PR Newswire | Mar 30, 2021 09:10AM EDT

03/30 08:10 CDT

ClearOne Reports Fourth Quarter 2020 Financial Results- Q4 year-over-year overall revenue up by 35%- Q4 year-over-year video revenue up by 241%, microphones up by 17%- Net income dramatically increases for full year 2020 driven by one-time income tax refund of $7.1 million SALT LAKE CITY, March 30, 2021

SALT LAKE CITY, March 30, 2021 /PRNewswire/ -- ClearOne (NASDAQ: CLRO), a global provider of audio and visual communication solutions, reported financial results for the three and twelve- month periods ended December 31, 2020.

"We finished 2020 with sterling fourth quarter revenue performance. This follows comparable strong revenue growth we reported in the third quarter. While 2020 was a challenging year for most companies amid the COVID-19 pandemic, ClearOne benefitted from the changes the pandemic created as hybrid work-and-learn environments created demand for our broad line-up of audio and video solutions."

"During the fourth quarter, we introduced our ClearOne Aura(tm), a suite of pre-packaged professional audio and video home office solutions for remote working professionals to meet market needs. Also during the quarter, we upgraded our Convergence AV Network Manager Software which provides real-time, at-a-glance monitoring and control of ClearOne Professional AV products to support our new, technologically disruptive Ceiling Tile Beamforming Microphone Array, the BMA 360."

"During the past year, market recognition and acceptance of the versatility, scalability, performance, and affordability of our recent audio and video product introductions, from large rooms requiring professional installations to plug-and-play solutions suited for work-and-learn in-home environments drove our revenue growth."

"We reported net income for 2020 resulting from a one-time recognition of an income tax refund receivable of $7.1 million due to our ability to carryback net operating losses to earlier profitable years, made possible by the CARES Act. This expected refund will further strengthen our cash position, enabling us to continue to focus on our strategic market imperatives and to continue to defend ClearOne from the harm inflicted on us by Shure's infringement of our intellectual property. We achieved significant victories in our litigation against Shure in 2020, and we look forward to prevailing on our patent claims against Shure at trial, which has been delayed by the COVID-19 pandemic," Hakimoglu concluded.

Financial Summary

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

* Q4 2020 revenue was $8.6 million, compared to $6.3 million in Q4 2019 and $8.4 million in Q3 2020. The year-over-year increase was mainly due to the increase in revenue from video products, personal audio conferencing products and beamforming microphone array products. Despite this revenue growth in Q4 2020, revenue from audio conferencing products and microphones are far below the levels prior to infringement of our patents. * GAAP gross profit in Q4 2020 was $3.6 million, compared to $3.0 million in Q4 2019 and $3.5 million in Q3 2020. GAAP gross profit margin was 42% in Q4 2020, compared to 48% in Q4 2019 and 42% in Q3 2020. Gross Profit margin decreased year over year mainly due to increase in share of lower margin products in the revenue mix, increased freight and tariff costs and increased inventory obsolescence costs, partially offset by increased deferral of overhead costs added to the inventory. * Operating expenses in Q4 2020 were $4.4 million, compared to $5.0 million in Q4 2019 and $4.7 million in Q3 2020. Non-GAAP Operating expenses in Q4 2020 were $3.9 million, compared to $4.6 million in Q4 2019 and $4.2 million in Q3 2020. The year-over-year decrease in operating expenses was mainly due to reductions in sales tax expense, employee travel expenses and legal expenses partially offset by an increase in commissions paid to employees and independent reps. The sequential decrease in operating expenses was mainly due to reductions in sales tax expense, legal expenses and employee headcount costs partially offset by an increase in commissions paid to employees and independent reps. * GAAP net income in Q4 2020 was $5.5 million, or $0.29 per share, compared to net loss of $2.0 million, or $0.12 per share, in Q4 2019 and net loss of $1.3 million, or $0.07 per share, in Q3 2020. The change from net losses in Q4 2019 and Q3 2020 to net income in Q4 2020 is primarily due to recognition of income tax refund receivable of approximately $7.1 million arising out of the carryback of net operating losses that became possible due to the enactment of the CARES Act, as well as an increase in gross profit due to increase in revenues and decrease in operating costs.

($ in 000, except per share) Three months ended Year ended December 31, December 31,

2020 2019 Change% 2020 2019 Change %

GAAP

Revenue $ 8,566 $ 6,325 35% $ 29,069 $ 25,042 16%

Gross profit 3,583 3,013 19% 12,559 11,193 12%

Operating expenses 4,400 4,982 -12% 18,126 19,755 -8%

Operating loss (817) (1,969) -59% (5,567) (8,562) -35%

Net income (loss) 5,549 (1,985) 380% 505 (8,408) 106%

Diluted income (loss) per 0.29 (0.12) 342% 0.03 (0.51) 106%share

Non-GAAP

Non-GAAP gross profit $ 3,583 $ 3,015 19% $ 12,561 $ 11,201 12%

Non-GAAP operating expenses 3,919 4,595 -15% 16,369 18,136 -10%

Non-GAAP operating loss (336) (1,582) -79% (3,810) (6,943) -45%

Non-GAAP net income (loss) 6,030 (1,598) 477% 2,262 (6,789) 133%

Non-GAAP Adjusted EBITDA (331) (1,471) 77% (3,745) (6,221) 40%

Non-GAAP diluted income 0.32 (0.10) 420% 0.13 (0.41) 132%(loss) per share

Balance Sheet Highlights

At December 31, 2020, cash, cash equivalents and investments were $6.7 million, as compared with $8.6 million at December 31, 2019. The Company carries debt of $3.0 million on account of senior convertible notes issued in December 2019 and $1.5 million in Paycheck Protection Program (PPP) loan in April 2020. The Company intends to use the entire PPP loan amount for qualifying expenses and to apply for forgiveness of the PPP loan.

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 and the possible outcomes of litigation, 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, 2020 (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.

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

December December 31, 2020 31, 2019

ASSETS

Current assets:

Cash and cash equivalents $ 3,803 $ 4,064

Marketable securities 1,117 3,026

Receivables, net of allowance for doubtful accounts 5,194 5,468of $506 and $424, respectively

Inventories, net 10,463 11,441

Income tax receivable 7,169 110

Prepaid expenses and other assets 1,536 1,074

Total current assets 29,282 25,183

Long-term marketable securities 1,762 1,517

Long-term inventories, net 4,590 6,284

Property and equipment, net 906 1,044

Operating lease - right of use assets, net 1,936 2,459

Intangibles, net 19,248 14,009

Other assets 4,599 4,614

Total assets $ 62,323 $ 55,110

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 3,950 $ 2,871

Accrued liabilities 2,352 3,205

Deferred product revenue 123 173

Short-term debt 672 -

Total current liabilities 7,097 6,249

Long-term debt 3,245 2,222

Operating lease liability 1,489 2,021

Other long-term liabilities 678 140

Total liabilities 12,509 10,632

Shareholders' equity:

Common stock, par value $0.001, 50,000,000 sharesauthorized, 18,775,773 and 16,650,725 shares issued 19 17and outstanding

Additional paid-in capital 63,359 58,520

Accumulated other comprehensive loss (186) (176)

Accumulated deficit (13,378) (13,883)

Total shareholders' equity 49,814 44,478

Total liabilities and shareholders' equity $ 62,323 $ 55,110

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

Three months ended Year ended December 31, December 31,

2020 2019 2020 2019

Revenue $ 8,566 $ 6,325 $ 29,069 $ 25,042

Cost of goods sold 4,983 3,312 16,510 13,849

Gross profit 3,583 3,013 12,559 11,193

Operating expenses:

Sales and marketing 1,796 1,814 6,728 7,935

Research and 1,193 1,453 5,512 5,775product development

General and 1,411 1,715 5,886 6,045administrative

Total operating 4,400 4,982 18,126 19,755expenses

Operating loss (817) (1,969) (5,567) (8,562)

Interest expense (111) (26) (436) (26)

Other income, net 9 1 79 236

Loss before income (919) (1,994) (5,924) (8,352)taxes

Provision for(benefit from) (6,468) (9) (6,429) 56income taxes

Net income (loss) $ 5,549 $ (1,985) $ 505 $ (8,408)

Basic weightedaverage shares 18,771,306 16,646,371 17,271,629 16,638,580outstanding

Diluted weightedaverage shares 18,829,341 16,646,371 17,325,351 16,638,580outstanding

Basic income (loss) $ 0.30 $ (0.12) $ 0.03 $ (0.51)per share

Diluted income $ 0.29 $ (0.12) $ 0.03 $ (0.51)(loss) per share

Comprehensiveincome (loss):

Net income (loss) 5549 (1,985) 505 (8,408)

Unrealized gain(loss) onavailable-for-sale (8) (8) 8 68securities, net oftax

Change inforeign currency 5 5 (18) (63)translationadjustment

Comprehensive 5,546 (1,988) 495 (8,403)income (loss)

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

Three months ended Year ended December 31, December 31,

2020 2019 2020 2019

GAAP gross profit $ 3,583 $ 3,013 $ 12,559 $ 11,193

Stock-based - 2 2 8compensation

Non-GAAP gross $ 3,583 $ 3,015 $ 12,561 $ 11,201profit

GAAP operating loss $ (817) $ (1,969) $ (5,567) $ (8,562)

Stock-based 7 40 63 217compensation

Amortization of 474 347 1,694 1,402intangibles

Non-GAAP operating $ (336) $ (1,582) $ (3,810) $ (6,943)loss

GAAP net income $ 5,549 $ (1,985) $ 505 $ (8,408)(loss)

Stock-based 7 40 63 217compensation

Amortization of 474 347 1,694 1,402intangibles

Non-GAAP net income $ 6,030 $ (1,598) $ 2,262 $ (6,789)(loss)

GAAP net income $ 5,549 $ (1,985) $ 505 $ (8,408)(loss)

Number of sharesused in computing 18,829,341 16,646,371 17,325,351 16,638,580GAAP diluted income(loss) per share

GAAP diluted income $ 0.29 $ (0.12) $ 0.03 $ (0.51)(loss) per share

Non-GAAP net income $ 6,030 $ (1,598) $ 2,262 $ (6,789)(loss)

Number of sharesused in computingNon-GAAP diluted 18,829,341 16,646,371 17,325,351 16,638,580income (loss) pershare

Non-GAAP dilutedincome (loss) per $ 0.32 $ (0.10) $ 0.13 $ (0.41)share

GAAP net income $ 5,549 $ (1,985) $ 505 $ (8,408)(loss)

Stock-based 7 40 63 217compensation

Depreciation 107 136 422 512

Amortization of 474 347 1,694 1,402intangibles

Provision for(benefit from) (6,468) (9) (6,429) 56income taxes

Non-GAAP Adjusted $ (331) $ (1,471) $ (3,745) $ (6,221)EBITDA

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SOURCE ClearOne