2016 Annual Report
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Annual Report 2016 (This page intentionally left blank.) Plantronics Annual Report 2016 FINANCIAL HIGHLIGHTS FY2016 Revenue Breakdown Revenue by Product Group and YoY Growth Annual Revenue by Product Group ($MM)1 Revenue by Product Group Revenue by Geography CAGR: 3.8% 13% 6% Decrease 865 857 1% 1% 819 Decrease 762 Increase Americas Decrease 713 246 230 $51 MM 231 Asia Pacific 213 Consumer 181 $105.7 MM $230.2 MM United Europe States 588 619 627 and Africa $482.6 MM 532 549 Enterprise $217.6 MM $626.7 MM 2% 1% Increase Fiscal Year 2012 2013 2014 2015 2016 Increase Enterprise Consumer $856.9 Million Total Revenue 1Fiscal year ended April 2, 2016 Diluted GAAP Earnings Per Common Cash/Cash Equivalents, Share–Continuing Operations Short- and Long-Term Investments Dollars Dollars in Millions 2.63 540.9 2.49 2.59 2.41 482.3 425.6 435.8 1.96 389.9 Fiscal Year 2012 2013 2014 2015 2016 Fiscal Year 2012 2013 2014 2015 2016 Other Financial Data In Millions Fiscal years ended March 31, 2014 March 31, 2015 March 31, 2016 Cash provided from operating activities $141.5 $154.4 $146.9 Total assets $811.8 $876.0 $933.4 Total stockholders’ equity $698.7 $727.4 $312.4 Total shares repurchased 1.9 2.2 9.1 Total cash utilized for stock repurchases $85.7 $112.9 $497.4 Shares used in diluted per share calculation 43.4 42.6 34.9 TIMELINE OF INNOVATION 1972 Plantronics Mexico (Plamex) opens in Tijuana 2000 2012 Digitally 2011 Plantronics launches enhanced Plantronics a developer community celebrates 2014 USB headsets to focus on delivering BackBeat FIT for PC and 50 years of intelligent context-aware innovation wireless stereo Mac computers data into applications headphones 1983 are introduced introduced for the growing 2014 The new StarSet The EncorePro 500 Series Supra soon health and 2016 1961 fitness market is introduced, an all-new becomes the generation of headsets Voyager 5200 Pacific Plantronics call center Introduction of WindSmart® is incorporated for customer service industry standard centers and offices technology, our most advanced, adaptive noise-cancelling innovation to date 1995 2015 2011 Voyager Focus UC FreeHand, an Contextual 1963 ultra-lightweight Stereo Bluetooth intelligence headset optimizes FAA selects in-the-ear introduced with 2014 2003 collaboration and focus Plantronics as its sole headset is Voyager PRO UC Plantronics receives headset provider introduced CS50 Award for Corporate for PC and smartphone brings Excellence from U.S. calls/multimedia with 1969 wireless Secretary of State active noise-cancelling First words from the freedom for its operations technology moon spoken through to the office 2012 at Plamex a Plantronics headset 2010 Plamex Savi Office celebrates 2013 wireless 40 years Contextual headset system in Tijuana intelligence unifies PC and expanded in desk phone Voyager and communications Blackwire lines Plantronics Annual Report 2016 1972 Plantronics Mexico (Plamex) opens in Tijuana 2000 2012 Digitally 2011 Plantronics launches enhanced Plantronics a developer community celebrates 2014 USB headsets to focus on delivering BackBeat FIT for PC and 50 years of intelligent context-aware innovation wireless stereo Mac computers data into applications headphones 1983 are introduced introduced for the growing 2014 The new StarSet The EncorePro 500 Series Supra soon health and 2016 1961 fitness market is introduced, an all-new becomes the generation of headsets Voyager 5200 Pacific Plantronics call center Introduction of WindSmart® is incorporated for customer service industry standard centers and offices technology, our most advanced, adaptive noise-cancelling innovation to date 1995 2015 2011 Voyager Focus UC FreeHand, an Contextual 1963 ultra-lightweight Stereo Bluetooth intelligence headset optimizes FAA selects in-the-ear introduced with 2014 2003 collaboration and focus Plantronics as its sole headset is Voyager PRO UC Plantronics receives headset provider introduced CS50 Award for Corporate for PC and smartphone brings Excellence from U.S. calls/multimedia with 1969 wireless Secretary of State active noise-cancelling First words from the freedom for its operations technology moon spoken through to the office 2012 at Plamex a Plantronics headset 2010 Plamex Savi Office celebrates 2013 wireless 40 years Contextual headset system in Tijuana intelligence unifies PC and expanded in desk phone Voyager and communications Blackwire lines (This page intentionally left blank.) LETTER FROM THE CEO Dear Fellow Stockholders, Plantronics continued to improve its strategic position in fiscal year 2016 despite a challenging currency headwind and a sharp decline in the mono Bluetooth® headset market. On a constant currency basis, we grew revenues by 2% for the year compared to fiscal year 2015. Some highlights from fiscal year 2016 and our outlook are: • Our core enterprise business is stable and revenue from Unified Communications (UC) grew 11% for the full year. We expect a mid-teen percentage UC revenue growth in fiscal year 2017 • Our consumer business has stabilized and we expect growth to resume by the end of fiscal year 2017 • We expect average annual constant currency revenue growth in the mid-to-high single digit percentages through fiscal year 2019, with a slightly lower revenue growth rate in fiscal year 2017 • New opportunities in services and Soundscaping are anticipated to provide incremental upside to our revenue growth after fiscal year 2017 • Our competitive position in the enterprise and mono Bluetooth headset categories remains strong, and we believe we are well positioned for growth in the stereo Bluetooth market Commitment to Improved Profitability We completed restructuring activities announced in February, and have taken steps to further reduce expenses to position us for additional operating margin improvement in fiscal year 2017. Our operating margins are expected to increase by 100 to 200 basis points in the first quarter of fiscal year 2017 over last quarter and to improve throughout fiscal year 2017, assuming no significant fluctuations in currency exchange rates. Long term, we remain committed to achieving Non-GAAP operating margins of 20% to 23%. Enterprise Results Robust UC revenues drove our financial results to the high end of expectations, growing by more than 10% in fiscal year 2016. Our margins, average selling prices and competitive position remain excellent, and our offerings continue to receive a price premium compared with competitive offerings. We believe the opportunity for UC to drive headset adoption remains compelling, though growth of the market has been less than originally anticipated. We’re very pleased with the phenomenal reception for our new EncorePro® Series, Voyager® Focus UC, and line of digital adapters that enable us to capture and analyze meaningful data insights for our customers. Most of our investment continues to be focused on delivering a hardware and software solution set to deliver more value to customers through data insights and tools to manage their headset deployments. We anticipate these products, when combined with service offerings, will contribute to growth in the coming years. Consumer Our market share in mono Bluetooth headset sales reached record levels in the U.S. during fiscal year 2016, however the overall market decline outpaced our gains. Our gaming and Clarity products experienced healthy growth in the fourth quarter of fiscal year 2016, and our overall outlook for our consumer line of products has improved entering fiscal year 2017. Three solutions developed and built in fiscal year 2016 and introduced in the first quarter of fiscal year 2017—the Voyager 5200, BackBeat® GO 3, and virtual reality headsets—have received noteworthy market reception. The Voyager 5200 is our new premium mono Bluetooth headset, providing our best mono Bluetooth communications experience ever. We believe its capabilities and sound experience are superior to others in its category today. Voyager 5200 and its UC-enabled counterpart, Voyager 5200 UC, were designed for stability and maximum comfort, fitting more than 90 percent of people. Both headsets feature our new WindSmart® technology, an exclusive Plantronics innovation providing extraordinary wind and noise reduction. They also feature Plantronics sensor technology allowing automatic call answering, a wireless range of up to 100 feet, and 50% more digital signal processing. BackBeat GO 3 is our new stereo Bluetooth wireless offering, and is designed to provide stunning audio quality and sound performance. BackBeat GO 3 delivers vivid, high-resolution sound in a small form factor that is attractive and comfortable to wear. In the gaming category, recognizing that sound is as important as sight, we introduced RIG 4VR, a headset designed for use with the upcoming PlayStation®VR. RIG 4VR is a complete audio solution with interchangeable cables for use with PlayStation®VR and DualShock®4 wireless controllers, and will be available worldwide with the launch of the PlayStation®VR in October 2016. Expanding our Business Model In coming years, we anticipate higher revenue growth and profitability as new services offerings are introduced and expanded. Plantronics Device-as-a-Service (DaaS) Enterprises are increasingly adopting “as-a-service” business practices to reduce the complexity and costs of having to maintain and upgrade their own internal software and hardware infrastructures. During fiscal year 2016, we introduced Plantronics Device-as-a-ServiceSM (DaaS), an offering designed to meet customer demands for hardware flexibility and reliability. Making our premium-quality products available in a subscription-style model has the potential to expand Plantronics presence in the small- and mid-sized business category. Plantronics Annual Report 2016 Plantronics Software-as-a-Service (SaaS) In tandem with UC deployments, our investment in software in recent years is providing customers with new insights into how their customer service centers run and can be improved. Our strategy in SaaS leverages telemetry data generated by our headsets and captured by our client software, Plantronics Hub™. We can now process this data in the cloud to enable customers to greatly simplify management of systems that include our devices.