ClearOne Reports First Quarter 2017 Financial Results

May 9, 2017

SALT LAKE CITY, May 9, 2017 /PRNewswire/ -- ClearOne (NASDAQ: CLRO), a global provider of audio and visual communication solutions, reported financial results for the three months ended March 31, 2017.

"2017 is trending positively," said Zee Hakimoglu, president and chief executive officer. "In the first quarter, our new Converge® Pro 2 platform gained market traction with revenue more than doubling sequentially and contributing to an improved gross margin. Also, video solutions continued to make steady, strong gains with revenue growing 60% over Q1 2016. The combination, despite typical seasonality, fueled sequential total revenue growth of 9%.

"In addition, ClearOne was awarded a new patent on April 25th on a system and method involving the combination of echo cancellation and beamforming microphone arrays. This award, named the '186 patent, augments ClearOne's strong history of product innovation and development of cutting edge technologies. Our investments are powering ClearOne's industry-leading edge in conferencing technology and delivered the pro-AV industry's first pro-grade microphone array with beamforming, adaptive steering/smart beam selection, and acoustic echo cancellation, which we believe to be a significant asset in our market. We have initiated a strategy to ensure our intellectual property is respected by the industry, which is consistent with our commitment to build long-term shareholder value," concluded Hakimoglu.

Financial Summary

The Company uses certain non-GAAP financial measures and reconciles those to GAAP measures in the attached tables.

  • Q1 2017 revenue was $11.7 million, compared to $13.0 million in Q1 2016 and $10.7 million in Q4 2016. The year-over-year decrease reflects the continuing transition to the next generation professional audio conferencing platform and the price reductions to corresponding legacy products, and the sequential growth reflects increased contribution from video solutions and Converge Pro 2.
  • GAAP gross profit in Q1 2017 was $6.7 million, compared to $8.5 million in Q1 2016 and $5.7 million in Q4 2016. GAAP gross profit margin was 57% in Q1 2017, compared to 65% in Q1 2016 and 53% in Q4 2016. Non-GAAP gross profit margin was 57% in Q1 2017, compared to 65% in Q1 2016 and 55% in Q4 2016.  Year-over-year the product mix was still heavily weighted toward the lower margin, legacy Converge Pro 1. Sequentially GAAP gross profit margin improved 4% and non-GAAP improved 2%, reflecting growing adoption of the next generation Converge Pro 2.
  • Operating expenses in Q1 2017 were $7.2 million, compared to $6.5 million in Q1 2016 and $6.8 million in Q4 2016. The majority of the increase over Q1 2016 is attributable to litigation, primarily related to the patent lawsuit.
  • Net loss in Q1 2017 was $0.5 million, or $0.05 per diluted share, compared to net income of $1.4 million, or $0.14 per diluted share, in Q1 2016 and net loss of $1.1 million, or $0.12 per diluted share, in Q4 2016.
  • Non-GAAP net income was $0.1 million, or $0.02 per diluted share, in Q1 2017, compared to $1.8 million, or $0.18 per diluted share, in Q1 2016, and non-GAAP net loss of $0.2 million, or $0.02 per diluted share, in Q4 2016. 

($ in 000, except per share)

Three months ended March 31,

2017

2016

Change

GAAP





Revenue

$ 11,678

$ 13,033

-10%

Gross Profit

6,678

8,465

-21%

Operating Income (Loss)

(526)

1,972

-127%

Net Income (Loss)

(468)

1,368

-134%

Earnings (Loss) Per Share (Diluted)

(0.05)

0.14

-136%

Non-GAAP





Non-GAAP Gross Profit

$   6,686

$   8,469

-21%

Non-GAAP Operating Income

366

2,520

-85%

Non-GAAP Net Income

149

1,755

-92%

Non-GAAP Adjusted EBITDA

634

2,774

-77%

Non-GAAP Earnings per share (Diluted)

0.02

0.18

-89%





Continued Investment in Shareholder Value

At March 31, 2017, cash, cash equivalents and investments were $35.6 million, as compared with $38.5 million at December 31, 2016.  The Company continued to have no debt. During the Q1 of 2017, the Company paid a cash dividend of $0.05 per share and repurchased approximately 79,000 shares amounting to $0.9 million. As of March 31, 2017, the Company has acquired approximately 621,000 shares amounting to $7.0 million since beginning program in March 2016. The Company intends to continue to repurchase shares of its common stock, and in March 2017 the board renewed and extended the stock repurchase program for up to an additional $10 million in the open market, subject to price, volume and other safe harbor restrictions over the next twelve months. 

Conference Call Information

ClearOne senior management will host an investor conference call today, May 9th at 11:30 a.m. Eastern Time to review the company's financial results. The conference call will be available to interested parties by dialing +1-877-369-6586 (domestic) or +1-253-237-1165 (international). The conference ID is 18924039. The call will also be available through a live, listen-only audio Internet broadcast at http://investors.clearone.com/events.cfm. For those who are not available to listen to the live broadcast, the call will be archived on the same web site for at least three months.

About ClearOne

ClearOne is a global company that designs, develops and sells conferencing, collaboration, and network streaming & signage solutions for voice and visual communications. The performance and simplicity of its advanced comprehensive solutions offer unprecedented levels of functionality, reliability and scalability. More information about the Company can be found at www.clearone.com.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented on a GAAP basis, ClearOne uses non-GAAP measures of gross profit, operating income (loss), net income (loss), adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and net income (loss) per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance from period to period and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of ClearOne's underlying operational results and trends and our marketplace performance. The non-GAAP results are an indication of our baseline performance before certain gains, losses, or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods.  The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for gross profit, operating income (loss), net income (loss), income (loss) per share or other financial measures prepared in accordance with GAAP. There are limitations to the use of non-GAAP financial measures. Other companies, including companies in ClearOne's industry, may calculate non-GAAP financial measures differently than ClearOne does, limiting the usefulness of those measures for comparative purposes. A detailed reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is included with this release below.

Forward Looking Statements

This release contains "forward-looking" statements that are based on present circumstances and on ClearOne's predictions with respect to events that have not occurred, that may not occur, or that may occur with different consequences and timing than those now assumed or anticipated.  Such forward-looking statements and any statements of the plans and objectives of management for future operations and forecasts of future growth and value, are not guarantees of future performance or results and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. Such forward-looking statements are made only as of the date of this release and ClearOne assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances. Readers should not place undue reliance on these forward-looking statements. The information in this press release should be read in conjunction with, and is modified in its entirety by, the Annual Report on Form 10-K (the "10-K") filed by the Company for the same period with the Securities and Exchange Commission (the "SEC") and all of the Company's other public filings with the SEC (the "Public Filings"). In particular, the financial information contained herein is subject to and qualified by reference to the financial statements contained in the 10-K, the footnotes thereto and the limitations set forth therein. Investors may not rely on the press release without reference to the 10-K and the Public Filings.

Contact:
Investor Relations
801-975-7200
investor_relations@clearone.com
http://investors.clearone.com



CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

As at

March 31, 2017

December 31, 2016

ASSETS




Current assets:




Cash and cash equivalents

$

8,639

$

12,100

Marketable securities

5,862

5,030

Receivables, net of allowance for doubtful accounts of $186 and $187, respectively

7,303

7,461

Inventories, net

14,438

11,377

Distributor channel inventories

1,463

1,530

Prepaid expenses and other assets

3,000

2,642

     Total current assets

40,705

40,140

Long-term marketable securities

21,102

21,365

Long-term inventories, net

1,470

1,664

Property and equipment, net

1,529

1,513

Intangibles, net

5,496

5,677

Goodwill

12,724

12,724

Deferred income taxes

4,654

4,654

Other assets

379

387

     Total assets

$

88,059

$

88,124

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

4,907

$

3,545

Accrued liabilities

2,045

1,894

Deferred product revenue

3,888

3,882

Total current liabilities

10,840

9,321

Deferred rent

82

103

Other long-term liabilities

1,274

1,251

Total liabilities

12,196

10,675




Shareholders' equity:




Common stock, par value $0.001, 50,000,000 shares authorized, 8,734,917 and 8,812,644 shares issued and outstanding

9

9

Additional paid-in capital

46,868

46,669

Accumulated other comprehensive income (loss)

(155)

(205)

Retained earnings

29,141

30,976

Total shareholders' equity

75,863

77,449

Total liabilities and shareholders' equity

$

88,059

$

88,124




CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share values)

Three months ended March 31,

2017

2016

Revenue

$

11,678

$

13,033

Cost of goods sold

5,000

4,568

Gross profit

6,678

8,465




Operating expenses:




Sales and marketing

2,741

2,625

Research and product development

2,357

2,270

General and administrative

2,106

1,598

Total operating expenses

7,204

6,493




Operating income (loss)

(526)

1,972




Other income, net

102

11

Income (loss) before income taxes

(424)

1,983

Provision for income taxes

44

615

Net income (loss)

$

(468)

$

1,368




Basic weighted average shares outstanding

8,768,112

9,196,522

Diluted weighted average shares outstanding

8,768,112

9,513,440




Basic earnings (loss) per common share

$

(0.05)

$

0.15

Diluted earnings (loss) per common share

$

(0.05)

$

0.14




   Net income (loss)

(468)

1,368




Comprehensive income:




   Unrealized gain on available-for-sale securities, net of tax

38

121

   Change in foreign currency translation adjustment

12

33

   Comprehensive income (loss)

(418)

1,522




CLEARONE, INC.

UNAUDITED RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(Dollars in thousands, except per share values)

Three months ended March 31,

2017

2016

GAAP gross profit

$

6,678

$

8,465

Stock-based compensation

8

4

Non-GAAP gross profit

$

6,686

$

8,469




GAAP operating income (loss)

$

(526)

$

1,972

Stock-based compensation

171

148

Amortization of intangibles

237

289

Legal expenses, acquisition expenses, re-audit expenses, restructuring expenses, etc. not related to regular operations

484

111

Non-GAAP operating income

$

366

$

2,520




GAAP net income (loss)

$

(468)

$

1,368

Stock-based compensation

171

148

Amortization of intangibles

237

289

Legal expenses, acquisition expenses, re-audit expenses, restructuring expenses, etc. not related to regular operations

484

111

Loss on disposal of assets related to wireless microphones manufacturing

—

49

Tax effect of non-GAAP adjustments

(275)

(210)

Non-GAAP net income

$

149

$

1,755




GAAP net income (loss)

$

(468)

$

1,368

Number of shares used in computing GAAP income per share (diluted)

8,768,112

9,513,440

GAAP income (loss) per share (diluted)

$

(0.05)

$

0.14

Non-GAAP net income

$

149

$

1,755

Number of shares used in computing Non-GAAP income per share (diluted)

8,768,112

9,513,440

Non-GAAP income per share (diluted)

$

0.02

$

0.18




GAAP total net income (loss)

$

(468)

$

1,368

Stock-based compensation

171

148

Depreciation

166

194

Amortization of intangibles

237

289

Legal expenses, acquisition expenses, re-audit expenses, restructuring expenses, etc. not related to regular operations

484

111

Loss on disposal of assets related to wireless microphones manufacturing

—

49

Provision for income taxes

44

615

Non-GAAP Adjusted EBITDA

$

634

$

2,774

 

 

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SOURCE ClearOne

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