Clearone Inc (CLRO) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Third Quarter 2014 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require operator assistance, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded.

I would now like to introduce your speaker for today's conference, Roger Pondel, Investor Relations of ClearOne. You may begin.

Thanks, Nicole. Welcome everyone and thank you for joining us today to discuss ClearOne's 2014 third quarter financial results.

On the call today Zee Hakimoglu, President and CEO, and Narsi Narayanan, Senior Vice President of Finance.

First, some housekeeping measures before we begin. Please be advised that this call is being broadcast live on the Internet at www.clearone.com. Playback will be available for at least three months and may be accessed on the Internet at ClearOne's website.

Before we begin, I would like also to make a cautionary statement and remind everyone that all of the information discussed on the call today is covered under the Safe Harbor provisions of the Litigation Reform Act. The Company's discussion today will include forward-looking information reflecting management's current forecast of certain aspects of the Company's future, and actual results could differ materially from those stated or implied.

And with that, it's my pleasure to turn the call over to Zee. Zee?

Thank you, Roger and good morning, everyone. Thanks for joining us today t discuss our third quarter 2014 results.

We're pleased to report record revenue for the third quarter of 2014 and our ninth consecutive quarter of year-over-year revenue growth. Revenue for the third quarter reached $15.7 million, representing an extraordinary 27% year-over-year growth.

While many in our industry continue to experience revenue decline or at best experienced flat revenue, ClearOne continues to show consistent and robust growth proving that our strategy for growth is working. It's important to note that this revenue growth has been achieved without sacrificing our high growth margin and profitability.

ClearOne's strongest ever lineup of audio and visual solutions have made this recording setting financial performance possible. Our VIEW Pro enterprise streaming system, which we started shipping last quarter exhibited positive momentum. VIEW Pro notched notable successes for shipment in Q2 including a murky project win in Japan.

Our Spontania cloud-based media collaboration service continues to also gain acceptance worldwide and especially in the North American market where it essentially had no market presence before being acquired by ClearOne.

Our growth profit margin also increased from 60% in the third quarter 2013 to 61% in the third quarter of 2014. This is also a significant improvement from a 57% growth margin in the second quarter of this year.

Operating expenses for the third quarter was $6.59 million when compared to $6.93 million in the second quarter. Non-GAAP operating income increased year-over-year by an astonishing 50%.

Increases in taxes due to changes in forecast of our profitability mix across different tax jurisdictions around the world impacted net income for the third quarter of 2014. This limited the year-over-year growth in non-GAAP net income to 6%.

Our recent acquisitions continue to contribute forward to our success evident from Sabine wireless microphone netting $1.3 million in revenue and Spontania cloud-based media collaboration service adding $301,000 in bookings and $180,000 in revenue.

During the third quarter, ClearOne achieved an important intellectual property milestone when the company filed its 100 patent application in August. The company's intellectual property portfolio comprises present and future patent protection in five strategic categories.

These include audio signal processing, video conferencing, multimedia network streaming, wireless and industrial design. These patents were filed with the United States Patent and Trademark Office as well as with international patent agencies in Europe and the Asia Pacific region.

To date, 61 of these patents have been granted with 39 more in process in these patent offices. The intellectual property developed in house and obtained through acquisitions over the past decade are strategically significant and will contribute to the future value of the company.

We are committed to investing in the growth of our patent portfolio to promote continuous research while protecting ClearOne's innovation. We have a strong reputation in the industry for incorporating the latest new technologies into our expanding product lines.

At the end of the third quarter, the company released five new models in digital wireless microphones for the European Union. These are expected to increase the footprint of our wireless microphones in Europe significantly.

These new series of digital wireless microphones from ClearOne has been redesigned with the unique message for data compression that reduces that occupied bandwidth by more than half from 500 kHz to 200 kHz per channel to comply with the European standards without compromising the quality and fidelity of the audio signal.

On the video front, during the quarter, ClearOne also struck two separate partnerships with service providers to incorporate Spontania media collaboration platform into their workflow application one deals with healthcare and the other with education.

The award winning Spontania video and web collaboration engine can be easily incorporated into third party workflow application. Industries such as healthcare, education, enterprise, finance, government and others can take advantage of Spontania by integrating voice, video and web collaboration into their new or existing workflow processes.

In today's collaboration environment, it's all about workflow integration and the need for the user to have all of their tools available within the environment that they are comfortable with whether it's a doctor consulting a patient, a lawyer speaking to a client, or a financial advisor working a trade within investor.

These connections are best accomplished within their familiar workflow application. ClearOne's cloud-based Spontania enabled businesses to easily, affordably and seamlessly add advanced media capability such as voice, video and web collaboration tool directly to their application offering greater value to their customers.

In July, ClearOne was named TMCnet - by TMCnet as a recipient of the as a recipient of the 2014 Communications Solutions Product of the Year Award for our revolutionary Beamforming Microphone Array. As one of TMC's most coveted award, the Communications Solutions Product of the Year Award honors exceptional products and services that facilitate voice, data, and video communications that were recently brought to market.

TMC, by the way, is the world's leading business to business and integrated marketing media company that serve niche markets within the communications and technology industries. For new investors who may not know ClearOne's Beamforming Microphone Array, it is the world's first professional-grade directional microphone array with the beamforming and adaptive steering technology and with ClearOne's next generation acoustic echo cancellation.

In the world of professional AV conferencing, our Beamforming Microphone Array with its associated mixers, single processors and echo cancelling function represents the newest and the most advanced technological innovation in audio processing and breaks new ground for enterprise conferencing, sound fidelity, clarity and intelligibility.

In September, ClearOne was also profiled in the prestigious CRN 2014 Network Connectivity Services Partner Program Guide for our ClearOne Partner Program. Each year, CRN highlights the industry leaders in the telecom, cloud, and connectivity industries.

It also recognizes industry leaders such as ClearOne ready, willing, and able to help channel partners understand and benefit from technology convergence. CRN is the top new source for value-added resellers and the IT channel.

With this wrap-up of our recent highlights, I'd like to turn the call over to Narsi for a detailed discussion of our third quarter 2014 financial performance. Following Narsi's discussion, we will take questions for the remainder of the available time. Narsi?

Thank you, Zee and good morning, everyone.

Before I begin, I would like to point out two things. First, I will be discussing certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to reported GAAP measures is included in the earnings release that went out this morning.

Now, turning to our financial results for the third quarter of 2014, please note the following comparisons refer to third quarter of 2014 versus the same quarter of 2013. Net revenue increased to $15.7 million, making this quarter the strongest ever third quarter in terms of revenue.

The revenue for third quarter increased by 27% compared to $12.4 million in 2013 third quarter. Gross profit was $9.6 million or 61% of revenue compared with $7.4 million or 60% of revenue.

Turning to operating expenses, since the marketing expense increased by 26% to $2.8 million from $2.2 million, the increase was mainly due to increased commissions to salesperson and independent reps. Sales marketing reduced by 6% when compared to second quarter of 2014.

Research and product development expense increased by about 29% to $2.3 million from $1.8 million in 2013. The increase was mainly due to increase in R&D project costs and increase in headcount due to acquisitions.

Non-GAAP G&A expense reduced by about 5% from $1.15 million in 2013 third quarter to $1.08 million in 2014 third quarter. Total non-GAAP operating expenses increased by 20% from $5.1 million in 2013 third quarter to $6.2 million in 2014 second quarter. However, total non-GAAP operating expenses for the third quarter reduced by 5% when compared to second quarter of 2014.

Non-GAAP operating income increased to $2.3 million from $2.3 million and astounding increase of 50%. Non-GAAP net income increased by 6% to $1.8 million or $0.19 per diluted share from $1.7 million or $0.18 per diluted share for the prior year period.

Net income for 2014 third quarter was negatively impacted by higher taxes. The higher taxes were due to the changes in forecast of our profitability mix occurs in difference tax jurisdictions around the world. Non-GAAP adjusted EBITDA increased tremendously by 44% from $2.6 million to $3.8 million.

Let me turn my attention to financial results for the nine months ended September 30, 2014. Please note the following comparisons refer to nine months ended September 2014 versus the nine months ended September 2013.

Net revenue increased to $42.6 million from $35.3 million, an increase of 20%. Gross profit was $25.4 million, or 60% of revenue compared with $21.3 million, or 60% of revenue.

Turning to operating expenses, sales and marketing expense increased by 30% to $8.5 million from $6.6 million. R&D expense increased by about 26% to $6.9 million from $5.5 million.

Non-GAAP G&A expense reduced by 5% from $3.8 million to $3.6 million. Total non-GAAP operating expenses increased by 20% from $15.8 million in 2013 to $18.9 million in 2014. Non-GAAP operating income increased $6.5 million from $5.5 million, an increase of 17%.

Non-GAAP net income was slightly higher at $4 million compared to $3 million in 2013. However, diluted non-GAAP net income per share remained at $0.41. Non-GAAP adjusted EBITDA increased by 17% from $6.2 million to $7.2 million.

Turning briefly to the balance sheet. Our balance sheet remains strong. At September 30, our cash and investment balance was $34.3 million, and we remain debt-free. The cash balance reduced from $42.7 million at the end of December 31, mainly due to cash payments for both acquisitions, Sabine and Spontania, happening in the first quarter of 2014.

I would now like to turn the call back to Zee. Thank you.

Thank you, Narsi.

Our performance results reaffirm our vision and disciple to create a cohesive strategy for growth, for profitability and for market relevance. The synergy generated from you're diverse and comprehensive portfolio of products and technologies have created a compelling ClearOne value proposition for our channel and our customers.

We are energized and strengthened by our consistent strong performance and we'll continue to sensibly execute on our vision for sustainable future growth.

Operator, I think we could go now to questions.

Thank you.

Ladies and gentlemen, if you have question at this time, please press star and then the one key on your touchtone telephone. If your question has been answered or if you wish to remove yourself from the queue, please press the pound key. One moment for out questions. Again, ladies and gentlemen, if you have question or comment at this time, please press star one.

Our first question or comments comes from the line of Kara Anderson of B. Riley & Company. Your line is now open.

Hi. Thanks for taking my question. I'm just wondering if you could break out how the professional, UC, and video segment stood in the quarter?

Okay. Pro made up 78% of the total income, total revenue, UC made up 15% and video made up 7%. And Pro revenue growth was at, let me see this, was at 37%, video grew at 43% and UC went down by 11%.

Great. Thank you.

Thank you. Our next question comes from Chip Saye of AWH Capital. Your line is now open.

Good morning Zee and Narsi. I have a question. I saw the growth in Sabine and Spontania. Can you speak to what would be responsible for the double digit growth outside of those two new product category?

Yes. I could speak to that. Those - we talked about a synergy and a total ClearOne value chain. When we sell microphones, that promotes more sales of our mixers and our other products. They work together, altogether at the enterprise or for the application.

So we're not just selling disparate pieces of products, they work together to promote each other and we get, as they say, the whole is greater than the sum of the parts and each complements each other and motivates our value-added resellers to sell complete solutions where they can get paid faster, make more money. It's really the business value proposition that helps to promote each of the product lines.

Okay. Thank you.

You may recall we came out with the Beamformer which now connects directly with our collaborate Room Pro media collaboration system. So, again, highly complementary solutions.

Okay. Thank you for that. I have a question as it relates to the video and Narsi just gave the number, the growth was 40 something percent, I think I heard him say. Is that because of the VIEW Pro streaming system shipping in the quarter?

It's a combination of our VIEW Pro and our collaborate Room Pro and Spontania. All three contribute.

Got that. Next question. Could you talk about your inventories? I thought that you had a good leverage revenues up at nice percentage in the inventories did not grow that much. Can you talk about your inventories?

I think as we have discussed before, we have acting inventories are within the range that we think is comfortable. We don't see any risk with our inventory and especially with Q4 coming which is going to be, we expect to be a big quarter. Our inventories are at the right level actually.

Got it. Okay. Narsi, while I got you here, can you talk about the tax rate? What kind of tax rate do you anticipate for Q4?

Our current -- the effective tax rate at 40%, it depends on many things and we - I don't have a big forecast but I don't expect it to change significantly in the coming quarter.

So you think it would be similar to this quarter or would it be the 40%?

Yes, the 40%. That's the year-to-date effective tax rate. That's the right number to go with, actually.

Okay. And this is back for Zee again or you too, Narsi. I had a question as it relates. I saw you bought back some stock in the quarter and you still have a pretty sizeable amount out there given the decline in the stock price in the last few months and your excellent performance, could you speak to stock buyback versus acquisitions. I know you were still probably looking for revenue enhancing in growth acquisitions but could you talk about how you view those to now?

I don't think there's necessarily a change. We have a stock buyback plan that we put in place and adhere to the plan and we're executing on the plan. That's number one.

On acquisitions, acquisitions still remain, you know, a very valuable part of our growth strategy. Both of those are in balance, you know, on one hand. We need to continue to look at growing the company in a meaningful way in the market and acquisitions are critical to that.

At the same time, we enjoy the benefit of having cash to use for stock buybacks. We try to balance it in a way so that we could ensure our future growth.

Okay. Well, thank you very much and excellent quarter.

Thank you, Chip.

Okay.

Thank you. (Operator Instructions)

Our next question come from [Michael Kae of Kae Associates]. Your line is now open.

Hi. Thank you very much, and congratulations on the fine quarter. I was just wondering as it relates to the previous question to an extent, not necessarily myself but there is some in the investment community who feel that, you know, money could better be used in other ways than buying back company stock that it kind of is like an artificial way of affecting price share and that will, you know, shows the lack of creativity so would you comment on that where is the sense that we could be other ways to use the cash available than buying back the company stock?

As we mentioned in prior calls, we really try to do a balance. You know, we try to spend on our own operationally expenses. We haven't gone overboard in sales and marketing, that's an area that is always right for more spending. I think we don't go overboard in buying our stock. We've had a few couple, I believe, we've had a couple tenders if I recall right in that, at least one.

And so, we try to balance it. Once we put a stock buyback in place, we like to exercise it but we want to do - whatever we do, we want to spend our money in terms of what will grow the company and bring the most stock - most value back to our shareholders.

We have a limited float and our limited float, you know, is always a challenge in terms of our buyback and, you know, we follow - we follow best practices on what we can or can't buy. I think it's an important component of our use of cash but it's - I can tell you this, if it was only a stock buyback, we could not keep up with the changes in the market. It's really a dynamic market. We're in a wonderful opportunity to capitalize on it. I don't know if you've seen some of our peers conference calls but we have a lot to say of our future and so our investments, you know, have to focus on our future.

Okay. Thank you. I'll buy that. Thank you very much. I appreciate your comment.

Thank you, Michael.

Thank you. Our next question comes from an Alan Mitrani of Sylvan Lake Asset Management. Your line is now open.

Hi. Close enough. Alan Mitrani. How are you? Thank you, guys.

Hi, Alan.

Hi, Alan.

Hi. Zee, can you talk about what you're seeing in the marketplace right now in terms of Europe? Have you see any slowdown there in terms of the weakness in the euro and because of the weakness in some of the economies that they're seeing? Just give us your take on that.

I think I'll defer that to Narsi who has some figures. But I would tend to say that there's definitely a weakness that is apparent in both EMEA and Asia. But you go right ahead, Narsi.

Actually, EMEA was kind of flat especially given our product portfolio that was a surprise to us. In fact, that also contributed to some of our tax issues. But EMEA, it came as a surprise to us especially considering how strong EMEA was in Q2. Q3 was flat, was a kind of a surprise. And we are keeping our fingers crossed for Q4 especially at EMEA.

APAC came in strong in Q2 but -- sorry, I meant Q3, actually, Q3. We are also getting reports from our field as to the challenges that they have for this quarter. We'll try our best but these are the things that we need to act in when we think about expectations for Q4, actually.

I think what we're doing in the interim, of course, is looking at other areas. We're focusing our attention to the Middle East which is a burgeoning economy, I will say, and something - something like what China was, I would say 15-20 years ago. So we're focusing our efforts there.

We opened a very small office in Dubai so that we could service that market. We're also trying to make a push into both Latin America and South America as well as Africa, those are markets. Certainly, they're not the size of the EMEA market but there's significant market that are right for future sales development and we're focusing our efforts in those markets to make up for whatever happens in Europe and APAC.

I should add that the third quarter for EMEA is usually a slower quarter because of the summer vacations and the holidays that the Europeans love to enjoy, and let's see, and it could be that it's the first quarter for APAC is often a bit slower because of all the holidays in Asia. They tend to be a bit seasonal but there is definitely a hint of some pullback.

Thank you. Narsi, can you remind us what percent of your sales are in EMEA for this last year and fiscal year '13 as well as maybe in this last quarter?

Okay. Give me a second. I'm looking.

Roughly. Okay. I'll ask another question while you can check that.

Okay. I can tell you, actually. In 2014, APAC was about 18%. EMEA was about 13%.

Okay.

This year, so far, APAC has been 18% and EMEA has been about 12%.

10%? Okay. So, EMEA --

12%.

12%.

No, he said 12%, 1-2%.

Twelve. Okay. Thank you. I appreciate. Got it. So it's becoming a diminishing forecast. It's not a -- Okay.

Zee, can you talk about -- we talk about this all the time but I do think your balance sheet has gotten better. I think you're becoming opportunistic with buyback. But, again, I have to echo the issues that I think you guys could be doing more as it relates to returning capital shareholders.

Can you talk about the possibility of some sort of special dividend given that you are still pretty over capitalized with 40% of your entire market cap in cash and generating cash?

As we already said, we have not ruled out any of those things, but at the same time, we are still looking at the future, especially with the -- those big [wall hang] of interest rate cuts, interest rate hikes, actually, I meant interest rate hikes and the China's close down and everything. We wanted to make sure that we are not giving up cash in volatile time, actually. I think that's important.

And we also have not ruled out other possible things like Zee already discussed about buyback, things like that. I think none of those things are ruled out but we have not made up our mind, actually. At least management might have feel we have not made up our mind to do one thing or the other.

Okay. I just -- and also, is there a reason why -- I realized the history, but is there a reason why now given that almost all the litigation is done and you're now a reporting company and things are back on track where your annual meeting has to be held at the end of the year given that your calendar year is December. It just seems like bad governance now for shareholders to wait that long to have to deal with this.

The timing issue, we had June to - we tied one year to push things up and it is also the amount of the effort we have to put in from the management side to get enough orders to show to get the core of other things. We have a lot of things on our plate and doing this around the same time as immediately after reporting our 10-K puts a lot of pressure.

But it's -- and we were also busy on acquisitions the last couple of years that acquisitions came right around the time we are reporting our 10-K and it was putting enormous pressure. Yes. But it's -- unless to move the annual meetings up, not immediately to the usual, the April-May timeframe, at least by two or three months --

Incrementally.

Incrementally and then be aligned with, like, everybody else, actually. We don't have any special motive to keep it at the end of the year. It was simply because that's how we use to have it and our internal calendar about how we distribute our workload and everything centered around different events and this seems to happen at the end of the year, actually.

It's a - we have it on our calendar - it has some [you see a little] filing issues, we have to do 8-K to let the shareholders know that it has to move up to a different date other than the usual date. We are looking to it maybe next annual meeting, we'll move it up by a few months and then in the next of years, it will be like anybody else, actually. But I don't think you're --

I would appreciate that. I think that would be - I think your shareholders would appreciate it too.

Yes. You're correct on that and it's definitely being the subject of discussion and it's in our interest to move it up as quickly as we can.

Also, Zee, maybe again, I'm going to come back to this because now that you guys have good financial footing, we've dealt with the legacy issues, you're buying in stock, you made acquisitions which seem to be contributing, I want to understand as a shareholder, we still have seen the stock basically be flat for a long time and it seems to us to be undervalued and I'm sure to you as well.

And yet, I want to understand you have to maybe give us a better pathway in the next couple of years, next few quarters where you think this revenue growth can go and what kind of, you know, sustainable revenue growth you can have with the mix that you have currently. Because if it's continually buying companies at three times revenues in order to trade in your company at $0.90 on a trading dollar, we're going to lose our shirts overtime.

So the real issue is how do you get your valuation up to where you think is appropriate or find a way to let someone else do it overtime because you can't keep buying companies of three times revenues and not have it being reflected in the stock price over a period of time. And I've been a shareholder for years and I've watched you guys and I like what you're doing but I'm frustrated that it just doesn't translate into the stock. And I'm not talking over five and six years when you had issues with the accounting, I'm talking just over the last few years where you've cleaned up a lot of this and it's gotten back to a growth track.

Well, to be perfectly clear, we bought technology. We haven't bought operating company. We buy critical technologies that are critical to our growth and each one has taken considerable time, although it had a fabulous core, to integrate into our products.

And there's no shortcut. There's no silver bullet to get there faster, easier or cheaper. It's just the reality that we live in.

We've been fortunate to make the right choices that are absolutely critical to our growth. If you were to deduct a way, all our new products and our technologies and our acquisitions, it's not a matter of simple subtraction. We would be not relevant to the market, period.

We have to appreciate the synergy. There are many companies. We could look at -- I don't want to name names today, there's no point in it -- but if you look at any relevant technology company that's in market or in adjacent market, none are overnight shining stars. It just doesn't happen. We a small high tech company. I think we're showing phenomenal growth.

If we have had an issue, it has been some legacy which as you has pointed out rightly, is past, thankfully to a lot of hard work of the team. And number two is that market, we're not a - it's not like a lottery. We're restricted with still a bit of a hindrance which is minimal float, small number of stocks.

On one hand, you know, investment bankers and market analysts are interested in companies with a big large float and easier trades to get in and to get out of. We still have some of these issues that what we hope is to our inherent growth, we will get out of that. Okay? It's just the way it is.

If looking at the assets of our company. We are certainly not diminishing in our assets. We're here, in fact, I read an interesting article in the "Financial Times" called short-termism and I'm not implying that your wish is for short-term success but our jobs as management, we are committed to long-term growth as opposed to favoring short-term profit. And I think we've done a pretty good job of getting there.

Our core technology purchases even though we buy companies, we're buying technology so that we can enjoy the growth that we're seeing and again it was still primarily Pro. So I'm optimistic, I appreciate your patience.

I think the value of the company yet is not still there in terms of the stock price but we're working very hard to get it there and we're committed to enjoy it a higher valuation just as you would.

So again just to understand that, I appreciate your insight, I said if that's the case, can you give some sort of roadmap so that we can focus on the long term in terms of what you think is sustainable revenue growth, where you see this business in two to five years potentially.

Just share with us the vision because maybe even the asset value, what do you think, you know, the company if it's trading at nine or five times this year's EBITDA, you know, and if tomorrow you turn around and sold it, would someone buy it for 10 times EBITDA.

You have to share with the shareholders in my opinion, if we're going to take this at least where our roadmap could be so that we know where, you know, how to measure you over time.

Hi, Alan, this is -- let me go first. This may defer from my perspective around where we will see the value and where we are headed but with slight difference as we both share some of the inherently. I think the wireless microphone business that we recently acquired has very high probability of contributing to big revenue reducer in the near future. I think I'm going by the probability and the mix with the growth.

The next one, I think, is going to be our streaming products. I think these are to be sure but less that probability than wireless mike because it needs more education from the buyers to get into it.

Okay. Long-term projects --

When do the streaming products come out?

These two will be big revenue generators. We are not talking about $5 million or $10 million over a year from where we are actually. Actually, these are tens of millions of dollars which would put us on a track to double our revenue very quickly actually.

Third component, of course, is our video conferencing. Why putting it with a constant thought? Because it's a very competitive space. We think we have all the technology that required to compete there but it's a lot of hardwork. We are not going to discount our own chances but it's a hard space that's why I am putting it into the third spot.

All three have enormous potential and don't -- the actual launch -- yes, I'll let Zee talk about that actually.

We recently launched and we will be shipping at the end of November is our plan a very, very important product that generated out of our current Pro product line. It's called the CONVERGE Matrix.

It is a sound distribution system. The sound distribution market according to Frost & Sullivan is probably 15 to 20 times the size of the conferencing market where we enjoy our greatest revenue.

It emanates - the product emanates from our CONVERGE Pro. It's an extremely important product. It's an extremely larger market. It's an extremely complimentary market and we couldn't have done it without our CONVERGE Pro in the first place.

So we have many big ticket items that on their own are going to be, as Narsi pointed out, significant revenue generators which gladly worked or adapted to our existing channel and that's the key. We are not building new businesses but these are projects that are not like the chat phones or the max phones.

These are projects where consultants kick the tires, inspect the part, install it, et cetera. They are systems. We are essentially going into the systems business which is the most -- the business that I came from quite frankly which is a lucrative, high-kicking, high revenue valuable market that not everyone can accomplish.

Again, looking at our peers and where they need to do, we enter the video conferencing market with a solution that's unlike anything in the market today and we think that we'll have significant contribution. But since our acquisitions have taken place over the years, those need to get right but they're significant.

Our team is enthusiastic and partners can -- we just had an EMEA partner conference in Europe last week, two weeks ago and I came back and our partners say the same thing. ClearOne is not the company that's used to be.

And great companies do take time I'm afraid. It takes longer than we all want. I would love to as much as anyone else see the stock price show value. But with consistent growth and profitability, I think we're going to see it sooner than we have in the past.

Okay. Thank you. I appreciate that.

By the way, so this CONVERGE Matrix, I was just looking at it, you're saying it's basically a longer lead time product but higher ASPs. When do you start--?

No. No. It's not necessarily higher ASPs. It's bigger projects. These go into stadium, very large hotels, large venues where you're distributing sounds for every - say, for every 10 conference rooms it's probably more than that. I'm just talking about conference rooms.

One may need echo cancellation, the other nine just needs sound distribution. So the ASPs are about the same, you know, on a channel basis but the --

But if you take one project that are huge projects.

That's huge project.

Streaming rather than--

When do you think you'll have your first sale in this business?

Pardon?

When do you think you could make your first sale in this product?

Well, we -- I think that we're going to start making sales at the end of the year on our demo unit.

And then I think in Q1, we will --

Yes. In Q1, we will start seeing revenue just like on the StreamNet. We have some large projects designed by consultant on our streaming project but they're going to deploy it, you know, they inspect it.

Typically in my experience with ClearOne, I have seen it takes three quarters for us to see noticeable revenue increase. I have seen this happened when we introduced Interact. I have seen this happened with our ceiling mikes, Beamformer mikes.

It is typical with the real Pro in the business world and if we go by the same logic, you would see feasible revenue contributions from this project in 2015 Q3 actually.

Okay. Thank you very much.

Thank you, Al.

Thank you.

Again, ladies and gentlemen, if you have question or comment at this time, please press star and then one on your touchtone telephone. I'm showing no further questions at this time.

Okay. We appreciate your continued interest in ClearOne and if you have any further questions, please contact us at ClearOne investor relations. Thank you. We thank you for your attention.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.