Plantronics, Inc. (NYSE:PLT) Q2 2021 Earnings Conference Call - Final Transcript

[Operator Instructions] Your first question comes from the line of Amit Daryanani with Evercore.

Hey guys. This is Michael Fisher on for Amit. Thanks for taking my question and congrats on a great quarter. I just wanted to -- I'm wondering if you can kind of give us an idea of the magnitude of both the freight headwind and then also the capacity expansion. I think you mentioned it's something that will carry on for at least a couple of more quarters until your supply chain normalizes. So just give us an idea of maybe the quarterly run rate if that's where we expect it for the next couple of quarters.

Certainly, Michael. Thank you. This is Chuck. Freight -- as we said in the last call, the freight costs globally have gone up by three to five times what they were pre-pandemic. And so what we've seen in terms of incremental freight costs over last quarter was up about $5 million over last quarter and last quarter, I think, it more than doubled from the prior quarter. So I don't want to get into the details per se. But it's a pretty significant headwind. We don't expect any near-term changes this quarter or next quarter, but we do expect over time as the supply chain stabilizes for freight to get back to where it was and ultimately should help margins.

In terms of capacity expansion, in the last two quarters we've hired over 2,000 additional people in our factory in Mexico and we've expanded lines in contract manufacturers. And what we've seen is a record quarter ever for Plantronics for Enterprise Headsets and a record quarter, at least since the acquisition, of video endpoints. So I won't get into the exact levels of details on capacity size and whatnot. That's very strategic information. But we have radically expanded capacity, but we're still not quite meeting the exact demand.

Okay. And then just talk [Phonetic] about video strength. You obviously mentioned the education was a tailwind. I am just curious because I guess some people would think of this maybe as more of an on-prem in the office solution. So, are you seeing Enterprises equipped huddle rooms for the eventual return to work or is this getting some home office setups as well?

This is Dave. I think there's a couple of factors here. On the education side, it's obviously a fairly specific use of the product. And it's really sort of, what I would call, almost a hybrid consumers/enterprise usage, given that it's being used by teachers, some of which is at home, some of which is in the classroom, broadcasting to the homes.

A lot of the other video demand is being driven by, what I would call, some preparation of people coming back to the huddle rooms on a video basis as opposed to just a voice basis. And so it's sort of a mixture across the board there.

Thanks for [Phonetic] taking the question.

Thanks, Mike. Operator,