ClearOne (CLRO) 11 Nov 172017 Q3 Earnings call transcript

Good morning, everyone, and welcome to the ClearOne 2017 Third Quarter Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the company's Investor Relations representative, Ms. Cathy Mattison of LHA. Ms. ahead. go please Mattison,

Welcome, the thank Results ClearOne Tyron. us Conference for today for Third everyone, you, you and joining Call. Thank Quarter XXXX

CEO; www.clearone.com, Vice least call Narsi being note for broadcast the today at the Zee three playback is President On Internet will on at available are this call Narayanan, the of President and Senior live Finance. and Please months. Hakimoglu, and be

stated information Litigation remind discussed would the I with to a the the Narsi current future, everyone differ like reflecting is actual up and or of that business will and under today provisions Zee follow the The our our the Before Safe we begin, of those could information implied. open will update, aspects management's discussion covered on Today, cautionary make forecast then include with of results. today financial Reform call Harbor statement company's forward-looking results discussion company's will the of from certain Act. materially the

We will for questions. call open the then

my pleasure over Zee. call to to the turn is it Now

capitalize And The year-over-year migration of the a increased. grew grew audio product XX%. video CONVERGE application. morning, video In every product continue on Thank large and good also we that percentage videoconferencing strategy. mix demonstrating a driven revenue mix delivered increases improvements. about revenue to everyone. you, were solution by as Pro video professional we the third X a our order to our total included and several revenue Cathy, just in basis, On XX%, sequential of quarter, software-based Total we offered, Pro-audio

our revenue of we transition take to better the a favor, the demand ability it cloud-video video through on sequential in ClearOne's strategy and previous we and discussed calls, As Trends, year. would going success. increasing point. video company developed services, growth anticipate audio our sound growing end collaboration is revenue knew foundation the for video. To include drives our contribution complement market to a product major intercept needs and serve the and part from

of summary, of comprehensive to XXXX gives peripherals competitive our complete degree for capability. for services audio and & This to high believe belief endpoints businesses industries our varying prestigious technology recognition. further and converged We award video The In value Sullivan ClearOne's leadership. of larger compelling customer diverse portfolio affordable its conferencing is cater and of audio and customers Our Award footprint sizes, strategy strategy innovation and features, requirements reaffirms mind ClearOne and unified-solution achieve product validation and with October, this customization. industry to demand. In industry our Frost solution collaboration our the product prices share. video garnered portfolio ability offer they grow a positioned and cited that videoconferencing

and before. collaboration Sullivan's marketing & increasing space, industry's No Audio XX.X% that requirement. installation October, and for Frost one-stop continues drive we we've is ClearOne platforms Market and for was growth, of Global do To source ClearOne sales solutions conferencing all as across revenue which and initiatives to every a to of addition, new audio the the resources only analysis, to all we markets. other published turn vertical attention consultants conferencing in in range for Conferencing found integrators are and offers the to stated installed complete In Endpoints our lead share company XXXX, XXXX. Forecast market with to that

funnels. for to headcount partners smaller sales Our on initiative to street bringing includes adding regional opportunity boost arenas, team and feet the channel on on new increased focusing regional sales

cases exposure side of marketing success ClearOne lines. across few industry publications, some relation's in has Our in dramatically last our including the dozens featuring great increased the months all public initiative product on alone,

we will end-user be and van can't integrators, In demonstrations streaming touring and States, van XX-foot and for with to hear solutions redesigned always to that services. information and be launching of comprehensive their conferencing, they of our the touring AV Our effectively collaboration consultants is possible as products. who crisscrossing conjunction find trade our customers will it the we United our website ClearOne's new see to making get full-line live and to will feel, solutions soon look larger need. conferences the shows mentioned, modern more to organized be brand-new and its With easily showcase and optimized and partners

our ClearOne the camera, software PC-based quarter, only. capabilities solutions and for BYOD meeting during lineup. Business, Business Pro camera ClearOne shipping we for collaboration speakerphone and existing The hub. USB our an video most offering we market began enhances Also QX, Spontania, available WebEx your Pro-X PC-based the spaces video-collaboration option expanded experience business began media of began compatibility to own and camera, the for GoToMeeting, of as collaboration our our versatile lineup other, Skype through shipping XXX economical for native new upgrade. complement rooms. optional significantly We XXX shipping for by only During addition Skype UNITE ease own some bring the Hangouts, Skype USB COLLABORATE any the XXX and on The that Versa huddle for or such ClearOne a new audio an connectivity professional-grade USB workplace. in applications of COLLABORATE to products system videoconferencing Versa and our We audio delivers the makes today includes applications native with and

Pro well in simplest Pro X conferencing calls to needs began We X On for also the that the system. and new The One model and number conferencing panel interface X control new in QX. shipping expensive for control need and X a to provides Pro-audio Pro new scaled the addresses shipping A don't conference increase started connectivity touch and smaller using other the Pro-audio exclusively microphone wireless environments the addresses new easily controller microphones additional CONVERGE manage rooms a we CONVERGE room. as shipping front, of DSP need began economically QX. mixers controller in highly-complex designed the our the platform for VoIP systems. as models of platform CONVERGE intuitive

Finally QX, additional and smaller receive recognition. that DIALOG market environment smaller in which a budgets set, XX, to microphone very video our to additions to any during that presentation was will options system venues confident and as wireless significant and also by We X-channel unbeatable are These empowered the unlicensed such gig offices. platforms in our growth band. rooms, any remain training frequency products outperform offering venues new size conveniently Pro-Audio product conferencing compact system on uses the room, ship and adoption This application. drive any awards continues to and X.X

XXXX up will to Going fourth be year. the are better quarter, a into confident shape we

I'll over Now call the Narsi. to turn

you, Thank and Zee, morning, good everyone.

will non-GAAP So release that our financial is reconciliation measures. discussing went before I that earnings certain to like The included out begin, I be note I would in morning. this

was percentage expenses $X by spending, percentage XX%. of largely reduced in gross $XXX change was change the and from the I -- gross results Non-GAAP the declined results per non-GAAP recognized product operating from The and $XXX,XXX financial XX% in reduced and Reviewing million. on margin. was Africa analysis was due were QX quarter expenses. revenue or to of fall Americas assets the margin Non-GAAP $XXX,XXX XX% XX%, Middle by in revenue in $XX.X Video decreased of of company XXXX. assets, company per recent will marketing and million income the Net G&A Europe XX%, QX the bulk million. than $X.X was compared to margin $X.XX The R&D usual stock Now XXXX. that $X.XX increased Non-GAAP and the XX%. million to endpoints company's Reviewing was or the increased EBITDA income in XXXX. compared due increased XXXX $X.X this of XX% of XXXX net X% price our improvement was adjusted operating entire diluted share diluted $X.X XXXX. QX to and million decreased income QX some compared charges XXXX million impaired determined amounting to the million Most Non-GAAP for to gross profit to was XXXX. region. share by the $X $XX.X in fulfilled higher to Based turn to in sales compared in net change triggered margin QX million decreased and UC intangible by financial category. and non-GAAP partially million. impairment in Asia-Pacific XX%; in including $XX.X year-over-year year-over-year Sequential that QX gross performance, and operating income professionally revenue of of impairment the large and increase goodwill order in Non-GAAP portion East, $XXX,XXX intangible were this recent compared XXXX. revenue to QX offset compared QX was third and $XX.X in

to or was non-GAAP to $XXX,XXX the million. million prior Non-GAAP turning financial nine XXXX. results first XXXX. Now million share $X.X revenue compared of following diluted Non-GAAP versus compared adjusted diluted months months or December Net ended $X.XX $X.XX $XX.X XXXX note million refer to nine months $XX.X first the per nine income EBITDA share net for decreased comparisons Please our net XX, million. period. income per was for $X.X the the to from of to of $X.X

balance Turning to sheet. the

related We significant still be cash new is December CONVERGE flow share expenses, strong. XXXX, be back inventory investments this platform to repurchases, XXXX. to in microphones, very were to million XX, $XX.X any attributed payments patent-litigation to $XX.X the wireless debt. and continue without portion of and investment into Pro equivalents million to cash can decrease expected higher Cash, at in X compared The dividend which and

to dividend will our paid volume for since was QX for program March subject shareholder-friendly in turn we approximately total XXXX. intend to million, by in extended repurchase for million, Also, and to quarter, March the the XXX,XXX Zee. We price, the in to commenced shares other actions. continued bringing call back of per XXX,XXX renewed cash $X.XX company XXXX Harbor market, now $X.X and our restrictions. the $XX.X open the share Safe shares and a I board repurchased XXXX. And shares to We continue the a During the

Thank you, Narsi.

We product favorable our are the quarter. delivered pleased third trends transition in

confident are very for call Operator, questions. we please set in remain in call product open our we noted, I and the -- XXXX. As for prospects our confident

Riley. [Operator Instructions] of from is question Anderson first Our Kara B.

open. Your line is

I if about attention million saw OpEx to from, in you operating versus forward wondering in QX. implications the increase to going X you any the in Just talk expenses can guess, marketing

to trying to increase an in of We expect to sales very greater framework. and we as area our didn't XX% and have be, that going in been the been. We're marketing vigilant of than spending stick year and in course, Yes. throughout that have

Okay. And overall expectations? second two expected? then, how to up shaping I your that, how then Can the relative you think cycle is quarter with quarters talk full CPX. in sales now had you internal about you're what to the relative performed to And

Okay. What tenders we're is had participated seeing we and opportunities in where more quotes.

really interest CPX we the more that opportunities CPX some quoted is opportunities getting fact, us. In see them product in important clearly. is are diminishing The of what is for and

consultants, QX, the and we pipeline. that And our the job, have also, to. say good in we're and in to have of the made more in We features we on working had to just regions. the speak added Also, we various software overall products could so, others. we the we making We by regions some introduced that even an are think would which see still adjustments there's adoptions I see the have see complete prospect of particular suite a and that the than from regions significant do many faster important industry. that consultants about nice additions we various understand interest which we and need improvement those on we now have as

not while every we're the same region seeing of interest. CPX So would and overall, level I good has progress, the on adoption say progress

the in QX were prepaid why expenses much QX? so then, over up And

deferred tax it's it's with not us off has prepared big assets. expenses, goodwills write Actually, the given

in we category, and tax these do will and end our that put it's got Q, with properly we its it's deferred now right prepaid -- in very out of So recently. all When own see confirmations broken other you assets. included spot expenses

before mostly get that. balance tax we the deferred sheet it not could So assets. It's into

talk think for time, I apologize expectations up the around you was that. I But And that this come then I the it inventory it the if Got you last bump. to discussion changed? call, I was six And Can think about what's the missed next down again? on months. at had

Yes.

attempts made going as quite get out of terms we it's cost relationship the we in to pipeline well bit, a the to I But it's the suppliers our forecast our with both us think -- with suppliers. revised found and as changed. the margins

decided original the profitability for qualitative have we of the reasons. go for other to also and So with forecast and sake

till We have January XXXX. commitments

pressure $X we of a inventory, our XXXX in year And we're inventory these over our to be these going go introduced starting It'll cash have back not better revenue actually. down, likely all it's And products it'll QX, the And actually. significantly it'll on but at up one. quarter, And much million our up hopeful come actually. XXXX, it's start and our coming reduce in back. that's It we QX so, significantly. growth the the will go will terms to that new up going depending on going see would that XXXX, up. things all will be go tune least -- to But

quite been or SSD like thing demand. the as a bit have the since we have and something time be the facing imbalance semiconductor fact between anti-electronics was And supply second especially new simple like about not prepared. spectrums all we our heard recent especially, demand as they we Intel -- is, the longer it capacity in the and whenever the things CPX, whatever with The taking want. The are market. like And drives can versus products, introduced you might in long-term who to it's chain memory, of commitments big a have fulfill. Cisco to hard built Even

us have the in require play place advance. rules. these to orders by We the rules And well to

it on get the can we products the get So on and time available actually. shelf

we cash. So it would be cautious, are -- have we

cautious So -- the making the all products about introduced. available new we're and with products

returned cautious think this uptick. into to enough cash. And about will back have that for I having be inventory we a We hope be XXXX, possible all

from The of next question is Lisa Singular Research. Springer

favor sales I Or wanted CPX percentage of to in a revenue of down during was ask you it wind mix about. Are large you still the seeing of QX? CPX?

The far. The the actually, actually. QX going we're mix CPX significantly, I going actually. today, combination. results as mix And looking And still percentage up is up, yes. going it's at It's in up up is speak so going

the had reduction expenses quarter? Okay. should And think fourth the we for Q&A going quarter. you a nice How in Q&A into about

talking about You're right? G&A,

right. G&A, Yes,

of stabilize will $X think, think any the actually. to I expect million have between pretty Further dollars. don't year, we reduction, that increase. Yes, much significant been continue we And I it should amount this non-GAAP $XXX under it and

us Okay, good. update And with is new regarding the there anything litigation? to

I that We litigation I of doing say shareholders. we advisement team. doing under protect We're all things continue to make to litigation. everything our -- say interest excellent the would we're the -- the would we progress the of can on And

hope eyes have we record company. that and and track before, good have wide we said it I've ultimately we anticipate the benefit As a litigation our and will open

of is from Van Our Brazos Research. Zelfden question next Dennis

the in expenses and litigation quarter the were What year-to-date?

numbers in capitalized were I litigation actually. for QX the quarter expenses we don't this But have handy. patents the that $XXX,XXX year-to-date

all in quarter? X That's

Yes.

left program? Okay. It's big buyback number. on What's a your

$X about million left actually. It's is

on Okay. product Zee, of aware you competitors we're any, from on if Can infringing of impact all impact patents? the on revenue. there your negative the is revenue quantify the transition your

the unless litigating review question, is certainly, It's there But to We're unfortunate. I competing going that. Patents to in system need technology, a we we its our and we're And is would court there our our we of was of and patented company and not to That feel the shareholders. reason and expenses try that and do we couldn't for is and to properly, the there impact to are interest manage under our impact. we're which against respect be a an we go court property. going and are attorneys. do we to own the good what share an felt intellectual protect defend

Okay.

over product remember transition. in that? if quarters? quarters, growth? And between revenue mentioned we're a decline had normally it else past about take new into that Do to two still product correctly, typical going to two a quarters have quarters takes return in return, the the four of calls, old on Or guys the X to product. and that maybe see to product said for i.e two you and I somewhere Someone you you're on transition the maximum, about

a We're CPX would CPX it looking and at transition, extent in features bright differences very effective, growth. addresses about for the knew extremely as the very it new It we needs has is market. how XXXX impact. that on an -- was And did impact functionalities the would in which be there not the modern, side the the to speak that We fact, did and We the impactful. of would the design, did. and appreciate many

really pleased we transition, took next with but a generation. that changes at time, the But we're leap made. we So in the the same the we we're pleased underestimated

an and goal it and that's offering to what to then And not and the win. I can both sales to we've and they game. easy if in have territory grin channel bit do it we love likes in. displace We're we're to feedback. takes market. and It's audio-conferencing many and effort, that growth the more to get want They we the performance. get our our play And our defend is it want and more by to going Our people have is we're a in competitors. bear markets get Technology on best excellence channel rather doing to it, to And or little want based our see proven survival into technology market, we in in longer training, with and going now. think, spend they They're growth. it a the but products, our to The through spec have taking time and today, ClearOne. excellence it, an attractive is, they just reality it. got good But products getting

a kind just So pinpointing growth, quarter sometime you're particular to during in expect not XXXX return we of a can when XXXX?

a activity it's good time and But this quarter. long-term point projects, with would to And complex small I see on we're share particular a And a based that's quarter. I I difficult indicator. to I might and large pick always pinpoint, business, hesitate a point at and you. But quoting wish if quotes, it even it's to could a could I on it's quarter. very seeing a nice

[Operator We Associates. Instructions] Kay from question of have a Michael Kay

-- you Is end there light the going damages significant ClearOne? a could do is on? any possibility long there the tunnel. I to see mean has there And it of any at ClearOne litigation awarded been if that is be victorious, how

began I think we've how from And that U.S. was PTO, since long can our got we been clearly or before... patent of probably the the date, certainly exact in will activity quarter involved, recall we the last -- terms we in notice when issue it quarter we but say that I don't whole. the was

XXXX.

XXXX and part litigation And XXXX. we it how of on litigation side. dependent the the of the out, The process. other when end is began will it's roll

a and do. we control have approach on our the and need other side has and they our want what what of will big of We the control and impact strategy

of early and victorious, perhaps business we they will our we control, to consequences our litigation objection. of we and looking are compensated have expenses course, And that intangibles part patents, be any the victorious all we best we on and in manage to we always And So part and done loss because certainly for will look our and manage are the being that. of of addition do other assuming to so have of we've it, lawyers there at. but towards we're the to have have aware that infringed and the expect be given warning will don't

infringed Are than with So these ClearOne. resources they're that much on greater larger much are patents? those much of companies the

out litigation? So the really draw it through they could

Yes.

are. they fact, In

and litigation expenses and as we of And we we've before victorious. as private progress. some the less one and of and have turns I But well companies litigation of And think they're making parties lens them course. out with their as can. we're are larger will And older this it large in been under work certainly, as been best good

for Asia, the an And Do growing China? your also, sales, international in you products? as in what's been trend important that see especially and markets

of Yes, course.

markets market outside And North it, have had America. from have XX% important whole. pretty on the we been U.S. yes. focusing India, as have We plus share it's And consistent East, Middle XX% a a these outside and been about China,

eliminate it litigation you in buyback of be back to given program, the the either And also expenses prudent you the think that cut Okay. protect dividend? the the or QX? involved could so results will And

how of they've that confidence products in continues say team. would received in the and have I course, to well board confidence the been high and the

to committed program dividend. should be. it it repurchase is they've So of the and reviewed And actively the course, as

has decided question board that. that litigation, I... the So a we're the continue going Was with to on there

No.

Expense?

sheet. litigation pressure seems it the the Yes, on to so very not balance know is expensive, you put

And and exercise Right. But such as appropriate balance we the this we shareholders. cash have and at watch will time, expenses, our feel watch we sufficient these existing to we that the our actions to friendly decisions. sheet make

Mitrani question Sylvan next of Alan Our from Lake. is

open. is line Your

you've almost couple growth? mean about I in year clear, being of revenue you lost a XXXX $XX it's pretty Were of the talking years. of million

couple million of of $XX revenue years. So

point, of some need to course at grow. So you

largest end professional the what I business growth products my we and talking what in rates grow is, year-over-year hitting are from? And close this us can for you your So area, have. you growth saw does it Give kind point you mean about? that of at it is can you of to lost us? legacy Are question size XX% I rock-bottom? is? a the where And sense

want get detail. the into you to Narsi,

it's that turnaround. we to have highest exactly going have But going paper based also improvements customer are crystal getting the we we're already play we and when with the done, field still and released, So we -- the have what share a space based it our professional. feedback on feedback have don't that increase market the added, on the yes, things from have ball on all business the we on will And actually. to it's that like we upgrades

must seen press it's the above XX% from actually. have still You worth Yes, release.

not suffering, actually. us So everybody's it's just

even up at with to with the and have We're get it's So our actually. the actually. put happening in same are we're especially, we financials us be sales side each that guys if But those, that out suffering, than not other And transition on marketing of everything sharp to affecting on doing razor time, more the much others you can. fact can the the focusing team. best region, of maybe we resting

we actually. we it'll talked big up are marketing should we big video, go side, all of opportunities talked we we dominated it products on on the in So if need to it products everything only doing the in has play on total order is We channel not And professional, strategy the And or by Even actually. product sizable have actually. which have we large be this able that to the can't And side, consistently about other orders hit -- about growing the this side. the way. did have has piece, solution kind also which actually. is in a to this have bottom, we and have the been the think and video,

to least be actually. XXXX be hope We should would go better. to guidance. XXXX, don't back So give at I it

the video? this revenue I Out percent, of roughly? year. then far million appreciate What on so video. How of of And $XX.X it Okay, is that. much

year-to-date Video it. is is, percentage XX%, here actually. Video

XX%.

award, of you corporate Can impacted that I it you in millions XX%, okay. margins, it better that... said the Is a is, gross how margins. give And assume? was than us the it on big sense your was big

Yes, reveal to want project. information. by exactly we don't confidential It's

throughout that, we consider solution. a it not disclose we bluebird here came periodically. mix our get And optimal happens unusual and we them of in lifetime. time bluebird, would one this year at It's that we a and one bluebird. We get a wanted not It a call it's total did a to the what nice with an to

Actually, this say big about actually. projects quarter all and compete -- happen we our work or pipelines it's time can't quarter. still the like this We are next that on big actually. actually, timing there the always But it'll have projects exactly

So it's strategy able a get win actually. to our and into be to them part projects of these

saying. said them, an XX% very really if revenues to being as it better down Because and a were you year-over-year helped little this Okay. your big quarter, Because I'm I been. you that's get like contract. from want quarter what comes time managed understand to to you could thought it it you seems but maybe than have disaster can't save a outright being the to

think tell expect out your better think you on shareholder, channels or I just cut like more know But said, hitting up, want to it. quarter. frustrated. a have you it's -- you salespeople think you're spending as I every I really whether marketing, a just that to I don't never money -- get have revenues figure very know really to I'm only I could way the So the I don't -- mary's I just you And you hail I much room to your cost.

it So to know different. I put don't any how

tracking will getting as of like. -- are out I is There's sales don't a results say, of marketing we're products sure to on that in buy, spend. under spend video we also can feel we we changing leader have of and on But the that. And The no watch we're prudently people as the compete. terms question results. in respect. market, our recognizing Michael products. as we market a do and suite solutions. can't we're are we and make always disappointed we how they that job of way boosted job doing need organization, But which it. the innovating people solid about question in to our last done we technologies, audio the innovation. point, to that are innovative. marketing, If definitely a good great we we in We And as products. terms a we and and sales I impact the putting to is often our And that And very have have also quickly public, this the to pieces our because than and of think that pointed structure would have we sales that on And work on channel first the do in duplicate that, good be not that the product sell, good at the spend, and technology all products capitalize are strategically others we try in

Okay. you this offs a and back mean a frame. the And bit time I off? about you talk exactly 'XX, in you acquisitions 'XX write write -- made did acquisitions of Which number the can 'XX

Actually, actually. not to the our market actually. reflected It's stock our tied price write acquisitions in value specific, off is

reason write all our because Because not at So million, is look $XX.X -- below actually. we stock had as we triggered. acquisition. our off business entire the our specific at goodwill, one one unit. entire is the this price book business That's that's value, of any It's single because

drop for business. we that's how this small, are And price So market we our is actually. reason the track

incentives. you to suites, could bonuses Is gross for you operating of to understand guys, to and Probably executive for some with elsewhere So years see, But this relates numbers? -- the it as somehow this you're make you need not piled not issues. quantitative seems -- certainly I the you have to your management Do I any there get numbers and for what's margin business to inventory appreciate while the easier fix changes specifically just be us. if for set you it could not good bar suite and don't for so get your revenues. your paid to in payments with non low was give now, having and stuck the up this proxies you quarterly able deal. been back but know really two, end over certain going because going it's that, good guys don't do more And Can and and tied bonuses? and not years, on? already you dealing not beat enough is income detail going on three to beat your any maybe while call and the And out missing I gills. in numbers, it's you just But the planning? you management products was maybe you quarterly you this something

will to We... address I try that.

one I thing. out can point

to like both of would hear your ideas. I

you Okay, Narsi. ahead, go

how we CDNA analysis. the paid. Let compensation they out at The looking is think compensation pay me and structure discussion one work are point committee's our manage you're and It I thing.

have goals based but the we mentioned, They have it. input, I arbiters. stretch set are you then final committee and are decide. We And the would've to measures up -- some they as likes compensation noticed that on

understands clearly We set So compensation But entire Yes, to understand be the being sand How bag, don't sure to paid. approach us that committee to do thing growth it's it's the our fun goals obligations we have thing paid bonuses. part we we actually. we make bonus. hit of just to not to the that can investors. don't not to deliver watch

times, by said are driven bonuses. quarterly goals many not immediate for have We we our

and to driven We the market out get we'll are of take to the to and long-term your is also we'll and challenges it. on and up. profits Compensation work products aware this inputs committee more get share yes the by get

really basically Narsi to I has just that. I every point about raised more And going think much raise. was add think I to I can't

over the to turn concludes Thank for like any you, Zee this I remarks. today's period. to closing Q&A call

next Thank your a for time. call. And wonderful conference forward Okay. the day. have you look And hope to you, we

thank you participation today's the gentleman, This your and program. for concludes in conference. Ladies

a Have wonderful disconnect. now day. may You