outside the office using modern cloud-based collaboration solutions capable of operating on multiple platforms. For decades, traditional on-premises competitors had a stranglehold on the world's biggest accounts as these customers were effectively held hostage to a single hardware architecture supporting a single proprietary communications platform. Almost overnight, all that legacy equipment went from being a competitive moat to being a millstone. And the CEOs, CIOs, and CTOs at these companies are calling us because they need to replace it. They're throwing it all out. They want modern cloud collaboration equipment that works every bit as well on Teams as it does on Zoom or Google. Polly has the best enterprise-grade platform-agnostic solutions for any business seeking to ready itself for cloud collaboration, and our customers know it. So right now, when I talk about the hundreds of millions of dollars currently in our backlog, that's exciting, but it doesn't begin to capture the magnitude of the opportunity. These big accounts, what we call franchise accounts, are currently ordering Polly solutions for hundreds of conference rooms. and proof of concept exercises. But this is just the start. They have thousands of rooms that need to be built out. These enterprise accounts don't want to buy just off-the-shelf webcams. They want complete solutions and a support system, including monitoring and room insights, which we provide through our PolyLens platform, and a services offering, such as PolyPlus, that wraps all the installation, maintenance, and upgrade support they need into one simple package. For the first time in years, Poly is set to win these franchise accounts. We have dedicated enterprise account executives who have sold into the Global 2000 for decades, a worldwide services team, and we have the product features and quality to win these accounts. This demand super cycle is a global phenomenon. We are seeing it as we engage with our own customers and through the massive reach of our key partners, like Microsoft and Zoom, with whom we go to market to provide integrated communications and collaboration solutions. We continue to make progress in forging these valuable partnerships and markets that we believe will make a significant contribution to our growth and profitability. One major initiative I'll highlight is our relationship with Tencent as we seek to expand our presence in China. For context, years ago, China was a strong market for Poly, one in which we had tremendous revenue growth and significant market share. A combination of trade pressures and a focus on local vendors served to cut that share in half over the past five years. However, as with the demand drivers we see in other markets, businesses and government agencies in China are now starting to make investments in upgrading their communications infrastructure to cloud-ready video. Tencent is leading the shift to cloud-based communications and collaboration in the Chinese market. And our partnership with them, starting with certification and ultimately leading to an integrated go-to-market strategy, will make Poly an organic part of Tencent's communication ecosystem. This partnership is still young, but has every opportunity to deliver meaningful growth for Poly as it develops. As strong as the demand side of the equation is, at the same time, it's no secret that businesses everywhere remain challenged by supply chain constraints and disruptions. Our backlog tells the story. While we're excited to see so much demand growth, we are frustrated because we want to fill our customers' orders sooner than we currently can. Our supply chain team is doing extraordinary work to deliver improvements. Examples include product design to ensure that from inception, our new products can be built efficiently with readily available and modern components. The product redesigns we discussed last quarter are on track, with most of them scheduled for completion this spring and summer. Our recycling and refurbishing initiative is also working. We've already taken in approximately 15,000 devices from customers and are in the process of refurbishing and redistributing them to customers in need. Those that can't be refurbished are recycled, a win for our customers, for us, and for our ESG initiatives. We've been as transparent as possible about our business and our challenges with investors on this front, and will continue to be. The number of suppliers where we have challenges has decreased substantially to just a handful. The potential benefit from improvements with these suppliers is spring-loaded. Remarkably, in some cases, just a few hundred thousand dollars of components will unleash tens of millions of dollars in revenue. We're working very closely with these suppliers to understand their fab plans, alternative component qualification options, and so on. We've been as transparent as possible about our business and our challenges with investors on this front, and will continue to be. I'm confident we'll resolve these issues. It's only a question of when. As we look forward to the year ahead, we see improvements both in the supply chain and from our responses to it. that make us confident we can deliver growth. We'll offer formal annual guidance next quarter. However, we see a realistic path to mid-single-digit top-line growth next year. We expect supply constraints to continue to impact the first half of fiscal 23, with accelerating revenue in the back half driven by product redesign, demand tailwinds, and significant backlog. For our partners, customers, suppliers, and everyone at Poly, there's a lot to look forward to. Thank you for your time, and now let me turn to Chuck to review our financials in more detail.