Ken Kannappan - Director, CEO, and President Pamela Strayer - SVP and CFO Greg Klaben - VP, IR.

Dave King - Roth Capital Partners Tavis McCourt - Raymond James & Associates, Inc. Gregory Burns - Sidoti & Company Mike Latimore - Northland Capital Markets Yi-Dan Wang - Deutsche Bank Paul Chung - JPMorgan Operator Good afternoon. My name is Leonie, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the First Quarter Fiscal Year 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I’d now like to turn the call over to Mr. Klaben. You may begin your conference..

Thanks, Leonie. So welcome everyone to Plantronics' first quarter fiscal year 2016 financial results conference call. Joining me today are Ken Kannappan, Plantronics' President and CEO; and Pam Strayer, Plantronics' Senior 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 press release.

For the remainder of today's call, we will be providing only non-GAAP metrics related to gross margin, operating expenses, operating income, net income, and EPS. We have reconciled these measures in our earnings press release and in our quarterly analyst metric sheet, both of which are available on the Investor Relations page of our Web site.

We have also reconciled constant currency in the Investor Presentation. And additionally after the conclusion of today's call, the recording of the call will be available with information on our Web site. Unless stated otherwise, all comparisons of the first quarter fiscal year 2016 are to the same quarter of the prior fiscal year.

Plantronics' first quarter net revenues were $206.4 million. Our GAAP diluted earnings per share was $0.55 compared with $0.68 in fiscal 2015. Non-GAAP diluted earnings per share was $0.67 compared with $0.78 in the first quarter of fiscal 2015.

The difference between GAAP and non-GAAP EPS for the first quarter consists of charges for stock-based compensation, purchase accounting amortization, both are net of the associated tax impact, and tax benefits from the release of tax reserves. Please refer to the full reconciliation of GAAP to non-GAAP in our earnings release.

Plantronics has two upcoming investor events we hope you would be able to join. The first is an Analyst Day with members of our senior management team at the New York Stock Exchange on the morning of September 2. We are also planning a field trip to our manufacturing plant in Tijuana, Mexico in the second half of September.

Please let me know if you’re interested in attending, and I will provide additional information. With that, I'll turn the call over to Ken..

number one, fiscal 2016 is being impacted by a number of factors with the most significant being currency. We also expect our fiscal year constant currency growth rates to be below our long-term forecast of 10%.

However, we continue to believe our long-term top line growth opportunity is 10% with the key drivers being unified communications and stereo Bluetooth. Second, we’ve executed on our capital allocation strategy with repurchase of over 5 million shares during the quarter backed by the issuance of $500 million in eight year notes.

As of today, we have approximately 1.8 million shares remaining in our repurchase authorization. Third, we’ve recently announced some very promising new products with industry first functionality that squarely target our innovation waves.

As you may recall from our last call, our innovation waves are focus areas where Plantronics is uniquely able to solve customer requirements.

We received increasingly positive feedback from enterprise and consumer customers that were meeting their strategic direction with these innovation waves, which are about creating simple and easy use products, enhancing customer experiences, and improving intelligence for the customer service center.

The first Innovation Wave aims at delivering simple and easy to use products and is referred as taming the communications chaos. Our goal is to provide better integration in smarter headsets and tools for users in IT departments.

We introduced Plantronics Hub software which is a client application that allows end users to control the settings on their Plantronics audio devices. End users can customize their ring tone, ring location, configure presence updates, and with the new app users can monitor and manage their headsets from their Android or iOS phones or Apple watches.

The app supports all of our new products and includes features such as find my headset, headset battery monitoring, alerts when mute is enabled, and connection status. At the enterprise level, Plantronics Hub is part of this Plantronics Spokes software portfolio.

And together with Plantronics Manager and Manager Pro, it allows enterprise IT managers to seamlessly administer and support the Plantronics audio devices in their organization. As new software is deployed or upgraded in these organizations, a challenge is to ensure the compatibility for voice and audio is maintained.

By communicating with Plantronics Manager Pro in the cloud for updates, settings, firmware, and reporting, IT departments can effectively tame the chaos and manage their global headset deployments more efficiently.

We also introduced two new versions of our enterprise Blackwire products, targeting the mobile worker who needs to connect to multiple devices. The entry level Blackwire 350 and 325 corded headsets helped tame the chaos as they feature both USB and 3.5 millimeter connectivity options for individuals using a PC, smartphone, tablet, or all three.

The increased flexibility of these headsets provide make it easier for IT departments to match the right headset with an individual’s personal work style and work environment, make it extremely easy for the user to switch the headset from one device to another.

The second Innovation Wave focused on enhancing productivity is referred to as In the Zone. The productivity of knowledge workers is crucial for organizations. Open plan environments designed to improve collaboration can create interruptions from knowledge workers who are concentrating.

We’ve just introduced the Voyager Focus headset for UC and multimedia applications. And it’s uniquely designed to help workers stay in the zone in an open plan environment while having multi point connectivity to mobile phones, laptops, tablets, and desk phones.

With active noise cancellation, long run, long range Bluetooth connectivity of 150 feet, 12 hour talk time, enhanced USB with three microphones for superior noise cancellation; the Voyager Focus was built expressly for the needs of employees in open space work environments.

Getting an enthusiastic response from customers who want to eliminate background noise on calls, and add to the time employees are in the zone.

The Voyager Focus is also equipped with our trademark sensors providing an intuitive experience for the user by muting the call when the headset is removed and answering a call or resuming music when the headset is put back on.

The Voyager Focus also reduces background sound even when you’re not on a call, allowing you to be avoid interruptions from people near you. The Voyager Focus UC provides a 12 hour talk time and up to 15 hours of dynamic Hi-Fi stereo music streaming.

Integrated open-mic feature, allows you to hear your surroundings when you need to and enhanced voice alerts provide caller ID, mute status, connection status, and talk time level.

Our gaming line of products received a much needed refresh with the introduction of RIG 500 series for an immersive gaming experience, which allows gamers to be in the zone. We demoed these products at the E3 Conference to an enthusiastic reception.

These ultra-light noise canceling and durable PC gaming headsets have been engineered specifically for the intensity of E sports with interchangeable components, personalized style, precise fit, and incredible comfort.

The RIG 500 series system includes components such as vented air and sound isolating ear cups, several colors of headbands, mobile stereo cables, a digital USB adapter with Dolby 7.1 surround sound and 24 bit audio support. This series of gaming headsets will be available worldwide within the next month or so.

The third Innovation Wave is focused on driving smarter customer interactions and is made possible through the unique and proprietary intelligence our products provide.

Here we’re very focused on integrating our technology with that of our strategic alliance partners to build solutions to go beyond providing the exceptional call quality enterprise have come to expect from Plantronics.

Our new digital adapter the DA80 and its superior audio optimization technology delivers richer, clear communications for an improved call experience for both customer service reps and their customers.

When integrated with Plantronics Manager Pro software and Plantronics Hub, contact centers can configure, update, and track their DA80s by their unique serial number, simply workflows, receive information to improve operations. Plantronics also offers developers free open APIs integrated vents from the DA80 with third-party software applications.

Our adapters have already been integrated with customer service products from alliance partners such as Genesis, [indiscernible], and Interactive Intelligence, will help lead to real business results for our enterprise customers.

We believe this portfolio of highly differentiated solutions for smarter customer interactions presents an extraordinary position of leadership. Turning to our capital allocation policy, we made solid progress from returning cash to our stockholders and utilizing debt to fund repurchases.

The past year we’ve announced repurchase authorizations for 10 million shares and have 1.8 million shares remaining for purchase under authorizations as of today. Our capital allocation policy targets a return of 60% of total free cash flow, defined as total operating cash flow less capital expenditures.

We are also targeting our cash distribution of two-thirds in the form of stock repurchases, and one-third in the form of dividends. However, the actual percentage returned in a given quarter year maybe significantly more or less than our long-term goal. We remain as confident as ever in our market opportunities and our competitive position.

With that, I will turn the call over to Pam..

Thanks, Ken. First an overview of our results. As a reminder, unless stated otherwise, all comparisons of our Q fiscal year 2016 financial results are to Q1 of fiscal year 2015. Given the significant impact of foreign currency exchange rates and our year-over-year comparisons, we’re providing constant currency results for many of our key metrics.

First quarter net revenues were $206.4 million representing a 4.8% decrease. On a constant currency basis, our first quarter revenues were $214.3 million, a decrease of 1% from Q1 of the prior year. Breaking down the currency impact on our revenues, FX movements decreased our revenues by $11.4 million.

However, our hedging program protected us against $3.5 million of this loss for a net negative impact of $7.9 million. It should be noted that these constant currency results can only address a quantifiable impact on how foreign currency denominated business gets reported in our U.S dollar financial reports.

What these metrics don’t capture is the impacts we had from additional pricing pressure, discounting, or lost business in locations where we sell in U.S dollar outside the U.S and the stronger dollar negatively impacts buying decisions.

Approximately 9% of our total revenues fall into that category and we believe our revenues would have been flat to up without the negative impact of currencies. Our non-GAAP gross margin was 52.4%, down 80 basis points compared with last year’s 53.2%.

The primary driver of the decline in gross margin is negative currency impacts on revenues that are partially offset by favorable product mix. Approximately over 75% of our cost of goods sold is denominated in U.S dollars, so we do not see a significant currency benefit in those costs.

Our non-GAAP operating income of $37.5 million is a decrease of $6.6 million or 15.1%. On a constant currency basis, our operating income was $39.5 million, which represents a decrease of 10.5% over the year-ago quarter. Non-GAAP EPS of $0.67 per share is $0.11 lower than the prior year.

On a constant currency basis, our EPS would have been $0.72, a decrease of approximately 8%. EPS was negatively impacted in the quarter by interest expense associated with our $500 million debt offering, net of a tax benefit and net of share repurchases made to date.

We repurchased 5.1 million shares during the quarter and currently have approximately 1.8 million shares remaining in our repurchase authorization. I want to highlight a few key points in our financial results for the quarter.

First, while the stronger dollar is clearly impacting our revenue growth and lowering our profitability, our enterprise business remains strong and grew by 3% on a constant currency basis, driven primarily by UC deployments, but also by growth in our core Office and Contact Center products.

Second, we will continue to return cash to our shareholders through share repurchases, having a positive impact to EPS over the long-term. Third, we will remain focused on the long-term growth of the Company over near-term profitability targets.

Currency movements are impacting our ability to report operating margins of 20% or above and do not have a similar impact on our primary competitors. While we have explored the possibility of cutting cost to improve profitability, we believe it will put us at a significant competitive disadvantage to cut cost further at this time.

Due to the significant impact that currency have on our profitability reported in dollars and the inability to forecast or control this important factor, we will not be providing profitability guidance beyond Q2 at this time. Now I’ll cover revenue in more detail.

Total net revenues for the first quarter were $206.4 million and down $10.3 million or 5%, compared to the first quarter last year substantially all of which was driven by a 6% decline in our Americas revenue. Revenues in our Europe and Africa region were down 2%, but grew by 9% on a constant currency basis.

And in our Asia Pac region revenues were down 2%, but grew 5% on a constant currency basis. The following are our key product line comparisons to Q1 last year. Enterprise net revenues were $151.8 million and roughly flat to the year-ago quarter. On a constant currency basis, enterprise revenues grew by 3%.

That increase was driven primarily by revenues from our UC products. We experienced double-digit growth in the UC category and our E&A, and the Asia Pac regions on a constant currency basis. Consumer net revenues were down 15% and down 12% on a constant currency basis. This decrease was driven largely by a decline in the U.S.

Mono Bluetooth market of over 20%. However, we continue to achieve share gains in this market. The decline in Mono Bluetooth was greater than we expected and being driven in part by smaller shelf space allocated to the category in favor of the faster growing stereo Bluetooth category.

In addition, Radio Shack's restructuring eliminated an important retail channel outlet and we’re not seeing a corresponding increase through other channels. While we’ve been building our stereo portfolio over the last several years, it is not yet as robust as our Mono Bluetooth portfolio of products.

We will continue to invest in the Stereo Bluetooth market to take advantage of this fast moving market. As Ken mentioned, we expect to launch some new consumer products in the near future and received very positive initial reviews.

Non-GAAP operating expenses were $70.7 million down $0.5 million compared to Q1 of last year, due primarily to the positive impact of currency movements of $4.5 million. These decreases were offset primarily by higher headcount and related costs and lower litigation gains.

Our non-GAAP operating margin was 18.2%, down from 20.4% in the prior year and within our guidance expectations. On a constant currency basis, our operating margin was 18.4%. When you exclude GN litigation expenses of $1.1 million, and the unusual litigation gains we recorded this quarter, the operating margin does not change significantly.

Below the operating income line, we recorded interest expense of $2.7 million related to the bond issuance and the previously outstanding line of credit balance. Our effective non-GAAP tax rate for the quarter was 24.5%. The lower rate is due primarily to lower domestic earnings, resulting from the interest expense on the note.

As a result of all of these items, our Q1 non-GAAP net income of $26 million was 21% lower than a year-ago, using non-GAAP EPS of $0.67, down $0.11 from last year’s Q1 result. On a constant currency basis, our non-GAAP EPS is $0.72.

We finishedthe -- now turning to balance sheet and cash flow highlights, we finished the quarter with $683 million in cash and investments in our balance sheet and generated over $43 million in cash flow from operations during the period. Of the $683 million in cash and investments at quarter end, $196 million was domestic.

We use $284.4 million to repurchase shares during the quarter. We issued $500 million in eight year 5.5% notes and made repayments of $190.2 million on our line of credit.

DSO was 55 days down from 63 days at the end of Q1 of the prior year due to improved focus on collections as well as billing linearity that is less heavily weighted towards the back half of the quarter. Inventory turns are 7.1 compared to 6.7 in Q1 of last year, primarily due to improvements in our inventory management practices.

Turning to our capital expenditures. Our Q1 investment was $4 million or 1.9% of net revenues.

Large expenditures included cost related to the construction of a new smarter working office at our European headquarter site in the Netherlands, an investment in manufacturing execution system for our Mexican plant, and equipment and tooling for our operations.

Total CapEx for fiscal year 2016 is expected to be approximately $30 million to $35 million. Depreciation expense on a GAAP basis for Q1 was $5 million, up $0.3 million from the prior year. Now turning to the outlook. We believe total net revenues for our second fiscal quarter ending in September will be in the range of $202 million to $212 million.

This forecast assumes gross margins in the range of 51% to 52%, lower than the current quarter margins as currency continues to weigh on our profitability and we expect products mix to have more lower margin UC and consumer products.

On a constant currency basis compared with Q2 of FY15, this range would be roughly $210 million to 220 million and at the mid point would represent a decrease of 1% from the prior year.

At today's spot rates on the Euro and British pound; we would expect a negative currency impact to revenue of roughly $10 million offset by hedging gains of approximately $2 million for a negative net impact of $8 million.

Depending on revenue mix and other factors, we believe our GAAP operating income will be approximately $25 million to $29 million and non-GAAP operating income of approximately $34 million to $38 million.

The GAAP reconciling items we expect in the second quarter include approximately $9 million in stock-based compensation expense and purchase accounting amortization before tax. Our guidance assumes that we will spent approximately $1 million on GN litigation in Q2.

The GN lawsuit is still in the discovery phase and the impact to operating income from the associated legal expenses is particularly difficult to forecast. Actual expenses can vary significantly from our forecast. On a constant currency basis compared with Q2 of fiscal year 2015, we expect a positive impact to our expenses of roughly $5 million.

Therefore, if currency rate do not change significantly, the positive OpEx impacts combined with the negative net -- with the net negative impact on the revenue line of $8 million means our hedging program will protect us from all, but about $3 million in negative impacts to operating income.

Our non-GAAP tax rate for the quarter is expected to be 24.5% and we're expecting -- and we’re anticipating a full-year tax rate of the same amount. Based on all of the above, the second quarter, we expect GAAP EPS of $0.39 to $0.47 per share and non-GAAP EPS to be $0.58 to $0.66, on average diluted shares outstanding of approximately $35 million.

With that, I’ll turn the call back over to the operator for questions..

Hi Leonie, we’re ready to take questions..

[Operator Instructions] And we have a question from Dave King..

Hi, Dave..

Hi. Good afternoon, everyone. I guess, first off in terms of the sequential guidance, I’m just curious any color there in terms of how that’s going to shake out by business. I think Pam, in your comments you talked about growth in UC and consumer.

But I guess, just in terms of enterprise overall versus consumer, how are we you thinking about that?.

Yes. So, if you take a look at the midpoint of our guidance, our enterprise and consumer categories would be roughly flat quarter-over-quarter. By region, Europe has a small seasonal decline that they always do in enterprise due to the summer holidays, but it’s offset by increases in Americas and Asia Pac..

Okay. That’s helpful. And then, Ken, taking a step back and just thinking about the macro outlook from where you sit. I think it comes at a little bit of just on some of the energy stuff [ph] and some other things. But do you have any commentary or thoughts around global demand, IT spending, current conversations with some of your customers.

Are you seeing any signs of weakness, anything to point to in terms of consumer in China and then in the Americas obviously job turnover is improving which I think generally has done well, I mean, good things for you guys. I guess, just what are the current thoughts there? Thanks..

Okay. Well you covered a lot of areas. Let me say that the general tone of business in my mind has actually been more positive than we’re experiencing in my own mind in terms of our results. What I’ve continued to hear is a fairly optimistic tone on the part of most customers in terms of their interest in UC and their plans to deploy that.

Clearly, this was not enough to compensate for FX conditions for some weaker economic conditions that we’ve seen around the world as well as perhaps this transition on the UC platform.

Nonetheless, if you talk to the customers that we talked to over the past quarter and at the most recent WPC conference, many of the key channel partners, the tone was very, very upbeat and people continue to be pretty optimistic that, that things are moving forward. So we feel pretty good about that.

I think that from the standpoint of the consumer market, actually demand for stereo continues to be pretty good. The challenge that we’ve had clearly there has been on the Mono Bluetooth side, where particularly in the U.S., the market declined pretty significantly.

And again with that we also had this reduction of channel inventories which if it stops sliding is a one-time item. I don’t know that that is going to reverse.

We do hope that the pace is going to slowdown, but I don’t expect that to reverse because that’s just a fundamental use case with fewer and fewer people wishing to have both a voice accessory and a consumption accessory for stereo for their mobile device which is increasingly a texting, entertainment, et cetera device more so than it is a mobile phone.

So, if I take all that together, again we still come back feeling very, very good about the 10% growth outlook for the company as a whole strategically. If I talk to your regional point, I would say that within the U.S. to your point again there is a very good tone I think about, with the SME business. I think the oil patch has been hit.

I think that the large companies that have got greater foreign currency issues have also been concerned about those impacts. Europe has again benefited some from FX although they have less robust domestic conditions. We had a pretty good quarter in Europe.

Certainly, in terms of Asia, we’ve seen stronger performance in India than we did in China, although China was not terrible, it was certainly weaker than it had been..

Okay. That’s all great color and encouraging in terms of what you’re hearing from the U.S. business. And then, I guess lastly on the subject of capital allocation, of that cash balance, how much of that at this point is held domestically.

I think $200 million or so is what I was sort of guessing, but how much of it do you feel then comfortable using on repurchases from here.

And then any plans to draw down on the revolver again or increase debt further for further repurchases?.

Yes. So, Dave the current domestic cash in investment balance is $196 million. So yes, right around $200 million, and we will not be drawing down on the line of credit or draw additional debt in order to buy share repurchases. But we will continue on our approach of returning 60% to shareholders over the long-term..

Okay. That’s helpful. Thanks very much everyone..

Yes, and just to be clear. Sorry, Dave the $196 million was as of the end of the quarter..

Okay. Right..

That’s moved down since then..

And our next question comes from the line of a Tavis McCourt..

Hi, guys, its Tavis. Just to follow up on that last one, Pam.

Is 60% of the free cash flow generated in the U.S?.

No, roughly 50% of our free cash flow is located in the U.S..

Okay. And then, you described earlier the hedging impact of both the June quarter -- the currency and offsetting hedging impact for both the June quarter and September guidance and then, if I remember correctly roughly similar numbers.

When you look forward looking at your hedges, when does that year-over-year comparison on foreign currency get easier for your guys or less harmful? Is it the December quarter or is it more into calendar ’16?.

Well I think the December quarter is still going to have some hedge gains, but also some significant currency headwinds.

I think it will probably be Q4, our March quarter before that starts to even out a little bit if you recall how currency movement happened last year and all of our hedging instruments where we were entering into hedges for a 12 month period. So I would say it’s probably March before it evens out.

Having said that, I think because most of our cogs are in U.S. dollar, even if currencies flatten out a little bit we’ll still have a little bit of gross margin pressure..

And I think you mentioned expectations for GN litigation of $1 million in the September quarter.

Can you repeat what that was in the June quarter?.

Yes, it was $1 million forecasted for September and it was $1.1 million in the June quarter..

Okay. And then, Ken I think you mentioned Stereo Bluetooth was down year-over-year in the quarter, correct me if I’m wrong in that.

But the bigger picture question is, as you look to the Mono Bluetooth market declining, how broadly and how quickly can you expand the Stereo Bluetooth lineup to help offset that?.

Well, first Stereo Bluetooth was not down. But just to answer your question, I mean I think that, we have a much smaller position in the Stereo Bluetooth market. We have a very large and significant market share in the mono category.

So there’s no getting out of the way of category decreases for us, and given our relatively larger size in the mono category that the two are not offsetting. So at the end of the day we are going to be hit by that.

We did launch another new product in the stereo are, the BackBeat SENSE that uses a lot of the same technologies that we have in the voyage of focus. We’re continuing to get a pretty good response from the very unique BackBeat Fit will be of component allocation on that in the September timeframe. So we continue to see good growth opportunities there.

But again, when we have a really large decrease as we had in the mono category its going to hit us..

Great. And I think Pam said that the U.S. business was down year-over-year in the June quarter.

With that entirely related to consumer or was the enterprise business down as well?.

Yes. So year-over-year it was primarily consumer. It was actually a small increase in revenues in the enterprise business that offset that..

Great. Thanks a lot..

[Operator Instructions] Our next question comes from a Greg Burns..

Goof afternoon.

Is there any margin differential between your Mono Bluetooth and Stereo Bluetooth headsets?.

Yes. So over time we have been working to improve the profitability of our whole consumer line and since our stereo products are more recent products sets, it also has more innovation and that the margins due tend to be higher..

Okay. And I guess, given what's going on in the Bluetooth market, would you expect that to impact seasonality in the third quarter.

Will that be like muted this year based on what's going on?.

I think we could see a little bit of a mute, and the reason is because even though I think it may follow the kind of the same seasonal trend, the secular trend is declining and I think that will create some muting.

The second issue is, I think that there is will be a significant focus on the part of retailers, in the part of advertising around the stereo category around fitness and so forth that I think its going to probably be a negative for the communications category..

Okay.

And the EncorePro headsets that were delayed, I think last quarter you mentioned October timeframe, is that still the same?.

Yes, I think its going to be about then..

Okay. Thank you..

Our next question comes from a Mike Latimore..

Great. Thanks a lot. Yes, I guess just on the UC area, I think in your prepared remarks you talked a little bit about some delays around Skype perhaps. I mean, are you seeing then the general commentary around UC was somewhat positive.

I mean are you seeing, if you’re seeing starting to move forward after the new Skype launch here maybe people are getting comfortable with it and starting to deploy a little faster?.

Yes, we think that there is some momentum picked up a little bit in the market, and I think that part of that is that the market is migrated past the large enterprise to include the SME, where there is just hope of faster cycle to begin with. And then I think the second thing is to your point, it’s a new product.

People take a little bit of time to get familiar with it, to evaluate it, to make decisions. I think on the part of the Microsoft sales organization also there is a kind of a new fiscal year in July. And so I think all these things combine towards creating a little bit of a pause in the market and then an opportunity for some restoration..

I got it. And it sounds like EncorePro is coming out and the Voyager Focus is, I guess just starting to ship recently. In terms of Voyager Focus specifically, how important is that in terms of your enterprise product category.

You’ve had other UC products over time, where would you rank this one relative to other UC products in the enterprise category?.

Well just to be clear, we’re just going to be shipping it within the next week or so. So it’s not actually shipping yet, but referring to the Focus. But I think its going to be a very, very important product, because its -- and it’s really an innovative product that is solving a problem that people have not really had a solution for.

So in that context it’s going to be new. It may take a little bit more education. It may take a little bit more explanation for people to get familiar with it, get familiar with its potential. But I will tell you that the people who experienced it and reacted to it, the enthusiasm for it was absolutely overwhelming.

I mean we’ve just had a tremendously positive response to that offering..

And then just two clean up questions here, I guess, what was -- I think you’ve said constant currency growth in EMEA was a certain rate.

Could you give that again as well as the tax rate outlook?.

Sure. On the constant currency basis, the E&A region grew by 9% year-over-year..

Okay..

And our tax rate was 24.5%..

What do you expect it to be next quarter?.

Same thing, that’s our annual forecast..

Okay. Great. Thanks a lot..

And we have another question. Caller, please state your name. Caller, please state your name.

Yi-Dan Wang?.

Sorry, Yi-Dan Wang. Thank you for taking my question. I have several.

So first of all on the consumer products, can you give us a -- some sense of what the mix is between mono and stereo movement and what kind of young year [ph] developments you see in these segments? And then, when do you expect these two to cross so that at some point, there should be some growth from those business?.

So Yi-Dan, we don’t disclose the mix between mono and stereo. We don’t get into that level of detail, but clearly mono is a larger part of our consumer business right now, and when expect those to cross is difficult to say, the combination between growth opportunities in stereo and the mono market itself declining.

I’m not sure I can help you with that..

Right.

So, I guess, as it stands at the moment, is there any possibility that you may see across this year -- this fiscal year?.

I don’t know. I don’t believe so..

Okay. And then what were the relative growth that you see in mono and stereo? In mono, you said the market was down 20%, but you guys gained shares.

So roughly some sense of how you performed there would be helpful? And then also in the stereo statement, roughly how fast are you growing with the product that you’ve been launching?.

Yes, let me add one point of clarification, if I can, Yi-Dan, so on the one hand, we did better than the market as -- and the only data you understand that we get is sell off data from these third party firms. So when we compare our sell off data to these other third party firms we gain share.

But our revenues actually decline to more than the category because our revenues are a measure to sell on, and the categories inventories also declined. So we actually dropped more than 20% in terms of our U.S. sell on revenues in the Bluetooth category..

And that’s for mono or the ….

That’s -- I’m sorry, I’m referring to mono there, yes..

Okay. And then the stereo, I think, maybe in your press release you did say that the stereo segment declined, but on the call when you answered a question, you said that it didn’t..

Yes, I’m sorry. Just to be clear on that, so the category did not decline. We declined a little bit and maybe I was confused -- confusing in how I answered the question..

Okay. And why did you decline. I would have thought that, this would be -- given that the market is a much faster growing segment and you’re entering the market where base should be fairly low.

Why would you decline?.

Yes, very fair question. I mean a couple of things. First, the hottest product we have was on allocation. So that was the BackBeat Fit. That obviously doesn’t help you grow with the market. We had in the case of this new product, the Focus it was not yet launched at that point in time.

And we had a couple of products that were a little older up against some pretty effective marketing. So we did loose a little share on the stereo side..

Okay. So, can we expect then that, when the Fit comes back online in September, actually that would probably not make much of a difference for you in the September quarter.

So it’s more of a December quarter benefit that we should expect from that product coming out the allocation?.

Yes, I mean it’s -- I would say part of the September quarter..

Okay.

And the benefit of Focus, would that be fairly immediate or will that also take a bit of time to work its way into the market?.

Well, I think we’ll get some benefit this quarter, but it won't be a full quarter..

Okay. That’s helpful. And then on the delays that you’ve seen for the types of business that occurred, how quickly -- or do you have a sense of how much volume is being sort of deferred as a result of this and roughly based on your previous experience if whenever Microsoft upgrades those software.

How fast we would see that -- see the deferred volume come back to the market?.

So this is really impossible to assess in terms of size or predict in terms of speed. First of all, as I said that the nature of the market has shifted some from enterprise down to SMEs, so that the cycles are different. Earlier on, the market was less mature.

Now this is a much more proven category, so you have a lot more people potentially interested in moving forward on it. It is really, really hard to predict in advance the deployment cycle that people are going to take. And we’ve found this over and over and over again where plants specifically communicated to us were not followed.

And so, one thing we know that they won't be followed but on the other hand it’s really hard to predict exactly what it will be..

Okay.

So maybe it would be educational for us to get something, the cycle time for the SMEs relative to the large enterprises?.

Yes. Well the SME business, I mean we’ve seen a lot of that happen within a, lets just call it -- I mean it depends where you measure the beginning of the sales cycle. But I would say, lets just call it three to six month total sales cycle..

And the margins part is -- would be..

Those have been anywhere from really, one to four years..

Okay, so much longer.

And do you have a sense of roughly how much of your -- sort of demands you’re seeing for UC is coming from the SMEs relative to the large enterprises [indiscernible]?.

Well we’re still getting more of our business from the large enterprise, but the SMEs is beginning to increase..

Okay. And then, just hopefully a last question on the Radio Shack -- on consumer product.

The Radio Shack effect, how big of an effect was that this quarter and how should we really expect that effect to trend for you over the next few quarters of the fiscal year?.

Well we’ve already, I mean put it this way. This quarter we had virtually no revenue in terms of our shipments to Radio Shack. The same I think was really true last quarter. So it’s really the comparison to the year-over-year periods and within a couple of quarters that year-over-year effect will be done..

And what were the comparisons? How much revenue did you get from that last year?.

I’m not sure that we disclose the specific amount..

No, we don’t. It was less than $5 million, but we don’t get anymore specific than that..

Okay. I have two more, but I’ll take those offline. Thank you..

And your next question comes from Paul Coster..

Hi. This is Paul Chung on for Paul Coster. Thanks for taking my question. Most of them have been asked by the way, but just to follow up on consumer in mono and stereo.

Do you see existing mono consumers transitioning to stereo or is this more of a younger demographic first time customer driving the shift? And should we expect some next generation BackBeat lines in time for the holiday season?.

So, first of all I think that the, from the standpoint of the demographic shift, I think that the primary impact is the -- the primary impact is the switch from people who were buying communications, not buying communications products.

They’re either buying it because they’re continuing to use their old communications product so they’ve been continuing to use the legend for quite some period of time and then you get a new demographic into the market who are buying stereo products for consumption for the firs time and I think those are the two primary shift.

We don’t see a lot of core business oriented communicators stop and use that. Now I do think there’s been some decrease due to the influx of cars with built in communications into them that has also reduced the market a little bit..

Okay. Thanks..

At this time there are no further questions..

Okay. Thanks everyone for joining us today. If you have any additional questions, we will be available afterwards..

This does conclude today’s conference call. You may now disconnect..