IIN - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the IntriCon Second Quarter 2018 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Scott Longval, Chief Financial Officer. Please go ahead, sir.

Scott Longval

Operator. you, Thank

today's on Mark IntriCon's Gorder, Joining call CEO. me is

forward-looking I'd Before Today's our certain IntriCon's are management like uncertainty assumptions remarks subject changes estimates begin, on conference These current based with contains and statements. preface of harbor in to we circumstances. and statements safe the call to are statements. and customary

today's headings that Analysis filing materially Given statements. quarter. Actual forward-looking cause for look at reliance on results from for expectations include, and those these and the like XXXX. these among uncertainties, “Risk XX-K ended a factors of strategic year you I'd the set should Factors” Mark XX, not call. contained differences December such forth in Management's may could of place financial vary Important introduce second undue the our others, IntriCon's results With Discussion operations and that, condition under to

Mark Gorder

Scott to more to After By had today. will most everyone then and second time, quarter. the for that, Thank reviewing you take your chance results we'll have the and this of us review and in financials release. by a highlights our begin quarter second cover press you joining thank for you, like detail, Scott would questions. I key

in strong sales $XX.X year of prior We execute are from another million, initiatives. net the reported excited up to continue quarter million to we $XX.X growth as company announce period. on our The XX.X% key

to strong leading another sales to Our our that record medical, value performance, bottom-line direct-to-end-consumer, top quarter and businesses and health expectations. drive indirect-to-end-consumer hearing of continue surpassed

period. have in the operations the half the of and increase well positioned leased manufacturing our primarily X over designed businesses, primary XXXX, invested systems, presses support In room in system our from XXXX. anticipate business in assembly, or second space providing also the very of quarters, of accommodate the The presses systems. The medical continue Medronic robotic commitments Furthermore, remains XXXX throughout of several added year MiniMed additional company for during headquarters space XXXX. Hills. increasing Arden volume near related capital ongoing Medtronic's customers in continuous foot floor production demand located began gain our quarter second capacity. made increases, to will we delivery XX,XXX the has dollars molding manufacturing company our last by and and the system another to In CGM wireless with systems. components, million glucose components clean was increases, end The the the two of volume XX.X% with the sensor by increased square is key newly half medical medical driven first invest assembly are conjunction XXXX including prior our accessories. at to monitoring Looking the for key order XX we beyond, and We several To equipment. the quarter medical on and

the our transparency last quarterly health more we revenue. businesses, hearing providing health. quarter with to to Beginning started within detail greater Turning provide hearing

value-based value-based Specifically, our we and consumer, streams. indirect-to-end out revenue have broken The distinct three consumer, OEM. legacy direct-to-end

value-based As the business directly consumer. to express nontraditional revenue help from products is to the customers a value-based indirect-to-end sells sell contrast, the our end who the models. reminder, that In through direct-to-consumer end is the hearing our consumer consumer

in consumer are by year and strong and at value-based, in the model. sold to breakout hearing sales the the revenue to the which believe direct-to-end our into drive second Lastly, businesses, respectively. quarter, health XX.X% value consumer growth XX.X% by over growth increased prior our viability hearing health provide indirect-to-end sales posted we XX.X% We health will space. making traditional disability, led progress being Hearing the goal stated product legacy is OEM to this greater

As high-quality HHE, delivering into Within progress health we anticipated, partially to the in care continue these the were make channel. by hearing sales offset conventional underserved declining gains market.

company For October the its with quarter, we HHE XXXX. posted equity the development quarter enhance hearing took since phase the ecosystem HHE’s highest completed consumer Along ethnographic in of position which initial its $X.X of revenue this, of million our of revenue first will centric research, healthcare.

during operations quarter. second inside and increased Additionally, its an representatives from HHE the perspective, sales marketing expertise

we market incorporate Looking This forward, advertising into be refined growth. investments revenue campaigns test to we to our further appropriate and different our to research. to intend continue At time, ethnographic segments. advertising the accelerate data targeted we continue from increase marketing will as

build technology hearing self-fitting and low-cost healthcare creating On the to continue we front, hearing healthcare wireless a that in are critical high-quality, ecosystem. our technologies our value-based technology portfolio, with step

with XXX the Energy most Lumen the product market. product Semiconductors’ family, integrating our industry-leading milliamps hearing NXP's wireless accessories. efficient, aids X.X can industry’s audio volts, devices accessories streaming the we stream IntriCon's Lumen figure. features at NxHXXXX launched audio streaming microphones, By remote Bluetooth current is connecting XXX only Low various we consuming audio Lumen outcome-based During into which XXX X.X power wireless provide incorporates aid hearing which as into wireless quarter, NxHXXXX wireless family system-on-a-chip. IntriCon’s NXP can to The such an

increased greater Progress audio. intend app Brain to of our smart Sentibo the we Shifting Act resulting access launch Lumen Hearing for XXX remote Lumen device allow We this adjustments. the being satisfaction. made designed is which will FDA the in productivity near-term, channel Smart wireless software, product to and quality line on which with and excited public lower Aid fittings, the to XXX is the XXXX. we the integrate intend streaming regulations, both of Also, policy. anticipation new first-time customer are improve In very self-fitting about of integrate of to a in with the with prices,

on bill discussions that based Warren's a the take we will believe several the could legislation regulation XXXX necessary three have in Senator we be continue over it last move signed had to from upto issued this the draft for the with years review in Brain While months XXXX. channels, for August our benefits when to was in have to with through office we can health half hearing thus Smart the U.S. market. low-cost self-fitting our government Furthermore, of the care other FDA in and comments of barriers software in reducing it adoption and Sentibo provide ecosystem, creating a second scheduled mid-August the cost high-quality meeting

Now I'd the over back Scott. to like to turn call

Scott Longval

detail. in Thank financial our you, Mark. more quarter reviewing I'll second begin by results

net year-over-year For $XX.X the XXXX and of $X per $XX.X the million, or up to period. businesses. shareholders million the diluted company the or XX.X% reported quarter. in for growth increase diluted share to income second gains attributable of share, from versus direct-to-end-consumer value-based The $X.XX indirect-to-end-consumer prior net second the sales Medtronic hearing posted $XXX,XXX due in million, was revenue primarily from year health and per quarter, XXXX We $X.XX

from in million, gross The of growth. compared investments other to Second-quarter primarily second advertising Express quarter the the million increased stemmed at The profit business’ stemmed the to were second to and Help prior-year from year. period. margins XX.X%, from drive sales support Operating XX.X% Hearing prior $X.X increase the key related the $X initiatives expenses costs increase up for volume. greater in were quarter

in we investments amended associated we we expenditure to initiatives. capacity capital the press to facility $XX USA our support $XX loan July, million revolving and credit credit million our increasing CIBC – Bank with amended to Additionally, in our release growth its with facility mentioned

diluted June per XXXX. period million, six-month up XX, $X.X the the million, $XX.X income reported share, of million $XXX,XXX, $X.XX the diluted of XX.X% For in shareholders in company XXXX. $X.XX delivered or XXXX, or $XX.X company per to net ended share, from sales The attributable versus

feel we to Based the range net in in available, million. about $XX between guidance, of good and our currently anticipate XXXX we growth opportunities competitive $XX on million sales our markets terms In these the position third-quarter markets. and information

One $XXX.X million XXXX. year, anticipate to $XXX.X sales totaling as we and of final operating like the and $X.X are XX, filing, state XXXX $XX.X note, had to For and guidance, our we December million XX-K increasing reported item our losses I’d between sales net federal million range in we as million. and

to revenue the current our of future for projections million of impact XXXX, remainder year-to-date assets we’re Given income. of the income the reviewing tax offset XXXX and financial deferred utilizing related and $X.X

the provide half additional We in second to expect of XXXX. detail

call to operator questions. back take over I’d the the any so turn we can Now like

Operator

you. comes D'Silva Instructions]. question Andrew from our And from Thank first B. [Operator Riley FBR.

Andrew D'Silva

nice Hey very good thanks and job during afternoon, progress the my quarter. making questions taking for

burden? quarter a it the the on Just that third essentially in to gross as was utilization what about the a we on you here, color quick think base just and first ones few standpoint? expect off, be where you touch can Should improve should slightly are of or manufacturing utilization where experienced some most perhaps facility from new you please quarter utilization, lower second on you margin we

Mark Gorder

June running Thanks move Andy, the it We about started right we out in roughly beginning say took operations facility. the of up in quarter good producing of that’s I process. say and actually in we’re at to now end would to would talking the basically kind product began was occupancy and I when you. there. at of the of new XX% and

experiencing be to moves year on. going We’re utilization greater as the

drag had on end basis the QX a So, points we be higher and forward to expect that the we and utilization. about I mentioned, and at to quarter QX, XXX on of we carry as anticipate and of much would year, by current fully the into up running margin,

Andrew D'Silva

that you had though or that’s the that’s or actually at, where XX points right second minus margin So -- now. plus you on that gross kind basis be should XX.X% quarter of XX

aid and the the for of are business, Act, air what then what like when right the you’ve you’ve not Hearing can much in guidance in that when you guidance or -- elections, them was draft out that's framework I just for got to better expecting. Aid then Okay, than are to hoping hearing graph for a the right or is see the FDA a of to them sense establish point be for as now talk And might to feeling discuss there’s would you guidance big with now? focal that side to really moving up that – the you the to get over OTC you the like before the them urgency the mid-term to just related talked what to you guidance

Mark Gorder

the with of with sense I a I there get putting in Sure – we got Andrew, know want XX, of the but FDA August system – going at idea that the office to on going that year. anticipate pressure draft political to the is this something doing the gauge the the present Senator with to the half guidance that on and that sense Warren’s that we're they the they're self-fitting, and lot to to still into we're I’m FDA with be there – in urgency does find what down having self-fitting that move second don't forward. a we Mark. right the the They out never met with going our not path. want discussion, fit is Sentibo government document, don’t feedback last process We fact we’re the is our where of the I guidance? after that them at to

OTC don't II some know technologies this regarding there to they're exactly Class to that that to remote allows legislation listed we yet So, what an going and devices new of some get are as but place, make changes to and in going have take like into for the adjustments. have self-fitting, wireless they're The connectivity these configuration. for exempt still to

So consistent we with listening very write would some limitations they draft be would a for the that much devices. consumer-electronics of that spec anticipate would

idea adjustments. on happen, do things of can use the that You meeting self-fitting, -- apps wireless but of inclusion limits. allow won't so XXth, that have still we expect we call safety end the be year. power and will like sure think better trained connectivity and to people have after you a guidance will to but it come able about exceeds The not to remote the still not the by we'll centers out the We're

Andrew D'Silva

Okay. Perfect. ahead. Go

Mark Gorder

give I on color that? Did enough you

Andrew D'Silva

That great absolutely. color, Yes. was

I'm ASP really question with looking meaningful a almost showing revenue so, last standpoint at help been just standpoint? understand and guidance. Just released just attachment means that moving rates, data me what gave that's over revised growth color additional double, can my Obviously, on is an for guidance. to looking from you not you a pickup,

ratio really any how to is of it, a or it on kind Just what any looking, whether provide that? of for idea think to be I'm sort .X color would one one with about you one or can X.X

Scott Longval

Medtronic. what to really is of sold for this question. are Andy, by Thanks being tied Scott. Part products this the that is

the that clearly So, system. new transmitter marketing of for comes system, as full they're that, XXXG the along the way part

the see we've where There clearly pick I in has are filings geographically Europe seen public going where attachment look not what that been think that of and rates at than you'll and still we in if over their much higher some to So some up. areas are other places. product past, approved

will manufactured transmitter. rates are attachment the of lower. little talked as and about the be So, we've bit we supplier the sole of But record a

one make So with new to we of XX% those as their progress system one. going the historical XX% for upwards are attachment from benefit of they'll moving to basically rates be to

Andrew D'Silva

when sales standpoint. actually was X:X asking great. was Okay, average point I more – average the And sales an with from price

a I and things year? thing being Or that XX there's a manufacturing So, .X to some we be correlation we and we or sales like the automated think of stuff to we previous from main I that XX years? should to kind that because the with is say, and attachments should modeling figure nature, the facility reason should .X out rates X:X double new variability expect as being would of ask with figured and start

Scott Longval

costs production .X facilities. Yes. pricing back at which obviously also And the of the way than would our to have we cost reduce I be at will less look to That's we'll discussions find it into little the able and customer. that volume a lower X:X to get eventually the probably is some its a we'll good we'll that And closer as part look doing of in point. some one with on

going that's or to me. X:X X.X to necessarily all point its not bleed So closer one to .X, a where to or excuse to

Andrew D'Silva

I it. meaningful. very take still That's

thus new ties of So completely some basically goal top on that then it CGM-only showing adding it XXX%. a And double. to far getting They organically of are that doing. what planning rates adding on the a and attachment have there that you're customers? is equipment to framework And growing growing new now? right market, the Medtronic Is on of going they right with so just kind eventually

Scott Longval

market as have announcement And growth. Yes. thing market system. we've that of that's in more Connect about themed the the their with basically their targeted as pump been Guardian been to and the And we've you little would to their integrated type the product supplier primarily mentioned for recent talked of historically X transmitter the type share so that's market in market into the CGM very entree past, do they that X the additive only know standalone be they

Andrew D'Silva

on Thank right. congratulations Good forward progress. much. very Great. All you luck going and the

Scott Longval

Thank you, Andy.

Operator

comes [Operator next Instructions] Block Jon from our And question from Stifel, Nicolaus.

Jon Block

Great. Good guys. afternoon. Thanks

got just around or and three Mark for and questions I Scott. you think two bounce I I've between might maybe

on what the term to do do I return Maybe about and those one return initiative the So road. if But talk on an improvement that in consumer, function you first things, the the end to there? to guys this help progress the side rates? can direct of you minimize down. the step the at of I'm execute rates that's And know bringing IntriCon with hearing a legislation guessing down can able more

Scott Longval

into hoping the preliminary, taking that probably with this little this can And Jon, classify it during experiments, only very first we model. significant we're it a with device a or process strongly weren't which in the called the time shows its out high-touch first process experimental in we're would on -- it a across roll that is refine the we And the initial that data Today what stick send board. out. new few we're steps thing although we're its And doing concept I doing feel before. is an And and basis of keeping when product we're rates we bit we design is that next is line. experimenting a high-touch which follow-up results. extensive one positive using very months we small put very improvement then hypercare had our the very three of

to of process. this do across sales you XXXX would use you experience us see week our suppose and then how you I way it have, you make it, how doing. roll sure how call works would care how that anticipate is get battery follow-up you adjust out-of-box you a follow-up an when on in put the put it later so they're extensively that to of see all So understand how it, do to and maybe tips we'll and you so on use what in, on, the you it, we the call, the forth, And board do kind out you

a we be over that's And that days continue quite affected think follow-up. stick see it and then we And We how of XX significant. period that say look rate. will

first So that's step. the

Second the they feel over And of it step power hearing have, It's wireless is, some not realized or call it because common that have well, quite typically powerful time back is a have time And use hear using either they its works will a them we that get the right. hearing weak OTC settings on smart self-fitting device, one legislation happen user a on friendly. may device change because passes to don't pilot probably takes And have If its have the some very because send wears next last the enhance the back felt to device to their on consumer never we're won't consumer remotely, consumer they maybe to back all its to where access send but is a mid but allow experience where best we'll today can going they some then they'll won't costly when that adjustments. do out we and technology we're year feel it requirements send which people do those. adjustments. we The the through a kind fit introduce and the of initially a make of the probably then then then new they device the the their to very have okay, if device to not we remote phone the example, for before, connect what kind and us technology going enough. they that loud segment until working after to of cloud their way further device to we'll can aids sounds that acclimate. result they'll aids end our it to technology hearing certain that during of aid was of and absolutely them we can exact can probably that is say, the where to these they put it's

of we all would consumer. even do the the all if do are three continue still additive, and However still care those we the self-fitting have adjustments assist to remote customer to calls do we'd three we

Jon Block

just to and first was the question two pipeline? one somewhat third your I of going the And to the waiting the you to move legislation today, can say, for move point,

Scott Longval

without a OTC Correct. legislation. lot we the can There's do

Jon Block

six XXX% and Perfect. the is And certainly Understood. very a was was comp. up but big you XQ numbers I gave a into a from number, stick consumer remember for see moment. correctly months helpful. can that backing XX%, or part And XXX% hearing if sort implied the of plus indirect-to-end I just clearly the to solid Value-based

consumer, we products of consumer So out about around the as those the the investors try of maybe are analyst versus on and little variability get with disclosure shipping guys of hopefully Scott, arm increase over take be if Will about indirect-to-end you to level some can next and a made I the don't you part but the direct-to-end the this, more sense want just to several that think the just can question bulk? quarter? quarter that quarters? that bit of that, lumpy evolving we you how to particular know, in business talk

Mark Gorder

is it, kind tag think evolving the going I then be first, but I'll to team with of Scott lumpy. way business Jon take it somewhat that and is let's

Some are start stop mode. customers they of these a and in

well what go to to experimentation direct some the and they right as are is figure out are doing formula trying we like consumer. So to

are of they FirstSTREET, we to And ICOT different like several be so methods our if group they that are they Hearing, we've got using – in other EARGO, and are also to have steady, that. don't tense And insurance people people around but are and anything know UnitedHealthcare, lumpy. Scott, these more to MD bit very more all they little I ones you lumpy. add them the and

Scott Longval

No.

from Jon. I expect lumpiness think a good time going have kind do to point. we that very of some and that's seen forward, we And time

Jon Block

job years, walked going And follow-up last I'll tonight. Scott, from past even and one a and XXXX. offline maybe guidance Okay. throughout you over guidance on later with the you Perfect. done really back, you've the just couple then me, the up you But tracking guys of with guys

with in this of You but walked the magnitude increase. the up was really an XQ, XXXX, point inflection

your So between maybe it Thanks attributable hearing, somewhat that's if would great? shared you can to, talk is color for about medical, all guys. that any medical is be time what and

Scott Longval

for we due Thanks predominantly in the sure say one we've the cognition ahead the don't far question. I making Medtronic of of of the it's increase get very that things that Yes. been too ourselves. and to would

have and in With in control we understand are said, that know the closely how is aspirations diabetes we're very they So market. We not growth that being Medtronic with of aggressive them. full we growth. positioned aligned

that. we try kind we even And view to So approach press internal typically we so we surpassed take conservative we to release, and kind again as now of how of have guidance typically how a guided going that that expectations, the mentioned how provide our and of that view off forward. how that's we in business been

Mark Gorder

that. to color more little a add I'll But

lot our on do is press being it what manual, at its -- And requirements. said several Great open the of quarters over things still that manual call automation Its Scott of we couple also doing rapidly reflected up assembly are can the the we're the with release now, we because we as And here next to capability. Medtronic. for meet we're yet next quarters. But up but assembly we and limit installed as will up be capacity very the that think not ramped I the that's have And somewhat guidance. have line. One in try in constrained our facility Fox in Medtronics mentioned of of the a to Scott with

Jon Block

Thanks the Okay. color guys. for the and follow-up it Appreciate with I'll offline.

Scott Longval

Thanks Jon.

Operator

Our & Ryan comes from from next Dougherty question Company. Dick

Dick Ryan

Thanks by for side, taking a some non-Medtronic of said in customers you're migrate made that questions the investment to or my Say guys. large being how the medical will seeing kind there, the broad-based that be you end a contribution shape? customers couple will day? Will at that of

Mark Gorder

we Well, know X can it core and that we and step customers have that competencies more of medical manufacturers. a one, additional Dick, but be by utilize you'll have host we concentrated business, core securing tier that other see also technologies

by are on other We device be We largest Medical. medical covered the of know We supplier. Medtronic offering suppliers one our diabetes do with Smiths would side. work

our that putting things and infrastructure talked opportunities the go customers about working today. with aren't attack out of is other in one currently to currently So, the on we've database are that and

So see longer term two its and us new as existing from inroads think you'll see well. Initially bringing of top perspective kind I you'll tier customers a further customers prongs. in with

Dick Ryan

revenue you fully what's you. analog to and now of digital? your Okay. refresh out can me – your On there digital mix is you Thank products are of rolled what the with hearing health, kind

Scott Longval

Dick, full HHE. digital At products integrated into point with we're this

items is it out – all analog, digital few revenue be might basically So minor point. coming of a there but this at there analog the with

Dick Ryan

Okay. over And UK? can seeing the in you're now discuss you what

Scott Longval

have and the some Basically additional at hearing only the had business of we're process in that sales. the so an that education get category but including in And related it related efforts aid there. on OEM to in OEM, targeted traditional selling business, in streams see those that our revenue were focus and aids, the things UK hearing all not focusing traditional to on and really business on we're but you'll that reduced revenue our that past of our OEM accessories in we that we're trying were core

progress there, make would we're to business. that continue in we restructuring process I say the of So but

Dick Ryan

is what force Okay. there? And the over like current look sales

Scott Longval

four sales direct major people four a in they on call It’s clinics. territories. different the And

Dick Ryan

the Any that has story side and changes although on all? retail. that additional I in channel but the conventional been at seen you've been some discuss kind conventional in mean there, that what's it's you've story widely dynamics going And on of consolidation

Scott Longval

And former mentioned The I use Widex division, to was the Recently you accelerate. continues hearing merge you the don't consolidation Denmark. oligopoly of six. with the out that big which to aid if -- Siemens we call Sivantos,

continue bought they're simply autophone, much serve that only that there's anticipate GAES business the continue all their because up customer, oligopoly, would too five now the we and a We more consolidation five So and distribution the a to are had market. capacity continues to amongst is buys amplifon products buy in from oligopoly the got just consolidation expand -- horizontally. so they to which Spain, that available and will continue, by

Dick Ryan

shaking have with what thinking? shaking that initiative the know that that I domestic audiologists – of the some any you Is change is are in non-captive ADA

Scott Longval

made and assumptions change enough we with we it. The slow in there us basically we benefit learned is that there for change to Not its to that traditional fast the that very tested to from be really. not that distribution going going system

learn want and there to a so they're ear doing We what continue we to to because speak. rail an maintain to connection keep

Dick Ryan

and Okay, great. Thank you congratulations.

Scott Longval

you, Dick. Thank

Operator

call Q&A Executive Gorder, Thank over Chief the Mark I'd turn like to That Mr. today's concludes Officer. you. to now portion.

Mark Gorder

excited appreciate, to the that like very much. I'm to with direction again you day we out I'd you we're reiterate closing taking Once join of time Thank your headed. In the call.

and pursue Americans. new driven quarter us of record only medical the second our We you of to in progress demand, hearing we microelectronic robotic affordable for providing would and businesses. enable but value-based joining key our meet accessible end The position look current you benefit channel molding We Furthermore, expansion continue to consumer our core quarter. performance Thank on to deliver to forward developing that and by meaningful our not competencies. progress updating capacity assembly health direct medical opportunities call. continue assembly, next our millions underserved unserved and hearing us our to heath to from again solutions advancing or to make

Operator

Thank concludes you ladies and gentlemen, today's this teleconference.

You disconnect. may now

Intricon (IIN) 25 Jul 182018 Q2 Earnings call transcript