25-APR-18 – ClearOne (CLRO:Buy Long-Term) Revenues fell year-over-year and sequentially due to continued slow transition to new AV conferencing platform and ongoing challenges from patent infringements. CLRO recorded Q4 and FY:17 net losses. Due to poor near-term visibility, we maintain our Buy Long-term rating, but reduce our price target from $13 to $10.

Q4:17 Highlights

  • Overall revenues fell 14% year-over-year and 9% sequentially due to a slow transition to the new Converge Pro 2 professional audio conferencing platform and ongoing damage from what CLRO claims is infringement on its patents.
  • Sales of Converge Pro 2 and the Beamforming Microphone Array 2 rose 48% quarter-over-quarter. Video products posted year-over-year revenue gains.
  • Operating expenses fell 15% to $5.8 million in Q4:17 from $6.8 million in Q4:16 as a result of $0.8 million of litigation proceeds. Non-GAAP operating expenses rose 15% year-over-year to $6.1 million from $5.3 million due to higher R&D spending. .
  • Lower revenues and increased inventory obsolescence costs drove a 200 basis point decline in gross margin to 51% in Q4:17 from 53% in Q4:16.
  • Changes in federal income tax rates resulted in a $2.6 million reduction in income tax benefits. This was the principal cause of a Q4:17 net loss of $3.6 million or ($0.43) per share, up from a net loss of $1.1 million or ($0.12) in Q4:16. Non-GAAP net loss was $2.3 million or ($0.27) versus a net loss of $0.1 million or ($0.02) one year earlier. Lower revenues, higher R&D and reduced tax benefits were primary reasons for a higher Q4:17 non-GAAP net loss.
  • CLRO has no long-term debt and ended 2017 with cash and investments totaling $8.26 million, down from $17.1 million onyear earlier.. In 2017, the Company consumed $9.2 million of cash in its operations, repurchased $5.1 million of stock, and paid out $2.2 million of dividends to shareholders. Quarterly dividends increased 40% during FY:17 from $0.05 to $0.07.
  • Shares currently trade near book value and close to a 52 week low.
  • We reduce our FY:18 estimates, but anticipate a return to non-GAAP profits this year. We reduce our price target from $13 to $10 but continue to rate these shares as Buy Long-Term.

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