Exhibit 99.1
ClearOne Reports Third Quarter 2018 Financial Results
● | Revenue continued to be impacted by infringement of ClearOne’s strategic patents |
● | Under absorption of overhead costs continued to reduce gross margin |
● | Non-GAAP Operating expenses declined by 18% year-over-year |
SALT LAKE CITY, UTAH – November 13, 2018 – ClearOne (NASDAQ: CLRO), a global provider of audio and visual communication solutions, reported financial results for the three months and nine months ended September 30, 2018.
“Our revenue and consequently our bottom line continues to be under assault due to infringement of our strategic patents” said Zee Hakimoglu, President and Chief Executive Officer. “We continue to emphasize the strategic priorities of product innovation, operational savings and legal defense of our strategic patents. The third quarter results show evidence of cost savings measures starting to yield results and inventory turning to cash. We also have embarked on a path to strengthen our cash position through a rights offering to our current shareholders. We believe our focused implementation of core initiatives will bring us back to the path towards profitability and growth.”
Financial Summary
The Company uses certain non-GAAP financial measures and reconciles those to GAAP measures in the attached tables.
● | Q3 2018 revenue was $6.7 million, compared to $10.6 million in Q3 2017 and $7.0 million in Q2 2018. The year-over-year decrease as well as sequential revenue decline reflect an impact of the on-going harm of infringement of ClearOne’s patents resulting in slower adoption of our next generation professional audio-conferencing platform. The patent infringement has also negatively impacted revenue from ClearOne’s other products that are sold with professional audio-conferencing systems. |
● | GAAP gross profit in Q3 2018 was $3.0 million compared to $6.5 million in Q3 2017 and $3.3 million in Q2 2018. GAAP gross profit margin was 45% in Q3 2018, compared to 62% in Q3 2017 and 47% in Q2 2018. Gross profit margin decrease was primarily due to an increase in inventory obsolescence costs, a decline in licensing revenues and due to reduced overhead absorption into inventory. The proportion of overhead costs absorbed into inventory has declined due to a sharp decline in our inventory purchasing activity causing increased amounts of overhead costs to be expensed. |
● | Operating expenses (excluding impairment of goodwill and intangibles) in Q3 2018 were $5.3 million, compared to $6.6 million in Q3 2017 and $6.2 million in Q2 2018. The majority of the decrease in operating expenses over Q3 2017 is attributable to reduced employee related costs, reduction in sales commissions and reduction in R&D related project expenses. Non-GAAP operating expenses in Q3 2018 were $4.9 million, compared to $6.0 million in Q3 2017 and $5.8 million in Q2 2018. The sequential decrease in Non-GAAP operating expenses was mainly due to reduced employee related costs, sales commissions and R&D related project costs. |
● | GAAP net loss in Q3 2018 was $10.1 million, or $1.22 per share, compared to net loss of $9.2 million, or $1.09 per share, in Q3 2017 and net loss of $2.2 million, or $0.26 per share, in Q2 2018. Net loss in Q3 2018 was largely caused by the non-cash write-off of deferred tax assets amounting to $7.8 million and reduction in revenue and associated gross profit. Non-GAAP net loss was $9.6 million, or $1.15 per share, in Q3 2018, compared to non-GAAP net profit of $0.8 million in Q3 2017 and net loss of $1.8 million, or $0.22 per share, in Q2 2018. Non-GAAP net loss in Q3 2018 was caused by lower revenues and reduction in associated gross margin. |
Financial Summary | ||||||||||||||||||||||||
($ in 000, except per share) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||||
GAAP | ||||||||||||||||||||||||
Revenue | $ | 6,683 | $ | 10,560 | -37 | % | $ | 20,943 | $ | 32,549 | -36 | % | ||||||||||||
Gross Profit | 2,980 | 6,509 | -54 | % | 10,329 | 19,256 | -46 | % | ||||||||||||||||
Operating loss | (2,310 | ) | (13,506 | ) | 83 | % | (7,724 | ) | (15,141 | ) | 49 | % | ||||||||||||
Net loss | (10,142 | ) | (9,276 | ) | -9 | % | (14,151 | ) | (10,564 | ) | -34 | % | ||||||||||||
Diluted loss per share | (1.22 | ) | (1.09 | ) | -12 | % | (1.70 | ) | (1.22 | ) | -39 | % | ||||||||||||
Non-GAAP | ||||||||||||||||||||||||
Non-GAAP Gross Profit | $ | 2,983 | $ | 6,516 | -54 | % | $ | 10,341 | $ | 19,277 | -46 | % | ||||||||||||
Non-GAAP Operating Income (Loss) | (1,915 | ) | 526 | -464 | % | (6,430 | ) | 1,028 | -725 | % | ||||||||||||||
Non-GAAP Net Income (Loss) | (9,554 | ) | 760 | -1357 | % | (12,857 | ) | 807 | -1693 | % | ||||||||||||||
Non-GAAP Adjusted EBITDA | (1,790 | ) | 743 | -341 | % | (5,975 | ) | 1,742 | -443 | % | ||||||||||||||
Non-GAAP Earnings (Loss) per share (Diluted) | (1.15 | ) | 0.09 | -1378 | % | (1.55 | ) | 0.09 | -1822 | % | ||||||||||||||
Balance Sheet Highlights
At September 30, 2018, cash, cash equivalents and investments were $10.3 million, as compared with $18.6 million at December 31, 2017. The Company continued to have no debt.
About ClearOne
ClearOne is a global company that designs, develops and sells conferencing, collaboration, and network streaming 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 | ||||||||
September 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,522 | $ | 5,571 | ||||
Marketable securities | 1,972 | 2,689 | ||||||
Receivables, net of allowance for doubtful accounts of $580 and $472, respectively | 5,212 | 7,794 | ||||||
Inventories, net | 13,299 | 14,415 | ||||||
Distributor channel inventories | - | 1,555 | ||||||
Prepaid expenses and other assets | 2,525 | 1,862 | ||||||
Total current assets | 25,530 | 33,886 | ||||||
Long-term marketable securities | 5,757 | 10,349 | ||||||
Long-term inventories, net | 8,266 | 8,708 | ||||||
Property and equipment, net | 1,451 | 1,549 | ||||||
Intangibles, net | 9,418 | 6,543 | ||||||
Deferred income taxes | — | 6,531 | ||||||
Other assets | 377 | 311 | ||||||
Total assets | $ | 50,799 | $ | 67,877 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,364 | $ | 4,122 | ||||
Accrued liabilities | 1,668 | 1,843 | ||||||
Deferred product revenue | 250 | 4,635 | ||||||
Total current liabilities | 5,282 | 10,600 | ||||||
Deferred rent | 135 | 103 | ||||||
Other long-term liabilities | 646 | 607 | ||||||
Total liabilities | 6,063 | 11,310 | ||||||
Shareholders' equity: | ||||||||
Common stock, par value $0.001, 50,000,000 shares authorized, 8,306,535 and 8,319,022 shares issued and outstanding | 8 | 8 | ||||||
Additional paid-in capital | 47,875 | 47,464 | ||||||
Accumulated other comprehensive income (loss) | (208 | ) | (65 | ) | ||||
Retained earnings (Deficit) | (2,939 | ) | 9,160 | |||||
Total shareholders' equity | 44,736 | 56,567 | ||||||
Total liabilities and shareholders' equity | $ | 50,799 | $ | 67,877 | ||||
CLEARONE, INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Dollars in thousands, except per share values) |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 6,683 | $ | 10,560 | $ | 20,943 | $ | 32,549 | ||||||||
Cost of goods sold | 3,703 | 4,051 | 10,614 | 13,293 | ||||||||||||
Gross profit | 2,980 | 6,509 | 10,329 | 19,256 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 2,168 | 3,006 | 7,796 | 8,393 | ||||||||||||
Research and product development | 1,781 | 2,268 | 5,757 | 6,947 | ||||||||||||
General and administrative | 1,341 | 1,281 | 4,500 | 5,597 | ||||||||||||
Impairment of intangibles | — | 736 | — | 736 | ||||||||||||
Impairment of goodwill | — | 12,724 | — | 12,724 | ||||||||||||
Total operating expenses | 5,290 | 20,015 | 18,053 | 34,397 | ||||||||||||
Operating loss | (2,310 | ) | (13,506 | ) | (7,724 | ) | (15,141 | ) | ||||||||
Other income, net | 5 | 78 | 78 | 264 | ||||||||||||
Loss before income taxes | (2,305 | ) | (13,428 | ) | (7,646 | ) | (14,877 | ) | ||||||||
Provision for (benefit from) income taxes | 7,837 | (4,152 | ) | 6,505 | (4,313 | ) | ||||||||||
Net loss | $ | (10,142 | ) | $ | (9,276 | ) | $ | (14,151 | ) | $ | (10,564 | ) | ||||
Basic weighted average shares outstanding | 8,306,707 | 8,520,041 | 8,304,974 | 8,641,173 | ||||||||||||
Diluted weighted average shares outstanding | 8,306,707 | 8,520,041 | 8,304,974 | 8,641,173 | ||||||||||||
Basic loss per share | $ | (1.22 | ) | $ | (1.09 | ) | $ | (1.70 | ) | $ | (1.22 | ) | ||||
Diluted loss per share | $ | (1.22 | ) | $ | (1.09 | ) | $ | (1.70 | ) | $ | (1.22 | ) | ||||
Net loss | (10,142 | ) | (9,276 | ) | (14,151 | ) | (10,564 | ) | ||||||||
Comprehensive income: | ||||||||||||||||
Unrealized gain (loss) on available-for-sale securities, net of tax | (22 | ) | 10 | (93 | ) | 68 | ||||||||||
Change in foreign currency translation adjustment | (13 | ) | 23 | (51 | ) | 88 | ||||||||||
Comprehensive loss | (10,177 | ) | (9,243 | ) | (14,295 | ) | (10,408 | ) | ||||||||
CLEARONE, INC. | ||||||||
UNAUDITED RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||
(Dollars in thousands, except per share values) |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
GAAP gross profit | $ | 2,980 | $ | 6,509 | $ | 10,329 | $ | 19,256 | ||||||||
Stock-based compensation | 3 | 7 | 12 | 21 | ||||||||||||
Non-GAAP gross profit | $ | 2,983 | $ | 6,516 | $ | 10,341 | $ | 19,277 | ||||||||
GAAP operating income (loss) | $ | (2,310 | ) | $ | (13,506 | ) | $ | (7,724 | ) | $ | (15,141 | ) | ||||
Stock-based compensation | 112 | 175 | 379 | 515 | ||||||||||||
Amortization of intangibles | 279 | 238 | 792 | 706 | ||||||||||||
Impairment of intangible asset | — | 736 | — | 736 | ||||||||||||
Impairment of goodwill | — | 12,724 | — | 12,724 | ||||||||||||
Legal expenses, acquisition expenses, restructuring expenses, etc. not related to regular operations | 4 | 159 | 123 | 1,488 | ||||||||||||
Non-GAAP operating income (loss) | $ | (1,915 | ) | $ | 526 | $ | (6,430 | ) | $ | 1,028 | ||||||
GAAP net income (loss) | $ | (10,142 | ) | $ | (9,276 | ) | $ | (14,151 | ) | $ | (10,564 | ) | ||||
Stock-based compensation | 112 | 175 | 379 | 515 | ||||||||||||
Amortization of intangibles | 279 | 238 | 792 | 706 | ||||||||||||
Impairment of intangible asset | — | 736 | — | 736 | ||||||||||||
Impairment of goodwill | — | 12,724 | — | 12,724 | ||||||||||||
Legal expenses, acquisition expenses, restructuring expenses, etc. not related to regular operations | 4 | 159 | 123 | 1,488 | ||||||||||||
Tax effect of non-GAAP adjustments | 193 | (3,996 | ) | — | (4,798 | ) | ||||||||||
Non-GAAP net income (loss) | $ | (9,554 | ) | $ | 760 | $ | (12,857 | ) | $ | 807 | ||||||
GAAP net income (loss) | $ | (10,142 | ) | $ | (9,276 | ) | $ | (14,151 | ) | $ | (10,564 | ) | ||||
Number of shares used in computing GAAP income per share (diluted) | 8,306,707 | 8,520,041 | 8,304,974 | 8,641,173 | ||||||||||||
GAAP income (loss) per share (diluted) | $ | (1.22 | ) | $ | (1.09 | ) | $ | (1.70 | ) | $ | (1.22 | ) | ||||
Non-GAAP net income (loss) | $ | (9,554 | ) | $ | 760 | $ | (12,857 | ) | $ | 807 | ||||||
Number of shares used in computing Non-GAAP income per share (diluted) | 8,306,707 | 8,520,041 | 8,304,974 | 8,641,173 | ||||||||||||
Non-GAAP income (loss) per share (diluted) | $ | (1.15 | ) | $ | 0.09 | $ | (1.55 | ) | $ | 0.09 | ||||||
GAAP total net income (loss) | $ | (10,142 | ) | $ | (9,276 | ) | $ | (14,151 | ) | $ | (10,564 | ) | ||||
Stock-based compensation | 112 | 175 | 379 | 515 | ||||||||||||
Depreciation | 120 | 139 | 377 | 450 | ||||||||||||
Amortization of intangibles | 279 | 238 | 792 | 706 | ||||||||||||
Impairment of intangible asset | — | 736 | — | 736 | ||||||||||||
Impairment of goodwill | — | 12,724 | — | 12,724 | ||||||||||||
Legal expenses, acquisition expenses, restructuring expenses, etc. not related to regular operations | 4 | 159 | 123 | 1,488 | ||||||||||||
Provision for (benefit from) income taxes | 7,837 | (4,152 | ) | 6,505 | (4,313 | ) | ||||||||||
Non-GAAP Adjusted EBITDA | $ | (1,790 | ) | $ | 743 | $ | (5,975 | ) | $ | 1,742 | ||||||
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