The turnaround begins!
- Non-GAAP revenues of $415M, down year-over-year but up sequentially
- Record video unit shipments
- Record headset unit shipments
- Supply chain disruption continues, but improving
- Expense management leads to positive GAAP and non-GAAP operating income
- Repurchased $37.4M of debt
Comments & Opinions
(Note: Poly’s fiscal quarters and calendar quarters are different. We chose to focus on calendar quarters since this facilitates comparisons with other companies.)
Perhaps it’s too soon to say that Poly has turned the corner, but several signs indeed point to a turnaround. Most noticeably, video sales are up, reaching the highest revenue point since the Polycom acquisition. Also, enterprise headset demand remains strong, with revenues hitting the highest level since at least CY17-Q2. Voice, which mostly consists of desk phone products, remains a laggard as many (most) workers have yet to return to the office due to the pandemic.
Under the hood, Poly released some sales data on its new video products – a category that includes three Studio models and the G7500 room system. From FY20-Q4 to FY21-Q1, sales doubled (based on sales-out reporting), and from FY21-Q1- to FY21-Q2 (the most recent), sales doubled again to approximately $40M.
Notably, Poly did not provide unit shipment data for this category. These products generally sell for prices far lower than Poly’s traditional video products – a challenge that brings up the topic of transformation.
There is no question that the market for video solutions has changed. The evolution began more than five years ago, but has accelerated markedly in the past 12 months.
Poly itself is now addressing its own business transformation head-on. From his time at Dish Network, TiVo, and the Weather Channel, new CEO Dave Shull brings leadership experience and expertise in helping companies transform. Arguably, such skills may be more valuable than market knowledge in video conferencing and UC.
Poly’s number one priority must be growth, without which nothing else makes long-term sense. However, to achieve this growth, the company will need to:
- Increase its manufacturing capacity while maintaining financial flexibility
- Continue to cut costs to thrive in a world of lower average selling prices
- Drive business through its long and impressive list of partners, including Microsoft, Zoom, RingCentral,8×8 and others
- Re-invigorate its network of channel partners
Indeed, one can detect some of these efforts already in the current quarter’s figures – quarterly operating expenses are down more than $20M from a year ago, and debt repayment will help reduce quarterly interest costs.
The stage is now set with products that address current market needs and financial moves that will strengthen the P&L. If, in addition to addressing the growth drivers above, Poly’s management team can successfully integrate Plantronics’ and Polycom’s sales teams and back-office systems, we should see an engine firing on all cylinders.