ShoreTel, Inc. (SHOR)

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ShoreTel, Inc. (SHOR)

F4Q2011 (Qtr End 03/31/2010) Earnings Call

August 09, 2011, 05:00 pm ET


Tonya Chin - Director, IR

Peter Blackmore - CEO

Mike Healy - SVP & CFO

Kevin Gavin - CMO


Troy Jensen - Piper Jaffray

Steve O’Brien - JPMorgan

Edward Parker - Lazard Capital Markets

Rohit Chopra -Wedbush Securities

Mike Latimore - Northland Securities

Lynn Um - Barclays Capital



Good day and welcome to the ShoreTel fourth quarter and fiscal year 2011 earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Ms. Tonya Chin. Please go ahead ma'am.

Tonya Chin

Hello and thanks for joining us today to report our fourth quarter and fiscal year 2011 financial results. Joining me on the call today are ShoreTel’s CEO, Peter Blackmore; Chief Financial Officer, Mike Healy; and Kevin Gavin, Chief Marketing Officer is joining us for participation in our question-and-answer session.

Before we begin, I will remind you that during today’s call, management will make forward-looking statements within the meaning of the Safe Harbor provision of federal securities laws regarding the company’s anticipated future revenue, gross margins, operating expenses and other financial and business-related information. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Additional information concerning the risk factors that could cause actual results to differ materially from those in the forward-looking statements can be found in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010, and 10-Q for the quarter ended March 31, 2011 and the current report on Form 8-K furnished today.

The information in this conference call related to projections or other forward-looking statements is based on management’s current expectations. The company does not intend to update its forward-looking statements should circumstances change. As a matter of policy, ShoreTel does not comment on financial guidance during the quarter unless it’s done in a public forum.

We will be discussing both GAAP and non-GAAP results throughout this call and I ask that you refer to our press release issued today for a reconciliation between these amounts. Our non-GAAP numbers exclude stock-based compensation charges, other adjustments and the related tax impact.

During today’s call, we will be discussing both our fourth quarter and fiscal year 2011 results. Now I’ll turn the call over to Peter.

Peter Blackmore

Thank you, Tonya and thanks to all of you for joining us today. I am please to end our fiscal year on a high note and to enter fiscal 2012 with positive momentum. The investments we have made in our sales channel, product development and branding over the past several quarters have helped us to close fiscal 2011 strongly. In the fourth quarter, we recorded revenues of $56.5 million, which is slightly above the high end of our guided range of $53 million to $56 million. And once again an all time high for ShoreTel. This represents a 10% increase sequentially over the previous quarter and a 34% improvement of the fourth quarter fiscal 2010 revenues which were $42.2 million.

Non-GAAP gross margins were 66.3% and our non-GAAP net income was $1.3 million or $0.03 per share which represents a solid improvement over last year’s numbers. For the year, we were pleased to cross the $200 million threshold for our fiscal 2011 revenues which were up 35% over last year’s revenue of $148.5 million. Non-GAAP gross margins for the fiscal year were 67.3%, up from 65.6% in fiscal 2010.

We were also pleased to deliver a non-GAAP profit of $681,000 or a $0.01 per share as we continue to balance ongoing investments in our business with the desired show leverage in our model.

Looking at the market place we are pleased to see continued evidence of market share gains, both worldwide and in the United States. According to Synergy Research’s most recent published data based on revenue in the March 2011 quarter ShoreTel increased to share of worldwide pure IP telephony market from 4% in the December quarter to 4.5% in the March quarter, a substantial quarterly improvement. Additionally, the company continues to command a greater share of the US market. In the pure IP telephony market, you’ve seen a solid improvement in our market share from 8.4% in the December 2010 quarter to 9.1% in the March 2011 quarter.

In fact, ShoreTel grew revenue by 35% over the past four quarters, while the US enterprise IP telephony market grew 8%. This growth makes ShoreTel the fastest growing major vendor in the enterprise IP telephony market this year by a significant margin.

I will now review several highlights of the fourth quarter. Overall, we saw a strong growth across our various segments, channels and verticals. We continue to enjoy increasing success of selling to enterprise customers.

Revenue from our major accounts group was strong this quarter, up 20%, with revenues from transactions over $100,000 increasing 43% from the fourth quarter of last year. We are pleased with the increasing traction of enterprise customers deploying more than 500 licenses.

Our international business experienced strong improvement with revenue outside of the United States up 13% from quarter three. This was driven primarily by returned strength in Australia, which last quarter experienced delays in closing certain deals.

As expected, these transactions were finalized in quarter four and helped to deliver the best quarter in the company’s history in that region. In July, we hosted our 2011 Champion Partner Conference in Chicago. The theme mobilized growth was well received by our partners and the level of enthusiasm and excitement was very high.

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