Medical and Value Hearing Health Performance
Drive Second Consecutive Quarter of Record Sales
IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of miniature and
micro-miniature body-worn devices, today announced financial
results for its third quarter ended September 30, 2017.
Highlights:
- Third-quarter net sales rose to a
record $24.0 million, up 54.4 percent from the prior-year third
quarter;
- Sales to IntriCon’s largest medical
customer more than doubled from the 2016 third quarter and were
again at record levels;
- Driven by the company’s value hearing
healthcare initiatives, hearing health delivered 53.8 percent
year-over-year growth;
- Hearing Help Express (HHE) hearing aid
orders increased 38 percent in the third quarter over the 2017
second quarter;
- Approximately 82 percent of hearing
aids now being sold by HHE are IntriCon devices, up from 21 percent
at the end of the 2017 second quarter;
- Gross margins for the third quarter
were 31.5 percent, up significantly from 22.7 percent in the
prior-year third quarter; and,
- IntriCon reported third-quarter diluted
net income per share of $0.15 versus a ($0.19) loss in the 2016
third quarter.
Financial ResultsFor the 2017 third quarter, the company
reported net sales of $24.0 million, up 54.4 percent from $15.6
million in the prior-year period. The increase was primarily due to
year-over-year revenue gains from IntriCon’s largest medical
customer, as well as continued traction in value hearing
health.
IntriCon posted net income attributable to shareholders of $1.1
million, or $0.15 per diluted share, versus a net loss attributable
to shareholders of ($1.3) million, or ($0.19) per share, for the
2016 third quarter.
“We’re pleased to report that medical and value hearing health
gains continue to drive strong top- and bottom-line performance,”
said Mark S. Gorder, president and chief executive officer of
IntriCon. “Moreover, we’re successfully cultivating a new
direct-to-consumer channel to deliver superior, outcomes-based,
affordable hearing healthcare—meeting several key milestones during
the third quarter.”
Third-quarter gross profit margins were 31.5 percent, up
significantly from 22.7 percent in the prior-year third quarter.
The increase primarily stemmed from greater volume and the
inclusion of the HHE direct-to-consumer business in 2017, as well
as more IntriCon devices being sold into the HHE channel.
Operating expenses for the third quarter were $6.1 million,
compared to $4.3 million in the prior-year third quarter. The
increase was largely due to the inclusion of HHE in 2017, and key
initiatives to drive the business’ growth.
Business UpdateSales in IntriCon’s medical business
increased 68.4 percent in the 2017 third quarter over the
prior-year period. The gain was primarily driven by the continued
production ramp of Medtronic’s MiniMed 640G and 670G wireless
glucose monitoring systems.
The company remains very well positioned with Medtronic
long-term, providing both continuous glucose monitor (CGM) and
sensor assembly. As part of their earnings release on August 22,
2017, Medtronic announced strong global demand for their diabetes
technology, including the MiniMed 640G in international markets and
the world’s first hybrid closed loop system MiniMed 670G, in the
United States. These systems have increased their installed base
and market share, driving a large increase in CGM demand. As a
result, overall sensor unit demand (a key component of CGMs) has
more than doubled, temporarily outstripping Medtronic’s production
capacity. Medtronic expects to have increased sensor production
capacity by the end of their fourth quarter, which IntriCon
anticipates will drive significantly higher sensor assembly sales
in 2018.
Hearing health sales increased 53.8 percent from the prior-year
third quarter, primarily stemming from growing traction with the
company’s value hearing health initiatives, including 94.1 percent
growth in direct-to-insurance sales, the addition of new private
label direct-to-consumer partners and a $1.8 million contribution
from HHE, partially offset by declining conventional channel
sales.
IntriCon currently owns a 20 percent stake in DeKalb, Ill.-based
HHE. In January 2017, the company exercised its option to acquire
the remaining 80 percent stake in HHE, and that purchase is
expected to close during the 2017 fourth quarter. As previously
discussed, as part of the closing, IntriCon will likely absorb a
portion of the losses allocated to the majority owner. The amount
of losses previously allocated to the majority owner that IntriCon
may have to absorb could range $500,000 and $700,000. Losses
incurred by HHE to date include non-cash amortization, acquisition
related costs and operating results, all of which are related to
prior periods and have no future cash impact.
Since taking its initial stake in HHE, IntriCon has made
substantial progress integrating and optimizing the organization.
During the first part of the year, the company relocated the
business, hired a vice president of direct-to-consumer sales and
introduced IntriCon’s digital hearing aids into the HHE portfolio.
Those activities are paying off, driving key third-quarter metrics
over the sequential quarter including:
- A 49 percent increase in new
leads;
- A more than two-fold increase in net
new hearing aid customers;
- 20 percent growth in backlog; and
- A 38 percent increase in hearing aid
orders.
Said Gorder, “We continued to be pleased with our HHE traction.
Hearing aid orders rose 38 percent over the 2017 second quarter and
82 percent of the devices we’re selling through HHE are IntriCon
devices. We expect continued sequential growth in the fourth
quarter, and throughout 2018.”
In addition to HHE, IntriCon announced in April 2017 that it
entered into an agreement to acquire a 49 percent stake in
Soundperience, headquartered in Frankfurt, Germany. Just recently,
IntriCon made its final payment on the $1.3 million investment.
IntriCon does not anticipate the Soundperience business will have a
notable financial impact on operating results, but rather will
provide the company with exclusive access in the United States to
critical software technology.
Soundperience has designed the first psycho-acoustic way of
analyzing peripheral hearing and central hearing processing,
branded as the Sentibo Smart Brain System. The software is a
sophisticated, self-fitting hearing aid and brain training software
technology that is being used in the German market today, most
notably through IntriCon’s Signison joint venture with
Soundperience. In addition to its international application,
IntriCon began piloting a U.S. cloud-based version of the Sentibo
Smart Brain System during the third quarter.
Said Gorder, “Incorporating self-fitting technology is a
critical step in creating our high-quality, low-cost hearing
healthcare ecosystem. We believe Soundperience’s technology has the
potential to drastically reduce the price of hearing aids, drive
greater access and increase customer satisfaction. We anticipate
piloting the cloud-based system, with our wireless hearing aids in
the U.S. market via Hearing Help Express.”
On the public policy front, in August 2017, President Donald
Trump signed into law H.R. 2430, the U.S. Food and Drug
Administration (FDA) Reauthorization Act, which includes the
Over-the-Counter (OTC) Hearing Aid Act of 2017. The legislation is
designed to enable adults with mild- to moderate-hearing loss to
access OTC hearing aids without being seen by a hearing care
professional.
Concluded Gorder, “Echoing what we have said before, this is an
important step forward in hearing health. The OTC Hearing Aid Act
is designed to provide greater public access to OTC hearing aids at
a lower cost. We believe that this new law can remove the
significant barriers existing today that prevent innovative hearing
health solutions and can provide affordable and accessible
solutions to millions of unserved or underserved Americans. By
signing the OTC Hearing Aid Act into law, we’ve entered a new era
in hearing healthcare. IntriCon is at the forefront and
spearheading an effort to create innovative solutions that provide
greater hearing device access at a much lower cost.”
Looking AheadConcluded Gorder, “The future is bright for
IntriCon. Our medical business is thriving, and our longer-term
prospects are encouraging. Additionally, we continue to gain
momentum in value hearing health, meeting critical milestones,
driving sales and positioning the business for success. Based on
information currently available, we anticipate 2017 fourth-quarter
net sales to range between $22.0 million and $23.0 million,
compared to $17.7 million in the prior-year period and positive
pro-forma EPS (excluding a loss of $0.07 to $0.10 to absorb a
portion of the losses previously allocated to the HHE majority
owner). For the year, we are raising our net sales guidance to
range between $88.1 million and $89.1 million, compared to $68.0
million in 2016. Looking forward to 2018, we anticipate continued
strong growth, with annual revenues ranging from $100 million to
$104 million.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Monday,
November 6, 2017, beginning at 4 p.m. CT. Mark Gorder, president
and chief executive officer, and Scott Longval, chief financial
officer, will review third-quarter performance and discuss the
company’s strategies. To join the conference call, dial:
1-800-289-0548 and provide the conference ID number 5232505 to the
operator. To access the replay, dial 1-888-203-1112 and enter
passcode 5232505.
About IntriCon CorporationHeadquartered in Arden Hills,
Minn., IntriCon Corporation designs, develops and manufactures
miniature and micro-miniature body-worn devices. These advanced
products help medical, healthcare and professional communications
companies meet the rising demand for smaller, more intelligent and
better-connected devices. IntriCon has facilities in the United
States, Asia, the United Kingdom and Europe. The company’s common
stock trades under the symbol “IIN” on the NASDAQ Global Market.
For more information about IntriCon, visit www.intricon.com.
Forward-Looking StatementsStatements made in this release
and in IntriCon’s other public filings and releases that are not
historical facts or that include forward-looking terminology,
including estimates of future results, are “forward-looking
statements” within the meaning of the Securities Exchange Act of
1934, as amended. These forward-looking statements may be affected
by known and unknown risks, uncertainties and other factors that
are beyond IntriCon’s control, and may cause IntriCon’s actual
results, performance or achievements to differ materially from the
results, performance and achievements expressed or implied in the
forward-looking statements. These risks, uncertainties and other
factors are detailed from time to time in the company’s filings
with the Securities and Exchange Commission, including the Annual
Report on Form 10-K for the year ended December 31, 2016. The
company disclaims any intent or obligation to publicly update or
revise any forward-looking statements, regardless of whether new
information becomes available, future developments occur or
otherwise.
INTRICON CORPORATION Consolidated Condensed
Statement of Operations (In Thousands, Except Per Share
Amounts) Three Months Ended Nine Months Ended September
30, September 30, September 30, September 30, 2017
2016 2017 2016
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Sales, net $ 24,034 $ 15,570 $ 66,083 $ 50,262 Cost of sales
16,469 12,028 46,261
37,789 Gross profit 7,565 3,542 19,822 12,473
Operating expenses: Sales and marketing 2,342 1,041 6,857 3,357
General and administrative 2,698 2,221 7,961 6,570 Research and
development 1,047 1,076 3,312 3,562 Restructuring charges -
- - 132 Total
operating expenses 6,087 4,338
18,130 13,621 Operating income (loss) 1,478
(796 ) 1,692 (1,148 ) Interest expense (177 ) (135 ) (548 )
(387 ) Other income (expense) (337 ) (181 )
(328 ) (472 )
Income (loss) from continuing operations
before income taxes and discontinued operations
964
(1,112 ) 816 (2,007 ) Income tax expense 47
33 165 119 Income (loss)
before discontinued operations 917 (1,145 ) 651 (2,126 )
Loss on sale of discontinued operations,
net of income taxes
-
- (164 ) -
Loss from discontinued operations, net of
income taxes
-
(194 ) (128 ) (759 ) Net Income
(loss) 917 (1,339 ) 359
(2,885 ) Less: Loss allocated to non-controlling interest
(186 ) (35 ) (925 ) (106 ) Net Income
(loss) attributable to shareholders $ 1,103 $ (1,304 ) $
1,284 $ (2,779 ) Basic income (loss) per share
attributable to shareholders: Continuing operations $ 0.16 $ (0.16
) $ 0.23 $ (0.32 ) Discontinued operations -
(0.03 ) (0.04 ) (0.12 ) Net income (loss) per share:
$ 0.16 $ (0.19 ) $ 0.19 $ (0.44 ) Diluted income
(loss) per share attributable to shareholders: Continuing
operations $ 0.15 $ (0.16 ) $ 0.22 $ (0.32 ) Discontinued
operations - (0.03 ) (0.04 )
(0.12 ) Net income (loss) per share: $ 0.15 $ (0.19 ) $ 0.18
$ (0.44 ) Average shares outstanding: Basic 6,853
6,796 6,836 6,287 Diluted 7,251 6,796 7,179 6,287
INTRICON CORPORATION Consolidated Condensed
Balance Sheets (in thousands, except per share data)
September 30, December 31,
2017
2016
(unaudited)
Current assets: Cash $ 332 $ 667 Restricted cash 649 595
Accounts receivable, less allowance for doubtful accounts of $235
at September 30, 2017 and $170 at December 31, 2016 6,853 7,289
Inventories 14,899 12,343 Other current assets 1,105 957 Current
assets of discontinued operations - 123
Total current assets 23,838 21,974 Machinery and equipment
40,700 40,152 Less: Accumulated depreciation 34,412
33,546 Net machinery and equipment 6,288 6,606
Goodwill 10,555 10,555 Intangible Assets 2,779 2,920 Investment in
partnerships 1,468 146 Other assets, net 914
1,557 Total assets (a) $ 45,842 $ 43,758
Current liabilities: Current maturities of long-term debt $
2,411 $ 2,346 Accounts payable 8,410 6,722 Accrued salaries, wages
and commissions 2,831 2,413 Other accrued liabilities 2,830 1,914
Liabilities of discontinued operations - 123
Total current liabilities 16,482 13,518 Long-term
debt, less current maturities 7,014 9,284 Other postretirement
benefit obligations 468 501 Accrued pension liabilities 754 737
Other long-term liabilities 685 707
Total liabilities (a) 25,403 24,747 Commitments and contingencies
Shareholders’ equity: Common stock, $1.00 par value per share;
20,000 shares authorized; 6,860 and 6,820 shares issued and
outstanding at September 30, 2017 and December 31, 2016,
respectively 6,860 6,820 Additional paid-in capital 22,140 21,383
Accumulated deficit (7,349 ) (8,633 ) Accumulated other
comprehensive loss (740 ) (1,014 ) Total
shareholders' equity 20,911 18,556 Non-controlling interest
(472 ) 455 Total equity 20,439
19,011 Total liabilities and equity $ 45,842 $ 43,758
(a) Assets of Hearing Help Express (HHE), a
consolidated variable interest entity, that can only be used to
settle obligations of HHE were $6,408 at September 30, 2017 and
$5,159 at December 31, 2016, respectively. Liabilities of HHE, for
which creditors do not have recourse to the general credit of
IntriCon, were $6,167 at September 30, 2017 and $3,833 at December
31, 2016, respectively.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171106006349/en/
At IntriCon:Scott Longval, CFO,
651-604-9526slongval@intricon.comorAt Padilla:Matt Sullivan,
612-455-1709matt.sullivan@padillaco.com
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