President, CEO, and Chairman: Zee Hakimoglu
WSA: Good day from Wall Street, this is Juan Costello Senior Analyst at the Wall Street Analyzer. Joining us today Zee Hakimoglu, the CEO and President of ClearOne Incorporated. The company trades on NASDAQ ticker symbol is CLRO. Thanks for joining us today there Zee.
Zee Hakimoglu: Thanks for having me Juan.
WSA: Yeah, I definitely appreciate the update since our interview from May of last year. So starting off can you give us an overview of ClearOne for some of our listeners that might have not caught our previous interview?
Zee Hakimoglu: Okay. ClearOne is a company that has been around about 30 years. Our focus has been audio conferencing but we’ve moved into other areas that I think are valuable for our future growth in the marketplace. Basically what we do is – our mission is to enhance business communications and collaboration in a group environment. We have offices in Salt Lake Utah, Austin Texas, and Gainsville, Florida here in the US and we have a research and development offices in Israel, in Spain, as well as a small sales office in Dubai. Basically we have development offices where we made our technology company acquisitions and our headquarters is here in Salt Lake.
WSA: Certainly. So can you talk about some of the recent patents that you’ve received, as you’ve been pretty active on that front here to start off the year?
Zee Hakimoglu: Sure. We’ve been very aggressive building of our intellectual property portfolio since I joined about 11 or 12 years ago. When I joined, we had essentially no patents, and now, we have an IP treasure chest of about 69 patents issues with about 31 applications in play. Many of these patents are pretty fundamental, they span all our product catagories and technologies which include, audio, video, and network streaming technology. Since May when we last talked, we were awarded six new patents which are related to audio and video technologies used on our latest audio and video products.
Recently, we received a couple of patents related to our beamforming microphone array technology. We were the first in the world and remain the only company in the world today with a conferencing grade beamforming microphone array. We were issued some fundamental patents on this product technology which we think will be a very good barrier to our market dominance in this growing conferencing application. Since we last spoke, we also recently received a few patents on our video network streaming technology. These patents are fundamentally related to streaming audio and video across IP networks, and networked speakers and audio sources. Interestingly, some of these patents were applications submitted to the US Patent office way back in 2002, before we made our NetSteams company acquisition in 2009 and were just granted. The company was incredibly visionary in terms of using an IP network to stream audio and video and we benefitted as these early patent applications came to fruition on our clock when the market was ready for this innovative technology. We feel that these patents are pretty fundamental and again provide great hidden potential value as ClearOne’s assets.
Finally, since we last spoke, we received another patent related to our video conferencing and collaboration technology. This patent is for what is commonly called, all-in-one displays. Basically it’s a very interesting patent in that there is a market for large displays that have integrated a camera, video processor, and speakers into the display unit. The patent gives ClearOne the design ownership of such a system where the microphone is not integrated but separated from the all-in-one display unit. This is an important design because as we all know, typically, microphones should be placed closer to the speaker and not built into the display for good quality conferencing audio.
So we continue to fill our war chest with battle tested IP which are strategic and important assets for the ClearOne.
WSA: Certainly and what are some of the other key trends that your focusing on right now in this sector and how are you positioning the company to continue to capitalize?
Zee Hakimoglu: As we’ve talked in the past, there are some very interesting trends happening in the collaboration and communications market. Fortuitously, we predicted what was emerging some years ago. We anticipated that audio and video is moving to the network, moving to software based appliances and moving to cloud services. These were the drivers behind our acquisitions.
On the audio front, microphones are going wireless and networked as well as incorporating advanced single processing inside of them for enhanced performance. Our newest networked wireless mic systems and our beamforming microphone array have embraced, no less led, the market in these trends. We offer the most advanced and complete conferencing microphone portfolio in the market today.
With respect to video conferencing the traditional hardware based video conferencing equipment and associated heavy conferencing infrastructure continue to be in structural decline. The big players that offered 100, 200, and 500 thousand dollar systems are seeing significant price and deployment erosion for those legacy products. There is a huge market shift underway for collaboration and towards the adoption of low cost video conferencing solutions that are easy to use, easy to deploy, and easy to pay for, interoperable with existing systems, but have many more collaboration features built into the solution. ClearOne has a suite of amazing and compelling video conferencing products that were recently introduced to meet these dramatic new trends emerging. These include low-cost software based collaboration appliances and services for both cloud and traditional environments. We are poised to capitalize on this global growth market. Fewer than 10 percent of the conference rooms world-wide are equipped with video capability. This is a trend we are ready to intercept with the solutions we have recently launched.
With respect to network media streaming there are market trends and drivers making ClearOne’s products an attractive solution for communications across enterprises and organizations of all sizes and type. As you know, with the precipitous pricing drops of displays, big screens and 4K displays, organizations are putting up displays everywhere to relay critical information and or marketing messaging or entertainment- displays will become ubiquitous. These are deployments where video, audio, and data media is not used for two-way conferencing but for the purpose of streaming audio, video and data content, basically media sources of every form, such as DVD players, PCs, cameras, etc., across an organization or public venue. Applications include cameras for security, database information for transportation hubs, media sources for entertainment and hospitality venues such as casinos and stadiums, institutional information for finance firms, hospitals, and command & control center information such as and maps, data, and images for government and public services.
Very importantly, the network streaming solutions offered by ClearOne are unique in the industry as our solutions are fully non-invasive. This means these solutions can use the organizations’ already deployed and existing ethernet IP infrastructure to move the media anywhere and everywhere. Unlike competing solutions, there is no need to add and deploy expensive and labor intensive new cable runs and install complex hub based equipment in IT closets. Our solution is fully software-based solutions housed inside small appliances that can be easily and quickly added node by node as needed from small to virtually infinite scale. Since our network media streaming is software based, the end user can add features and functions by inexpensive software license upgrades easily and remotely— only if needed and when needed. Further as we all know, today color depth and image quality expectations are increasing and critically important for many applications. we offer the absolute highest available true color experience, available in the market today known as 24 bit, true color quality.
Zee Hakimoglu: So really, enterprises and organizations are looking to save costs in hardware, installation and support to get more of what they want and making it much more easy to deploy, use, and upgrade solutions. Our solutions meet the market demand to minimize up-front capital expenses and avoid expensive professional services for the life of the product.
WSA: Certainly so yeah. I think you covered most of it but what are some of the other factors that you feel make the company unique from some of the other players that are in the sector?
Zee Hakimoglu: There are many startups and wannabes, and some large legacy players who are trying to figure out what they need to do to get into this software-based media conferencing and communications market. We have some unique attributes for market advantage and success. First, we have everything to gain and nothing to lose in offering low cost software-based appliances and cloud services compared to some large legacy businesses selling the high priced equipment and support services. These guys today are business challenged to re-tool and reinvent themselves. Not an easy task. Changing a business model can be as challenging if not more challenging than changing technology. This is a classic business dilemma not easily solved. Our biggest competitor is under such a threat. Also, even with that, some of this new technology is extraordinarily difficult to develop from scratch, or to acquire and integrate since time-to-market is critical. We’ve introduced both a software based conferencing and collaboration portfolio and a software based media streaming portfolio using the same powerful software-based video engine and acquired these technologies some years while the market was still nascent.
And to fortify our video centric solutions, we uniquely offer the best conferencing and distributed audio in world as a result of our legacy audio business. Advanced audio solutions are central to conferencing, collaboration, and communication and we have the perfect complementary line up to meet these trends. We can offer two-way conferencing and collaboration ala low-cost appliances or cloud services as well as one-way networked media streaming with the best in the world complementary audio solutions for any scale of deployment. No one can beat us in the market with the breadth and depth we offer for this market.
WSA: Good and what are some of the goals and milestones that you’re hoping to accomplish over the course of the net six to 12 months?
Zee Hakimoglu: I think we’ve finally – I would like to say that we have finally reached the point where our investments in the new video centric product line-ups will begin to pay off— these are the right products at the right time, with the right features at the right price. Our challenge going forward will be building awareness of these new products. We will need to focus harder on the marketing of these solutions and the new direction for ClearOne which is highly complementary to our audio centric business. We’ve done minimal marketing in the past, as we are a well known brand in our industry for audio. Going forward, we’re going to initiate marketing programs and campaigns for our global channel network of dealers and distributors, who are the ones who actually sell ClearOne products to drive these new solutions to end-customers. As some folks may or may not know, ClearOne does not sell its products directly to end-users. We sell generally through a two-tier channel model. So we’re going to work very hard to raise awareness of these products in our market. That’s one element that we recognize will need more work and we have a plan to do that.
We are going to work on channel programs and channel rewards so that our global and loyal channel partners have a reason to sell ClearOne’s newest video centric and not only ClearOne audio- to sell the full value proposition. What we have noticed is once a channel partner succeeds with a new sale, their customer loves the solution which is the spark that lights the fire.
We’re also going to be coming out with a completely new website in June that will reframe the company’s positioning focusing on our entire value proposition and emphasizing the broad applications available to end-users across industry verticals. So I’m looking forward to the results of that in the year ahead.
WSA: Certainly and perhaps you can talk a little bit about your background and experience Zee as well as the key management there.
Zee Hakimoglu: Sure. I have been at ClearOne for about 12 years, I’ve been CEO for about 11.5 years and it’s been a good experience. The reason I came to ClearOne was my past experience- I saw a ‘pony’ at ClearOne. My very first job was in the Silicon Valley in 1979 and I spent 20 plus years in the Silicon Valley in high tech in a mix of roles including technology development, business development, and general management. Communications has been at the heart of my experience across industries such as satellite and wireless communications, datacomm, and fiberoptics.
I try to bring a Silicon Valley mentality, drive, work ethic, innovative spirit to ClearOne, which was a small but struggling audio conferencing company undergoing significant legal and financial challenges. I got the company relisted back on the NASDAQ after closing on outstanding issues. I brought best practices to the company based on my past experience. I have recruited and retained great management. As far as our finance team goes, Narsi Narayanan is our Senior VP of Finance. He came from some very large reporting companies and does an excellent job keeping our NASDAQ and SEC compliance perfect while costs low.
We have some great technologists as well. We have technologists that have come from our acquisitions and remain with us such as Michael Braithwaite, Senior VP for the Network Media Streaming Business from our NetStreams acquisition. And we have great technologists here in Salt Lake that have been with the company for many years, some from inception.
We also have a very nimble and effective direct global sales team in the field from North America, Northern and Southern Europe, China, Southeast and Northeast Asia, India and Dubai. Our direct sales team works very tightly with our global channel partners to promote and sell our products worldwide.
WSA: And as you continue to speak with the financial community Zee, what are some of the key drivers there that you wish investors perhaps they better understood about ClearOne?
Zee Hakimoglu: One principle at ClearOne is we bring products to market that are going to make money for the company, for our channel partners, and ultimately and most importantly for our shareholders. We don’t introduce products without profitability. We also don’t buy revenue just for sales sake. That is a road to nowhere. We try to be well balanced for top line growth with bottom line profitability. We have a second-to-none track record of profitability and work to retain that, albeit that we’re in a challenging macro-economic environment with headwinds. We have a global market that spans across all regions in the world across all industry verticals- this is a pretty good mix for business growth and stability.
We also have a history of driving shareholder returns to our shareholders since the company went public back in 2006. ClearOne has delivered more than $22 million back to its shareholders. This does not include the recent dividend program we introduced. In 2014 we introduced the first dividend for ClearOne. As a small microcap high tech company, we’re kind of unique in that respect. We delivered a 10 cent per share dividend for the year 2014. In 2015 we issued a 3.5 cent per share quarterly dividend and then in the fourth quarter of 2015, we announced an increased dividend to 5 cents per share quarterly to be paid in 2016. So we take our shareholders quite seriously, we know they expect to see returns and we consider them in everything that we do and in all of our business planning and the long-term growth of the company.
WSA: Great so once again joining us today is Zee Hakimoglu the CEO and President of ClearOne Inc. The company trades on NASDAQ ticker symbol CLRO, trading close to $11 a share and market cap slightly north of a 100 million. And before we conclude here Zee to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?
Zee Hakimoglu: I like to keep it simple. I think that you should look at the past history of ClearOne with this management team. We’ve delivered shareholder value, we have received market recognition for more than 50% market share of our flagship audio products. We’ve been good stewards of our hard earned cash, have made several strategic investments in technology acquisitions and manage our operations for maximum profitability day in and day out. We have accumulated nearly 40 million dollars in cash or cash equivalents, and have zero debt. We’ve put our cash into share buy backs, tender offers, and dividend payouts and we’ll continue to allocate and invest our cash for our shareholders’ benefit.
I think that we’re doing everything to both grow profitability, grow revenue and grow market awareness of ClearOne. We live with the creedo, “If you don’t see profitability at the front end, you likely won’t see it at the back end.” We don’t make promises, we simply deliver results.
WSA: Well we certainly look forward to continue to track the company’s growth and report on your upcoming progress, and would like to thank you for taking the time to join us today Zee and update our investor audience on CLRO, it’s always great to have you on.
Zee Hakimoglu: Thank Juan, it was my pleasure.