IIN - Earnings call transcript Q3 2018

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Operator

Good day, everyone and welcome to the IntriCon Third Quarter 2018 Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call 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 third undue the our others, IntriCon's results With Discussion operations and that, condition under to

Mark Gorder

our Scott this how welcome today. shareholders. everyone and is market markets. on positioned ahead. we're and within like to believe very for the our Thank conference Well you equity I'd stages company us our about excited first since basis. is We're joining thank vastly offering global opportunities you, a as of growth growth the new sustained start To the We early diabetes it tremendous has long-term penetrated experienced in remains our core call under

beginning to critical our we provide become $X forefront The glucose underserved a we on and to vision continuous is could impaired value which or Americans. Specifically and space were hearing of a accessible the affordable market component healthcare believe needs billion emerge the is has and solutions to many executing just hearing un-served expanding serving at of diabetics. monitoring to be

changes of million up quarter end to The chance release. continue further had business. The growth as the regulatory initiatives. number year-over-year's to to execute company third in million provide In By review most $XX.X and key time increase you reported indirect strong to announce prior forthcoming hearing press We're will tailwinds. excited a medical revenue of on our period. due gains this believe our the largest addition, of we quarter the XX.X% the in primarily consumer growth to was of $XX.X sales from IntriCon's customer net we year

systems. our CGM expanded We XXXX and headquarters systems, clean primarily very business Looking XXXX of wireless in medical room system we our production third and XXXX to MiniMed at the well and increase demand year including two remains Arden from medical earlier the Medtronic's Hills. operations XX,XXX monitoring providing ongoing prior the our located increased with the was foot system this year support volume company our space in assembly, the Medtronic beyond, positioned businesses, footprint anticipate driven accessories. primary of leasing a quarter The increases, throughout into period. The related remainder XX.X% near components, To continue XXXX. for square by glucose continuous gain will key sensor and manufacturing

at quarter adding required XX the the in several total presses. several made molding or two key commitments quarters, facility. limited robotic last bringing to also increases the dollars invested year-to-date validation continued are Furthermore, have capacity we and customers quarter presses systems of to invest the began over more million it our our volume capital the equipment. During production qualification medical increasing the we during conjunction with assembly In new

transparency to quarterly within year Turning health provide we providing greater health, beginning our this started business revenue. hearing the more detail hearing to of

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

revenue In contrast, is direct business from solves the models. indirect-to-end consumer that Express is products who the through the end Help value value-based non-traditional directly the to customers consumer end reminder our Hearing sell consumer. through a based As consumer our the

hearing Lastly, revenue our believe sold stated this drive model. by growth into goal XX% Hearing being increased to visibility breakout Hearing space. which over led third business health and We the will progress indirect-to-end posted XX.X%. sales companies Help traditional is year in to the product the value-based making the the value legacy of we're OEM provide strong sales growth consumer health quarter prior greater by

the its value-based the HHE several quarter posted aid last Well quarter the We to HHE quarter. of aid further order pace $X.X hearing HHE months fourth believe hearing for be pause consumer healthcare as to over Turning high for the million mission to continues hearing of record temporary only orders. business strengthened on this revenue into IntriCon the putting quality a underserved delivering is a the direct-to-the-end market.

to accelerate we're Looking Within our forward, growth. our other business space. targeted growth advertising different market further value-based will on continue with investments consumer This indirect-to-end to increase further test the partnering we that we research. companies can data from ethnographic refine continue campaigns be incorporate intend this focused our advertising segments. appropriate un-penetrated time, vast revenue to we to marketing accelerate as and of in At

technology the build to technologies. with continue portfolio health self-fitting our front, we value On and hearing wireless technology

hearing it our of introduce ecosystem. FDA's how not OTC under a new being Smart hearing the FDA and is quality, finalizing marketable code FDA quality to be aid Reauthorization product the an our high XXXX. third Act software our help the specifications the the fittings. In for exemplifies of required Act of satisfaction. or code. self-fitting OTC the on aids and the positive received pursue quarter met the by the show designed healthcare and the productivity our Based improve opinion Resulting to of marketed product low self-fitting progress communication OTC which Warren. of such software aid made Corporation having prices, emergence quality competition. policy a in as approval market Bose of first Grassley deadline. hearing the and before such knowledge During Brain public wireless Brain in product we time Shifting after October of this healthcare for the Sentibo customer XXXk we'll Aid Hearing XXXX. In US high XXXX enable Smart late fostering the with come can from The hearing greater joint timing and category spurring recent to OTC both Senators FDA XXXX OTC desire on advance aid well feedback, hearing August channel Furthermore is and innovation in regulations based by could new self-fitting for cost cost regulation into to despite Sentibo finalizes a lower increased on access low could FDA FDA the over-the-counter hearing self-fitting

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

Scott Longval

our Mark. you by Thank begin reviewing details. I'll quarter in more results financial third

quarter primarily year-over-year and reported our from per value-based consumer or gains for million shareholders share per net growth third to business. diluted or versus XXXX increase due the of customer the income million indirect-to-end $X.X in For revenue hearing in the the million The million net quarter. $X.XX third company help sales $XX.X from $X.X largest We the up posted to period. attributable of $X.XX XXXX $XX.X was prior the XX.X% medical year share

the greater year's Operating cost expenses associated prior stemmed ramp manufacturing profit by margins for to less with increase slightly certain million sales in at our facility. period. advertising XX.X% sales and cost year the a business favorable from up to the quarter. to new volume the were gross up stemmed quarter public growth increase The offset were key investments third related increased million $X.X HHE, associated mix compared XX.X% from from cost Third $X.X in second primarily investments prior quarter in support the to The drive offering.

ended the in million attributable versus diluted $X.XX We million shareholders delivered For the net income $X.XX up per IntriCon XXXX. to million per or share of XX, nine-month million diluted from $X.X in or $XX.X $XX.X September XXXX reported $X.X of share period sales XXXX. XX.X%

and to from off the in underwriting board debt repurchases the offering stock the public offering shares $XX proceeds these of we used and X,XXX,XXX During $XX shares and All short-term share. pay We by and at the after management invested per completed fees, deducting offering commissions sold public million. stock. to remainder IntriCon offering price portion of a our more securities. totaled common investment proceeds the from discount in a expenses the than at were bank Net quarter the of estimated

transaction As This technology Allowing we balance sheet, be and noted in partnerships. providing to growth the strategic and our de-lever pursuit will accomplished past, of our multi-faceted. that. in capital accelerate raising opportunistic and rationale shareholder in our capital base be more to us reconstituting

and $XX quarter Lastly, in to range XXXX the to financial Based anticipate strong position Accordingly, XXXX opportunities tightening annual between our information range we're of success. net extremely for sales terms competitive to for numerous positioned on we growth fourth advantages million continued million we're $XX and between $XXX.X sales well available, guidance our currently million. million. given $XXX.X guidance

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

Operator

[Operator we'll with first question FBR. from our Instructions] B. D'Silva Riley Andrew take

Andrew D'Silva

quick on help recent hearing to Just direct-to-consumer intend using the drive how ones from the maybe couple elaborate within bit here. you on you a Could little a health raise just proceeds growth channel?

Mark Gorder

Andy the thanks for question. Yes,

deploy capital offering As we're to our a the was bring portfolio, self-fitting how couple that that heavily that the see Obviously the market. accelerate we through growth went methodologies to in idea of about whilst furthering in we doing we would we different in self-fitting and technology fashions. the investing talked in technologies, associated DTC to

see opportunities HHE. also our our direct-to-consumer within space to We with accelerate marketing

market. going looking And look our measurable that could indications that partnering players in we're traction, down So other capital of there underserved this to indirect-to-end accelerate as penetration we're [ph] terms lastly the help we're with fastly advertising. certain ways at at in the space making large deploy more believe that is in into looking consumer into we're closely we we of very

about those require deploy most to would that So areas couple partnerships look some some so that of capital. that's of would co-investment, we likely

Andrew D'Silva

how noise sense lot a change the connected - about you in Medtronic that a you insulin insulin there's market the move some the of lately makes share that might away from heard now? and or from to and right and been related pumps. anything market had lot view how pens or then do of have there they market Is Okay in

Mark Gorder

are different. that's diabetics looking I'll pumps used individuals target pumps technology more look in at that myself. allowing for won't just continuous you and that products managing speak for monitors use when We view manage speak for Medtronic like are levels. I population to I be their sugar in to connected personally think glucose insulin heavily pins Patients instant blood

the So we really think products competing not marketplace. in they're

Andrew D'Silva

year. it new we should quarter, into was expect got far the the as as going grow and facilities. of to the obviously that the ramping of up part I'm somewhat second from sure sequential back half gross Okay the margins dip rebound

Mark Gorder

on into going margins up talked about things maybe the two the the drag fourth margin getting and new factor the from But potentially quarter. had into the previous drag drag bit revenue direct-to-consumer first. there, Andy on really heading little a the gross on that some running and and we we see over Yes we this sequential facility of and was other the the quarter notable lower

had the a obviously fourth that that going quarter and we in down pull rebound little So to expect forward.

strengthening we're seeing So anticipating from a sequential standpoint margins.

Andrew D'Silva

just just and it's question, related to Okay general news. last

modeling of One changes material we contracts any were is them, value steady any of or been clients your forward? inventory about any impacting that that it as some added suppliers kind other state Medtronic's your there changes think of that's has the in of unfavorable with going there announced were

Mark Gorder

Yes customer, in we've capital. requirements any won't conducted there on the anyone working any business about our that and of of changes way I with customers been terms but their large - hasn't talk

Andrew D'Silva

luck Great. going forward good this you Perfect. year. Thank much so and

Operator

next go to we'll Jon with Instructions] [Operator Block Stifel.

Jon Block

on In with in the a quarters roughly with small need where of inventory me or trying There level you maybe sensors was that go and [indiscernible] Medtronic with to weeks at many that optimal and question is higher question. and that subsequent maybe I'm that has the the last if sort quarters? still just suboptimal how you for can to comment guys. have Medtronic, regards stands where handful intra to Maybe high this that is on hand go on built

Mark Gorder

of on the the customers reiterate hand. what be for have I had that would of with would they we one give I specific of unfavorable in sort had of question. any can't into that forward on our impact just may seen kind not into us buildup sort and of customers we've and result beyond not Thanks Medtronic holding. as on Again any discussions quarter in or based go fourth our we what may inventory terms

Jon Block

hearing like the little seems on I'm same it could out you that months return the in more strengthened What trialing and gears our just shift quarter curious Maybe but seems positive bit for was know why some that provide as some you third for to the to quarter side couple saw and direct-to-consumer of XXXX. have it you pause marketing can right quite #q all detail. versus Okay job XQ, that earlier. XXXX the out you I if a caused you said that over HHE. more the just past letting if a do HHE tried different experience of initiatives weakness didn't XQ specific did better you

Mark Gorder

I'll Jon take Yes that one.

It's the we've kind on we that these optimal we're as out model, build we're try to trying a be stool using our or optimal and print got focus we're advertising and for so it's One the that business, think the mail telesales formula our three leads. business our of HHE. new of to driving thing figure in expanding doing that can order legs to very into they're positive drive media businesses we outbound trying advertising new

formula Some higher debt worked issue some some have as trying those what said bad and I which as in through that to for that, we some rebounding unit been I that made Scott we're this out anticipated from some the and overall from did adjustments we of think sources would we sales resulted new handling we bringing and experimenting we're and in didn't optimal and of have the figure worked think and which of is. and through go leads experimenting to we'll the that time-to-time

going knowledge the every that what see model and So going it's would I didn't I growing knows corrected And I think some an experiment forward. or we of gaining I our hope, hiccups formula, hope is, it produce better add, market we be for would and driven we the time-to-time forward. learn anticipate it's we at exact to as tour, that with and we're did this would it the number from additional results we're we've trying backup had to would we're Nobody day it. going emerging that confident getting

Scott Longval

add Jon one this to is Scott. maybe I question, to comment just other response. want Mark's your

If you days this XX recognizes recall roughly we business after revenue ship product.

Jon Block

Yes.

Scott Longval

saw and shipments from in June we've where weakness results higher the financial again now May is to statements bullish confident June that So and direction. a since last the again, seen that in fourth where and start really seeing the July that we're we produced trend was May, rebound [indiscernible] we feeling more and lot of and continue going significantly the in forward months and orders is

Jon Block

same just answer I that Okay that if we're you apologies and page. want with commentary, make to just my but on the helpful sure

and in commentary me or let are HHE that when to and So going XQ the about about think you XQ, in we think that makes XQ the further. see strong hearing sense out converged if that orders should laid we really we the know

Scott Longval

the would both. answer it does. is I No say

fourth here saw last over in [indiscernible] same to already October we particularly see orders strengthening November strength. to we're and a months So in we've see continuing starting few or in up been and that days the

doing and So advertising, is so of to talked the last after we clearly about what quarter. of over the to have the as eight tweaking be in four we've able to channels go kind been good strategies, the Mark that through three remaining that we methodology be feel months that lot proving we about we're we'll of a build confidence right terms weeks what our of the

Mark Gorder

we and those the what saying, a have we're areas in good telesales. add aggressive more mail And we on into confident and advertising to get print push formula, Scott of order, media grasp terms marketing once Jon spend intend to was outbound of three

will we investment community more rollout as we aggressive in to So that plan with share XXXX. start a the

Jon Block

that? how down do Bose can customer road. facility One, and need thinking maybe Thanks and you an And an talk ISO I I do that if the they for think of your time. be offline. on perfect the am so But me announcement Or could for maybe indirect-to-end Okay, would questions. if self-fitting about somewhere they the technology I sort guess this correct? last from is actually one two they I certified correctly then, the guys

Mark Gorder

Jon. serve various Bose in good companies Very FDA where consumer need do positioned for business well question And yes to need they indirect-to-end a our devices yes, XXXk certified they that are those do are facility, devices And our we're customers. we private labeling like approved.

arises. an opportunity if welcome would partner opportunity such with endeavor Bose we the So the to on

Jon Block

helpful. for your Very Thanks time guys.

Operator

questions no Officer. turn to the like to Gorder, I with Chief would queue. Mark call further And back in over the Executive

Mark Gorder

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

provide performance to mission solid our hearing We health enabling to joining again business. you on channel you our based value Furthermore, to full call. us key affordable underserved consumer accessible continue millions in continue hearing of advance forward Americans. solutions to to health un-served the medical deliver updating to direct-to-end by We and we driven Thank or look our on execute for year and February. results our

Operator

you conclude does thank your We today's This for participation. conference.

now disconnect. may You

Intricon (IIN) 5 Nov 182018 Q3 Earnings call transcript