Medical and Value Hearing Health Performance
Drive Double-Digit Fourth Quarter Sales Gains and Record
Year
IntriCon Corporation (NASDAQ: IIN), a designer,
developer, manufacturer and distributor of miniature and
micro-miniature body-worn devices, today announced financial
results for its fourth quarter and year ended December 31,
2017.
Highlights:
- Record full-year revenue of $88.3
million increased 29.9 percent over 2016;
- 2017 full-year gross margin of 30.0
percent, also a record, was up from 25.1 percent in the prior
year;
- Fourth-quarter net sales rose to $22.2
million, up 25.2 percent from the prior-year fourth quarter;
- Sales to IntriCon’s largest medical
customer rose 41.3 percent from the 2016 fourth quarter;
- Hearing Help Express (HHE) hearing aid
orders increased 173 percent in the quarter over prior-year fourth
quarter;
- Gross margin for the quarter was 30.0
percent, up significantly from 25.9 percent in the year-earlier
period; and,
- IntriCon reported fourth-quarter
diluted net income per share of $0.07 versus a ($0.27) loss in the
2016 fourth quarter.
Financial ResultsFor the 2017 fourth quarter, the company
reported net sales of $22.2 million, up 25.2 percent from $17.7
million in the prior-year period. The increase was primarily due to
year-over-year revenue gains from IntriCon’s largest medical
customer and continued traction in value hearing health.
IntriCon posted net income attributable to shareholders of
$518,000, or $0.07 per diluted share, versus a net loss
attributable to shareholders of ($1.8) million, or ($0.27) per
share, for the 2016 fourth quarter. During the quarter, the company
also closed on the acquisition of the remaining 80 percent equity
interest in HHE. The transaction resulted in an $880,000 decrease
in Shareholders’ equity, but did not have an impact on net
income.
“Our medical and value hearing health businesses continue to
drive strong top- and bottom-line performance, leading to record
annual sales,” said Mark S. Gorder, president and chief executive
officer of IntriCon. “During the fourth quarter, we further
advanced our new direct-to-consumer channel to deliver superior,
outcomes-based, affordable hearing healthcare. In addition to
completing our acquisition of HHE and continuing to deliver
quarter-over-quarter progress, we also made further investments in
Soundperience—a German-based provider of key self-fitting
technology.”
Fourth-quarter gross profit margins were 30.0 percent, up
significantly from 25.2 percent in the prior-year fourth quarter.
The increase primarily stemmed from greater volume and stronger HHE
margins in 2017, as more IntriCon devices are being sold through
this channel.
Operating expenses for the fourth quarter were $6.1 million,
compared to $5.1 million in the prior-year period. The increase was
largely due to increased advertising investments at HHE in 2017,
and other key initiatives to drive the business’ growth.
For the year ended December 31, 2017, IntriCon reported record
sales of $88.3 million, up 29.9 percent from $68.0 million in 2016.
The company delivered net income attributable to shareholders of
$1.8 million, or $0.25 per diluted share, versus a net loss
attributable to shareholders of ($4.6) million, or ($0.71) per
diluted share, in 2016.
Business UpdateSales in IntriCon’s medical business
increased 27.2 percent in the 2017 fourth quarter over the
prior-year period. The gain was primarily driven by the ongoing
production of wireless glucose monitoring systems for IntriCon's
largest medical customer. The company remains very well positioned
with this customer for 2018, providing key system components
including, the continuous glucose monitor (CGM), sensor assembly
and related accessories. IntriCon anticipates system demand to
further increase throughout 2018.
IntriCon’s overall medical business demand also continues to
strengthen. Over the last six months, key medical customers have
invested, or made commitments to invest, in over $3 million in
capital equipment. In response to these commitments, IntriCon is
expanding its manufacturing footprint. First, the company is
phasing out select legacy hearing health product lines in its
existing Minnesota facility to free up manufacturing floor space.
Second, in the current quarter, IntriCon intends to secure
additional manufacturing floor space near its existing locations in
Minnesota, to accommodate robotic assembly of medical components
and systems. In conjunction with the added space, IntriCon is also
increasing its molding capacity. During the 2017 fourth quarter,
the company added six presses and has another five presses on order
for delivery in the first half of 2018.
On the hearing health front, total sales increased 31.5 percent
from the prior-year fourth quarter, primarily stemming from growing
traction with the company’s value hearing health initiatives,
including 28.0 percent growth in direct-to-insurance sales, the
addition of new private label direct-to-consumer hearing device
partners and a $1.9 million contribution from HHE, partially offset
by declining conventional channel sales.
During the fourth quarter, IntriCon completed its acquisition of
HHE, acquiring the remaining 80-percent stake of the DeKalb,
Ill.-based, direct-to-consumer mail order hearing aid provider.
Terms of the transaction included $650,000 in cash and repayment of
approximately $1.8 million in debt to HHE’s 80-percent holder.
Said Gorder, “Completing the HHE acquisition gives IntriCon
direct access to consumers and the emerging value-based hearing
healthcare market. HHE offers a lower-priced alternative for
consumers to purchase devices directly—circumventing layers of
costs associated with the conventional hearing aid channel.”
IntriCon continues to make progress integrating and optimizing
HHE. During the fourth quarter, the company continued to increase
its marketing and sales assets by hiring a professional web
developer and graphic designer. In addition, new strategic
relationships with third-party marketing firms were consummated.
These efforts helped drive key fourth-quarter metrics over the
sequential quarter including:
- A 149 percent increase in new
leads;
- A 24 percent increase in net new
hearing aid customers; and
- A 6 percent increase in hearing aid
orders.
During the fourth quarter, IntriCon made payments to secure its
49 percent equity interest in Frankfurt, Germany-based,
Soundperience. Soundperience has designed the first psycho-acoustic
method 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.
Said Gorder, “Having access to self-fitting technology is a
critical step in creating our high-quality, low-cost hearing
healthcare ecosystem. This technology, which has been widely tested
and praised in Europe, will help eliminate cost and other barriers
of adoption in the U.S. market. We are excited to deploy this
state-of-the-art technology once the FDA has finalized the
regulation mandated by the OTC Hearing Aid Act of 2017.”
Also during the quarter, IntriCon amended its credit facilities
with CIBC Bank USA (formerly The PrivateBank and Trust Company).
The revised lending structure gives the company financial
flexibility to move quickly on value hearing-health opportunities
that arise, and supports IntriCon’s thriving medical business and
related working capital growth requirements.
Looking AheadConcluded Gorder, “2017 was transformational
year for IntriCon. We posted record top-line growth in our key
medical and value hearing health businesses. Importantly, we began
to strip away the significant barriers that prevent innovative
hearing health solutions, and through HHE, we’re now providing
affordable and accessible solutions to millions of unserved or
underserved Americans. Additionally, we were able to strengthen key
medical relationships, enabling meaningful growth opportunities. We
enter 2018 with the assets in place to deliver superior
outcomes-based affordable hearing healthcare, drive continued
growth in our medical business and reward our shareholders with
value.
“Based on information currently available, we anticipate 2018
first-quarter net sales, which incorporated new revenue recognition
standards, to range between $23 million and $24 million. For the
year, we are increasing our sales estimate, as we now anticipate
sales to range between $103 million to $107 million.”
Conference Call TodayAs previously announced, the company
will hold an investment community conference call today, Monday,
February 12, 2018, beginning at 4 p.m. CT. Mark Gorder, president
and chief executive officer, and Scott Longval, chief financial
officer, will review fourth-quarter performance and discuss the
company’s strategies. To join the conference call,
dial: 1-888-740-6139 and provide the conference ID number
5521522 to the operator. To access the replay, dial 1-888-203-1112
and enter passcode 5521522.
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 CORPORATIONConsolidated
Condensed Statement of Operations(In Thousands, Except Per
Share Amounts)
Three Months Ended Twelve Months Ended December 31,
December 31, December 31, December 31, 2017 2016 2017
2016
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Sales, net $ 22,227 $ 17,747 $ 88,310 $ 68,009 Cost of sales
15,558 13,148 61,819
50,937 Gross profit 6,669 4,599 26,491 17,072
Operating expenses: Sales and marketing 2,590 1,343 9,447 4,700
General and administrative 2,378 2,583 10,339 9,154 Research and
development 1,146 1,126 4,458 4,688 Restructuring charges -
- - 132 Total
operating expenses 6,114 5,052
24,244 18,674 Operating income (loss) 555 (453
) 2,247 (1,602 ) Interest expense (168 ) (167 ) (716 ) (553
) Other income (expense) (39 ) (129 ) (367 )
(602 ) Income (loss) from continuing operations before
income taxes and discontinued operations 348 (749 ) 1,164 (2,757 )
Income tax (benefit) expense (157 ) 97
8 217 Income (loss) before discontinued
operations 505 (846 ) 1,156 (2,974 ) Loss from discontinued
operations, net of income taxes - (1,014 ) (128 ) (1,770 )
Loss on sale of discontinued operations, net of income taxes
- - (164 ) - Net
Income (loss) 505 (1,860 ) 864
(4,744 ) Less: Loss allocated to non-controlling
interest (13 ) (51 ) (938 ) (157 ) Net
Income (loss) attributable to shareholders $ 518 $ (1,809 )
$ 1,802 $ (4,587 ) Basic income (loss) per
share attributable to shareholders: Continuing operations $ 0.08 $
(0.12 ) $ 0.31 $ (0.43 ) Discontinued operations -
(0.15 ) (0.04 ) (0.27 ) Net income (loss) per
share: $ 0.08 $ (0.27 ) $ 0.26 $ (0.71 )
Diluted income (loss) per share attributable to shareholders:
Continuing operations $ 0.07 $ (0.12 ) $ 0.29 $ (0.43 )
Discontinued operations - (0.15 ) (0.04
) (0.27 ) Net income (loss) per share: $ 0.07 $ (0.27
) $ 0.25 $ (0.71 ) Average shares outstanding: Basic
6,883 6,805 6,852 6,497 Diluted 7,646 6,805 7,307 6,497
INTRICON CORPORATIONConsolidated
Condensed Balance Sheets(in thousands, except per share
data)
December 31, December 31,
2016
2015
(unaudited)
Current assets: Cash $ 373 $ 667 Restricted cash 644 595
Accounts receivable, less allowance for doubtful accounts of $332
at December 31, 2017 and $170 at December 31, 2016 9,052 7,289
Inventories 15,397 12,343 Other current assets 1,544 957 Current
assets of discontinued operations - 123
Total current assets 27,010 21,974 Machinery and equipment
40,124 40,152 Less: Accumulated depreciation 32,949
33,546 Net machinery and equipment 7,175 6,606
Goodwill 10,808 10,555 Intangible Assets 2,740 2,920 Investment in
partnerships 1,616 146 Other assets, net 3,835 1,557 Other assets
of discontinued operations - - Total
assets (a) $ 53,184 $ 43,758 Current
liabilities: Current maturities of long-term debt $ 2,040 $ 2,346
Accounts payable 10,423 6,722 Accrued salaries, wages and
commissions 3,113 2,413 Other accrued liabilities 3,224 1,914
Liabilities of discontinued operations - 123
Total current liabilities 18,800 13,518 Long-term
debt, less current maturities 9,321 9,284 Other postretirement
benefit obligations 455 501 Accrued pension liabilities 772 737
Other long-term liabilities 3,172 707
Total liabilities (a) 32,520 24,747 Commitments and contingencies
Shareholders’ equity: Common stock, $1.00 par value per share;
20,000 shares authorized; 6,900 and 6,820 shares issued and
outstanding at December 31, 2017 and December 31, 2016,
respectively 6,900 6,820 Additional paid-in capital 21,581 21,383
Accumulated deficit (6,831 ) (8,633 ) Accumulated other
comprehensive loss (733 ) (1,014 ) Total
shareholders' equity 20,917 18,556 Non-controlling interest
(253 ) 455 Total equity 20,664
19,011 Total liabilities and equity $ 53,184 $ 43,758
(a) Assets of Hearing Help Express (HHE), a
consolidated variable interest entity (at the end of 2016), that
can only be used to settle obligations of HHE were $5,159 at
December 31, 2016. Liabilities of HHE, for which creditors do not
have recourse to the general credit of IntriCon, were $3,833 at
December 31, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180212006225/en/
At IntriCon:Scott Longval,
CFO, 651-604-9526slongval@intricon.comorAt Padilla:Matt
Sullivan, 612-455-1709matt.sullivan@padillaco.com
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