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ClearOne Reports 2012 Second Quarter Financial Results

August 13, 2012

SALT LAKE CITY, Aug. 13, 2012 /PRNewswire/ — ClearOne (NASDAQ: CLRO) today reported its financial results for the three and six months ended June 30, 2012.

For the 2012 second quarter, revenue was $11.7 million compared with $11.9 million for the second quarter of 2011. Gross profit was $7.1 million, or 61% of revenue, compared with $7.2 million, or 60% of revenue, for the second quarter of 2011. Operating expenses increased to $6.0 million from $5.3 million in the prior year second quarter. Operating income declined to $1.1 million from $1.9 million for the second quarter of last year. Net income declined to $575,000, or $0.06 per diluted share, from $1.3 million, or $0.14 per diluted share, for the 2011 second quarter. Non-GAAP net income decreased to $905,000, or $0.10 per diluted share, from $1.7 million, or $0.18 per diluted share, for the second quarter of 2011. Non-GAAP Adjusted EBITDA decreased to $1.9 million, or $0.20 per diluted share, from $2.6 million, or $0.27 per diluted share, for the second quarter of 2011.

For the first half of 2012, revenue was $21.8 million compared with $22.6 million for the same period in 2011. Gross profit was $13.2 million, or 61% of revenue, compared with $13.5 million, or 60% of revenue, for the first half of 2011. Operating expenses, excluding litigation proceeds, increased to $11.6 million from $10.4 million in the first six months of the prior year. Operating income declined to $1.8 million from $3.1 million for the same period in the previous year. Net income declined to $1.0 million, or $0.11 per diluted share, from $2.1 million, or $0.23 per diluted share, for the 2011 first half. Non-GAAP net income decreased to $1.5 million, or $0.17 per diluted share, from $2.8 million, or $0.30 per diluted share, for the first half of 2011. Non-GAAP Adjusted EBITDA decreased to $3.1 million, or $0.33 per diluted share, from $4.5 million, or $0.48 per diluted share, for the first half of 2011.

The reconciliation between GAAP and Non-GAAP measures is available in the tables attached to this release. The results for the first six months of 2012 include the operations of VCON, a video conferencing solutions company acquired in February 2012.

At June 30, 2012, the Company had cash and cash equivalents of $10.4 million, and no debt after paying for the acquisition of VCON.

“Our financial performance for the 2012 second quarter met our expectations but did not match last year’s record-setting results, due to overall softness in all the markets in which we operate,” said Zee Hakimoglu, President, Chief Executive Officer and Chairman of ClearOne. “We continue to build and align our sales channel and internal sales organization for the new video solutions we are bringing to the market. The new products from our acquisition of VCON are in production and will be shipping under the ClearOne brand at the end of this month. The introduction of these new software-based video conferencing products complements our industry-leading enterprise audio, expands our total available market and we believe will make immediate contributions to ClearOne’s top-line.”

Recent Highlights:

  • At InfoComm, ClearOne demonstrated COLLABORATE(TM), software-based video conferencing solutions for desktop, room, infrastructure and management to provide future-proof solutions for video and audio conferencing and collaboration.
  • ClearOne introduced at InfoComm CONNECT(TM) AVB and CONNECT(TM) CobraNet(TM), its first network audio bridges to provide a modular approach for networked audio using ClearOne’s flagship audio products.
  • The company also unveiled at the tradeshow the Beamforming Microphone Array, the Pro Audio industry’s first professional-grade microphone array with patent-pending audio beamforming with adaptive steering and next generation AEC technology.
  • Also, Frost & Sullivan, recognized ClearOne with the 2012 Global Tabletop Audio Conferencing Endpoints Product Line Strategy Award. The award recognizes ClearOne’s breadth of product line for emerging UC and VoIP trends for enterprise and SMBs. The Product Line Strategy Award criteria measured ClearOne’s tabletop solutions against the competition in several categories, including breadth of product line, size of addressable customer base, impact on market share and breadth of applications and markets served. When compared to competitive solutions, the Frost & Sullivan analysis gave top ratings to ClearOne in every category, including a perfect score for breadth of applications and markets served.

Non-GAAP Financial Measures
ClearOne provides non-GAAP financial information in the form of Non-GAAP net income, EBITDA, Adjusted EBITDA and corresponding earnings per share to investors to supplement GAAP financial information. ClearOne believes that excluding certain items from GAAP results allows ClearOne’s management to better understand ClearOne’s consolidated financial performance from period to period as management does not believe that the excluded items are reflective of underlying operating performance. Non-GAAP net income, EBITDA, Adjusted EBITDA and corresponding earnings per share excludes certain costs and expenses, the details of which are provided in the tables below containing the reconciliation between GAAP and Non-GAAP financial measures. The exclusion of these items in the non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent, or unusual. ClearOne believes non-GAAP financial measures will provide investors with useful information to help them evaluate ClearOne’s operating results and projections. This non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating income, net income 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 net income to GAAP net income is included with this news release.

About ClearOne
ClearOne is a global company that designs, develops and sells conferencing, collaboration, streaming and digital signage solutions for audio, video and data multimedia communication. The performance and simplicity of its advanced comprehensive solutions enhance the quality of life. ClearOne products are designed for business and residential use, offering unprecedented levels of functionality, reliability and scalability. More information about the Company can be found at www.clearone.com.

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, including any statements of the plans and objectives of management for future operations, 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.

Contact:
Brent Johnson
Investor Relations
801-303-3577
brent.johnson@clearone.com

http://www.b2i.us/irpass.asp?BzID=509&to=ea&s=0

                                                  CLEARONE COMMUNICATIONS, INC.
                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                             (Dollars in thousands, except par value)

                                                           As of                            As of
                                                       June 30, 2012                  December 31, 2011
                                                         Unaudited                         Audited
                                                         ---------                         -------
                          ASSETS
    Current assets:
    Cash and cash equivalents                                              $10,418                      $16,683
    Receivables, net of allowance for
     doubtful accounts of $61 and $149,
     respectively                                                            7,409                        8,457
    Inventories                                                             15,064                       12,565
    Deferred income taxes                                                    3,025                        2,987
    Prepaid expenses and other assets                                        1,501                          740
                                                                             -----                          ---
    Total current assets                                                    37,417                       41,432

    Long-term inventories, net                                               2,064                        1,905
    Property and equipment, net                                              2,135                        2,338
    Intangibles, net                                                         5,858                        2,690
    Goodwill                                                                 1,939                        1,153
    Other assets                                                                64                           41
    Total assets                                                           $49,477                      $49,559
                                                                           =======                      =======

               LIABILITIES AND SHAREHOLDERS'
                           EQUITY
    Current liabilities:
    Accounts payable                                                        $1,285                       $2,814
    Accrued liabilities                                                      2,648                        2,534
    Deferred product revenue                                                 3,451                        3,404
                                                                             -----                        -----
    Total current liabilities                                                7,384                        8,752

    Deferred income taxes                                                      128                          101
    Deferred rent                                                              487                          494
    Other long-term liabilities                                                686                          548
    Total liabilities                                                        8,685                        9,895
                                                                             -----                        -----

    Shareholders' equity:
    Common stock, par value $0.001,
     50,000,000 shares authorized,
     9,125,774 and 9,098,152 shares
     issued and outstanding,
     respectively                                                                9                            9
    Additional paid-in capital                                              40,265                       40,073
    Treasury stock at cost -22,814
     shares as of June 30, 2012                                                (92)                           -
    Retained earnings (accumulated
     deficit)                                                                  610                         (418)
    Total shareholders' equity                                              40,792                       39,664
                                                                            ------                       ------
    Total liabilities and shareholders'
     equity                                                                $49,477                      $49,559
                                                                           =======                      =======
                                                                     CLEARONE COMMUNICATIONS, INC.
                                                       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                             (Dollars in thousands, except per share value)

                       Three months ended June 30,                                         Six Months ended June 30,
                       ---------------------------                                         -------------------------
                                                  2012                               2011                                 2012       2011
                                                  ----                               ----                                 ----       ----
    Revenue                                    $11,655                            $11,890                              $21,809    $22,591
    Cost of goods sold                           4,562                              4,734                                8,608      9,133
    Gross profit                                 7,093                              7,156                               13,201     13,458
                                                 -----                              -----                               ------     ------

    Operating
     expenses:
    Sales and
     marketing                                   2,254                              2,106                                4,388      4,089
    Research and
     product
     development                                 2,029                              1,816                                4,037      3,453
    General and
     administrative                              1,686                              1,361                                3,191      2,833
    Proceeds from
     litigation                                      -                                  -                                 (250)         -
    Total operating
     expenses                                    5,969                              5,283                               11,366     10,375
                                                 -----                              -----                               ------     ------

    Operating income                             1,124                              1,873                                1,835      3,083
    Other income
     (expense), net                                 (5)                                 7                                   11         18
                                                   ---                                ---                                  ---        ---

    Income before
     income taxes                                1,119                              1,880                                1,846      3,101
    Provision for
     income taxes                                  544                                559                                  818        968
    Net income                                    $575                             $1,321                               $1,028     $2,133
                                                  ====                             ======                               ======     ======

    Basic earnings per
     common share                                $0.06                              $0.15                                $0.11      $0.24
    Diluted earnings
     per common share                            $0.06                              $0.14                                $0.11      $0.23

    Basic weighted
     average shares
     outstanding                             9,107,420                          8,992,500                            9,102,786  8,962,171
    Diluted weighted
     average shares
     outstanding                             9,226,426                          9,433,650                            9,224,727  9,279,800
                                                                                                               CLEARONE COMMUNICATIONS, INC.
                                                                                                       RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                                                                                                      (Dollars in thousands, except per share value)

                                                                        Three Months ended June 30, 2012                                            Three Months ended June 30, 2011
                                                                        --------------------------------                                            --------------------------------
                                                                                      GAAP                             Adjustments                         Non-GAAP                  GAAP           Adjustments         Non-GAAP
                                                                                      ----                             -----------                         --------                  ----           -----------         --------
    Revenue                                                                                      $11,655                            $        -                        $11,655               $11,890             $    -             $11,890
    Cost of goods sold                                                                             4,562                                     -                          4,562                 4,734                  -               4,734
    Gross profit                                                                                   7,093                                     -                          7,093                 7,156                  -               7,156
                                                                                                   -----                                   ---                          -----                 -----                ---               -----

    Operating expenses:
    Sales and marketing                                                                            2,254                                   (17)                         2,237                 2,106                 (6)              2,100
    Research and product development                                                               2,029                                   (10)                         2,019                 1,816                 (4)              1,812
    General and administrative                                                                     1,686                                  (534)                         1,152                 1,361               (479)                882
    Proceeds from litigation                                                                           -                                     -                              -                     -                  -                   -
    Total operating expenses                                                                       5,969                                  (561)                         5,408                 5,283               (489)              4,794
                                                                                                   -----                                  ----                          -----                 -----               ----               -----

    Operating income                                                                               1,124                                   561                          1,685                 1,873                489               2,362
    Other income, net                                                                                 (5)                                    -                             (5)                    7                  -                   7
                                                                                                     ---                                   ---                            ---                   ---                ---                 ---

    Income before income taxes                                                                     1,119                                   561                          1,680                 1,880                489               2,369
    Provision for income taxes                                                                       544                                   231                            775                   559                142                 701
                                                                                                     ---                                   ---                            ---                   ---                ---                 ---
    Net income                                                                                      $575                                  $330                           $905                $1,321               $347              $1,668
                                                                                                    ====                                  ====                           ====                ======               ====              ======

    Basic earnings per common share                                                                $0.06                                                                $0.10                 $0.15                                  $0.19
    Diluted earnings per common share                                                              $0.06                                                                $0.10                 $0.14                                  $0.18

    Basic weighted average shares outstanding                                                  9,107,420                                                            9,107,420             8,992,500                              8,992,500
    Diluted weighted average shares outstanding                                                9,226,426                                                            9,226,426             9,433,650                              9,433,650

    The adjustments consist of the following:
    -----------------------------------------
    Share-based compensation                                                                                                               $60                                                                     $44
    Amortization of purchased intangibles                                                                                                  224                                                                      87
    Legal expenses for litigation relating to indemnification of former
    officers, intellectual property claims and our claim for damages                                                                       237                                                                     358
    Acquisition related expenses                                                                                                            40                                                                       -
                                                                                                                                           ---                                                                     ---
                                                                                                                                           561                                                                     489
    Provision for income taxes affected by the above adjustments                                                                           231                                                                     142
    Total adjustments                                                                                                                     $330                                                                    $347
                                                                                                                                          ====                                                                    ====
                                                                                                           CLEARONE COMMUNICATIONS, INC.
                                                                                                   RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                                                                                                  (Dollars in thousands, except per share value)

                                                                        Six Months ended June 30, 2012                                           Six Months ended June 30, 2011
                                                                        ------------------------------                                           ------------------------------
                                                                                     GAAP                            Adjustments                       Non-GAAP                 GAAP           Adjustments         Non-GAAP
                                                                                     ----                            -----------                       --------                 ----           -----------         --------
    Revenue                                                                                    $21,809                         $           -                      $21,809              $22,591             $    -             $22,591
    Cost of goods sold                                                                           8,608                                    (1)                       8,607                9,133                  -               9,133
    Gross profit                                                                                13,201                                     1                       13,202               13,458                  -              13,458
                                                                                                ------                                   ---                       ------               ------                ---              ------

    Operating expenses:
    Sales and marketing                                                                          4,388                                   (30)                       4,358                4,089                (10)              4,079
    Research and product development                                                             4,037                                   (17)                       4,020                3,453                 (8)              3,445
    General and administrative                                                                   3,191                                (1,005)                       2,186                2,833               (942)              1,891
    Proceeds from litigation                                                                      (250)                                  250                            -                    -                  -                   -
    Total operating expenses                                                                    11,366                                  (802)                      10,564               10,375               (960)              9,415
                                                                                                ------                                  ----                       ------               ------               ----               -----

    Operating income                                                                             1,835                                   803                        2,638                3,083                960               4,043
    Other income, net                                                                               11                                     -                           11                   18                  -                  18
                                                                                                   ---                                   ---                          ---                  ---                ---                 ---

    Income before income taxes                                                                   1,846                                   803                        2,649                3,101                960               4,061
    Provision for (benefit from) income taxes                                                      818                                   300                        1,118                  968                294               1,262
                                                                                                   ---                                   ---                        -----                  ---                ---               -----
    Net income                                                                                  $1,028                                  $503                       $1,531               $2,133               $666              $2,799
                                                                                                ======                                  ====                       ======               ======               ====              ======

    Basic earnings per common share                                                              $0.11                                                              $0.17                $0.24                                  $0.31
    Diluted earnings per common share                                                            $0.11                                                              $0.17                $0.23                                  $0.30

    Basic weighted average shares outstanding                                                9,102,786                                                          9,102,786            8,962,171                              8,962,171
    Diluted weighted average shares outstanding                                              9,224,727                                                          9,224,727            9,279,800                              9,279,800

    The adjustments consist of the following:
    -----------------------------------------
    Share-based compensation                                                                                                            $111                                                                  $83
    Amortization of purchased intangibles                                                                                                351                                                                  175
    Legal expenses for litigation relating to indemnification of former
    officers, intellectual property claims and our claim for damages                                                                     364                                                                  702
    Acquisition related expenses                                                                                                         227                                                                    -
    Proceeds from litigation                                                                                                            (250)                                                                   -
                                                                                                                                        ----                                                                  ---
    Total of adjustments before taxes                                                                                                    803                                                                  960
    Income taxes affected by the above adjustments                                                                                       300                                                                  294
    Total adjustments                                                                                                                   $503                                                                 $666
                                                                                                                                        ====                                                                 ====
                                                                                                                     CLEARONE COMMUNICATIONS, INC.
                                                                                                     RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA
                                                                                                            (Dollars in thousands, except per share value)

                                                                                                                   Three months ended June                                       Six months ended June
                                                                                                                             30,                                                           30,
                                                                                                                  ------------------------                                      ----------------------
                                                                                                                                         2012                             2011                                                    2012                             2011
                                                                                                                                         ----                             ----                                                    ----                             ----
    GAAP Net Income                                                                                                                      $575                           $1,321                                                  $1,028                           $2,133
    Adjustments:
    ------------
    Provision for (benefit from) for income taxes                                                                                         544                              559                                                     818                              968
    Depreciation and Amortization                                                                                                         417                              292                                                     754                              587
                                                                                                                                          ---                              ---                                                     ---                              ---
    Non-GAAP EBITDA                                                                                                                     1,536                            2,172                                                   2,600                            3,688
    Share-based compensation                                                                                                               60                               44                                                     111                               83
    Legal expenses for litigation relating to
       indemnification of former officers,
       intellectual property claims and our claim
       for damages
                                                                                                         237                              358                                                      364                             702
    Acquisition related expenses                                                                                                           40                                -                                                     227                                -
    Proceeds from litigation                                                                                                                -                                -                                                    (250)                               -
    Non-GAAP Adjusted EBITDA                                                                                                           $1,873                           $2,574                                                  $3,075                           $4,473
                                                                                                                                       ------                           ------                                                  ------                           ------

    Basic weighted average shares outstanding                                                                                       9,107,420                        8,992,500                                               9,102,786                        8,962,171
    Diluted weighted average shares outstanding                                                                                     9,226,426                        9,433,650                                               9,224,727                        9,279,800

    Basic Adjusted EBITDA per common share                                                                                              $0.21                            $0.29                                                   $0.34                            $0.50
    Diluted Adjusted EBITDA per common share                                                                                            $0.20                            $0.27                                                   $0.33                            $0.48

SOURCE ClearOne


Source: PR Newswire