ClearOne, Inc.
(NASDAQ: CLRO)
CEO and President: Zeynep “Zee” Hakimoglu
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INTERVIEW TRANSCRIPTS:
WSA: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today is Zee Hakimoglu, the CEO of ClearOne Incorporated. The company trades on NASDAQ, ticker symbol is CLRO. Thanks for joining us again today Zee.
Zee Hakimoglu: Thank you, good to be here.
WSA: Great, yeah anytime and so starting off please give us a history and overview there of the company for some of our listeners that didn’t catch the initial interview from about six months ago?
Zee Hakimoglu: Okay. ClearOne is a company that provides business collaboration and communications solutions for enterprise, whether that be all the different verticals – government, judicial, large blue chip companies, telemedicine, healthcare – business communications that are used across the spectrum, and we provide audio and video solutions, both hardware and software services, to help businesses, profit or nonprofit, communicate. We are listed on the NASDAQ and have been listed on the NASDAQ since about 2006 and have always been pretty much profitable and we have had five years of revenue growth as well as profitability growth.
WSA: Great. What were some of the key drivers there behind your recently announced quarterly results?
Zee Hakimoglu: Well, I think we continue to make progress with our legacy products which are the audio conferencing endpoints, which are used in blue chip and other environments. We had some nice recent wins with some large strategic customers, which includes the largest new automobile company in the world, the largest social media company in the world as well as the largest electronic company in the world. Our products are second to none and many of these large blue chip companies continue to compare our products to competitive products and make decisions that ClearOne is absolutely the best performance as well as value.
We also see continued progress with some of our microphone enhancements from an acquisition that we made about a year ago for wireless microphones, which is a very nice emerging large market for us, and general profitability of our performance, digesting some of our acquisitions that we made, kind of the fruits coming to bear, with less spending.
WSA: Well, that’s great and can you talk to us about some of the other recent news you’ve had since our last conversation including the launch of ClearOne Express?
Zee Hakimoglu: Yes, we are in the Pro-AV market, that’s called the professional audio and visual market, we remain really one of the only – if not very few – businesses that allow our partners to have 24/7 self-service of our products. Many of your listeners may or may not know we serve a channel, which is a two-tier channel. We serve distributors and we also serve value-added resellers. Our business is conferencing and collaboration, which is a global business.
We have partners worldwide and we find that just as in your personal life, B2B likes to do transactions in business on internet portals 24/7 and be able to place their orders, watch their orders, do returns, check shipments, credits, etcetera, and we have an operating portal which we extended to international just about a week or a couple weeks ago. And now our partners can conveniently do business with us across various time zones to order the products that they need to serve their end customers.
So, we are excited about it and our partners find it convenient and there is no reason that B2B in this marketplace should not operate the same way as consumers. At ClearOne we like to say that not only do we have innovation in our technology, innovation in our solutions, we also have innovation in the way the market wants and needs to do business going forward.
WSA: And what are some of the key trends that you are focused on right now in the sector?
Zee Hakimoglu: Okay, we have made a series of acquisitions. Some of those, as I mentioned earlier, were on the microphone side. Wireless microphones are displacing wired microphones on the table, etcetera. And we made an investment about, as I said, a year ago and those microphones are highly complementary towards existing conferencing and audio distribution business. On the other side of audio, we also invested in software-based video. Software-based video, for those who don’t know, is video which can run on common processors, such as Intel motherboards or tablets or PCs.
The traditional video conferencing for business has traditionally run on big boxes where you had very expensive digital signal processors and channel cards running into the $100,000 or $200,000 or $300,000 system prices. The market has moved to two things: low cost appliances as well as mobility and bring your own device; but they want solutions that do more than video conferencing. You want to be able to share your PowerPoint or your spreadsheets or do whiteboard annotation or do recording and then stream your sessions.
Our software-based media collaboration solutions are just that. We have complementary low-end appliances, otherwise known as sort of set-top boxes, where you put them in the huddle room, or we have software services that can run on a cloud for your working employees and staff. We have made several investments through acquisitions to obtain that technology and we have solutions that we’ve just rolled out at the end of last year, which enable and provide those solutions today.
So, we are building that market, we are putting it into the same channel where we have been successful with our audio products, and our focus is to add our complimentary free video solutions to our audio marketplace.
WSA: Great and what are some of the key goals and milestones that you are hoping to accomplish there over the course of next 6 to 12 months?
Zee Hakimoglu: Well, we are focusing on our growth for many of our new products. Some of our new products are somewhat of the video side, some of them, which we call network distribution, are on the infrastructure side. They are used for streaming and those are jobs that we have developed some nice key partners to help quote jobs, win jobs, and then install jobs. These are longer sales cycles. On the media collaboration, or the conferencing side of the video, we are putting our new products into various channels. We have a suite of complementary products that will be coming out in the next two months that will enhance our offering, so that we have a complete suite, from under $10,000 all the way down to $2,000, of complete media collaboration solutions, which include, as I said, video.
So we are focusing on the channel, we are getting units out on the street for demos, so that our partners can kick the tires, and we have had some nice modest wins on some of them and we will continue to focus on our video to complement our audio solutions. The good news is ClearOne has an amazing brand in the Pro-AV market. The Pro-AV market is a $100 billion market, a very big market, and with the ClearOne brand, we hope to extend that brand to some of the video solutions and we believe we will and we will take the time and the effort to do the marketing and get the products in the hands of our partners and customers.
WSA: And what are some of the other key factors that you see will make the company unique from some of the other players there in the sector?
Zee Hakimoglu: Well, the folks can see what our last quarter’s performance looks like. Whatever products that we introduce, we have key criteria. First the product, the solution, has to be very differentiated. At ClearOne, we don’t make me-too products. Video, for one, is a very changing industry, the legacy players are struggling with where to go with software-based solutions because it changes their business model significantly.
Number two is whatever solution we put in the market, we demand, at ClearOne, high margins both for our channel partners and for ourselves. If you could look at our gross margins at the company, even with the two-tier system, where we discount products for the distributor and then they go into a value-added reseller channel, ClearOne’s margins are in excess of 60% and continue to go up and we hope to retain our 61%, 62%, maybe 63% gross margins for the remainder of the year.
All our investments that we made in our acquisitions have been digested and we believe that as the solutions sell and get success in the marketplace that our expenditures are kind of capped off at this point, so that we should be able to see, for increased revenue, greater profitability. You could see that at ClearOne we have a very disciplined approach. We also introduced for our shareholders a dividend.
Last quarter, we announced a 3.5-cent dividend to our shareholders for common stock. The prior year we had announced a 10-cent dividend for the year, so we, this last quarter, had increased it and among many of our competitors, there are very few who actually share the wealth with our shareholders. Since we went public on the NASDAQ, we’ve spent about $22 or $23 million in stock buybacks to the benefits of our shareholders. ClearOne has put a message to our shareholders, we intend to grow revenue, we intend to grow profitability, and we plan to share our profitability with our shareholders to our own operational success.
WSA: Well, good and do you think investors in the financial community are sure to grasp your story and some of your positive news?
Zee Hakimoglu: Recently, over the last year or so, we’ve gotten the attention of a lot of great investors and I believe that investors are beginning to appreciate it through the rise of our stock. We still believe that our stock is undervalued. We hold about $36 million of cash and if you subtract the cash away from our main enterprise business, you could see that the enterprise value of our business is still undervalued. We have $9 million shares or so of common stock and with $36 million and about a $13 price per share we think we are an excellent value for investors that still want to get in.
WSA: Great and once again joining us today is Zee Hakimoglu, the CEO of ClearOne Incorporated. The company trades on NASDAQ, as mentioned, ticker symbol CLRO. Currently trading at $13.01 a share, market cap is about $118 million and before we conclude here, Zee, to recap some of the key points, why do you believe investors should consider the company as a good investment opportunity today?
Zee Hakimoglu: Again, ClearOne is in a fantasy market. The market for conferencing and collaboration, basic business communications, is very quickly evolving. ClearOne made strategic bets some years ago on where the market was going to be and we believe our bets are paying off. The market is growing, our solutions are innovative, we have a brand second to none. We have extremely strong financials along with no debt, a lot of cash, we are shareholder-friendly, and I think that we will continue to make great strides to drive ClearOne into the Fortune 500 and other blue chip companies, which is our core base.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress. We would like to thank you for taking the time to join us today, Zee, and update our investor audience on CLRO. It’s always good to have you on.
Zee Hakimoglu: Thank you Juan, thank you for the time.
