Q4 2021 Plantronics Inc Earnings Call
[music].
Good day.
Okay.
[music].
Okay.
Yeah.
[music], Inc.
True.
Yes.
Okay.
Good day, and thank you for standing by that GAAP to the Poly Q4 fiscal year 2021 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 one on your telephone.
If you require any further assistance. Please press star zero I would now like to hand, the contracts other day speaker today, Mike <unk>. Please go ahead.
Welcome to Poly's financial results conference call for the fourth quarter of fiscal year 'twenty 'twenty. One my name is Mike <unk> head of Investor Relations and joining me today are Dave Shull, 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.
For the Safe Harbor provisions of the private Securities Litigation Reform Act of 195.
The risks and uncertainties related to such statements are detailed in our most recent 10-Q10-K 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 today's call.
Along with a reconciliation of those measures to the nearest applicable GAAP measures. These 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 Day, Poly Dot com with that I will now turn the call over to Dave.
Good afternoon, everyone and thanks for joining us from wherever you work with vaccinations in travel on the rise day I'm, calling in from our Denver Office, what Chuck has been our Santa Cruz office.
Paul you had another strong quarter reflected by the numbers Chuck will talk in more detail about our financial results, but we saw non-GAAP revenues of $478 million and adjusted EBITDA of $86 million representing.
Representing year over year growth of 17% and 44%, respectively, driven primarily by strong video in headset sales.
I wanted to call out that this was the biggest video quarter in the company's history of terrific affirmation of the rise of video overall, which we see as a long term tailwind post COVID-19.
Despite pandemic related supply chain pressures and freight cost increases we continue to protect our gross margins, which were 48, 4% for the quarter, we generated $74 million in operating cash flow refinance our outstanding bonds and paid down our term loan.
On the site in February we announced our new studio P series, a line of personal video conferencing gear design for the remote worker and supported by our unmatched software and services platform Poly lens.
We also reached an incredible milestone this quarter shipping our 30 million for IP phone as we are seeing remarkably strong demand for phones across zoom phone ring central and others and just a few days ago, we launched Voyager focus to a Bluetooth headset with advanced noise cancellation and our unique.
Acoustic sense technology, delivering extraordinary sound and wear all day comfort.
This kind of performance, both financially and operationally defined policies opportunity going forward.
Specifically it speaks to both the transformation of our market and the transformation of our business.
When I joined Poly I was clear about the challenges the company faced I frame the company accurately as a turnaround we brought an excellent new leaders like our head of supply chain Grand Hoffman Who's arrival has already had a huge impact. We also enabled terrific executives already here like Carl we see our chief revenue officer.
Who is rapidly rebuilding our channel reputation and Chuck who is reduced and refinanced our debt.
While we are not yet at full sale, it's safe to say that the ship is churn everyone that policy has worked hard to get it from the point, where I can say today on an earnings call. We are no longer a turnaround you won't hear me use that word again.
Today, Paul is about transformation of our market and of our business.
The market is different because the way. We work has changed every day. There is more evidence of momentum of a permanent shift to a highly distributed workforce and hybrid connectivity across our colleagues our partners and our customers.
A recent survey of 160 for commercial landlords, who own and control seven 1 billion square feet of commercial real estate assets across the United States showed that 82% expect the hybrid work model going forward, where employees worked from the office just three days a week.
In a recent IDC study on.
Digital work transformation showed that 42% of organizations are focused on connecting people seamlessly regardless of location situation or context we've.
We've said it before and we'll keep saying it work is no longer a place. It's what you do and how you do it.
That means the world's workforce doesn't need tools for a place they need gear that connects them seamlessly to other people to be productive to sell provide counsel ask questions solve problems innovate and educate.
Holly makes a year products that are tools not twice and more importantly, we have the services support and technology to make sure that they work right all the time.
So now, let's talk about poly's own transformation, which we will expand on during our upcoming Investor day.
We're organizing our business around one key idea.
Enterprise communication is no longer about individual devices.
Instead, it is about offering comprehensive business infrastructure, the software and services to connect people spaces and technology to create the future of work.
This is the catalyst for a powerful and audacious future for poly.
In the past, even recently poly often competing just on the basis of camera and audio quality, maybe also on the AI integration with that hardware, but the fact is that our customers are facing a deeper and wider set of challenges as they plan for the post COVID-19 world.
The I T leaders are worried about compatibility data analytics security digital workflow management reliability and support both in the cloud and non premises Todd.
For HR leaders and Ceos are also worried about the quality and meetings for those in the room and does not.
Governments health care providers, and the worlds biggest banks, all need reliable and secure communications and each have a set of specific requirements that must be met when ensure an optimal experience.
Across the board, our customers want and comprehensive business solutions to enable work at home work in the office three days a week working short meeting and working lengthy brainstorming sessions.
Paul These future lies in getting as close as possible to our customers and working alongside them to create a complete infrastructure for the future of work our solutions must be easy to apply and despite the complexity of the underlying infrastructure must operate reliably seamlessly and invisibly all the time.
We have a team of business leaders in place who recognize this and who are frankly working harder than held for our zinc and outwork our competitors because we're not just content to capture incremental comp spend at our clients' communications is bigger the technology infrastructure supporting it is bigger and we're looking at.
Capture a bigger share of our customers' total it spend.
If we do this we will grow faster than our already expanding markets and we will create new markets that we will claim as our own.
Before we turn to Chuck for the numbers I wanted to take a moment to speak to supply chain.
Just a year ago people and businesses alike for one.
Wondering whether there would be enough demand to survive let alone grow.
Recently Ceos of every major public company Apple Cisco GM Samsung to name just a few are talking about supply chain pressures created by excess demand, especially for semiconductors memory and other electronic components poly is not immune and we are facing these same pressures.
Long term that speaks to the strength of our opportunity short term its operating pressure we have to manage.
We can't be sure how long this tightness will last and it changes daily. So we are focused on operational improvements that will allow us to deliver the best possible customer experience.
I want to underscore a far more important pointed out supply chain. However.
<unk> are just one part and a temporary part.
Poly supply chain story last quarter I highlighted that our supply chain was our number one area of operational focus and we have brought Grand Hoffman onboard as our new chief supply chain officer.
Since then grant and his team have been working nonstop to audit poly supply chain end to end from the conceptual stages of our products design to its final arrival on a customer's desk here.
Balancing delivered a detailed strategy to upgrade and optimize every aspect of it and it is in the process of executing plans that will generate tens of millions of dollars in savings over time.
Given our ambitions to grow we need to ensure Paul He's got the infrastructure to do it granted will be presenting that at Investor day, and I encourage you to join us and listening in I think you'll all agree that the experience and expertise he brings to Paul will serve our company, our customers and our shareholders well.
And just a few days on May 18th we will celebrate our 60 <unk> anniversary as a company.
But given the audacious plans for our future given the transformational opportunities we see in front of US. There's one more change we're making that you should know about our ticker.
Effective may 24th our new ticker will be P O L y poly.
And as much as I have enjoyed the transition to remote work I have to say, that's one business events I am thrilled to attend in person ringing the NYSE closing bell on the 24th to celebrate our history, our accomplishments and most importantly, the future ahead I was last in New York City on March 10, 2020 sort of return safely.
Fully vaccinated with a brighter future ahead will truly be a celebration.
Let me now turn things over to Chuck who will provide a more detailed view of our financial performance Chuck.
Thanks, Dave as Dave mentioned, it was another strong quarter driven by remote work and video collaboration and following last quarter's record professional headset revenue this quarter set a new all time record for video revenue.
Non-GAAP revenue was $478 million, a 17% increase from the prior year, driven primarily by video and professional headsets, which were up 125, and 20% respectively and as expected our voice sales declined 33% year over year, but were.
Typically flat sequentially services revenue remained stable at $67 million.
Gross margins declined 100 basis points year over year, driven by air freight and product mix.
Operating expenses were flat year over year at 155 million and operating income of $76 million was up 58%.
For the full fiscal year of 2021 total revenue increased 1% with video and professional headsets up 50% and 20% respectively. This was offset by voice from services, which declined 41 and 9% for the year.
Lastly, our consumer business, which we largely exited a year ago was down nearly 80%.
If you remove consumer our revenue was up 6% and excluding services total product revenue was up 9% in fiscal 'twenty one.
Gross margins for the full year declined 240 basis points, but that decline was more than offset by reduced operating expenses, resulting in an 80 basis point improvement in operating margins for fiscal 'twenty one.
Incremental freight impacted gross margins by approximately 200 basis points.
The demand environment for poly products remains strong our nexgen video solutions continue to gain traction with sell through increasing over 700% year over year.
These newer video products now represent approximately two thirds of our video revenue and 90% of our unit shipments.
Backlog remains elevated and is shifting to video and voice as enterprise customers prepare to return to the office.
Lastly, channel inventory was roughly flat for the prior quarter turning to cash operating cash flow was quite strong at $74 million for the quarter, yielding approximately $150 million for the year.
We ended our year with $217 million of cash and short term investments after retiring $100 million of the term loan in the quarter.
In February we refinanced our five 5% bonds due in 'twenty three with a 475% bond due in 29 this.
This transaction not only reduces our interest expense going forward, but also removed a near term debt maturity.
Note that we did not pay off the 23 bond in our fiscal Q4.
Save money and avoid the early redemption fees for cash was held in escrow and is reflected as restricted cash on our balance sheet.
Both the bond and the restricted cash will come off our balance sheet in fiscal Q1.
Turning to guidance as you likely saw in our earnings press release, the global semiconductor chip shortages impacting our supply chain and the situation remains fluid.
As mentioned earlier and market demand for video and professional headsets remains strong and voice demand is recovering.
Absolute supply shortages, we believe demand would support sequential revenue growth off the March quarter. However, based on our current supply than expected availability of specific components, we expect to deliver financial results for fiscal Q1 within the following ranges.
GAAP revenue $410 million to $430 million.
Adjusted EBITDA $50 million to $60 million earnings per share 35 to 55.
Our non-GAAP tax rate is expected to be 14% to 16% and the shares outstanding should be approximately $44 million.
Lastly, regarding our fiscal Q1 gross margins.
<unk> pricing for components and incremental logistics costs associated with the global chip shortage will impact gross margins by as much as several hundred basis points from the quarter.
Before I turn the call over to the operator to take questions. Let me Echo Daves point about where we are as a business in a difficult operating environment, we set out to improve every aspect of our business, we strengthened our balance sheet, which means we improved our financial flexibility, we improved our leadership team and launched new products from <unk>.
Services <unk>.
<unk> for last year, we have a new set of challenges ahead of us with constrained components supply. However, our balance sheet is strong we have significant demand and healthy and growing markets and we look forward to the future.
I'll now turn the call over to the operator to begin Q&A operator.
As a reminder to ask a question you will need the price on.
10 phone do we draw your question. Please press the pound key.
First question comes from the lineup.
Yes, Manny from Evercore. Your line is now open.
Yeah.
Thank you for taking my questions I have two I guess.
Wholesale as I, just thought off the March quarter Guide and help me out here, but if I look sequentially.
Sales were down 12% I think EBITDA is down 26% and limit for the EPS Guide I think the EPS it sounds like 60%.
Maybe just touch on what is driving that outsized EPS deleverage on a sequential basis and something on the operating line and below the operating line that would be really helpful.
Certainly thank you for the question.
So effectively what you're seeing is.
Revenue being impacted by the chip shortage and as we said in the prepared remarks absent the chip shortage. We would expect sequential growth now there is an impact on the gross margin line due to freight and spot market purchases and that flows for the gross margin line and we mentioned up to several hundred basis point impact.
On gross margins, we do expect our operating expenses to come in lower than they were sequentially. So we will get some additional leverage on the Opex line.
That effectively is driving.
No.
Mitigating and helping on the EBITDA line now in the past quarter, we had a tax benefit in Q1, we expect to then have tax expense, which is impacting.
Impacting EPS and so that's effectively what youre seeing relative to EBITDA to the EPS translation.
Got it that's actually really helpful and then.
The gross margin headwind of several hundred basis points.
Do you think March quarter will be the peak from a gross margin perspective are you into gross margins I guess when you go beyond the quarter beyond just what you wanted to do other people.
Thanks for the for yet.
We're very bullish on gross margin improvement over time I still think that this gross margin ratio are aligned for the company. When we normalize isn't the low fifty's, 50% to 55%, we're seeing really great progress with grant and the work he is doing on material cost reduction.
The supply chain freight issues are still plaguing us and as we move freight back to the water is airfreight charges start to subside following quite frankly consumer air travel are commercial air travel.
Those will benefit the gross margin line.
We should be back in the range, where we were historically in the low fifties.
Got it that's helpful. If I could just.
Second one I guess items, you've been averaging 20% topline growth in the back half of the fiscal year.
So the only thing what other struggled day one how does this understanding what should the long term growth, but it looked like beat that in fiscal 'twenty, one or beyond and very specifically have you been video of the settlement with stack up from a growth basis for the fiscal year.
So maybe I'll take that.
Main variable if we're not going to provide specific guidance today I think will provide a little bit more color in terms of the annual growth rates at the Investor day in a week or so but I think I think it was probably the most destructive metric on video is the next generation video portfolio growing more than 700% year over year and so we're seeing tremendous.
Demand.
The pipeline is very strong and I think.
Even with a few delays in certain geographies tied to slower vaccinations and people had hoped.
I think for.
Several quarters to come we're going to see pretty massive demand on the video side and so to me that to me that that's tremendously bullish we want to make sure that we are optimized and ready from an operating point of view to fully capitalize on debt the.
The one other thing I would add too to Chuck's comments on.
Gross margin is.
The reason why we're very.
Positive I guess I should say is that that kind of the low fifty's as the appropriate range is all the work that the supply chain team is doing with regard to design to value and so the tens of millions of dollars of savings that I that I mentioned in terms of <unk>.
Targets here on the gross profit side are tied to the freight issues that Chuck mentioned, but also a lot of designer for Thats going our way collaboratively between our suppliers and our engineering team.
Understood. Thank you very much for the clarity.
Thanks for thanks for your question.
Your next question Thats the line of Paul Silverstein from Cowen. Your line is now open.
Thank you for taking the questions.
Now, it's fluid and it's still early.
Vaccination increasing across the globe.
Volume is different region different places, we can put a vaccination process.
Any insight you gain in terms of the impact.
Whether it's the U S reopening Germany.
Okay reopening again recognized from close to the joint just from points, but one would think that macro recovery has certain implications for you and others any insight you can gain in terms of how that translates.
<unk> revenue for better or worse.
Yeah, I think I think it depends a lot by category. So, let's just talk a little bit specifically category by category.
So headsets are up.
Roughly 60% year over year Q4 for Q4, we are seeing a significant shift in mix, though we're seeing fewer people buying the wired headsets and more people shifting to Bluetooth because they are settling in and saying this is going to be a long term trend, where 35% to 40% of the work force is going to be in the after some business at home some days and so on.
It's really driving sort of the uptake from our Bluetooth point of view.
On the video side Theres tremendous demand as people are looking at building out the conference rooms, I think the we're seeing.
Shifting away from sort of the concept for the huddle room every room becomes more day huddle room in a sensitive requires video and so if you look at the 90 plus percent of conferences that need to be built up from a video point of view there is pretty substantial demand. The pipeline is very strong the precise execution of that pipeline really varies by geography based on the return to work and the vaccination rates.
That people are seeing and so so I would say, that's where we're seeing fairly long term orders come in and people are saying, Okay. We may have to move it a month or two or three is what actually happens from a vaccination rate point of view and then I alluded to this a little bit in my prepared remarks, the 30 30 million for IP phone that we ship, we're seen a surprising a wonderful recovery.
Really on the voice side, and we believe that what's triggering that is a return of smbs back.
Back to the office, even prior to some of the biggest enterprises and so there is a desire to get away from a traditional PBX zone and to get to more of a cloud base solution tied to Jim for phones or in central et cetera, et cetera, and so that's driving a fairly significant demand at the SMB sector on the voice side.
Do you feel net loss point.
And I'm not sure I understand what you're saying.
When you look at the numbers for us was $64 million per quarter down from 95 million a year ago quarter.
From $6 million to $7 million. So it was relatively flat or flattish sequentially, but was still down I hope equipped moving not surprising, but the demand youre, referring to Seb is coming back from U S revenue with it.
Is that you're looking at to assume on a week to week and month to month basis due to regain Kansas for the quarter I assume that strength is being reflected real time.
That is correct. That's looking at pipeline data is looking at.
Kind of the mix of products thats coming through within that revenue mix as well to be clear I think I said in one of my earliest conference calls I forget, which one it was that I don't expect it to get back to the full $95 million. For example that we had in Q4 of 'twenty.
But we are seeing a quicker recovery I guess I would say than I had originally anticipated.
Obviously, a good thing and it's and it's driven primarily by the F&B market, which again is a bit of a different dynamic than we expected.
Whereas the larger enterprises are very focused on the video capability and the buildout of the debt over a longer period of time.
One last question if I may referred from virtually every company networking comm equipment throughout technology, both supply chain constraints.
For the overwhelming majority of the societal challenges crews from challenges but.
That they are effectively managing the issue isn't meaningful is de minimis moderate share now there've been some others not just yourself inside a bigger impact, but you're one of the largest if not the largest true now in fact.
Is that by virtue, maybe that's not surprising given that your debt.
By segment.
For the challenges you are seeing that across voice video and headsets is it predominantly one versus the other is it getting worse and worse week by week month for months or any incremental insights it shows.
Yeah. So let me provide a bit more color commentary I mentioned grant a couple of times.
When I talked about sort of the new hires that we've had there has actually been a pretty significant set of new hires that grant has brought it in on top of debt and so as part of that we've done a pretty comprehensive audit.
All of our supplier relationships and I sit down and now I've talked to some of our biggest chipset manufacturers in the world other very senior level and explain to them our roadmap explain to them the 700% growth that we're seeing on the video side, they're thrilled to see that but and I think the new leadership team that we have coming in has helped us tell a clearer story.
As tell a more compelling story and that's getting a lot of attention from the supply base. So to me that's very encouraging and that gives me very bullish.
Sentiment I guess I should say with regard to the rest of this year.
But we also wanted to be very clear, which is there was a turnaround that took place here.
We're on a great track, but we've had some categories growing 700 per cent and so to make sure that we're fully delivering on that rapidly increasing demand for our newest products video some of the audio products for a lot of it in video we wanted to make sure that we're very clear on the guidance for this quarter.
Chuck do you want to.
Yes, I would just I think Paul.
Less of an impact on headsets.
More of an impact from the new video products not so much the legacy video products and then a mixed impact on desk phones and I think.
And then to your point, Paul Yes things are improving.
I would say we were more pessimistic a couple of weeks ago, and we're more optimistic today.
Work that grant and his team are doing other work that Dave is doing talking to Ceos of these major large scale chip providers.
It is getting better we expect Q2 to be better and to improve our probably not going to be out of the woods in Q2, but we think that Q2 will be significantly better from a chip supply standpoint than our Q1, and we would expect that.
Maybe not fully clear by the December quarter, but protium, hopefully back to normal by the December quarter.
Sure Karl Puzzled zone.
But I got a follow up from that protects you counterintuitive for counter to what I think most if not all other companies have been saying about the supply of insurance in particular, assuming from Broadcom and other suppliers. So I just wanted to assure I understand what youre, saying this significantly better if I heard you correctly in Q2.
That's just a day.
That's something specific to Q2 or you actually think that book.
Good improving trend from a supply chain component availability standpoint.
Again, when I say Q2, I mean, our September quarter, and a lot of that is the work that Dave is doing talking with the Ceos of the chip suppliers building those relationships for work that grant and team are doing as well as some purchasing on the spot market and so we're not providing guidance, obviously for our September quarter or December quarter.
But we expect that things improve in terms of chip supply.
As the as this quarter closes in the next quarter, but we've contemplated in our guidance. What we believe we have access to from a chip supply today.
And we're we're working with longer term arrangements.
Trying to kind of negotiate longer term arrangements with our chip suppliers.
I'll take the rest offline I appreciate your interest.
Thank you Paul Thanks, Paul.
Thank you. Your next question comes from the line up Greg Burns from Sidoti and company. Your line is now open.
Good afternoon.
How much.
And he was referencing impacted this quarter from any supply component constraints.
So in the.
In our Q4 quarter, our March quarter, we did have.
Impact for sure we haven't quantified that specifically, but.
I think revenue could have been.
I would ballpark it at $10 million $20 million higher we still have elevated backlog.
And it's a higher than we would like it to be it has shifted a little bit from headsets to the new video products.
But we haven't provided specific numbers, but I think realistically Q4.
Could have been much stronger even if we didn't have constraints in Q4.
Okay.
No.
When we look at the debt.
Business.
Relative to other than what we saw from some others in the space.
Hum.
It seems like.
The growth isn't as strong or maybe youre, losing some market share and maybe even some of the supply chain issue.
Chain issues, but maybe just talk about.
Relative growth rates, if you're gaining or losing share in the headset market.
Certainly in terms of both good Chuck book.
Okay.
If you.
Want to necessarily compare us to competition because in different cases, we compete in different categories, but if you look overall at.
The office headsets, the traditional kind of Bluetooth headsets I think the growth rates have been fairly comparable as you know Greg we have a higher concentration of contact center and that business is not yet recovering and then importantly, we have new products like our.
Our wireless speakers the sink lines, Inc, 2040, and 60 that has really great growth opportunities we do have.
Supply constraints in some of those products so I think.
We're doing quite well and some other key categories that we compete in.
Okay, and then in terms of those new.
<unk> the sink the speaker phones in the P series.
Where are we at in terms of.
The launch of those products are you currently selling them all and market.
How has the initial.
Market reaction to the products then.
Visiting 20, and 40 and market and we're just now releasing the <unk> 60, I would say the market response to especially the 40 has been phenomenal. It's a nice balance of kind of size and portability, which is seems to be resonating pretty well for the works from home folks.
Studio P series, we announced them in February they are in markets at relatively low volumes honestly, given the supply issues, but so far the feedback on particularly the <unk> has been excellent. We mentioned a few of the design awards that we won for both for the entire P series and I think youll see a lot of ramp up on debt based on.
<unk>, we've had with customers I think is they're looking for something that works both in the office, but also at home.
Okay and then.
You are talking about.
They are getting more of our businesses infrastructure being more involved in it.
The software and services, so, but what is that.
How is that going to mean lens becomes a bigger.
Part of the overall package so like how should we think of that and then maybe what the the growth of services might look like.
Given that it's been down for the last couple of years.
Greg that what I'm going to ask you to come back on for 'twenty, and you hear more detail I'd, rather I'd, rather kind of.
Could that comprehensively in place. So you can see a clear vision there.
Good question.
Alright.
Thanks.
Thanks for asking.
The map on my Chung from.
Okay.
Great. Thanks.
Maybe first question for me.
And then kind of two.
A few questions that hit Kumar.
But you noted kind of longer duration of video demand that you think you are seeing.
In your conversations with customers is that longer duration, because people are kind of outfitting in a more orderly fashion, maybe they want a day, 10% of their conference a month or is it that you expect kind of a different customers to hit at different times and then maybe similar question on the desktop side.
Is the demand pickup that you're seeing is that specific to maybe hotel in debt or going into place or maybe you can refresh activity that was paused in 2020 finally, starting to take place. Thanks.
This is a this is Dave good question so on the <unk>.
On the video side, we've seen a couple of factors.
Some of it is it.
Move from I guess for no call on premises gear to the cloud and that tends to be fairly industry specific. So we're seeing a fair amount of activity in financial services. For example, where people are looking at a couple of other cloud providers and looking to make a transition.
As they look at that Theyre looking at POC on the hardware components of that to make sure that they fully understand all the.
I guess, what I would call sort of <unk>.
Transformation sets that they need to take to go from on Prem to cloud and so we do expect that to it's a lot of it is happening right now, but I would say the revenue will ramp once they get through the POC as they make a final decision in terms of the cloud collaboration apart from them they want to use and they start to roll the hardware out and so we're expecting that to continue over the next few quarters and that's a global phenomenon.
Non with a largely a lot of these are very very large companies.
Specifically with regard to some of the the.
Longer term question marks that I mentioned in Europe. It varies by country tremendously the vaccination rates that we're seeing and so there's been a few countries where people have been about the place orders and saying well that might be a three month delay right. We're still very interested in doing it but we got to figure out exactly when the vaccination rates going to get to a point, where the government is going to allow.
For us actually go back into the office until you bump along with TLC has for a while and then you see sort of a pretty substantial pull the trigger as they try to actually execute on them.
The audio stuff is twofold, the voice stuff that I mentioned is twofold. One is were seeing direct demand now for.
SMB customers, especially here in the states coming back and wanting to get off of whatever PBX system. They had and wanted to get something that is his teams or zoom or green central based and so those are direct orders that are happening now with regard to the larger enterprise, it's a bit of the same sort of plc minds.
They've made the decision to get away from on premises gear, and Theyre kind of walking away and they're saying, okay. We're going to do a bit of a video trial, we're going to do a bit of an audio voice trial, and we'll see how that kind of happens over time, so kind of a bunch of different kind of dynamics. There to your question if that makes sense.
Yeah, that's great. Thanks, Inc.
Your next question comes from the lineup.
Okay.
Your line is open.
Hi, This is Paul Chung on for <unk>. Thanks for taking my question. So just on the sell through dynamic on.
Slide 17 is that if you could confirm if that just for new products and video and then if you could comment on kind of a balance between overall sell through versus sell in video you mentioned Chad.
Channel inventory was kind of flattish overall, so any comments there.
Certainly Paul.
Slide 17 shows the trend itself through for new video products.
Specifically the ex series.
7500, the new P series.
And we've really seen incredible growth, 700% year over year.
And we expect that absent chip shortage.
That trend is continuing these new products are selling incredibly well today two thirds of our revenue comes from the new products and video.
A third from the legacy products for 90% of the units and so demand is far outstripping supply.
And we would expect that to continue as it relates to channel inventory I would say you know we don't we're in a pretty good place at the end of the quarter now as the chip shortage is manifesting, we expect channel inventories to go down significantly in some cases, they're unhealthily low in some areas and there are.
And others and so I think on balance, it's probably a little lower than it should be right now, but its healthy I would expect it. Unfortunately channel inventories will decline this quarter and we expect backlog would continue to grow.
Gotcha. Thanks for that that's that's very helpful. And then as we as we think about the kind of makeup of video collaboration can you kind of provide.
Some extra details around the split between web cancer desktops of huddle rooms, and large conference rooms, and then kind of the respective growth rates you saw for for each of those.
Segments, and how you think that kind of trends are overtime for this year.
Is there some kind of buying ahead of.
Workers going back to the office or is this kind of a sustainable peace there.
I think we will cover more of that at analyst day, but maybe day do you can provide for a little bit of color now.
Yes, I was going to ask you just to suggest the same thing we're actually going to have Bill Wilder, who runs our video business unit presented at analyst day, and he's going to be able to go.
About deeper and again I think it's sort of as a broader context, which I think should be very very helpful.
We're seeing similar similar answer I guess, what I gave me there were seeing a lot of Trialing now with sort of Standalone, what we call single codec devices. Our studio ex 30 in our ex 50 products. We are seeing people start to experiment a little bit back with the larger conference rooms, thinking that maybe they need something a little bit larger that's suitable for.
COVID-19 spacing and so it's a bit of a tale of two cities, but let me let me, let Bob provide a bit more detail I can get a week I think that would be more helpful.
And then last question very very good performance in enterprise headsets.
For kind of.
New quarterly run rate north of $200 million kind of moving forward.
Then.
You mentioned kind of switched the Bluetooth relative to maybe wired.
Weigh on margins at all to any extent and then are you seeing any evidence from kind of contact center demand coming back.
Thank you.
Let me answer that last one first and then Chuck can feel free to weigh in we're seeing very very little uptick in demand on the contact center side I think there was a fair migration to USB.
Maybe now they're evaluating Bluetooth so no is the simple answer to that and that's really where the margin benefit was with regard to Bluetooth.
And Blackwater there is there's obviously a significant ASP difference, but there's not as much of a margin difference.
So we're glad to have the higher ASP products, because I do think they are stickier.
But we'll see how that migration happens trucking if you want to add to that yeah. I would just say that's right I mean, the margin percentage, a little higher in Bluetooth and black wire not not meaningfully but margin dollars are quite a bit higher so as Dave mentioned, the migration from corded to cordless.
As a real benefit both to revenue and margin dollars.
Per unit basis, and can should be.
Beneficial relative to your question on is this the.
Kind of like the new level for headsets I think so I mean, if you look at industry growth rates and we will talk about the smart analyst day in a week. They are projecting headset growth from these levels from a Tam standpoint.
Hard to say and we're not providing detailed quarterly guidance here, but I think we do.
Do expect the market to continue to expand and I think given our leadership position and the strength of our technology and some other new product offerings.
Expect that we can we can grow along with or perhaps even faster than the market.
Thank you very helpful.
Thank you for your next.
Yeah. Good question, perhaps on the line up for us.
Your line selling point.
That's really a certain part of the Apple I Should've asked you Shimon.
The 60 plus million.
A foregone revenue in the June quarter based upon current guidance you gave.
You were up sequentially would be at least six moving I assume it would be even more than that because that will be very much at all but that revenue due to supply constraints.
I assume because everybody from the same both price and supply constraints.
It's simply a matter for them.
Sure.
<unk>.
As opposed to losing that revenue for logitech or other competitors, but let me ask you. The opening question any risk that other suppliers will be able to satisfy the best moving it goes away or is it simply a timing issue.
I want to add this is Dave I'm going to answer it is a tale of two cities and Chuck can feel free to provide more color. If he wants so with regard to some of the SMB buyers on some of our a.
Pay TV use this word less differentiated products and more of our voice products. For example, some other phones, yeah I think some of that demand is a bit of perishable.
Because because each interest unless unique from a technology point of view with regard to the largest enterprises the fortune.
500, global one thousands right we have a long term relationship with many of these companies and are looking for a multiyear rollout and so I think a quarter or so of pickup is not.
And of that initial from a longer term relationship. There. So I think I think a lot of the video stuff is going to have a much longer shelf life. I guess is what I would say of course, we're trying to execute on it as quickly as possible for all of our states.
But on the voice other there are some risk Chuck.
Yes, I think thats well said.
Okay.
Just one quick follow up any way to quantify how much is one versus the other.
I don't have it.
Oh, Yeah, Yeah book.
I'm sorry, Chuck you can tell you for.
So you can't you can't thicken, you'd probably get the answer out.
Yeah.
[laughter].
I apologize I missed that.
That was you don't have that information.
Yes, I mean, I think you know ultimately Paul what I would say is the pipeline supports significant growth the pipeline deals tend to be enterprise transactions with large scale.
<unk> enterprises, and I think that they're doing long term rfps will retain that business.
The.
Commodity purchases that are short term debt.
A long tail SMB.
I can't really quantify or break that out for you.
But I guess, that's the real question is what I'm driving at obviously is.
To what extent does this.
Impact your long term demand for long term revenue for.
Growth rate how much of this is customers that will shift away from volume to one of your competitors because they have the ability to satisfy your now demand and Chris and the relationship of weighted from June <unk>.
Sounds like you're saying that it's.
Small piece.
I don't think it impacts for the long term thesis at all I really don't I think that the.
This is a market, where we've seen our competitors not be able to meet supply and.
And demand and we've had the same challenges and when you win a long term strategic accounts than they stick with you if it's a truly a jump ball.
We may lose that but I think we would get that back.
Right away and so I don't think this changes the long term thesis at all.
Alright I appreciate it thank you.
Thanks, Paul.
Thank you. Our next question, perhaps on the lineup, Greg Burns from Sidoti and company and a lifestyle thing.
Sorry, I tried to hop out Paul pulp beat me to it so.
My question's been answered thanks.
Thanks, Greg.
Thank you there are no further questions at this time.
Back to your day.
Thanks for all I really appreciate the engagement and the time.
I'm going to reiterate actually what Chuck said I remain very very optimistic.
About the longer term pieces here and again im fairly new on the CEO role and so we you know, it's it's never fun to issue a downward guidance, but I would rather just be straight with you all but by the same token I remain very very bullish for the year and for the next couple of years to come and again, we will share much more of that at the analyst day and.
I appreciate everyone's time and look forward to talking to you all next week. Thank you.
Thanks Keith.
Today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.