Plantronics Inc (NYSE:PLT) shares soared 10% after topping revenue and earnings estimates for the third quarter. The company has beaten revenue and earnings estimates by $6.33 million and $0.23 per share, respectively. However, its revenue declined 2.7% to $226 million in the third quarter, compared to the prior year period.
The company blamed consumer segment for lower net revenues, which declined 22.1% in Q3, driven by the divestiture of our Clarity business and lower stereo Bluetooth revenues.
Looking at the lower demand for consumer segment and hardware products, Plantronics management has been working on the strategy of expanding software revenues.
“We are transforming the business by complementing our hardware leadership with software and analytics,” stated Joe Burton, President, and Chief Executive Officer. “These software-driven solutions provide valuable insights, making our solutions more critical to our customers than ever before.”
The company’s strategy is working considering the growth in UC revenues for the second consecutive quarter. In the latest quarter, its enterprise net revenues increased 6.5% to $167.6 million, driven by growth in its UC revenues.
Moreover, Plantronics management has successfully converted the negative revenue growth into healthy profits, thanks to the cost-cutting and improved gross margin. Its GAAP operating income rose 15.4% to $36.8 million, a growth of $4.9 million compared to the same period last year.
Plantronics repurchased close to 298,000 shares in the third quarter for $13.7 million. In the last nine months, it repurchased almost 1.1 million shares for approximately $52.9 million. The strategy of reducing the outstanding shares always has a positive impact on earnings per share and share price performance.
The company appears strong in term of cash generating potential to support investments in growth opportunities. In the third quarter, Plantronics generated operating cash flow of $32 million, when its capital requirements were standing around $2.7 million. Thus, the company was left with almost $29 million in free cash flows to support share buybacks and investments in growth opportunities.
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