Plantronics Inc (PLT) Q4 2021 Earnings Call Transcript

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Plantronics Inc (POLY)
Q4 2021 Earnings Call
May 13, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Poly Q4 Fiscal Year 2021 Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mike Iburg. Please go ahead. Welcome to Poly's financial results conference call for the fourth quarter of fiscal year 2021. My name is Mike Iburg, 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 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 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 the 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.poly.com. With that, I would now turn the call over to Dave.

Dave Shull -- President and Chief Executive Officer

Good afternoon everyone, and thanks for joining us from wherever you work. With vaccinations and travel on the rise, today, I'm calling in from our Denver office, while Chunk is in our Santa Cruz office. Poly had another strong quarter reflected by the numbers. Chuck will talk in more detail about our financial results.

We saw non-GAAP revenues of $478 million and adjusted EBITDA of $86 million, representing year-over-year growth of 17% and 44% respectively, driven primarily by strong video and headset sales. I want to call out that this was the biggest video quarter in the company's history, a terrific affirmation of the rise of video overall, which we see as a long-term tailwind post-COVID. Despite pandemic-related supply chain pressures and freight cost increases, we continued to protect our gross margins, which were 48.4% for the quarter. We generated $74 million in operating cash flow, refinanced our outstanding bonds and paid down our term loan.

On the product side, in February, we announced our new Studio P Series, a line of personal video conferencing gear designed 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 millionth IP phone as we are seeing remarkably strong demand for phones across Zoom Phone, RingCentral and others. And just a few days ago, we launched Voyager Focus 2, a Bluetooth headset with advanced noise cancellation in our unique acoustic sense technology, delivering extraordinary sound and wear all-day comfort. This kind of performance, both financially and operationally defines Poly's 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 face. I frame the company accurately as a turnaround. We brought in an excellent new leaders like our Head of Supply Chain, Grant Hoffman who's arrival has already had a huge impact. We also enabled terrific executives already here like Carl Wiese, our Chief Revenue Officer who is rapidly rebuilding our channel reputation, and Chuck who has reduced and refinanced our debt. So while we are not yet at full sale, it's safe to say that the ship has turned. Everyone at Poly has worked hard to get us to 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, Poly is about transformation of our market and of our business. The market is different because the way we work has changed. Everyday, there is more evidence and 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 164 commercial landlords who own and control 7.1 billion square feet of commercial real estate assets across the United States showed that 82% expect the hybrid work model going forward where employees work from the office just three days a week. And a recent IDC study on Digital Work Transformation show that 42% of organizations are focused on connecting people seamlessly regardless of location, situation or context. 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. Poly makes that gear. Products that are tools, not toys. 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 are 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 [Indecipherable] future for Poly. In the past, even recently, Poly often completed 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 we plan for the post COVID world. The IT leaders are worried about compatibility, data analytics, security, digital workflow management, reliability and support, both in the cloud and on-premises. Half HR leaders and CEOs are also worried about the quality in meetings for those in the room and those not. Governments, healthcare providers and the world's biggest banks, all need reliable and secure communications and each have a set of specific requirements that must be met and ensure an optimal experience.

Across the board, our customers want comprehensive business solutions to enable work at home, work in the office three days a week, work in short meeting and work in lengthy brainstorming sessions. Poly's 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, we 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 in order to outthink and outwork our competitors, because we're not just content to capture incremental comp spend at our clients. Communication was bigger. The technology infrastructure supporting it is bigger. And we're looking to 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 want to take a moment to speak to supply chain. Just a year ago, people and businesses alike were wondering whether there will 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're facing these same pressures. Long term, that speaks to the strength of our opportunity. Short term, it's 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 point of our supply chain however. Components are just one part and a temporary part of Poly's supply chain story. Last quarter, I highlighted that our supply chain was our number one area of operational focus, and we have brought in Grant Hoffman on board as our new Chief Supply Chain Officer. Since then, Grant and his team have been working non-stop to audit Poly supply chain end-to-end. From the conceptual stages of a product's design to its final arrival on a customer's desk. He's developed and delivered a detailed strategy to upgrade and optimize every aspect of it and 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 Poly has got the infrastructure to do it. Grants will be presenting at Investor Day, and I encourage you to join us and listen then. I think you all agree that the experience and expertise he brings to Poly will serve our company, our customers and our shareholders well. And just a few days on May 18, we will celebrate our 60th anniversary as a company.

But given the days of plans for our future, given the transformational opportunities we see in front of us, there is one more change we're making that you should know about, our ticker. Effective May 24, 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 event I'm thrilled to attend in person bringing the NYSE closing down 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, so to return safely and 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?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

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 relatively 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 and 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 '21. 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 '21. Incremental freight impacted gross margins by approximately 200 basis points.

The demand environment for Poly products remains strong. Our next-gen 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 to 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 a $100 million of the term loan in the quarter. In February, we refinanced our 5.5% bonds due in '23 with a 4.75% bond due in '29. This transaction not only reduces our interest expense going forward, but also removed a near-term debt maturity. Please note that we did not pay off the '23 bond in our fiscal Q4. Rather save money and avoid the early redemption fees, the 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, end-market demand for video and professional headsets remained strong, and voice demand is recovering. Absent supply shortages, we believe demand would support sequential revenue growth off the March quarter. However, based on our current supply and 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 $0.35 to $0.55. 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, spot 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 in the quarter.

Before I turn the call over to the operator to take questions, let me echo Dave's 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 a new products and services. Similar to last year, we have a new set of challenges ahead of us with constrained component 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?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Amit Daryanani from Evercore. Your line is now open.

Amit Daryanani -- Evercore ISI -- Analyst

Yes. Thank you very much for taking my question. I have two I guess. First, I'm going to start off with the March quarter guidance, help me out here, but if I look sequentially, sales are down 12% I think; EBITDA is down 26% and the midpoint of EPS guide, I think EPS is down by 60%. Maybe start to feel, what is driving that outsized EPS deleverage on a sequential basis and something on the operating line or below the operating line, that will be really helpful?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Certainly, Amit. 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 expect a sequential growth. Now, there is an impact on the gross margin line, due to freight and spot market purchases and that flows to 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'll get some additional leverage on the opex line. That effectively is driving -- mitigating and helping on the EBITDA line. Now in the past quarter, we had a tax benefit. And in Q1, we expect to then have tax expense, which is impacting EPS. And so, that's effectively what you're seeing relative to EBITDA to the EPS translation.

Amit Daryanani -- Evercore ISI -- Analyst

Got it. That's really helpful. And then, you said [Phonetic] the gross margin headwind of several hundred basis points, do you think March quarter would be the peak from a gross margin headwind perspective or -- and can you fill in [Phonetic] gross margins, I guess if you go beyond the quarter, beyond fiscal Q1, the June quarter, for the full year?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

We're very bullish on gross margin improvement over time. I still think that this gross margin ratio or line for the company when we normalize is in the low 50s, 50% to 55%. We're seeing really great progress by the 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, as air freight charges start to subside following quite frankly consumer air travel, our commercial air travel, those will benefit the gross margin line. And we should be back in the range where we were historically in the low 50s.

Amit Daryanani -- Evercore ISI -- Analyst

Got it. That's helpful. If I could just -- the question, the second one I just had is you've been averaging 20% topline growth in the back half of your fiscal year. So I think [Indecipherable] to understand, what should the longer-term growth vector look like, be that in fiscal '21 or beyond, and very specifically, [Indecipherable] video as a segment with stack-up from a gross basis for the fiscal year?

Dave Shull -- President and Chief Executive Officer

So clearly, I think that I remain very bullish. We're not going to provide specific guidance today. I think we 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 it was probably the most instructive metric on video is the next-generation video portfolio growing more than 700% year-over-year. And so, I -- 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 than people have 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's tremendously bullish. We want to make sure that we are optimized and ready from an operating point of view to fully capitalize on that.

The one other thing I would add to Chuck's comments on gross margin is another reason why we're very positive, I guess I should say that that kind of the low 50s is 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 mentioned in terms of targets here on the gross profit side are tied to the freight issues that Chuck mentioned, but also a lot of design that's going our way collaboratively between our suppliers and our engineering team.

Amit Daryanani -- Evercore ISI -- Analyst

Understood. Thank you very much for the clarity.

Mike Iburg -- Head of Investor Relations

Thanks. Next question.

Operator

Thank you. Your next question comes from line of Paul Silverstein from Cowen. Your line is now open.

Paul Silverstein -- Cowen and Company -- Analyst

Thank you for taking the questions. I know it's fluid and still early, but with vaccination increasing across the globe, different economies, different regions and different places are now in vaccination process, any insight you gain in terms of the impact, whether in the US reopening, Germany reopening, the UK reopening, again I'm going to ask different places or at different points. But along with strength that macro recovery has certain implications for you and others, any insight you gain in terms of how that translates your revenue for better or worse?

Dave Shull -- President and Chief Executive Officer

Yeah. I think it depends a lot by categories. Let's just talk a little bit specifically category-by-category. So headsets are up roughly 60% year-over-year, Q4-over-Q4. We are seeing a significant shift in mix that we're seeing fewer people buying the wired headsets and more people shifting to Bluetooth because they're settle in and then saying this is going to be a long-term trend where 35%, 40% of the workforce is going to be in the office and based in homes some days. And so, that's really driving sort of the uptick from a Bluetooth point of view.

On the video side, there is tremendous demand as people are looking at building the conference rooms. I think we're seeing a shift away from sort of the concept of the huddle room, right, every room becomes more of a huddle room in the sense that it requires video. And so, if you look at the 90%-plus of conference rooms that you can develop, in the video point of view, there's 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, I would say that's where we're seeing fairly long-term orders come in and people are saying, OK, 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 millionth IP phone that we shipped. We're seeing a surprising, a wonderful recovery really on the voice side, and we believe that was triggering that is a return of SMBs 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 and to get to more of a cloud-based solution type of Zoom Phones [Phonetic] or RingCentral, etc., etc. And so, that's driving a fairly significant demand at the SMB sector on the voice side.

Paul Silverstein -- Cowen and Company -- Analyst

Should I -- just on that last point, I want to make sure I understand what you're saying is, when you look at the numbers, voice was $64 million in the quarter, down from $95 million in the year-earlier quarter and from $67 million. So it's relatively flat or flattish sequentially, but it was still down a healthy clip. Maybe not surprising, but the demand you're referring to, the SMB is coming back at least in the US in revenue with it, is that you looking on a -- I assume on a week-to-week and month-to-month basis, but again, we can't see it for the quarter. I assume that strength has been reflected real-time.

Dave Shull -- President and Chief Executive Officer

That is correct. That's looking at pipeline data, right. It's looking at kind of the mix of products that's 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 '20, but we are seeing a quicker recovery, I guess I would say than I had originally anticipated, which is obviously a good thing. And it's driven primarily by the SMB 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 to build out of that over a longer period of time.

Paul Silverstein -- Cowen and Company -- Analyst

[Indecipherable] referred from virtually every company in networking kind of equipment on throughout technology with supply chain constraints, the overwhelming majority of those subsided challenges, increasing challenges, but that they are effectively managing and the issue isn't meaningful as de minimis moderates here now. There have been some others, not just yourself that decided a bigger impact. But you're one of the largest, if not the largest here now in fact is that by virtue -- maybe that's not surprising given that you're in the device segment. But the challenges you're seeing that across voice, video and headsets, is it predominantly one versus the other? Is it getting worse and worse week-by-week, month-by-month or any incremental insight you share with us?

Dave Shull -- President and Chief Executive Officer

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's actually been a pretty significant set of new hires that Grant has brought in on top of that. And so, as part of that, we've done a pretty comprehensive audit of all of our supplier relationships. And I sit down and now I talk to some of our biggest chipset manufacturers in the world at a 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, right.

And I think the new leadership team that we have coming in has helped us tell a clear story, has helped us 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 a very bullish sentiment, I guess I should say with regard to the rest of this year. But we also want to be very clear, which is, there was a turnaround that you took place here. I think we're on a great track, but we've had some categories growing 700%. 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 and a lot of it's within video, we want to make sure that we're very clear on the guidance for this quarter. Chuck, if you want to add to that?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah. I would just -- I think, Paul, less of an impact on headsets, more of an impact on 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, things are improving. I said we were more pessimistic a couple of weeks ago. And we're more optimistic today the work that Grant and his team are doing, the work that Dave is doing, talking to CEOs of these major large-scale chip providers. It's getting better. We expect Q2 to be better and to improve. I will 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 we're maybe not fully clear by the December quarter, but pretty hopefully back to normal by the December quarter.

Paul Silverstein -- Cowen and Company -- Analyst

Chuck, I'll posit unions on the call, but I've got a follow-up on that. So it's actually counter intuitive or counter to what I think most, if not all other companies have been saying about the supply constraints in particular, Zumiez and Broadcom and other semi suppliers. So I just want to make sure I understand what you're saying. This is significantly better. If I heard you correctly in Q2, that's just -- that's something specific to Q2 or you actually think that's indicative of an improving trend from a supply chain component availability standpoint?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah. 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, the chip suppliers building those relationships the work that Grant and team are doing as well as some purchasing in 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 and next quarter. But we've contemplated in our guidance what we believe we have access to from a chip supply today and where -- we're working with longer-term arrangements in trying to negotiate longer-term arrangements with our chip suppliers.

Paul Silverstein -- Cowen and Company -- Analyst

I'll take the rest offline. I appreciate it. Thanks, guys.

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Thank you, Paul.

Dave Shull -- President and Chief Executive Officer

Thanks, Paul.

Operator

Thank you. Your next question comes from the line of Greg Burns from Sidoti & Company. Your line is now open.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Thanks. How much, if [Indecipherable] impacting this quarter, any supplier component constraints?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

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 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.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. When we look at the headset business relative to what we saw from some others in the space, it seems like your growth isn't as strong or maybe you're losing some market share and maybe with some of the supply chain issues, but maybe just talk about relative growth rates, if you're gaining or losing share in the handset market.

Dave Shull -- President and Chief Executive Officer

Certainly, in terms of -- I think. Go ahead, Chuck. Go ahead.

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Okay. I think if you -- I don't 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 wireless speakers, the Sync line, Sync 20, 40 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 in some of the key categories that we compete in.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. And then, in terms of those new products, the Sync, the speaker phones and the P Series, where are we at in terms of the launch of those products, are you currently selling them all in market and how is the initial market reaction to the product has been?

Dave Shull -- President and Chief Executive Officer

The Sync 20 and 40 in market, and we're just now releasing the Sync 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 it seems to be resonating pretty well for the work-from-home folks. On the 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, particularly the P15 has been excellent. We mentioned a few of the design awards that we won for both -- for the entire P Series. And I think you'll see a lot of ramp-up on that based on the conversations we've had with customers. I think they're looking for something that works both in the office, but also at home.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Okay. And then -- yeah, you're talking about getting more of a businesses' infrastructure being more involved in the softwares and services. So what does that entail? Is that going to mean Lens becomes a bigger part of the overall package? How should we think of that and then maybe what the growth services over time might look like given that it's been down the last couple of years?

Dave Shull -- President and Chief Executive Officer

Greg, I'm going to ask you come back on 20th to hear more detail. I'd rather kind of put that comprehensively in place, so that you can see a clear vision there. It's a very good question.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

All right. Thanks.

Dave Shull -- President and Chief Executive Officer

Thanks, Greg.

Operator

Question comes from line of Meta Marshall from Morgan Stanley [Phonetic].

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks. Maybe first question for me and then kind of two questions that hit the more ideas, but you noted kind of longer duration of video demand that you think you are seeing. In their conversations with customers, is that longer duration because people are kind of outfitting in a more orderly fashion like maybe they want to do 10% of their conferences in the month or is that you expect kind of different customers to hit a different time?

And then, maybe similar question on a desk phone side, is the demand pickup that you're seeing -- is that specific to maybe hoteling setups that are going into place, or maybe just refresh activity that was paused in 2020 finally starting to take place? Thanks.

Dave Shull -- President and Chief Executive Officer

This is Dave. Good question. So on the video side, we're seeing a couple of factors. Some of it is a move from, I guess, 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 the cloud providers that are looking to make a transition. As we look at that, we're looking at POCs on the hardware components of that to make sure that they fully understand all of the, I guess, what I will call sort of, transformation steps that they need to take to go from on-prem to cloud. And so, we do expect that to -- a lot of it's happening right now, but I would say the revenue will ramp, once they get through the POCs. They make a final decision in terms of the cloud collaboration platform that they want to use and they start to roll out the hardware out. And so, we're expecting that to continue over the next few quarters, and that's a global phenomenon with a lot of these -- a lot of these are very, very large companies.

Specifically, with regard to some of 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 has been a few countries where people have been about to place orders and saying, well, there 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 rate is going to get to a point where the government is going to allow us to actually go back into the office. And so, you bump along with POCs for a while and then, you could see sort of a pretty substantial pull of the trigger as they try to actually execute on it.

The audio stuff is twofold. The voice stuff that I mentioned is twofold. One is we're seeing direct demand now for SMB customers, especially here in the States coming back and wanting to get off of whatever PBX and they had and wanting to get something that is Teams or Zoom or RingCentral base. And so, those are direct orders that are happening.

Now with regard to the larger enterprises, it's a bit of the same sort of POCs, so they made the decision to get away from on-premises gear and they're kind of walk in the way in and they're saying, OK, 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 a bunch of different kind of dynamics there to your question, if that makes sense.

Meta Marshall -- Morgan Stanley -- Analyst

Yeah. That's great. Thank you.

Operator

Your next question comes from the line of Paul Coster [Phonetic] from JP Morgan. Your line is now open.

Paul Chung -- JPMorgan -- Analyst

Hi, this is Paul Chung on for Coster. Thanks for taking the question. So just on the sell-through dynamic on, I think, Slide 17, is that -- if you could confirm, is that just for new products and video and then, if you could comment on kind of the balance between overall sell-through versus sell-in in video? You mentioned channel inventory was kind of flattish overall. So any comments there?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Certainly, Paul. Yeah, Slide 17 shows the trend in sell-through for new video products, specifically the X Series, G7500, 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 in video. Only a third from the legacy products and 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, 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 they're appropriate in others. And so, I think on balance, it's probably a little lower than it should be right now, but it's healthy. I would expect it -- unfortunately, channel inventories will decline this quarter. And we expect backlog would continue to grow.

Paul Chung -- JPMorgan -- Analyst

Got you. Thanks for that. That's very helpful. And then, as we think about the kind of makeup of video collaboration, can you kind of provide some extra details around the split between webcast or desktops and huddle rooms and large conference rooms and then, kind of the respective growth rates you saw for each of those segments? And how do you think that kind of trends are over time for this year? Is there some kind of buying ahead of workers going back to the office, or is this kind of a sustainable future?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

I think we'll cover more of that at Analyst Day, but maybe Dave, you can provide a little bit of color now.

Dave Shull -- President and Chief Executive Officer

Yeah, I was going to ask you just suggest the same thing, why should we have Beau Wilder who runs our video business unit presenting at Analyst Day and he is going to be able to go a lot deeper and again, I think sort of as a broader context, which I think should be very, very helpful. We're seeing similar answer, I guess, what I gave you, we are seeing a lot of trialing now with sort of stand-alone what we call single codec devices or Studio X30 and our X50 products. We are seeing people start to experiment a little bit back with the larger conference rooms, thinking that maybe they need [Indecipherable] a little bit or larger that's suitable for sort of COVID spacing. And so, it's a bit of a tale of two cities. But let me let Beau provide a bit more detail, I think, in a week, that would be more helpful.

Paul Chung -- JPMorgan -- Analyst

Okay. And then last question, very good performance in enterprise headsets. Is this the kind of new quarterly run rate north of $200 million kind of moving forward? And then, you mentioned kind of switch the Bluetooth relative to maybe wired. Will that weigh on margins at all to any extent? And then, are you seeing any evidence from contact center demand coming back? Thank you.

Dave Shull -- President and Chief Executive Officer

Let me answer that last one first and then, Chuck can fill free to weigh in. We're seeing very, very little uptick in demand on the contact center side. I think there is a fair migration to USB and maybe to evaluate in Bluetooth. So no is the simple answer to that. And that's really where the margin benefit was. With regard to Bluetooth and Blackwire, there is obviously a significant ASP difference, but there's not as much of a margin difference. And 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. Chuck, anything you want to add to that?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah, I would just say, that's right. I mean, your margin percent is a little higher in Bluetooth than Blackwire, not meaningfully, but margin dollars are quite a bit higher. So as Dave mentioned, the migration from corded to cordless is a real benefit both to revenue and margin dollars on a per unit basis and 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'll talk about this more at Analyst Day in a week, they're projecting headset growth from these levels from a TAM standpoint. It's hard to say, and we're not providing detailed quarterly guidance here, but I think we do expect the market to continue to expand. And I think given our leadership position and the strength of our technology and some of the new product offerings, we expect that we can grow along with or perhaps even faster than the market.

Paul Chung -- JPMorgan -- Analyst

Thank you. Very helpful.

Operator

Thank you. Your next question comes from the line of Paul Silverstein. Your line is open.

Paul Silverstein -- Cowen and Company -- Analyst

[Indecipherable], the $60-plus million of foregone revenue in the June quarter based upon the guidance you gave, if you were up sequentially, be at least $60 million, I'm assuming to be more than that. It is -- that won't be up very much at all. But that revenue due to supply constraints, I assume, because everybody is in the same boat with regard to supply constraints that it's simply a matter deferring shipments in rev wreck [Phonetic] as opposed to losing that revenue to Logitech or other competitors, but let me ask you the open question, any risk that other suppliers will be able to satisfy that mainly it goes away or is it -- simply there's a timing issue?

Dave Shull -- President and Chief Executive Officer

I want to add -- this is Dave. I'm going to answer it as 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 ATVs, I use this word, less differentiated products, some of our voice products, for example, some of the phones, yeah, I think some of the demand is a bit perishable because it is less unique from a technology point of view. With regard to the largest enterprises, the Fortune 500, Global 1000, we have a long-term relationship with many of these companies and are looking for a multi-year rollout. And so, I think a quarter or so take-up is not the end of that. I mean, there should from a longer-term relationship there is. 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 stakes, but on the voice side, there is some risk. Chuck?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah, I think that's well said Dave.

Paul Silverstein -- Cowen and Company -- Analyst

Can I ask -- just one quick follow-up, any way to quantify how much is one versus other?

Dave Shull -- President and Chief Executive Officer

I don't have [Speech Overlap].

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah, yeah.

Dave Shull -- President and Chief Executive Officer

Sorry. I'm sorry, Chuck. You tell that [Speech Overlap].

Paul Silverstein -- Cowen and Company -- Analyst

I apologize. That was -- you don't have that information?

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Yeah, I mean, I think ultimately, Paul, what I would say is the pipeline supports significant growth. The pipeline deals tend to be enterprise transactions with the large-scale enterprises. And I think that they're doing long-term RFPs, we will retain that business. The commodity purchases that are short-term, the long tail SMB, I can't really quantify or break that out for you.

Paul Silverstein -- Cowen and Company -- Analyst

But I guess, there's the real question. What I'm -- again, driving it obviously is to what extent that impact your long-term demand, your long-term revenue growth rate. How much of this is customers that will shift away from, Paul, is one of your competitors because they have the ability to satisfy. You're -- now the demand increase and your relationship away from you, it sounds like you're saying that it's a small piece.

Chuck Boynton -- Executive Vice President and Chief Financial Officer

I don't think it impacts the long-term thesis at all. I really don't. I think that this is a market where we've seen our competitors not be able to meet supply and demand, and we've had the same challenges. And when you win a long-term strategic account, then they stick with you. If it's a truly a jump ball, we may lose that, but I think we'll get that back right away. And so, I don't think this changes the long-term thesis at all.

Paul Silverstein -- Cowen and Company -- Analyst

All right. I appreciate it. Thank you then.

Dave Shull -- President and Chief Executive Officer

Thanks, Paul.

Operator

Thank you. Your next question comes from the line of Greg Burns from Sidoti & Company. Your line is now open.

Gregory Burns -- Sidoti & Company, LLC -- Analyst

So, I try to hop out. Paul, [Indecipherable] to it. So my question has been answered. Thanks.

Dave Shull -- President and Chief Executive Officer

Thanks, Greg.

Operator

Thank you. There are no further questions at this time. Turning over back to you, Dave.

Dave Shull -- President and Chief Executive Officer

Thanks all. 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 thesis here. And again, I'm fairly new on the CEO role. And so we -- it's never fun to issue a downward guidance, but I'd rather just be straight with you all. By the same token, I remain very, very bullish for the year and for the next couple of years to come. And again, we'll share much more of that at Analyst Day. And I appreciate everyone's time and look forward to talking to you all next week. Thank you.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Dave Shull -- President and Chief Executive Officer

Chuck Boynton -- Executive Vice President and Chief Financial Officer

Mike Iburg -- Head of Investor Relations

Amit Daryanani -- Evercore ISI -- Analyst

Paul Silverstein -- Cowen and Company -- Analyst

Gregory Burns -- Sidoti & Company, LLC -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Paul Chung -- JPMorgan -- Analyst

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