UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 22, 2015
 
POLYCOM, INC.
(Exact name of registrant as specified in its charter)

State of Delaware	 	000-27978	 	94-3128324	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
 
6001 America Center Drive
San Jose, California	 	95002	
(Address of principal executive offices)	 	(Zip Code)	
(408) 586-6000
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02. Results of Operations and Financial Condition
On January 22, 2015, Polycom, Inc. issued a press release announcing its financial results for the three months ended December 31, 2014. The full text of the press release is furnished as Exhibit 99.1.
 
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release, dated January 22, 2015, entitled “Polycom Reports Strong Growth in Operating Performance on Revenues of $349 Million in Fourth Quarter 2014.”

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
POLYCOM, INC.	
 
By:	/s/ Laura J. Durr 	
 	Laura J. Durr	
 	Chief Financial Officer and Executive Vice President	
Date: January 22, 2015

 

EXHIBIT INDEX
 
Exhibit No.	  	Description	
99.1	  	Press Release, dated January 22, 2015, entitled “Polycom Reports Strong Growth in Operating Performance on Revenues of $349 Million in Fourth Quarter 2014.”	

Exhibit 99.1

Investor Contact:	 	Laura Graves	
 	 	Polycom, Inc.	
 	 	1.408.586.4271	
 	 	laura.graves@polycom.com	
 
Press Contact:	 	Michael Rose	
 	 	Polycom, Inc.	
 	 	1.408.586.3839	
 	 	michael.rose@polycom.com	
 
Polycom Reports Strong Growth in Operating Performance
on Revenues of $349 Million in Fourth Quarter 2014
 
· Non-GAAP EPS grows 50 percent year-over-year
· GAAP EPS grows 1600 percent year-over-year
SAN JOSE, Calif. – January 22, 2015 – Polycom, Inc . (Nasdaq: PLCM) today reported fourth quarter 2014 revenues of $349 million, non-GAAP net income of $34 million and non-GAAP earnings per diluted share of 24 cents. GAAP net income for the fourth quarter was $20 million, or 15 cents per diluted share. A reconciliation of GAAP to non-GAAP results is provided in the tables at the end of this press release.
“I am pleased with the significant turnaround in our Company’s operating performance during 2014,” stated Peter Leav, President and Chief Executive Officer.  “Polycom’s strategic pillars to drive profitable growth, optimize our cost structure, lead customer success, and build a culture of one winning team will continue to be foundational elements in how we run our business in 2015.”
“Operating margins grew significantly on both a quarterly and full year basis,” said Laura Durr, Chief Financial Officer and Executive Vice President.  “ Polycom also generated $91 million in operating cash flow and repurchased $25 million in common stock during the fourth quarter of 2014. ”  
On a comparative basis, consolidated financial results were:
 
($ in millions, except per share data)	Q4 2014	 	 	Q3 2014	 	 	Q4 2013	 	 	Year-Over-Year Change	 	
Revenues	$	348.9	 	 	$	335.7	 	 	$	347.9	 	 	 	—	 	
Non-GAAP Net Income	$	33.6	 	 	$	30.7	 	 	$	25.4	 	 	 	32	%	
Non-GAAP EPS	$	0.24	 	 	$	0.22	 	 	$	0.16	 	 	 	50	%	
GAAP Net Income (Loss)	$	20.5	 	 	$	17.0	 	 	$	(2.0	)	 	 	1140	%	
GAAP EPS	$	0.15	 	 	$	0.12	 	 	$	(0.01	)	 	 	1600	%	
 
On a geographic basis, consolidated revenues were comprised of:
 
($ in millions)	Q4 2014	 	 	Q3 2014	 	 	Q4 2013	 	 	Year-Over-Year Change	 	
Americas	$	165.3	 	 	$	166.4	 	 	$	170.6	 	 	 	(3	)%	
% of revenues	 	47	%	 	 	50	%	 	 	49	%	 	 	 	 	
Europe, Middle East & Africa (EMEA)	 	93.7	 	 	 	84.0	 	 	 	89.2	 	 	 	5	%	
% of revenues	 	27	%	 	 	25	%	 	 	26	%	 	 	 	 	
Asia Pacific	 	89.9	 	 	 	85.3	 	 	 	88.1	 	 	 	2	%	
% of revenues	 	26	%	 	 	25	%	 	 	25	%	 	 	 	 	
Totals *	$	348.9	 	 	$	335.7	 	 	$	347.9	 	 	 	—	 	
* may not foot due to rounding

By product category, inclusive of its service component, consolidated revenues were comprised of:
 
($ in millions)	Q4 2014	 	 	Q3 2014	 	 	Q4 2013	 	 	Year-Over-Year Change	 	
UC Group Systems	$	219.2	 	 	$	217.3	 	 	$	218.1	 	 	 	1	%	
% of revenues	 	63	%	 	 	65	%	 	 	63	%	 	 	 	 	
UC Personal Devices	 	66.6	 	 	 	60.1	 	 	 	62.1	 	 	 	7	%	
% of revenues	 	19	%	 	 	18	%	 	 	18	%	 	 	 	 	
UC Platform	 	63.1	 	 	 	58.3	 	 	 	67.7	 	 	 	(7	)%	
% of revenues	 	18	%	 	 	17	%	 	 	19	%	 	 	 	 	
Totals *	$	348.9	 	 	$	335.7	 	 	$	347.9	 	 	 	—	 	
* may not foot due to rounding
 
In Q4 2014, Polycom generated a total of $91 million in operating cash flow. Operating cash flow on a trailing 12 month basis was $205 million. Cash and investments at the end of Q4 2014 totaled $688 million, of which approximately $293 million is located onshore. Net of existing debt, cash and investments at the end of Q4 2014 totaled $446 million.
Earnings Call Details
Polycom will hold a conference call today, January 22, 2015, at 5:00 p.m. ET/2:00 p.m. PT to discuss these fourth quarter 2014 financial results and guidance for the first quarter 2015. You may participate by listening to the webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you may participate by calling 1.800.381.7839 and for callers outside of the U.S. and Canada, by calling 1.212.231.2900. The pass code for the call is “Polycom.” A replay of the call will also be available at www.polycom.com or, for callers in the U.S. and Canada, at 1.800.633.8284 and, for callers outside of the U.S. and Canada, at 1.402.977.9140. The access number for the replay is 21759155. A replay of the call will be available on www.polycom.com for at least three months.
Forward Looking Statements and Risk Factors
This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 regarding our future financial and operating performance, including profitable growth and optimization of our cost structure. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of competition on our product sales and for our customers and partners and any resulting loss of business; the impact of increased competition due to consolidation in our industry or competition from companies that are larger or that have greater resources than we do; potential fluctuations in results and future growth rates; risks associated with global economic conditions and external market factors; the market acceptance of our products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully implement process improvements and cost containment initiatives; changes to our strategic areas of focus; our ability to successfully integrate our acquisitions into our business; possible delays in the development, availability and shipment of new products due to engineering, manufacturing or other delays; increasing costs and the availability and differing uses of capital; changes in key personnel that may cause disruption to the business; the impact of restructuring actions; and the impact of global conflicts that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.
Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed and will be delivered on a when and if available basis.
GAAP to non-GAAP Reconciliation
To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom’s underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses, or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.

About Polycom
Polycom helps organizations unleash the power of human collaboration. More than 400,000 companies and institutions worldwide defy distance with secure video, voice and content solutions from Polycom to increase productivity, speed time to market, provide better customer service, expand education and save lives. Polycom and its global partner ecosystem provide flexible collaboration solutions for any environment that deliver the best user experience, the broadest multi-vendor interoperability and unmatched investment protection. Visit www.polycom.com or connect with us on Twitter, Facebook and LinkedIn to learn more.
© 2015 Polycom, Inc. All rights reserved. POLYCOM ® , the Polycom logo, and the names and marks associated with Polycom’s products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners.

 

POLYCOM, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 	Three Months Ended	 	 	Twelve Months Ended	 	
 	December 31,
2014	 	 	December 31,
2013	 	 	December 31,
2014	 	 	December 31,
2013	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product revenues	$	252,593	 	 	$	251,044	 	 	$	960,726	 	 	$	991,110	 	
Service revenues	 	96,332	 	 	 	96,898	 	 	 	384,428	 	 	 	377,279	 	
Total revenues	 	348,925	 	 	 	347,942	 	 	 	1,345,154	 	 	 	1,368,389	 	
Cost of revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of product revenues	 	109,880	 	 	 	112,435	 	 	 	406,625	 	 	 	422,429	 	
Cost of service revenues	 	37,913	 	 	 	38,475	 	 	 	153,520	 	 	 	153,189	 	
Total cost of revenues	 	147,793	 	 	 	150,910	 	 	 	560,145	 	 	 	575,618	 	
Gross profit	 	201,132	 	 	 	197,032	 	 	 	785,009	 	 	 	792,771	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	99,004	 	 	 	109,384	 	 	 	388,761	 	 	 	435,047	 	
Research and development	 	48,293	 	 	 	51,250	 	 	 	196,495	 	 	 	216,032	 	
General and administrative	 	25,711	 	 	 	20,141	 	 	 	99,886	 	 	 	96,602	 	
Amortization of purchased intangibles	 	2,418	 	 	 	2,854	 	 	 	9,781	 	 	 	10,389	 	
Restructuring costs	 	3,460	 	 	 	13,831	 	 	 	40,347	 	 	 	48,470	 	
Litigation reserves and payments	 	—	 	 	 	—	 	 	 	3,130	 	 	 	—	 	
Transaction-related costs	 	—	 	 	 	13	 	 	 	156	 	 	 	3,424	 	
Total operating expenses	 	178,886	 	 	 	197,473	 	 	 	738,556	 	 	 	809,964	 	
Operating income (loss)	 	22,246	 	 	 	(441	)	 	 	46,453	 	 	 	(17,193	)	
Interest and other income (expense), net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(1,489	)	 	 	(1,481	)	 	 	(5,893	)	 	 	(3,217	)	
Other income (expense)	 	627	 	 	 	(753	)	 	 	2,455	 	 	 	(1,794	)	
Interest and other income (expense), net	 	(862	)	 	 	(2,234	)	 	 	(3,438	)	 	 	(5,011	)	
Income (loss) from continuing operations before provision for (benefit from) income taxes	 	21,384	 	 	 	(2,675	)	 	 	43,015	 	 	 	(22,204	)	
Provision for (benefit from) income taxes	 	902	 	 	 	(706	)	 	 	956	 	 	 	(3,669	)	
Net income (loss) from continuing operations	 	20,482	 	 	 	(1,969	)	 	 	42,059	 	 	 	(18,535	)	
Gain from sale of discontinued operations, net of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	459	 	
Net income (loss)	$	20,482	 	 	$	(1,969	)	 	$	42,059	 	 	$	(18,076	)	
Basic net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) per share from continuing operations	$	0.15	 	 	$	(0.01	)	 	$	0.31	 	 	$	(0.11	)	
Gain per share from sale of discontinued operations, net
   of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Basic net income (loss) per share	$	0.15	 	 	$	(0.01	)	 	$	0.31	 	 	$	(0.11	)	
Diluted net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) per share from continuing operations	$	0.15	 	 	$	(0.01	)	 	$	0.30	 	 	$	(0.11	)	
Gain per share from sale of discontinued operations, net
   of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Diluted net income (loss) per share	$	0.15	 	 	$	(0.01	)	 	$	0.30	 	 	$	(0.11	)	
Number of shares used in computation of net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	135,785	 	 	 	151,158	 	 	 	136,801	 	 	 	167,272	 	
Diluted	 	140,802	 	 	 	151,158	 	 	 	142,005	 	 	 	167,272	 	
 
Note: Earnings per share amounts for continuing operations, discontinued operations and net income, as presented above, are calculated individually and may not sum due to rounding differences.
 
As a result of the net loss from continuing operations in some of the periods presented, all potentially issuable common shares for those periods have been excluded from the diluted shares used in the computation of earnings per share as their effect is anti-dilutive.

POLYCOM, INC.
Reconciliation of GAAP to Non-GAAP Net Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
 
 	Three Months Ended	 	 	Twelve Months Ended	 	
 	December 31,
2014	 	 	December 31,
2013	 	 	December 31,
2014	 	 	December 31,
2013	 	
GAAP net income (loss)	$	20,482	 	 	$	(1,969	)	 	$	42,059	 	 	$	(18,076	)	
Gain from sale of discontinued operations, net of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	(459	)	
Amortization of purchased intangibles	 	3,149	 	 	 	8,471	 	 	 	12,816	 	 	 	19,750	 	
Restructuring costs	 	3,460	 	 	 	13,831	 	 	 	40,347	 	 	 	48,470	 	
Litigation reserves and payments	 	—	 	 	 	—	 	 	 	3,130	 	 	 	—	 	
Transaction-related costs	 	—	 	 	 	13	 	 	 	156	 	 	 	3,424	 	
Stock-based compensation expense	 	13,782	 	 	 	11,165	 	 	 	47,960	 	 	 	64,465	 	
Effect of stock-based compensation on warranty rates	 	84	 	 	 	126	 	 	 	494	 	 	 	547	 	
Costs associated with CEO separation and related SEC
   investigation	 	208	 	 	 	802	 	 	 	2,159	 	 	 	2,909	 	
Income tax effect of non-GAAP exclusions	 	(7,548	)	 	 	(7,053	)	 	 	(29,093	)	 	 	(27,141	)	
Non-GAAP net income	$	33,617	 	 	$	25,386	 	 	$	120,028	 	 	$	93,889	 	
GAAP net income (loss) per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.15	 	 	$	(0.01	)	 	$	0.31	 	 	$	(0.11	)	
Diluted	$	0.15	 	 	$	(0.01	)	 	$	0.30	 	 	$	(0.11	)	
Non-GAAP net income per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.25	 	 	$	0.17	 	 	$	0.88	 	 	$	0.56	 	
Diluted	$	0.24	 	 	$	0.16	 	 	$	0.85	 	 	$	0.55	 	
Number of shares used in computation of net
   income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	135,785	 	 	 	151,158	 	 	 	136,801	 	 	 	167,272	 	
Diluted	 	140,802	 	 	 	155,310	 	 	 	142,005	 	 	 	171,008	 	
 
Note: As a result of the GAAP net loss from continuing operations in some of the periods presented, all potentially issuable common shares for those periods have been excluded from the diluted shares used in the computation of GAAP earnings per share as their effect is anti-dilutive.

POLYCOM, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 	December 31,
2014	 	 	December 31,
2013	 	
ASSETS	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	
Cash and cash equivalents	$	443,132	 	 	$	392,629	 	
Short-term investments	 	185,783	 	 	 	134,684	 	
Trade receivables, net	 	169,400	 	 	 	183,369	 	
Inventories	 	100,328	 	 	 	103,309	 	
Deferred taxes	 	38,805	 	 	 	37,085	 	
Prepaid expenses and other current assets	 	61,072	 	 	 	50,352	 	
Total current assets	 	998,520	 	 	 	901,428	 	
Property and equipment, net	 	109,195	 	 	 	115,157	 	
Long-term investments	 	59,197	 	 	 	56,372	 	
Goodwill and purchased intangibles, net	 	583,798	 	 	 	596,918	 	
Deferred taxes	 	54,019	 	 	 	51,398	 	
Other assets	 	26,493	 	 	 	27,757	 	
Total assets	$	1,831,222	 	 	$	1,749,030	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	
Accounts payable	$	108,172	 	 	$	84,640	 	
Accrued payroll and related liabilities	 	42,901	 	 	 	40,162	 	
Taxes payable	 	4,056	 	 	 	5,389	 	
Deferred revenue	 	173,532	 	 	 	172,408	 	
Current portion of long-term debt	 	6,250	 	 	 	6,250	 	
Other accrued liabilities	 	86,193	 	 	 	77,744	 	
Total current liabilities	 	421,104	 	 	 	386,593	 	
Non-current liabilities	 	 	 	 	 	 	 	
Long-term deferred revenue	 	89,366	 	 	 	87,467	 	
Taxes payable	 	11,719	 	 	 	12,419	 	
Deferred taxes	 	173	 	 	 	149	 	
Long-term debt	 	235,938	 	 	 	242,188	 	
Other non-current liabilities	 	49,189	 	 	 	43,849	 	
Total liabilities	 	807,489	 	 	 	772,665	 	
Stockholders' equity	 	1,023,733	 	 	 	976,365	 	
Total liabilities and stockholders' equity	$	1,831,222	 	 	$	1,749,030	 	

POLYCOM, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 	Twelve Months Ended	 	
 	December 31,
2014	 	 	December 31,
2013	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
Net income (loss)	$	42,059	 	 	$	(18,076	)	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	
Depreciation and amortization	 	57,412	 	 	 	64,779	 	
Amortization of purchased intangibles	 	12,891	 	 	 	19,825	 	
Amortization of capitalized software development costs for products to be sold	 	1,704	 	 	 	196	 	
Amortization of debt issuance costs	 	533	 	 	 	178	 	
Amortization of discounts and premiums on investments, net	 	1,964	 	 	 	1,816	 	
Provision for doubtful accounts	 	600	 	 	 	—	 	
Write-down of excess and obsolete inventories	 	6,532	 	 	 	7,390	 	
Stock-based compensation expense	 	47,960	 	 	 	64,465	 	
Excess tax benefits from stock-based compensation expense	 	(3,371	)	 	 	(920	)	
Loss on disposal of property and equipment	 	5,007	 	 	 	5,859	 	
Net gain on sale of discontinued operations	 	—	 	 	 	(459	)	
Changes in assets and liabilities, net of effects of acquisitions:	 	 	 	 	 	 	 	
Trade receivables	 	13,479	 	 	 	13,809	 	
Inventories	 	(3,551	)	 	 	(10,739	)	
Deferred taxes	 	(17,792	)	 	 	(14,332	)	
Prepaid expenses and other assets	 	(8,456	)	 	 	(637	)	
Accounts payable	 	19,006	 	 	 	(5,184	)	
Taxes payable	 	9,825	 	 	 	(5,848	)	
Other accrued liabilities and deferred revenue	 	19,624	 	 	 	46,320	 	
Net cash provided by operating activities	 	205,426	 	 	 	168,442	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	
Purchases of property and equipment	 	(50,133	)	 	 	(53,042	)	
Capitalized software development costs for products to be sold	 	(4,807	)	 	 	(2,165	)	
Purchases of investments	 	(269,842	)	 	 	(228,238	)	
Proceeds from sale of investments	 	45,492	 	 	 	45,467	 	
Proceeds from maturities of investments	 	168,328	 	 	 	237,499	 	
Net cash received from sale of discontinued operations	 	—	 	 	 	556	 	
Net cash paid in purchase acquisitions	 	—	 	 	 	(7,974	)	
Net cash used in investing activities	 	(110,962	)	 	 	(7,897	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	
Proceeds from issuance of common stock under employee option and stock purchase plans	 	23,729	 	 	 	23,326	 	
Proceeds from debt, net of debt issuance costs	 	—	 	 	 	247,349	 	
Payments on debt	 	(6,250	)	 	 	(1,562	)	
Purchase and retirement of common stock	 	(64,811	)	 	 	(515,022	)	
Excess tax benefits from stock-based compensation expense	 	3,371	 	 	 	920	 	
Net cash used in financing activities	 	(43,961	)	 	 	(244,989	)	
Net increase (decrease) in cash and cash equivalents	 	50,503	 	 	 	(84,444	)	
Cash and cash equivalents, beginning of period	 	392,629	 	 	 	477,073	 	
Cash and cash equivalents, end of period	$	443,132	 	 	$	392,629	 	
 
Certain prior period amounts have also been reclassified to conform to the current period presentation.

 

POLYCOM, INC.
Selected Summary Data
(In millions except per share amounts and headcount)
(Unaudited)
 
 	 	December 31,
2014	 	 	September 30,
2014	 	 	December 31,
2013	 	
Balance Sheet Highlights	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and investments	 	$	688	 	 	$	643	 	 	$	584	 	
Number of shares outstanding	 	 	135	 	 	 	136	 	 	 	135	 	
Cash and investments per share	 	$	5.09	 	 	$	4.71	 	 	$	4.32	 	
Debt	 	$	242	 	 	$	244	 	 	$	248	 	
Operating cash flow - quarterly	 	$	91	 	 	$	34	 	 	$	50	 	
Operating cash flow - trailing 12 months	 	$	205	 	 	$	164	 	 	$	168	 	
DSO (Days Sales Outstanding)	 	 	44	 	 	 	49	 	 	 	48	 	
Inventory turns - GAAP	 	 	5.9	 	 	 	5.7	 	 	 	5.8	 	
Inventory turns - non-GAAP	 	 	5.8	 	 	 	5.6	 	 	 	5.5	 	
Deferred revenue	 	$	263	 	 	$	257	 	 	$	260	 	
Share repurchases:	 	 	 	 	 	 	 	 	 	 	 	 	
Quarter-to-date share purchases - shares	 	 	1.9	 	 	 	1.9	 	 	 	35.4	 	
Quarter-to-date share repurchases - dollars	 	$	25	 	 	$	25	 	 	$	400	 	
Year-to-date share purchases - shares (1)	 	 	5.3	 	 	 	3.4	 	 	 	45.2	 	
Year-to-date share repurchases - dollars	 	$	50	 	 	$	25	 	 	$	502	 	
Remaining authorization for share repurchases (2)	 	$	150	 	 	$	175	 	 	$	—	 	
Ending headcount	 	 	3,525	 	 	 	3,528	 	 	 	3,774	 	

 	 	For the Three Months Ended	 	
 	 	December 31,
2014	 	 	September 30,
2014	 	 	December 31,
2013	 	
Income Statement Highlights	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP:	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	349	 	 	$	336	 	 	$	348	 	
Gross margin	 	 	57.6	%	 	 	58.6	%	 	 	56.6	%	
Operating expenses	 	$	179	 	 	$	178	 	 	$	197	 	
Operating margin	 	 	6.4	%	 	 	5.7	%	 	 	(0.1	)%	
Diluted EPS	 	$	0.15	 	 	$	0.12	 	 	$	(0.01	)	
Non-GAAP:	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	349	 	 	$	336	 	 	$	348	 	
Gross margin	 	 	58.4	%	 	 	59.4	%	 	 	58.8	%	
Operating expenses	 	$	161	 	 	$	161	 	 	$	171	 	
Operating margin	 	 	12.3	%	 	 	11.5	%	 	 	9.8	%	
Diluted EPS	 	$	0.24	 	 	$	0.22	 	 	$	0.16	 	
 
(1)	Year-to-date share repurchases include final settlement of shares under prior Accelerated Share Repurchase program completed in the three month period ended June 30, 2014 for which funds were advanced in the three month period ended December 31, 2013.	
(2 )	Polycom is not obligated to purchase any specific number of shares under its Share Repurchase Program and the program may be modified, suspended or discontinued at any time.	

 

POLYCOM, INC.
Reconciliations of GAAP Measures to Non-GAAP Measures
(In thousands)
(Unaudited)
 
 	Three Months Ended	 	 	Twelve Months Ended	 	
 	December 31,
2014	 	 	December 31,
2013	 	 	December 31,
2014	 	 	December 31,
2013	 	
GAAP cost of revenues used in inventory turns	$	147,793	 	 	$	150,910	 	 	$	560,145	 	 	$	575,618	 	
Stock-based compensation expense	 	(1,764	)	 	 	(1,892	)	 	 	(6,756	)	 	 	(8,744	)	
Effect of stock-based compensation expense on warranty rates	 	(84	)	 	 	(126	)	 	 	(494	)	 	 	(547	)	
Amortization of purchased intangibles	 	(731	)	 	 	(5,617	)	 	 	(3,035	)	 	 	(9,361	)	
Non-GAAP cost of revenues used in inventory turns	$	145,214	 	 	$	143,275	 	 	$	549,860	 	 	$	556,966	 	
GAAP gross profit	$	201,132	 	 	$	197,032	 	 	$	785,009	 	 	$	792,771	 	
Stock-based compensation expense	 	1,764	 	 	 	1,892	 	 	 	6,756	 	 	 	8,744	 	
Effect of stock-based compensation expense on warranty rates	 	84	 	 	 	126	 	 	 	494	 	 	 	547	 	
Amortization of purchased intangibles	 	731	 	 	 	5,617	 	 	 	3,035	 	 	 	9,361	 	
Non-GAAP gross profit	$	203,711	 	 	$	204,667	 	 	$	795,294	 	 	$	811,423	 	
Non-GAAP gross margin	 	58.4	%	 	 	58.8	%	 	 	59.1	%	 	 	59.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP sales and marketing expense	$	99,004	 	 	$	109,384	 	 	$	388,761	 	 	$	435,047	 	
Stock-based compensation expense	 	(4,496	)	 	 	(6,828	)	 	 	(14,893	)	 	 	(26,570	)	
Non-GAAP sales and marketing expense	$	94,508	 	 	$	102,556	 	 	$	373,868	 	 	$	408,477	 	
Non-GAAP sales and marketing expense as percent of revenues	 	27.1	%	 	 	29.5	%	 	 	27.8	%	 	 	29.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP research and development expense	$	48,293	 	 	$	51,250	 	 	$	196,495	 	 	$	216,032	 	
Stock-based compensation expense	 	(2,995	)	 	 	(3,056	)	 	 	(10,299	)	 	 	(15,634	)	
Non-GAAP research and development expense	$	45,298	 	 	$	48,194	 	 	$	186,196	 	 	$	200,398	 	
Non-GAAP research and development expense as percent of
     revenues	 	13.0	%	 	 	13.9	%	 	 	13.8	%	 	 	14.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP general and administrative expense	$	25,711	 	 	$	20,141	 	 	$	99,886	 	 	$	96,602	 	
Stock-based compensation expense	 	(4,527	)	 	 	611	 	 	 	(16,012	)	 	 	(13,517	)	
Costs associated with CEO separation and related SEC
     investigation	 	(208	)	 	 	(802	)	 	 	(2,159	)	 	 	(2,909	)	
Non-GAAP general and administrative expense	$	20,976	 	 	$	19,950	 	 	$	81,715	 	 	$	80,176	 	
Non-GAAP general and administrative expense as percent of
     revenues	 	6.0	%	 	 	5.7	%	 	 	6.1	%	 	 	5.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP total operating expenses	$	178,886	 	 	$	197,473	 	 	$	738,556	 	 	$	809,964	 	
Stock-based compensation expense	 	(12,018	)	 	 	(9,273	)	 	 	(41,204	)	 	 	(55,721	)	
Amortization of purchased intangibles	 	(2,418	)	 	 	(2,854	)	 	 	(9,781	)	 	 	(10,389	)	
Restructuring costs	 	(3,460	)	 	 	(13,831	)	 	 	(40,347	)	 	 	(48,470	)	
Litigation reserves and payments	 	—	 	 	 	—	 	 	 	(3,130	)	 	 	—	 	
Transaction-related costs	 	—	 	 	 	(13	)	 	 	(156	)	 	 	(3,424	)	
Costs associated with CEO separation and related SEC
     investigation	 	(208	)	 	 	(802	)	 	 	(2,159	)	 	 	(2,909	)	
Non-GAAP total operating expenses	$	160,782	 	 	$	170,700	 	 	$	641,779	 	 	$	689,051	 	
Non-GAAP total operating expenses as percent of revenues	 	46.1	%	 	 	49.1	%	 	 	47.7	%	 	 	50.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP operating income (loss)	$	22,246	 	 	$	(441	)	 	$	46,453	 	 	$	(17,193	)	
Stock-based compensation expense	 	13,782	 	 	 	11,165	 	 	 	47,960	 	 	 	64,465	 	
Effect of stock-based compensation expense on warranty rates	 	84	 	 	 	126	 	 	 	494	 	 	 	547	 	
Amortization of purchased intangibles	 	3,149	 	 	 	8,471	 	 	 	12,816	 	 	 	19,750	 	
Restructuring costs	 	3,460	 	 	 	13,831	 	 	 	40,347	 	 	 	48,470	 	
Litigation reserves and payments	 	—	 	 	 	—	 	 	 	3,130	 	 	 	—	 	
Transaction-related costs	 	—	 	 	 	13	 	 	 	156	 	 	 	3,424	 	
Costs associated with CEO separation and related SEC
     investigation	 	208	 	 	 	802	 	 	 	2,159	 	 	 	2,909	 	
Non-GAAP operating income	$	42,929	 	 	$	33,967	 	 	$	153,515	 	 	$	122,372	 	
Non-GAAP operating margin	 	12.3	%	 	 	9.8	%	 	 	11.4	%	 	 	8.9	%	

POLYCOM, INC.
Summary of Stock-Based Compensation Expense
(In thousands)
(Unaudited)
 
 	Three Months Ended	 	 	Twelve Months Ended	 	
 	December 31,
2014	 	 	December 31,
2013	 	 	December 31,
2014	 	 	December 31,
2013	 	
Cost of product revenues	$	635	 	 	$	640	 	 	$	2,463	 	 	$	2,892	 	
Cost of service revenues	 	1,129	 	 	 	1,252	 	 	 	4,293	 	 	 	5,852	 	
Stock-based compensation expense in total cost of revenues	 	1,764	 	 	 	1,892	 	 	 	6,756	 	 	 	8,744	 	
Sales and marketing	 	4,496	 	 	 	6,828	 	 	 	14,893	 	 	 	26,570	 	
Research and development	 	2,995	 	 	 	3,056	 	 	 	10,299	 	 	 	15,634	 	
General and administrative	 	4,527	 	 	 	(611	)	 	 	16,012	 	 	 	13,517	 	
Stock-based compensation expense in operating expenses	 	12,018	 	 	 	9,273	 	 	 	41,204	 	 	 	55,721	 	
Total stock-based compensation expense	$	13,782	 	 	$	11,165	 	 	$	47,960	 	 	$	64,465