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ClearOne 2017-Q2

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on Unified Communications & Collaboration


ClearOne 2017-Q2

By: -
14 Aug 2017

The downdraft continues at ClearOne, although sunny skies are expected soon.   On August 9, the company reported total revenues for the quarter of $10.3M, down from 12.0M a year earlier.  Net income on a GAAP basis fell to a loss of $820K; on a non-GAAP basis, the reported net income was a loss of just $102K.  Revenues in APAC + Middle East (CLRO's regional definition) were flat while Americas were down by 17% and EMEA and Africa (no Middle East) were down by 15%.

Several factors contributed to the company's disappointing performance in Q2.  Management cited a lengthening sales cycle, and a difficult product transition.  Converge Pro 2 (CP2) is the company's next generation conferencing platform, and while sales grew at 34% sequentially, the transition is taking much longer than previous product ramps for a variety of factors, including the need to train AV consultants, integrators, and large end-customers on the ins and outs of CP2.  The company's P&L was also negatively hit by legal expenses as CLRO moves aggressively to defend its patents.

So, the larger question remains.  Is CLRO the canary in the coal mine, an early indicator of customers' CapEx conservatism and the industry's extended sales cycles, and/or a shift towards personal solutions rather than in-room installations.  Or is CLRO a singularity at this point in time, with a turnaround likely as the new CP2 product contributes more revenues and higher margins.  And is patent litigation another upside for the company's coffers?

Strangely enough, you can see that the company's video business was up 60%, but in the earnings call management revealed that growth in video lead to declining gross margins.  I quote, "The increase in share of video products in our revenue mix was also a factor impacting reduced growth profit margin."  I suspect that the company, which is a market leader in the audio arena, commands better margins in audio than it does in video. 

So much for the bad news.  Here's reason to look up.

  • The company's new platform, Converge Pro 2, is gaining traction.
  • The company was awarded a new patent in April on a system and method involving the combination of echo cancellation and beamforming microphone arrays.  Much of the earnings call related to legal expenses, so it appears that this patent is defendable and the company has initiated a strategy to "ensure their intellectual property is respected by the industry."  Licensing fees anyone?

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