Clearone Inc (CLRO) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the ClearOne first quarter 2015 earnings results conference call. This call is being recorded.

At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Roger Pondel of the investor relations firm PondelWilkinson.

Mr. Pondel, please go ahead.

Thanks, Nicole. Welcome, everyone, and thank you for joining us today to discuss ClearOne's 2015 first quarter financial results. On the call today are 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 conference call is being broadcast live on the Internet at www.clearone.com. Playback of the call will be available for at least three months and may be accessed on the Internet at ClearOne's Web site.

I would like to make the 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, I will turn the call over to Zee. Zee?

Thank you, Roger. And good morning, everyone. Thanks for joining us today for our first quarter 2015 results.

We are pleased to report the highest first quarter revenue in ClearOne's history. This is our 11th consecutive quarter of year-over-year revenue growth. This performance follows our record of five consecutive years of top line and bottom line growth. ClearOne's impressive track record for revenue growth is also accompanied by extraordinary profit growth. Our non-GAAP diluted EPS doubled when compared to a year ago Q1. Net revenue for the first quarter reached $13.6 million, representing 7% year-over-year growth.

Our solid first quarter financial performance was fueled by increased demand across all regions, North America, Europe, Asia Pacific Middle East. More specifically, we saw continued strong sales from our innovative microphones as well as our network video streaming and media collaboration solutions. Our gross profit margin increased from 61% in the first quarter of 2014 to 62%. We expect this growth margin level to continue in the near future.

Non-GAAP operating expenses for the first quarter was $5.9 million, reduced nicely from $6.3 million last year. Importantly, we noted in our last earnings call in March that our operating expenses have reached a level where expenses can support additional revenue with minimal increases in spending. We predicted that this would mean increased profitability in the future, as our revenue grows. You can see this in our results today.

Non-GAAP operating income for the first quarter increased year-over-year by 83%. Non-GAAP net income and diluted EPS grew by an extraordinary 101% and 100%, respectively, year-over-year. While the growth achieved in the first quarter was a great start to the year, we are even more excited about our immediate future.

Our unique product offerings, combined with our forward-looking product and sales strategy will significantly disrupt current business models backed by obsolete technology and outdated solutions. In addition, we continue to make great strides in our drive to standardize ClearOne's product amongst the Fortune 500 and other blue chip companies.

Recent successes include the adoption of our innovative solutions by the largest electronics company in the world, by the largest online social networking company and by the fastest growing automobile company in the world.

On the sales channel front, we recently entered into a new relationship with a strategic reseller in China. This new important partnership provides us a perfect balance between the reseller's extensive technical and integration expertise and ClearOne's groundbreaking audio, video and media collaboration solutions. This new strategic relationship enables both companies to introduce compelling offerings in this vast market. Our new reseller's comprehensive reach into China's government and private sectors will considerably grow ClearOne's market share in Asia and ultimately open new pipelines for ClearOne products.

At the end of January ClearOne introduced a new version of its digital wireless microphone product, now with support for Dante Technology. Dante, for those who do not know, is the professional AV industry's fastest growing media networking solution for digital audio networking. The new ClearOne microphone, coupled with the Dante media interface, is the most economical and versatile, easy to install, easy to use and easy to scale wireless system in the market today.

This newly released microphone system complements other professional audio products from ClearOne. It uses RF digital technology and highly secure encryption for privacy and security.

Very importantly, the ClearOne Dante wireless microphone interoperates with any other Dante device from any other supplier in the market, including ClearOne's own new lineup of Dante products, such as the new converge matrix audio distribution system and our own CONNECTDante bridge for our legacy audio products converge.

Also during the quarter, we announced our new value-priced VIEWPro video streaming decoder. The decoder is a software-based end point that enables high quality, low latency media streaming over existing IP networks.

This cost-efficient network ClearOne device, compared to our higher end device, is the ideal solution for less demanding deployments. such as digital signage applications for airports and transportation hubs, hotels, casinos and shopping malls.

This new value-priced addition to ClearOne's pro video streaming lineup incorporates many of the features of the higher end video streaming decoder, including 1080p60, H264 high definition HDMI video and audio, and 444 true color output, the platinum standard for color.

Complementing the new value-priced video decoder, we added to it the virtual matrix software platform, which gives users a simple view of the entire network media system on a single screen. It perfectly aligns with today's hot market trends where users can control the system from any device, including PCs, laptops and hand-held devices, using Android, IOS and Windows.

With the addition of this economical video decoder during Q1, ClearOne continues to be truly differentiated in the pro market by offering complete AV streaming and distribution systems that can scale to fulfill projects of any size and any complexity, from light commercial to the very largest environment.

With this wrap-up of our recent highlights, I'd like to turn the call over to Narsi for a detailed discussion of our first quarter 2015 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 first quarter of 2015, please note the following comparisons refer to the first quarter of 2015 versus the same quarter of 2014. Net revenue increased to $13.6 million, making this quarter the strongest ever first quarter in terms of revenue. The revenue for first quarter increased by 7% compared to $12.7 million in 2014 first quarter.

Gross profit was $8.5 million, or 62% of revenue, compared with $7.7 million, or 61% of revenue. Gross profit increased by 10%. Turning to operating expenses, sales and marketing expense decreased by 4% to $2.6 million, from $2.7 million. The decrease was mainly due to decreased commissions to sales people. R&D expense decreased by 13% to $1.9 million, from $2.2 million, primarily due to a reduction in project-related expenses.

Non-GAAP G&A expense increased slightly, from $1.4 million to $1.5 million, primarily due to increased amortization expenses and accounting fees. Total non-GAAP operating expenses decreased by 6%, from $6.3 million in 2014 first quarter to $5.9 million in 2015 first quarter. Non-GAAP operating income increased to $2.5 million, from $1.4 million, an impressive increase of 83%. Non-GAAP net income increased by 101% to $1.7 million, or $0.18 per diluted share, from $800,000, or $0.09 cents per diluted share, for the prior year period. Non-GAAP adjusted EBITDA increased similarly by 76% from $1.6 million to $2.8 million.

Let's turn our attention to balance sheets. Our balance sheet continues to remain strong. At March 31, our cash and investment balance was $36.3 million, up by $2.7 million from $33.6 million at the end of 2014.

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

Thank you, Narsi. ClearOne is on a transformational journey. Across our business, our talented team of employees, management and partners are motivated to focus on the future, while executing every day to bring economic value to the company and its shareholders, while meeting the needs of the industry as it evolves.

I can say we have promising days ahead. Thank you. Operator?

(Operator Instructions).

Our first question comes from Ian Corydon of B. Riley & Company. Your line is now open.

Hi, this is [Cara] in for Ian. Just wondering if you could give us the year-over-year growth in percentage contribution to revenue for the -- each of the segments PRO, UC, and video?

Okay, first let me clarify. They are not segments. We are just giving you information every quarter for industry benefit. They are not for FCC purposes or for any reporting purposes. They are not segments. Just a legal clarification.

Let me go by the product group. Pro increased by 10.4 percent. Pro obviously includes our microphones. UC reduced by 22%. Video as a group which includes our Spontania COLLABORATE, MagicBox, and streaming, that actually goes by VIEWPo brand, all of them together grew by 104%.

If you want by region, I can give you the region breakout?

Sure. That would be great, actually, too.

Americas went up by 7%. APAC went up by 7%. And EMEA went up by 10% actually.

Great. Thank you.

And again, ladies and gentlemen, if you have a question at this time, please press star and then the one key on your touchtone telephone.

Our next question comes from the line of Dennis Van Zelfden of Brazos Research. Your line is now open.

Hello, Zee and Narsi.

Good morning.

Zee, you recently said in your comments that you made, sales to the largest electronics firm, the largest social networking, and the largest -- and the fastest growing auto company. Is the implication of these sales a validation of your products? Or does it imply more sales to these organizations to come?

Well, I think it's both. First of all, we -- we have been servicing our blue-chip companies, but we're always delighted when new ones come to us as they enter the Fortune 500 and come to ClearOne for their very innovative solutions.

I can say that the best demands the best. And that certainly the Fortune 500 are among the best. And many of our Fortune 500 adoptees are certainly new entities, you know, that either have been to the Fortune 500 or are entering the Fortune 500. And they select the best. And so, when they standardize on many of our new innovative solutions, we can be sure that as they grow, they will grow with ClearOne.

Okay. And with respect to the re-seller in China, just a little history. Did you previously have someone there, a re-seller there? Is this a new one? Can you also kind of put into context how large they are? Just things like that to give us an idea.

Okay, Dennis. Of course, we're always in the business of expanding and deepening our channel relationships. As you know, ClearOne is dependent on its channel sales since we don't sell directly to end-users.

So we -- we do have partners in AsiaPac. We have partners in China, but we fortify our partners. And I would say that this is a very strategic partner for us as I described on my call, and we of course have other partners in China. But each one tends to specialize or cover a certain segment or market.

So, we find that by adding this -- this new partner in China, it perfectly complements what we have going there today, which has been quite successful and we anticipate will be even more successful going forward.

All right. Thank you very much. Good luck on that.

Thank you, Dennis.

Thank you. (Operator Instructions).

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

Hi. It's Austin Hopper. Congrats and thanks for taking the questions. Could you just maybe elaborate more on the Dante opportunity you mentioned and kind of the significance of that? And how you're kind of pursuing the wireless mike opportunity and what the actual market opportunity is?

Okay. Thank you. Good hearing from you, Chip.

The Dante is really a newly emerging interface and protocol that runs over Internet protocol, which happens to be adopted -- has been adopted by the professional AV market for interconnecting audio devices. And it is extremely quickly getting adopted; quickly the standard, especially in North America, moving also over to Europe and the rest of the world.

And it provides a means to extend the reach of audio over existing I.P. networks without the need to install different cabling, which is very critical for the industry in terms of initial investment, maintenance, monitoring and control and other things. So it is very fundamental.

ClearOne made a bet some years ago. We had a choice between a couple of different protocols, which I will not bore you with now, but we made a bet that Dante would be the winner. And we were right. We did the development, did what we needed to do. It was an extensive development. And we did come out with a suite of products that are Dante-enabled, which is very, very important today.

We did it with our matrix new distribution switch. We did it with our Dante wireless mikes, and we did it with our legacy products, which were not originally Dante, but are now upgraded for Dante.

Okay, great. Thank you. It sounds like your video -- Narsi was talking about revenues on the video side, and up nicely in the quarter. Can you just give us more color on Spontania and some of the drivers of that?

Well, I mean, from a market perspective, it is pretty much established that -- that users of video are going to go from centralized, high-cost, expensive video conferencing systems, that many legacy players have been successful with over the past years, to distributed audio conferencing, low-cost end-points in cloud services.

We are the only company in the world today that offers both low-cost media collaboration appliances and cloud-based services. Spontania is the cloud-based services part of our portfolio and it was part of our acquisition that we recently purchased that we are still capitalizing on, and we're seeing nice adoption, you know, across the world. It was originally focused in Europe. And it is that part of what we think is distributed media processing that is going to displace high-end, centralized video conferencing systems.

We don't even call it video conferencing. We were the first in the market to talk about media collaboration. Today, others are following our lead. Media collaboration means you don't have just video conferencing, but you have data sharing, white-boarding, streaming, recording, annotation, et cetera. Video conferencing is but a small part of the Spontania solution.

Great. Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I'd like to hand the call back over to Zee for any closing remarks.

Well, we appreciate your continued interest this morning and for joining us today for our quarterly and full-year update. If there's any further questions, please contact ClearOne investor relations. That concludes our call for today, and we wish you a good day.

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