IIN - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentleman, and welcome to the IntriCon Corp.

First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions to how to participate will follow at that time. [Operator instructions].

conference being this reminder, a call recorded. is As introduce for today's would now Ms. host to like I conference, your Leigh Salvo of Investor Relations. Ma’am, you may begin.

Leigh Salvo

Jimmy. you, Thank

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

the vary differences statements. materially performance. should you December that, ended place reliance Operation Actual not Factors company's XX-K Longval, in in results call Analysis we for Discussion XX, forward-looking call. forth introduce CEO will for could may others, and the for quarter Given factors our these uncertainties, open now of and the Risk set CFO I'd then of today's in from on undue review the the questions. contained include, expectations Mark that filing first Scott and these With a Condition company's headings IntriCon's financial Financial those detail, Gorder to Results your Management's results under Important like cover more the cause when the among XXXX. of year such and

Mark Gorder

OTC aid Hearing and sales our seek advertising marketing in our laid prudently to to everyone included: at demands to business, pursue at Thank XXXX, and These partnerships a market; we revenue meet solid to today. our the of two, while with each year. and then three, Help direct development for leverage you, start hearing to opportunities four, emerging start tempering the one, progress thank out our diversify business Leigh. We're the And Biotelemetry you entrants with Medtronic; priorities the in with the in us programs. of best-in-class joining initiatives Express off to competencies our continue made base; volume Medical expand on core

and in lies with the products, IntriCon's of around core that and As effectiveness devices brief our the assemblies. competency body-worn microelectronics, and mobility people enhancing them commitment a complete reminder to to devices to assemblies people micromechanical micro-miniature connect

as is few the take primary well near call and discuss highlights each our Scott will focused to Health. of and and Medical the segments to next in for the I'd Hearing for on XXXX. core today I business our a turn performance long-term to like minutes segments, review detailed each Our for over recent market goals as more Biotelemetry our then financial guidance of businesses those two of and

value-added with in this of a for We CGM primary then products open A platforms. supplier we two and increased our the key diabetes will our segment our continuous to integrated CGM. their monitors, and insulin questions. with all including are relationship from your their These comes revenues into revenues categories: are pumps in in approximately contributor standalone longstanding where majority QX. the total Medtronic’s glucose XX% represented of revenue division designed current call MiniMed distributed Starting year-over-year key Medical XX.X% Biotelemetry,

an market Medtronic per X% average share pump be estimated insulin worldwide users. is approximately year. the reference of point X.X at roughly estimated market a this million has growing is As to which of XX%

CGM this an use. has within trend been increasing Importantly, there of category

insulin X more pump driven CGM to rates We closed hybrid closed continue to ongoing system loop the XXXG loop benefit new its double that pump first diabetes. from This systems. has system, system conversion type of to Medtronic's MiniMed than for legacy attachment

Conversions multiple were to month to Medtronic events. Connect their is Cross and just following monitoring mid continuous Guardian last Connect Blue XXXX. approximately market Medtronic or their The standalone designed billion its entered on commenced member agreement The and to growing February X the has XXX,XXX designed $X in recently Medtronic in agreement We Shield in at new MDI which system. last in this US pump about late and injection Europe new in Earlier the into year. global the a a with market the high based daily Minnesota. improve access those standalone type with CGM management Connect, CGM Guardian reminder, of category first [Convertive]. year value As for Guardian to pumps the approval outcomes-based about greater designed is glucose one-third therapy low XX% Blue a of people only help added Medtronic's today in glucose of CE provide at using as Mark commentary per system with

the continuous as the transmitter addition, support. accessories does broader MiniMed with and the of glucose In Guardian the demand of XXXG Connect launch transmitter true the will demand increases for the so rollout the for

in As our other from benefit we this all with market can customer. for ahead volumes delighted a a that capabilities. result factors manufacturing were greater the of roads beginning in important in volumes to above, segments customer design, we important in large of noted runway with medical believe long diabetes, we making in and for to XXXX be secure have development are a programming coils their recently pacemaker used proprietary We devices. new our medical We XXXX. anticipate modest Outside

opportunity that I I resources priorities wide support of a and array believe devices as earlier, support business. technologically smaller our our develop have leverage is and capabilities core of expansion are increasing to our diversification Medical more lightweight to ahead, a devices. noted competencies advanced, to to medical and tremendous we our Looking the of one

of validation are making our the exceptionally the progress new and manufacturing front, I’m On lines manufacturing the and pleased facilities. in with qualification production our equipment we in

the medical job and great necessary lines meeting X rigorous requirements our not qualify a manufacturer product done has to but as team Class devices often just a components. Our facilities and exceeding of

equipment will and our and of of approximately XX% the at We this related customer XXXX. business production completion recent capacity lines the complete we to to us operating for the positioning growth years. anticipate been expansion anticipated validation demand our and by partner we've to Upon meet be several As end and where is longstanding next excel of the able all foster foundation we why qualification relationships. having

Turning flat quarter segment, approximately business represented first of and the Hearing total was Health to XX.X% our relatively over revenue. revenue core our prior second year

period. customers sell recent distinct progress, this well non-traditional business. Within to through indirect goals next current the take over consumer, channels few we our support. value outcome-based $X.X million and prior and or revenue technology down to due end we a the is large have XXXX, this year end market: user we we legacy through solutions Health like was near-term by which quarter that The directly revenue in as and from a approach seek market service the who to modest of partners Starting during based highlight low-cost predominantly of slightly opportunities direct through the with to to customers high-quality, mean to consumer Our as to including comprehensive cycle deliver posted to ecosystem products, three customer. of the consumer, our Hearing of with end minutes largely the hearing models, healthcare to to indirect impact quarter OEM. comes from first to I'd of a product segment business end our some

about to attributes this all opportunities market to focused a vast underpenetrated we our the on market this that space. greatest strong are we a We Pursuing to a and be consumer advantage early in in Existing emerging business in well as our on and believe of marketing potential. balance to our other additional identifying best-in-class business priorities. to we partnerships partner. participant leaders sheet is have are rapidly enable one health as particular, have brand indirect hearing competitive dominant drive us key placed growth awareness, the identifying consumer are advertising will expertise, market accelerate that in priority seek In excited the volume and

market positions are own opportunity. competency the US emerging very far our for our aids coupled including our exciting us competition state-of-the-art better, unique the aids. accessible fitting the market the ability and care ability digital and excellence this of have ahead hearing of partners with self that solutions sophisticated excited enter customer affordable technologies at OTC I’m wireless, DTC software transition deliver who resident operations hearing new to in with seeking confident record more our for track We to about combined in

Help direct Turning consumer in revenue end XXXX million. our to Hearing the business. Express first to $X.X quarter was of

gained am the we taking Pending confident IntriCon legislation health and in have are channel. hearing past while care hearing thorough building in to approach to we plan our a direct to to to to are is market incorporating near-term In US that solutions highlighted the have the thoughtful market I we initiatives this assure emerging we taking steps the directly necessary well-positioned emerging expand continue that approach, ecosystem amended an to very insights dramatically potential change address to the and market. has As we opportunity. sales deliver affordable this of the aid the in

We emerges. period. sold channel model in revenue the very X.X% XXXX, see health direct Legacy end million is in OEM the first long-term as and the this of about opportunity continue an increase hearing into quarter to remain to excited meaningful year of channel growth consumer revenue our was potential which prior being the traditional over $X.X

announcing to to -- turn over exciting the like call comment would our I our I minutes to review financials take few to we announced detail, team the Before earlier we more quarter leadership first Scott changes are in to a today. on

market Michael who the from succeeds increased leadership oriented as business $XX.X Board on He numerous and core than our Directors, XX has contributions. of IntriCon business-to-business On million in expanded to more since since and successful I $XXX the Ray and years served Phil further concentrators the for as in of of McKenna IntriCon’s opportunities. portable executive assumes First, our leader for an into million of and his thank XXXX, Chairman Longvals has his we CEO service Smith provided behalf our is to Under lightweight we instrumental growth and would as Directors. to in XXXX. Board been of team XXXX his company I years welcome served has his excellent would Scott strategic in longstanding Chief wealth delighted faithful like to in Director And we effective also role and Scott announce Board role joined was delighted to well commercialization. IntriCon business, promotion forward the as I’m financial the hearing additional and wish him leadership. channel. Huggenberger Phil and in previously XXXX Operating Officer our medical to immediately. to XX through congratulate company’s He expand Chairman. invaluable the insight as to he like guiding market specifically device experience the are especially both Board on he Inogen, opportunity President the look Ray and and incredible as His a brings be oxygen where currently expansion health of we to our will of a our to vision direct-to-consumer Mr. McKenna in our retirement. market.

has well During and product has been day-to-day financing. executive delivery, equity our his several confident of our driven skills, an assumes serve. quality forward effective mission accessible for and leadership In deep key in leader to tenure mobility we life to the I’m ideal of been as our look the that care of completion the general the and human expanded Scott our of steward and and the of he provide role. that this knowledge him operations, recognized the devices and affordable instrumental responsibility in make business his Scott's furthering strong administration. body-worn enhancing leadership expanded management growth his assume role including for manufacturing, being those capital of control, the acquisitions as of We effectiveness improve revenue resources and resources, quality

turn Now, like the I Scott. over would to to call

Scott Longval

you, Thank Mark.

disciplines assume to teams the to I and delivery products talented of excited our the are working forward of continued that role Operating many critical with Chief to innovative needs. quality that I’m First, meets look our highest our Officer. additional across customers'

to the financial Turning results.

primarily reported medical markets. up due period. to and $XX.X quarter XX.X% coil gains in net year-over-year $XX.X year first revenue increase the of our diabetes million, prior was from from The the million For we revenue XXXX

qualification gross year million down in expenses quarter. first year the recent Gross and XX.X%, capacity prior quarter $X.X Operating and to First validation were million, manufacturing the quarter margins $X.X from XX.X% excess margins the for related and the were compared XXXX $X.XX consumer were share, increase to to in expansion. constrained prior investments ongoing expense or The $XXX,XXX by shareholders for per increased share stemmed support our end IntriCon period. development business diluted advertising $XXX,XXX posted first income in diluted per from initiatives. net to attributable key related costs to quarter. or versus direct new $X.XX the of

reiterating to million full of for of previously stated XXXX, In to guidance and million XX% terms included the our $XXX are revenue margins which year of XX.X%. we guidance, gross $XXX

be full gross the relatively anticipate growth expansion I weighted of headwinds growth positioned to core depreciation. related global noted and consistent our customer continuous well year-over-year product commercial more the XXXX, significant related improvement and to margin continue a ongoing half and be the from our revenue year of to impact margins in to we despite anticipate anticipate We for and pending certain are year. Long-term with long-term launch our contract of second increase largest believe timing we for XXXX now manufacturing orders the businesses. XXXX the towards In customers’ will

leverage anticipate expand manufacturing we for high the our to time addition In will margins able that gross revenue over to opportunities be XX% to current we infrastructure growth our range.

turn back operator we over your call calls. so the would to can Now to I take like the

Operator

[Operator instructions].

Our from Stifel. first Jon question Block with comes

Your open. line is now

Jon Block

million the I run more medical around two on other then and sort for I Is in customer, was one that medical do. there congrats usually the you to mentioned as of rate that new that ‘XX year X.X that. maybe Was off, maybe medical a this of million, in line? year. might ask going specific higher per new start XQ X.X sort than or just But quarter anything one-off next that

Mark Gorder

Scott?

Scott Longval

business some from first for benefit of new saw question, some that coil Jon quarter we of customer. the medical in Thanks original the what was the

that to to look we half bit clearly at XXXX. a the begin maybe and little growing a XXXX, expect that much second gain then then anticipate of traction in in We cliff. temper second quarter And as into

Jon Block

think XX% is it with would I the XXX the gross your about all guys at to there what confidence main then mentioned here quarter And got that year you and would that some nine color in XX.X% mean not versus blemish at XX.X% the the we very XX.X%, light this validation where of I be we if Scott around right. the of year the until finalizing remaining ‘XX you helpful? below were of for XX% around margins time averaging validation you XX.X%, to the sort midpoint guess I end bps to are I -- which question for believe finalizing of close GMs be thoughts can is get to in the get of months maybe capacity you

Scott Longval

Yes.

systems, is expansion XX I various about think bringing the itself, talking this automation a monumental task, online, we're molds. numerous presses

process can run bit So then said, through FDA. our and we point it's second the the both in quite effort internally year. with that -- are and we're a That in final confident that get presses of to on ultimately leverage the some half where validation through of we that those to can at the we the of customers and start

we into with additionally year’s be margins the the that in will comments we as confident of And second we're the second see year anticipate those the to as benefit gross from that starting favorable. revenue out more efforts. overall mix look we So laid half we’ve half

in that So play indirect with me. Jon maybe the we terms laid XXXX. two that helping and guidance us consumer in one call from think Q mentioned think part margins for In that a the Then something on - I more release out gross will end achieve or in business, XQ is specific of mean ahead also you Block the grew of go we’ve to slightly partners, in on the business healthy to a March of ‘XX, a and the down way a that obviously to that in there year-over-year, rate quantify your quantify try I to very there quarter? flat at and go XQ, you to sort XXXX effect one that is way indirect saw press

Mark Gorder

Mark. Jon this is

some and that launch relatively they're I of large of partners in cycles big buyers a from because and we're time a think group, have sales own because that on have to as we impact. products all they independent has buying these their percent with, these time, that working

expect flows. as with in cycle overall and to to bringing launch a ebbs partners. that more have business grow But We we’re continue we year-over-year

of would that growth. track we So show expect I year, to that half expect in the back to would on continuous the see second

Jon Block

And I me last be you. Mark, with question might for sticking

where had to thoughtful seemed the the specific control, comments you investment you investments some You there. HHE DTC the acknowledged business be making under that be on or to would

very ton experience, some experience added a with on with to obviously DTC You these of the types board businesses. of impressive

want the you DTC and of So to share how maybe step the there? the best sort just hearing pursue approach latest aggressively market back a feel how company's can and you us guys. to you around thoughts with business take Thanks

Mark Gorder

Jon. question Good

at HHE and legs our leverage-able stool manufacturing we that I supports the the and putting across all to into think being the these the -- infrastructure look that potential technology into partners. investment as we're of all here

That's So we capability we business. good for to of a be we care, core for Hearing bought all purchased customer going example partners this to Health when Telemedicine. HHE grow very useful as our

we're watch So talk at our to same time, to Health going spending prudently Hearing -- we're we the going our when marketing very core invest to capability Telemedicine. the about side. on carefully continue in to expand But

telesales think mentioned expenditures while the were moderate that release return expect, the better producing I investment. not things going we that on that forward press something have we increasing other is the we see in we spend. try tempering in and ad will as in So our return we a cost outbound Where

we the a at investment tactical telesales think outbound on we standpoint. better on current a state return get will So from

question? and answer advertising expense. that temper your Does So we're going marketing to prudently that

Operator

Thank you.

B. D'Silva from Our comes next Riley with question FBR. Andrew

open. Your line now is

Andrew D'Silva

that mind. know new with would Mark Could of with ones, that for operations, let well? don’t an couple Scott as useful customer, and then pulling can if medical is the be CapEx discuss cash expansion while flow and what just were existing quarter? or a you keeping me Scott, stock-based an just comp start from you the And customer book color customer, you're new a completely that on you or I'll

Mark Gorder

made to Well diversify in a trying Medical invest our we to commitment business.

several very for space. to the regulated so some to some now medical I patients lifecycle customer that's from grow getting activity from and because And four an the three it’s FDA they product to working in through we’ve approval we years last say to the product environment, of these had FDA of years, of where fortunately this starting is our coils the Now starting -- just ongoing been a for would lengthy, on particular development as trying the are launch it. FDA

As Scott and up growth mentioned sales vigorous in I XXXX. the modest think expect we more write in in XXXX

Business role his of the build medical platform space technologies core half companies a device is we expect other using to additional are in coil the to up who situation broader hired and in starting to that that line. similar in Pletcher have second Doug to one expect we we launches more and have But strategic addition we take year. and in the started of medical We a mentioned release, to VP launch press of Development customers in our a strategy we of that in to to the product that head medical in will future just array this how he the our as large

already reach body-worn approach So there platform we’re strategic array gaining traction with medical where core customers take coils a and technology. in then device we're technologies, where a of is a to our two-pronged more tactical broader and there is medical a the approach build approach investing there,

over to it turn Scott. I’ll Now

Scott Longval

$XXX,XXX. $XXX,XXX; Andy stock-based and cash depreciation operations, amortization $XXX,XXX; comp, roughly was $XXX,XXX; from and spend, flow CapEx

Andrew D'Silva

new just it’s was on completely subsidiary so not parent And that following the customer, then correct like comment that sort Mark that like that, another anything is a assumption? of up of or

Mark Gorder

Yes. Correct assumption.

Andrew D'Silva

that noted last mentioned this, a a was large call jumping on with new I between if front? contract calls then you establishing any you And I’m sorry quarter exiting updates partner, but

Scott Longval

finalize Andy, this while we're near-term. contract close securing in are the is that We contract Scott. to working really believe to long-term we a

that out a I relationship. with working something It’s customer think it's that we've over important this for been well to decade. point

integrated deeply We’re their into ecosystem.

something you investing is at the worked I several look last think to a both of if both there millions over years get sides vested finalized. on how interest dollars, parties have

So towards to be that able do we’re you. share do when working will that to we’re excited and that, with we we

Andrew D'Silva

where kind established? how could shake to expect guidance to And is renegotiated some assumption guidance partnership you the the of related there a on to variance out, the how fair would you based do out contract is shake or that the around that is think be

Scott Longval

is relation. no No. There

Andrew D'Silva

somewhat then you lower for points cross-walk margins standpoint can a it gross than from basis And a On I bps top-line me, about basis seemed segment-by-segment help XX QX think QX. sequentially -- close happened I the quarter out well. of figure as at believe just utilization the quarter. the still the least. I’m where issues margin last manufacturing trying to during mean were majority compression I relevant

So more out figure compression just was little why quarter? a this bit trying to there

Scott Longval

just There the valuations was qualifications, call uptick fourth release Yes, the press with in cost the first quarter and in recognize noted the correct. the the additional adding so some we on quarter. and through in didn’t expense we that going in what associated in

Andrew D'Silva

one And me. just one last from

sales? with [BBC] to Shield the like with contract can previous be at do Medtronic discuss your product are Minnesota? that Blue then How was established think based how Blue look And with contracts If maybe you you highlighted actually rollouts, established right you or and could of ramping from now? the landscape those up what's they Cross that value experience for beneficial many

Mark Gorder

trying diabetes to if these first but agreements. the that’s Very isn’t levels importance This best group something their patient and are broadly diabetes what they the provides one within are you very the definitely the of good you a ensuring excited area think about the doing group they an back defined value-added keeping umbrella think if the they enter that glucose wide, have outcome-based step outcome. look is is not but value-based the which focus range products supported of into diabetes and offering that only in corporate AXc about. really question, Medtronic in are the monitoring, that’s obviously form monitoring, the at this I And by under

So that these be that going demand as to to increase. we're and continue enter we the expand as they beneficiary the for front, continues they to into agreements on believe of CGM

Operator

next Ryan And from with question our comes Dougherty. Dick you. Thank

now is line open. Your

Richard Ryan

When you that’s more right. other at side part are and own that look are to that in We’ve United go the the side? that market consumer collective from is part indirect about United, of of seen it back other weakness where of vendors vendors, that the QX on QX. market their Can occurred, vendor talk going the or the levels of you

Scott Longval

have into the to the a I Mark that. first obviously number get up it it But customers that revenue in to large impacted a And as end couple make we was for of specific quarter, drive can’t customer. where mentioned, base. large of was up by

Richard Ryan

regulations? coming what's thoughts current up the And write for the FDA then on Mark your

Mark Gorder

as XXXX then and have this again as that at the Good time to all in question. I DC at by they issue allow that guidance FDA feel end of period March statute the by long the could was assess some months. they where for document will comments of type of out end I and of six to was where have and a take still

is expectation our that say effect. would I regulation XXXX the that will in mid be So

when Warren's the will later. pressure got move rather could that that get pressure done, of part Now politicians, than sooner to a such done of that and But think on being another office there statutorily feedback I take there than this was get year was this they as lot longer is center I that. we to FDA Senator the the

discussions. that have feedback recent the from most that’s So current my I

Richard Ryan

your where do software, What stand on process? in you are you that guys doing self-fitting now

Mark Gorder

we Europe. Well, going an still two we’ve past That's going the as very initiative had folds, in well. mentioned in

debug that technology. and the to using We’re test

going over self-fitting for They create now in and So coupled value-added of can without It us directly legislation. there. much are expansions to the allows consumer. do more more the the is doing and We the a process efficient OTC with into Germany. consumer But that's in that Switzerland including well to real long-term professional in the process. benefit a the Australia

we're the in stand in clinical get goal regulations. our with of get to XX-K on is that, US US prior the approval the in done process where Now trials to to the to put we the submitting that FDA of that market and release a

submission we’re that defining And that our a year. October the like XX-K process novo then look we’re So announced of forward. from approval and for those fact last de will what science of already self-fitting in benefiting the was moving got a that

they XX-K So we us every equivalence a did substantial do equivalent. believe is substantial that to our allows technology and to what a have to confidence that

by So completion a that ready is goal we're done OTC our to get for regulations. of that so the mid-XXXX

Operator

Gorder, President closing CEO like the call back Thank Mark showing to and the you. And would I any for I’m no further in question remarks. to queue at time. this turn

Mark Gorder

our shareholders conferences and you solid support. pleased Have upcoming Thank as forward to our I’m you trips. as IntriCon and great would seeing joining team for performance a many continued like today. the again well during for thank to the making evening. them with of your is We marketing look call

Operator

for program you your and in thank may gentlemen, you your Everyone, and This does participation Ladies conclude day. conference. have all today's a disconnect. great

Intricon (IIN) 29 Apr 192019 Q1 Earnings call transcript