• Q3 Microphone revenue up year-over-year by 3%
  
  
• Q3 Overall revenue down year-over-year by 10% — continued to be impacted by infringement of ClearOne’s strategic patents
  
  
• Non-GAAP Operating expenses declined by 14% year-over-year

SALT LAKE CITY, Nov. 14, 2019 (GLOBE NEWSWIRE) -- ClearOne (NASDAQ: CLRO), a global provider of audio and visual communication solutions, reported financial results for the three and nine month periods ended September 30, 2019.

“We have seen modest improvements in our microphone sales after the recent decision by a U.S. District Court granting our request for a preliminary injunction to prevent Shure from manufacturing, marketing, and selling its competing ceiling microphone array in an infringing configuration. Nevertheless, we believe it will take some time for us to recover our market share due to the extensive harm inflicted by the infringement,” said Zee Hakimoglu, CEO and Chair of ClearOne. 

“We will continue our focus on technological innovation, cost management and vigorous enforcement of our intellectual property rights.”

The preliminary injunction relating to ClearOne’s U.S. Patent No. 9,813,806 (the “Graham Patent”) became effective on August 23, 2019.  ClearOne sought injunctive relief as part of ongoing litigation to protect ClearOne’s intellectual property rights and rightful place in the market.  As the Court noted in its order, “The public benefits when [the patent] system works, and suffers when patents are infringed, so it is in the public interest—in the long run—to protect valid patents.”  The Court’s order also prevents Shure from encouraging others to use the Shure MXA910 beamforming microphone array in the “drop-ceiling mounting configuration” and “applies to Shure’s officers, agents, servants, employees, and attorneys, as well as anyone who is in active concert or participation with those listed persons.” 

A preliminary injunction is an extraordinary remedy that is rarely granted.  In granting ClearOne’s request, the Court acknowledged the strength of ClearOne’s position against Shure, declaring that “ClearOne has established that it is likely to succeed on the merits” of its infringement claims relating to the Graham Patent.

ClearOne remains confident in the merits of its case against Shure and that it will ultimately succeed on its claims, which assert infringement not only of the Graham Patent but of U.S. Patent No. 9,635,186 and U.S. Patent No. 9,264,553 as well.

Financial Summary

The Company uses certain non-GAAP financial measures and reconciles those to GAAP measures in the attached tables.

• Q3 2019 revenue was $6.0 million, compared to $6.7 million in Q3 2018 and $6.4 million in Q2 2019. The year-over-year and sequential decrease reflects an impact of the on-going harm of infringement of ClearOne’s patents on its audio conferencing products and microphones. The patent infringement also has negatively impacted directly the revenue from ClearOne’s other products. 
  
  
• GAAP gross profit in Q3 2019 was $2.5 million compared to $3.0 million in Q3 2018 and $2.9 million in Q2 2019. GAAP gross profit margin was 42% in Q3 2019, compared to 45% in Q3 2018 and 46% in Q2 2019. Gross Profit margin decreased year over year mainly due to an increase in inventory obsolescence costs.
  
  
• Operating expenses in Q3 2019 were $4.6 million, compared to $5.3 million in Q3 2018 and $5.0 million in Q2 2019. Non-GAAP operating expenses in Q3 2019 were $4.2 million, compared to $4.9 million in Q3 2018 and $4.7 million in Q2 2019. The majority of the decrease in Q3 2019 operating expenses over Q3 2018 is attributable to decreases in employee-related costs including benefits and commissions and allocations of overhead expenses, partially offset by an increase in demonstration inventory costs.
  
  
• GAAP net loss in Q3 2019 was $2.0 million, or $0.12 per share, compared to net loss of $10.1 million, or $1.22 per share, in Q3 2018 and net loss of $2.1 million, or $0.13 per share, in Q2 2019. Net loss in Q3 2019 was largely caused by operating losses on account of the reduction in revenue and associated gross profit. Net loss in Q3 2019 was lower than net loss in Q3 2018 largely due to reduced tax expense and reduced operating expenses offset by reduced gross profit. During 2018-Q3, the Company recorded discrete tax expense of $6.5 million, due primarily to the recording of a full valuation allowance on the Company's net deferred tax assets. Non-GAAP net loss was $1.6 million, or $0.09 per share, in Q3 2019, compared to non-GAAP net loss of $9.6 million, or $1.15 per share in Q3 2018 and non-GAAP net loss of $1.7 million, or $0.10 per share, in Q2 2019.

Financial Summary

Balance Sheet Highlights

At September 30, 2019, cash, cash equivalents and investments were $5.9 million, as compared with $15.9 million at December 31, 2018. The Company continued to have no debt. In August 2019, Company deposited $4.5 million with the United States District Court for the Northern District of Illinois as a bond so that preliminary injunction granted against Shure Inc could go into effect.

About ClearOne

ClearOne is a global company that designs, develops and sells conferencing, collaboration, and network streaming solutions for voice and visual communications. The performance and simplicity of its advanced comprehensive solutions offer unprecedented levels of functionality, reliability and scalability. Visit ClearOne at www.clearone.com.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented on a GAAP basis, ClearOne uses non-GAAP measures of gross profit, operating income (loss), net income (loss), adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and net income (loss) per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance from period to period and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of ClearOne’s underlying operational results and trends and our marketplace performance. The non-GAAP results are an indication of our baseline performance before certain gains, losses, or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for gross profit, operating income (loss), net income (loss), income (loss) per share 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 financial measures to the most directly comparable GAAP financial measures is included with this release below.

Forward Looking Statements

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 and any statements of the plans and objectives of management for future operations and forecasts of future growth and value, 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. The information in this press release should be read in conjunction with, and is modified in its entirety by, the Annual Report on Form 10-K (the “10-K”) filed by the Company for the same period with the Securities and Exchange Commission (the “SEC”) and all of the Company’s other public filings with the SEC (the “Public Filings”). In particular, the financial information contained herein is subject to and qualified by reference to the financial statements contained in the 10-Q, including the footnotes thereto, as well as the Company’s annual report on Form 10-K for the year ended December 31, 2018 (the “10-K”), the footnotes thereto and the limitations set forth therein. Investors may not rely on the press release without reference to the 10-Q, the 10-K and the Public Filings.

Contact:
Investor Relations
801-975-7200
investor_relations@clearone.com
http://investors.clearone.com

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

CLEARONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Dollars in thousands, except per share values)

CLEARONE, INC.
UNAUDITED RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(Dollars in thousands, except per share values)