CLEARONE INC
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
CLRO$5.01+10.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001753926-24-001441
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001753926-24-001912
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 63 previous paragraphs and 67 current paragraphs.
34 unchanged; 25 reworded; 8 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
On August 8, 2024, the DIALOG® UVHF wireless Microphone system was named a winner of the 2024 Communications Solutions products of the year award.
Current report
On September 9, 2024, ClearOne recorded a 31% increase in unique visitors at our 2024 Infocomm India trade show booth, while the overall annual increase of all attendees at that trade show was only 17%.
Current report
The decline was due to discounting products to close sales and an increase in purchase price variances from increasing vendor costs.
Current report
S&M expenses remained consistent in 2024-Q3 ,$1.1 million compared to $1.1 million in 2023-Q3.
Current report
S&M expenses remained consistent in 2024-YTD $3.6 million compared to $3.6 million in 2023-YTD.
Current report
R&D expenses remained consistent in 2024-Q3, $0.8 million compared to $0.8 million in 2023-Q3.
Current report
R&D expenses decreased to $2.5 million in 2024-YTD compared to $2.8 million for 2023- YTD. The reduction was primarily due to a reduction in personnel.
Current report
Other income of 2024-Q3 includes $0.087 million of gain on disposal of inventory compared to $(0.08) million of interest expense on debt in 2023-Q3.
Removed paragraphs (4)
Previous report
S&M expenses decreased in 2024-Q2 to$1.2 million from $1.3 million in 2023-Q2. The decrease was primarily due todecrease in salaries, commissions, and consulting expenses from sales department restructuring .
Previous report
S&M expenses remained consistent at $2.5 million when comparing 2024-H1 to 2023-H1.
Previous report
R&D expenses were consistent at $0.9 million when comparing 2024-Q2 to 2023-Q2.
Previous report
R&D expenses decreased to $1.8 million in 2024-H1 compared to $1.9 million for 2023-H1
Reworded paragraphs (25)
Previous wording
Overall revenue decreased by 58% in thesecond quarter of 2024 when compared to thesecond quarter of 2023, primarily due to a significant decrease in revenues from the audio conferencing category. The revenue decline was also caused by significantly reduced demand for our products in many regions including USA, Europe and China when compared to 2023-Q2 revenues. We believe this revenue decline was primarily due to the cumulative impact of past production shortages. We believe that lack of product availability has caused some of our channel partners to purchase and install competing brands. Historically, we have seen a lag of several months between the time that our professional conferencing products are specified for installation and the date when those products are installed. Since our product availability was constrained through a significant part of Q 4 2023, we believe our revenue was impacted negatively by these market dynamics through much of Q 2 2024. We have also faced sales headwinds from our products’ lack of Microsoft Teams certification, despite their longtime functional compatibility with this platform. Our work through the first half of 2024 has focused on mitigating these impacts through maintaining consistent dialogues, product demonstrations, and feedback cycles with end users and channel partners, along with improving our visibility at key industry events. In addition, we saw a reduction in sales in the Middle East region, where we had previously experienced consistent sales growth, as we transitioned to a new distributor for the Middle East region. We believe our revenue performance in 2024-Q2 also was to a small extent impacted negatively due to increased costs associated with electronic raw materials that have affected the global manufacturing of high tech products. We expect these increased costs in various degrees to continue through 2024 and 2025.
Current wording
Overall revenue decreased by 49% in thethird quarter of 2024 when compared to thethird quarter of 2023, primarily due to a significant decrease in revenues from the audio-conferencing category. The revenue decline was also caused by significantly reduced demand for our products in many regions including USA, Europe and China when compared to 2023-Q 3 revenues. We believe this revenue decline was primarily due to the cumulative impact of past production shortages. We believe that lack of product availability has caused some of our channel partners to purchase and install competing brands. Historically, we have seen a lag of several months between the time that our professional conferencing products are specified for installation and the date when those products are installed. Since our product availability was constrained through a significant part of Q 4 2023, we believe our revenue was impacted negatively by these market dynamics through much of Q 3 2024. We have also faced sales headwinds from our products’ lack of Microsoft Teams certification, despite their longtime functional compatibility with this platform. Our work through the first nine months of 2024 has focused on mitigating these impacts through maintaining consistent dialogues, product demonstrations, and feedback cycles with end users and channel partners, along with improving our visibility at key industry events. In addition, we saw a reduction in sales in the Middle East region, where we had previously experienced consistent sales growth, as we transitioned to a new distributor for the Middle East region. We believe our revenue performance in 2024-Q 3 compared to 2023-Q3 also was to a small extent impacted negatively due to increased costs associated with electronic raw materials that have affected the global manufacturing of high tech products. We expect these increased costs in various degrees to continue through the remainder of 2024 and 2025.
Previous wording
Our gross profit margin decreased to (0.9)% during thesecond quarter of 2024 from 33.7% during thesecond quarter of 2023. Our gross profit margin decreased to 19.1% during the firstsix months of 2024 compared to 32.7% during the firstsix months of 2023. This is due to scrapping of inventory items and increase in the reserve on Unite Camera from 35% to 50%.
Current wording
Our gross profit margin decreased to 24.4% during thethird quarter of 2024 from 33.1% during thethird quarter of 2023. Our gross profit margin decreased to 20.7% during the first nine months of 2024 compared to 32.8% during the first nine months of 2023. This is due to scrapping of inventory items and selling aged inventory at larger discounts.
Previous wording
Net loss increased from $1.0 million in thesecond quarter of 2023 to $2.8 million in thesecond quarter of 2024. The increase in net loss was mainly due to (a) decrease in revenues and increase in operating expenses related to inventory.Net loss increased from $1.9 million for the first half of 2023 to $4.7 million for the first half of 2024. The increase was mainly due to (a) decrease in revenue by $3.7 million, (b) significant decrease in Gross margin from 32.7% to 19.1% and (c) decrease in interest income.
Current wording
Net loss increased from $(1.4)million in thethird quarter of 2023 to $(2.1) million in thethird quarter of 2024. The increase in net loss was mainly due to (a) decrease in revenues and decrease in gross margin from purchase price variances from increasing vendor costs and sales price discounts. Net loss increased from $(3.2) million for the first nine months of 2023 to $(6.8) million for the first nine months of 2024. The increase was mainly due to (a) decrease in revenue by $6.1 million, (b) significant decrease in Gross margin from 32.8% to 20.7% and (c) decrease in interest income.
Previous wording
We derive a significant portion of our revenue (approximately 61% in the first six months of 2024) from operations outside North and South America and expect this trend to continue in the future. Most of our revenue from outside the U.S. is billed in U.S. dollars and is not exposed to any significant currency risk. However, we are exposed to foreign exchange risk if the U.S. dollar is strong against other currencies as it will make U.S. Dollar denominated prices of our products less competitive.
Current wording
We derive a significant portion of our revenue (approximately 61.6% in the first nine months of 2024) from operations outside North and South America and expect this trend to continue in the future. Most of our revenue from outside the U.S. is billed in U.S. dollars and is not exposed to any significant currency risk. However, we are exposed to foreign exchange risk if the U.S. dollar is strong against other currencies as it will make U.S. Dollar denominated prices of our products less competitive.
Previous wording
Deferred product revenue decreased to $23 thousand on June 30, 2024 compared to $30 thousand on December 31, 2023.
Current wording
Deferred product revenue decreased to $22 thousand on September 30, 2024 compared to $30 thousand on December 31, 2023.
Previous wording
Results of Operations for the three and six months ended June 30, 2024
Current wording
Results of Operations for the three and nine months ended September 30, 2024
Previous wording
The following table sets forth certain items from our unaudited condensed consolidated statements of operations for thethree and six months ended June 30, 2024 (“2024-Q2”)("2024-H1") and 2023 ("2023-Q2")("2023-H1"), respectively, together with the percentage of total revenue which each such item represents:
Current wording
The following table sets forth certain items from our unaudited condensed consolidated statements of operations for thethree and nine months ended September 30, 2024 (“2024-Q3”)("2024-YTD") and 2023 ("2023-Q3")("2023-YTD"), respectively, together with the percentage of total revenue which each such item represents:
Previous wording
Our revenue decreased to $2.3 million in 2024-Q2 compared to $5.5 million in 2023-Q2 due toa 60.5%decline in audio conferencing, a 30%decline in video products, anda 61% decrease in microphones. Our traditional ceiling mics, personal audio conferencing products, and video cameras suffered revenue declines due tolack of demand. When comparing 2024-Q2 to 2023-Q2, all sales regions suffered revenue loss. Revenues from Americas declined by 64%,from Europe and Africa by 41%, and from Asia Pacific (including Middle East, India and Australia) by 50%.
Current wording
Our revenue decreased to $2.5 million in 2024-Q3 compared to $4.9 million in 2023-Q3 due toa 50%decline in audio conferencing, a 40%decline in video products, anda 50%decrease in microphones. Our traditional ceiling mics, personal audio-conferencing products, and video cameras suffered revenue declines due tolack of demand and the loss of the major customer. When comparing 2024-Q 3 to 2023-Q 3, all sales regions suffered revenue loss. Revenues from Americas declined by 61%, from Europe and Africa by 50%, and from Asia Pacific (including Middle East, India and Australia) by 34%.
Previous wording
Our revenues decreased to $5.9 million in 2024-H1 compared to $9.7 million 2023-H1 due to a 47%decline in audio conferencing, a 24% decline in video products, and a 33% decrease in microphones. Our traditional ceiling mics, personal audio conferencing products. and video cameras suffered revenue declines due to lack of demand. When comparing 2024-H1 to 2023-H1, all sales region suffered revenue loss. Revenues from Americas declined by 54%, from Europe and Africa by 42% ,and from Asia Pacific (including Middle east , India and Australia) by 16%.
Current wording
Our revenues decreased to $8.4 million in 2024-YTD compared to $14.6 million 2023-YTD due to a 48%decline in audio conferencing, a 30%decline in video products, and a 39%decrease in microphones. Our traditional ceiling mics, personal audio-conferencing products. and video cameras suffered revenue declines due to lack of demand. When comparing 2024-YTD to 2023-YTD, all sales regions suffered revenue loss. Revenues from Americas decline by 56%, from Europe and Africa by 44%, and from Asia Pacific (including Middle east, India and Australia) by 23%.
Previous wording
Ourgross profit margin decreased from 33.7% during 2023-Q2 to(0.9)% during 2024-Q2. and
Current wording
Ourgross profit margin decreased from 33.1% during 2023-Q3 to 24.4% during 2024-Q3.
Previous wording
Our gross profit margin decreased from 32.7% during 2023-H1 to 19.1% during 2024-H1.
Current wording
Our gross profit margin decreased from 32.8% during 2023-YTD to 20.7% during 2024-YTD.
Previous wording
The declines in the periods represented were due to increased inventory scrap costs, increasing the inventory reserve to write down the value for certain items, and an increase in purchase price variance from increasing vendor costs.
Current wording
The decline was due to increased inventory scrap and write-off costs, discounting products to close sales, and an increase in purchase price variance from increasing vendor costs.
Previous wording
Our profitability in the near-term continues to depend significantly on our revenues from professional installed audio-conferencing products. We hold long-term inventory and if we are unable to sell our long-term inventory, our profitability might be affected by inventory write-offs and price mark-downs. Our long-term inventory includes approximately $0.1 million of Converge Pro and Beamforming microphone array products,$0.4 million of cameras, and $0.9 million of raw materials that will be used primarily for manufacturing professional audio conferencing products and BMA microphones. Any business changes that are adverse to these product lines could potentially impact our ability to sell our long-term inventory in addition to our current inventory.
Current wording
Our profitability in the near term continues to depend significantly on our revenues from professionally installed audio-conferencing products. We hold long-term inventory and if we are unable to sell our long-term inventory, our profitability might be affected by inventory write-offs and price mark-downs. Our long-term inventory consists primarily of three product categories. These categories are as follows: Converge Pro and Beamforming microphone array products, cameras, and raw materials that will be used primarily for manufacturing professional audio-conferencing products and BMA microphones. Any business changes that are adverse to these product lines could potentially impact our ability to sell our long-term inventory in addition to our current inventory.
Previous wording
Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses. Total operating expenses in 2024-Q2 was $2.9 million compared to $3.2 million in 2023-Q2. Total operating expenses were $6.1 million for 2024-H 1 compared to $6.7 million for 2023-H 1. The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.
Current wording
Operating expenses include sales and marketing (“S&M”) expenses, research and product development (“R&D”) expenses and general and administrative (“G&A”) expenses. Total operating expenses in 2024-Q3 were $2.8 million compared to $3.1 million in 2023-Q3. Total operating expenses were $8.9 million for 2024-YTD compared to $9.8 million for 2023-YTD. The following contains a more detailed discussion of expenses related to sales and marketing, research and product development, general and administrative, and other items.
Previous wording
G&A expenses decreased to $0.8 million in 2024-Q2 compared to $1.0 million in 2023-Q2. The reduction was primarily due to (a) decrease in insurance expenses, (c) and a reduction in amortization expense.
Current wording
G&A expenses decreased to $1.0 million in 2024-Q3 compared to $1.1 million in 2023-Q3. The reduction was primarily due to (a) decrease in insurance expenses, (b) and a reduction in amortization expense.
Previous wording
G&A expenses decreased to $1.9 million in 2024-H1 compared to $2.3 million in 2023-H1. The reduction was primarily due to (a) a decrease in legal expenses, (b) and a decrease in insurance expenses, (c) reduction in employee related expenses.(d) and a reduction inamortization expense.
Current wording
G&A expenses decreased to $2.8 million in 2024-YTD compared to $3.4 million in 2023-YTD. The reduction was primarily due to (a) a decrease in legal expenses, (b) and a decrease in insurance expenses, (c) reduction in employee-related expenses,(d) and a reduction inamortization expense.
Previous wording
Interest expense was $0 in 2024-Q2 compared to $0.1 million in 2023-Q2. Interest expense decreased to $0.0 million in 2024-H1 compared to $0.4 million in 2023-H1 The interest expense was NIL due to repayment of all the debts in full in 2023.
Current wording
Interest expense was $0 in 2024-Q3 compared to $0.1 million in 2023-Q3. Interest expense decreased to $0.3 million in 2024-YTD compared to $0.5 million in 2023-YTD. The interest expense was $0.0 due to repayment of all the debts in full in 2023.
Previous wording
Other income (expense), net includes interest income, foreign currency changes and gain or loss on disposal of assets. Other income for 2024-Q2 included $0.3 million of interest income received on marketable securities compared to $0.5 million in 2023-Q2
Current wording
Other income (expense), net includes interest income, foreign currency changes and gain or loss on disposal of assets. Other income for 2024-Q3 included $0.03 million of interest income received on marketable securities compared to $0.24 million in 2023-Q3
Previous wording
During each ofthe six months ended June 30, 2024 and 2023, we did not recognize any benefit from the losses incurred due to setting up a full valuation allowance.
Current wording
During each ofthe nine months ended September 30, 2024 and 2023, we did not recognize any benefit from the losses incurred due to setting up a full valuation allowance.
Previous wording
As of June 30, 2024, our cash and cash equivalents were approximately $2.5 million compared to $17.8 million as of December 31, 2023. Our working capital was $21.7 million and $39.1 million as of June 30, 2024 and December 31, 2023, respectively.
Current wording
As of September 30, 2024, our cash and cash equivalents were approximately $1.7 million compared to $17.8 million as of December 31, 2023. Our working capital was $19.7 million and $39.1 million as of September 30, 2024 and December 31, 2023, respectively.
Previous wording
Cash used inopera ting activities was approximately $2.7 million in thesix months ended June 30, 2024, adecrease of approximately $55.6 million from $52.9 million of cash provided by operating activities in thesix months ended June 30, 2023. The decrease in cash inflow was primarily due to the difference between $55 million in receipts from legal settlements received in first half of 2023 and $0 received in fist half of 2024.
Current wording
Cash used inopera ting activities was approximately $4.6 million in thenine months ended September 30, 2024, adecrease of approximately $55.7 million from $51.1 million of cash provided by operating activities in thenine months ended September 30, 2023. The decrease in cash inflow was primarily due to the difference between $55 million in receipts from legal settlements received in first half of 2023 and $0 received in first nine months of 2024.
Previous wording
Cash provided by investing activities in thesix months ended June 30, 2024 was $1.8 million compared to $7.4 million of cash used in investing activities in thesix months ended June 30, 2023. The increase in cash provided by investing activities was primarily due to proceeds from sale of marketable securities of $5.4 million offset by purchases of marketable securities of $3.4 million in the six months ended June 30,2024 compared to $2.3 million and $9.3 million respectively compared to the six months ended June 30,2023.
Current wording
Cash provided by investing activities in thenine months ended September 30, 2024 was $2.9 million compared to $6.8 million of cash used in investing activities in thenine months ended September 30, 2023. The increase in cash provided by investing activities was primarily due to proceeds from sale of marketable securities of $7.9 million offset by purchases of marketable securities of $(4.7) million in the nine months ended September 30, 2024 compared to $3 million and $(9.3) million respectively for thenine months ended September 30, 2023.
Previous wording
Cash used in financing activities in thesix months ended June 30, 2024 was $14.5 million compared to $31.4 million of cash being used in the six months ended June 30, 2023. This wascomprised primarily of dividend distributions payments made.
Current wording
Cash used in financing activities in thenine months ended September 30, 2024 was $(14.5) million compared to $(31.7) million of cash being used in thenine months ended September 30, 2023. This wascomprised primarily of dividend distributions payments made.
Previous wording
As of June 30, 2024, we had open purchase orders of approximately $3.02 million mostly for the purchase of inventory.
Current wording
As of September 30, 2024, we had open purchase orders of approximately $3.5 million, mostly for the purchase of inventory.
Previous wording
As of June 30, 2024, we had inventory totaling $16.4 million, of which non-current inventory accounted for $1.8 million. This compares to total inventories of $13.8 million, which includes non-current inventory of $3.1 million as of December 31, 2023.
Current wording
As of September 30, 2024, we had inventory totaling $16.5 million, of which non-current inventory accounted for $2.2 million. This compares to total inventories of $13.8 million, which includes non-current inventory of $3.1 million as of December 31, 2023.