IIN - Earnings call transcript Q2 2019

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Operator

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

Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to introduce your host for today's conference, Leigh Salvo. Ma'am, you may begin.

Leigh Salvo

you. Thank

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

such among Analysis and contained statements. headings XX-K Discussion may Operation vary others, ended under cause materially Factors Risk Given these place include, the not our that results should year those differences call. undue reliance factors the Actual expectations set in of uncertainties, you forth December and Management's XX, filing in on Results and today's Important for the Condition these forward-looking XXXX. from Financial could of

to then would the IntriCon's results the a quarter I Gorder for company's like questions. your will of Longval, in performance. the detail, Scott we that, CFO Mark cover now review and will CEO, the open second and call financial for more COO introduce company's With

Mark Gorder

Leigh. Thank our today. joining call you for everyone thank And you,

half growth XXXX horizon. As year, the second carefully the outset established several execute at priorities the of we the of to our team for while planning opportunities against enter on the exciting continues we

Hearing emerging Express programs. best-in-class our the our and To entrants OTC competencies with marketing demands XXXX development leverage revenue quickly sales Biotelemetry prudently three, in and our and while recap direct Help pursue aid include; our diversify priorities the Medtronic; core partnerships with of Medical base; that hearing for expand seek four, tempering initiatives advertising market; business two, one, meet opportunities our our in

both continue allows the core to our highlighted executing body-worn Hearing as devices. producer as effectiveness these each mobility Health. of Biotelemetry and our businesses us two these performance segments In to strength on device and a priorities focus our of on quarter micro-miniature second to of Medical commitment Our we enhance

reach highly with the through high-quality this while to accomplishing provide devices, are respected consumers partnerships medical world to throughout market-leading we Today, end opportunities directly. companies pursuing selectively

year, of our a to for number first the core focus steps on priorities competencies. long-term half better of this the During to we company our growth near-term and thus position took our significant

several As of pronounce contributions which we know our you in U.K. $XX.X weeks discontinued revenue ago most excluded of operations from the million,

updates. take to like few I'd next to recent minutes some highlight the

Our year and for how are of priorities goal. longer-term remainder this company the positioned we the for

the and will offer of guidance Following questions. detailed a call for performance financial for our Scott my then We’ll remarks, updated review your open more XXXX.

approximately our related volume be for our Biotelemetry Medical revenues continues XX% in this global, to X.X% growth product with ongoing Medtronic’s business, quarter launch. business represented segment the commercial of constrained by Starting to of revenue. increased year-over-year total and Revenue order

world. Association in of their American potential international XXXGwell for markets meeting in ramp around Europe, of to only During Medtronic's confidence up beginning where and they other the near-term the momentum presentation continued Diabetes its markets and the are into specifically just highlighted selected the annual in June, in Australia sustainable parts growth XXXX,

continuous of a could to submission growing granted pre-market monitoring markets requesting in international X, their it’s broaden the for catalyst FDA adoption increased glucose is approval their approval Guardian if more patient highlighted Medtronic's and and non-adjunctive Encouragingly, announced they growth which Sensor labeling recently, for penetration their access.

further partner opportunity long-term growth our as commentary a of in we our important to validation As view this business. of segment long-term an this IntriCon,

in leader excited with further strength to forward and to and in support rapidly that market a continuing be announced the validates we four diabetes weeks in the ago, shared relationship contract look them our management. to growing a we partnered future. commitment we year products of the delivering few this As space secured superior We're

business. medical our Importantly, we to committed diversifying remain

potential monitoring pursue continue applications an market biotelemetry inroads significant our various also pursuing addition potential. that making in hold that the to we design, capabilities. other longer-term with are coil manufacturing We for important other In we're benefit segments development can to customers and from medical opportunities uses,

with front, On facilities our required validations manufacturing new we the the are and of progressing equipment. qualifications and

Class a of the devices ongoing medical and with filled As components, manufacturer rigorous the progress. I'm pleased process requirements and X is with

we several to customer While action, and the meet positioning in XX% us anticipated validation be next operating final demand qualification will capacity, years. requires upon approximately at growth completion, the

tools, core products, customers, care Turning or delivered Hearing Health. valued and based solutions high-quality of hearing segment, with directly outcome business second service through low-cost comprehensive technology, We ecosystem to to partners, including health our a support.

revenue In XX.X% second second was quarter. this the the in year quarter over down total segment, prior

includes channels; channels. three updates consumer to go-to-market cover to health these legacy like OEM. to few in minutes hearing a and consumer, end to recent take in of direct indirect Our strategy each some I'd

impacted models. the to in million down Starting revenue indirect user of We with non-traditional health prior restructuring from who the company’s Order $X.X in through end sell of XXXX. comes second remainder with associated end of consumer, and period. to hearing insurance year customers to to over sales XXXX the the within business continue our large posted a quarter delays the activity are which quarter expected

be pursue participant to health hearing will our early this that partnerships of value-based dominant enable in to One a strategic emerging market. priorities us

entrants with softening effective recognition. highly opportunities brand hearing Looking participants consumer marketing can other customer that with health hearing and seek software and market a to our and ahead, continuing combine care we're aids, independent

meaningful candidates commencing We number a with them. are discussions are to have and several of excited of identified potential

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

As about reach are aid consumers. directly the the very hearing we we to in excited opportunity past, emerging have highlighted

sales the plan gained initiatives progress, of continue to selectively ecosystem measured while we in have direct an address While pursue monitor to emerging building we in care channel. we legislative this incorporating to a approach insights

traditional represents And health our market, legacy reduce optimize as anticipated. As a continued based decline to analysis prudent cost to revenue, to the sustainable model. result, finally which level we intend while a into sold data-driven on hearing OEM we and products

completed and period. the OEM quarter U.K. month was of Earlier this subsidiary million, For XXXX year new in Ltd. X.X assets U.K. facility, a entered the our of second in revenue annual we And business the reduction our of Limited XX.X% with agreement with Puretone resulting closed decrease cost sale accessory connection a $X of prior repositioning, an U.K. legacy into we over this million. approximately distribution

highlighted as draft pleased as early signals and OTC to forward as On an we the this the we FDA the expected very from moving update anticipated see November. front, were that regulation. on ahead June, We in look this update regulatory believe is the regulation action guidance potentially seeing to

that core reduce is to the competencies the legislation U.S. best drastically cost leverage taking increase to the IntriCon’s in health to This care and steps We're access designed high-quality ensure to are and hearing provide underserved hearing such of population U.S. as hearing-impaired meet significant needs exist health remove self-fitting the barriers most efficiently the innovative software that today. vastly solutions, the remote and care, help the market.

just hearing light market I’m summary, we estimated health made in will business have to costs particularly the holistically, In we in hearing of the the $X health not disrupt billion opportunity to on but have reduce I our changes highlighted. looking addressable the better only confident focus pending us emerging legislation at the U.S, resources enable

with track this competency positions coupled self-fitting aids with significant that our digital hearing to record software customer and expanding and care confident resident ability unique solutions combined technologies, DTC to market. participant be wireless for excellence our deliver our operations a sophisticated us in I'm in our including state-of-the-art thus exciting

in and the Scott guidance I to Now more detail. our discuss over would call financials like to to turn

Scott Longval

Thank you, Mark.

Turning to results. our financial

from flat by hearing the are by in million business. For second continues health prior our our XXXX be Growth business reported net we quarter, relatively to the Biotelemetry are of offset temporary revenue year. Medical we believe declines $XX.X what fueled

Second validation of XX% in in from second margins expansion the quarter. related constrained were and qualification to existing excess customers. recent prior by in capacity margins gross anticipated quarter and requirements second future volume expense year XX%, the the to ongoing meet -- manufacturing Gross were the higher year down

was the advertising in to million initiatives. higher by were of wire- period. our Operating $X.X Express and compared driven the business quarter consumer expense, direct-to-end in increased $X.X a stock expenses million support key for Hearing new related million business development year assets, intangible non-cash and second The compensation prior $XX.X goodwill cost investments increase non-cash Help to off

value-based Mark we are above, hearing model sales noted health our to our as refine As market the direct-to-consumer business, committed we align in emerging lowering with and gaining opportunities. better efficiencies costs to

net the XXXX of attributable income diluted $X second loss posted versus We $X.XX to $X.XX $X per diluted quarter. attributable of shareholders million million per for a share share or to or shareholders

second operations quarter Excluding from we of adjusted the posted non-cash one-time in diluted $XXX,XXX income share net XXXX. of the continuing or $X.XX per write-off,

guidance. to Turning

of between $XXX the anticipated the the than $XXX.X from a announced, expected is large impact full XXXX discontinued commercial company's XX% customers the Full The margin operation million is global, to volume order anticipated ongoing to related activities guidance delays U.K. within health expected reduced following year and Medtronic’s range gross with year and previously order facility. insurance launch of restructuring reflects primarily associated to revenue hearing range XX.X%. million. Lower business. As XXXX factors: to

goals. long-term our in confident very remain We

our Our effect new to us growth substantial a allowing at line, resources restructuring on same have focus bottom time will opportunities. while on efforts the

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

turn to I back call operator, the and can over like the Mark questions. Now take I’d so

Operator

[Operator from Instructions] comes B. D'Silva Riley from Our FBR. first Andrew question

open. now is line Your

mute now If please unmute your your D'Silva, Mr. is is open. line phone on it.

from Jon Our going next from to is Stifel. question come Block

Thomas Stephan

Scott, for you. This taking Thanks my on maybe Jon. with questions. is Tom I'll for start

frame means On some partners the explain that for had maybe can a medical IntriCon? side, you recalls, our what

Scott Longval

-- impact do us I we any we and we can’t and I we’re any relationships that the and some to the in aren’t our of obviously of recalls into referenced. related is you have can in but and going so specifics our see sort say the that recalls terms to meaningful what that don’t associated the the customers point businesses of customers to with products Yes, forward

Thomas Stephan

Doug I with been Doug's now around think fair. guess six company Okay, that's the I And months. Pletcher's the with with for now sticking medical. been --

over with XX You some medical months to but small wins to can it already XX more your months where you material medical, next six relative have the had to stood conviction wins ago? on talk

Mark Gorder

to are coming like quarters this brain good bit shareholders. those monitoring our more There we a will opportunities market path try some task for we've strategy several that. over identifying go the the doing into business and him out I'll well on Certainly, Doug, that very the little medical interesting a in generating more but he is opportunities epilepsy, to getting clearly we and vague take sleep areas very definitely define our are so opportunities and time new and delineate at given to the in disorders.

and of making significant market medical two inroads new taking areas And and measuring and biopsies the as are coils applications there a trying have in that ablation the at treatments The position catheters. of growing business more of in in we lungs you -- and and is other area then those areas; catheters number interesting biopsies in mentioned is in those the are interventional in and in of areas. area, defining probes opportunities accurately coils taking some international that all of interventional existing programming doing pacemakers cardiac using the is positioning is those one to there for Doug

you but we’re in be progress coil area. our much definitive in the will we continue the medical over anticipate that to a term there we’re coming where So more to short see good in quarters going should going

of are Just numbers the that time some we’re kind fruit of to are a for I and opportunities starting on bear them. working show think number starting

Scott Longval

I’ll maybe follow comments. Mark's to just Scott, is this -- on Maybe

the the core they of excited response some is already we’re laid One into technologies that opportunities and Mark competencies things our fit and out. of been that developed the core about very to how

the that through As Doug about on, we brought out. externally competencies our first believe existing that’s and community internally with we medical focused working OEM when very would technology obviously be our finding we’re in has that talked been what and received and we’ve we're well our Doug more customers, focused much

to of wane a into over how shorter-term update shorter to we we proceed months some the as with now And XXXX. larger and group, look next those. to the six proceed opportunities So the on longer-term we’ll Mark’s and opportunities point

Mark Gorder

disappointed very I to would And It's comment went close this by and this finding. would we’re many additional that. customers is we and be investments there core device identify medical we that not into -- what if with one get feeling areas I we’re out our in received those guess, made technologies and well the other

Thomas Stephan

on self-fitting one quick us initiatives? one where Thanks, then And the you just if color. hearing, hearing helpful I really that's Awesome, guys. are can remind you may, with

Mark Gorder

with releases, progress a have -- The it been in call Sentibo, Germany been announced a for definitely. in as technology, Yes, that’s time. in some developing working company we we Germany we self-fitting on Soundperience, prior in

to We’re U.S. in both channels, market adapt partners trials prove direct-to-consumer out working on that process our clinical market bring in can and over intending the FDA with to in the submitting and and be we're it before required currently to with use to for the technology that's the with XXXK U.S. used. ourselves the of it

with along exactly FDA go how well should we’re of forward. defining And the that the and having discussions path clinical

be regulations around available actually timely carrying on put with So we are which when sometime expect enacted, to in are that think technology and we mid-XXXX. the track forth a OTC manner we

Operator

Andrew Riley D'Silva B. Thank from you. from question our comes And FBR. next

Andrew D'Silva

sorry Thanks any questions, for and you between I of calls. my this, highlighted moving if taking was

me if and for goes, did just XXXG check just that comp, And reason of you what So the was know you and far amortization CapEx Mark, from international then I and referenced as tonight the I’ll you transcript depreciation, being cash but launch know Scott? let flow operations revised touch as some just stock-based could on guidance. quickly the out on, the

provided you between far theirs? goes, maybe your outlook as far maintaining consistent as outlook, annual update But Medtronic their clarify could and difference guidance then as revised the the a as two fairly

Scott Longval

Excellent. Andy, Scott. is this

of I think those I’ll both questions. take

from flow X.X was and was million amortization comp stock-based for for million. CapEx was cash the For quarter quarter depreciation XXX,XXX, operations XXX,XXX, and the X.X the

Andrew D'Silva

much. very you Thank

Scott Longval

actually terms about where organic in June, outlook year presentation X they early they their for year so toX% essentially the of that then question Medtronic into through of May April they XXXX your growth mind on at XXXX. ADA the give their and And in X% their that our provided XX.And fiscal about fiscal fiscal leads XXXX.Keep a runs in talked talk fiscal they year,

be if further that gave, guidance then in of international the most you stronger half market. they second on look to talked going at And about particularly they launches, the was

our you for really the if them, half second stronger through think April. November So is

of as to So moving. a that gives us confidence again that lot where business is

a XXXX. terms the was that in had take we and for approach bit little the to the we has illusive cautious thought but as about timing also confidence guidance we wanted thought that We more guidance year, of and is second we in the half about because of this move -- then task so took into the been we the that

Andrew D'Silva

assessment relative for be you Okay, of fall so year of very year? some that could in would be fair quarter the is it strong calendar or would that a your beginning fourth say there the year so chance, that XXXX the to into this that potentially to a

Scott Longval

That's definitely remarks. consistent true with the

Andrew D'Silva

maybe platform, it’s be CGM a how the you’d And that to big you how and integrated much. very very could different are integrated just launches have would when PCL you it disposables you its I pretty expecting today again in next work? Thank how there just us platform, let a is curious looking system, overhaul couple am years Medtronic know --

Scott Longval

And great so question. another

that As product they pipeline. presentation, part of their ADA outlined

way the provide of in the XX XXX, then For international the Medtronic months several next into find the the that U.S. platforms get and approval, are built years, they obviously, the battling and for pump, eventually of our CGM off the approval will targeting it generation its market still next they're those next both up today. the to international again XXX we here in which it are in which

very that about years those of the place lines, think in well you off feel coming positioned very we’re next growth. we for as so -- several And

closed-loop think support be As system. of that ultimately transmitter highlighted platform a you about. visions closed-loop off eventually like going to talked but that it personal the something about They it’s you it could looks that would personal the CGM that that’s out into initially that platform based that disposable the current be

our ourselves get what of too due terms we confidentiality. ahead can’t to far of customers talk We in business about

What go just kind supply signifies is deliver their that that start we four do platforms, I So as into of can so and sure sure envision quite they we to time. in confidence what a we’re with them at we can what they provide. and worked table Medtronic new we making agreements say we make to talking what understand to year obviously, think for We I want the signed can and detail. some great can’t I

So all you we that I tell that can with relationship. confident we’re aggressively feel and that is doing

Andrew D'Silva

guidance Aid question great pushes eyes as to may a for your some outcome? you come could Hearing would And and Could Act of OTC the maybe very just what a I so to and like related FDA. from the and be and an on me guidance be the pulls that expected what positive viewed out elaborate last not is the be in

Mark Gorder

work Yes, glad. of was I’ll that think critical and that pretty the regulation the on legislation One lot I highlights because us. loss about couple a our couple for XXK their moderate a things better should to hearing weeks hearing discuss July I mild out FDA ago, visiting than of is perceive times are the discussion and allow is just perceived it submission to a is. we people to to perceived had XX important be loss and the good that of be

moderate that’s might you well-known. well, So might you know say, I’ve of you for hearing you example, asked got And hearing the kind have loss, question, severe loss.

hearing for the allows for increases OTC legislation market consumer decide to that because we sold good category. So That's power mild is the the moderate. the to market with obtain addressable be can OTC is in us a allows which to the more, to that what aid what the higher -- for

that already perspective. our going is Novo which composed And pretty have good feeling FDA to be application for our was on relatively a of approved already FDA an about regard. some There dBSPL, device published is the from XXX De liberal is that self-fitting they -- power that level a

allow that fact that be that going the to large to indicates addressable that's already So is forward been relatively us going approved pretty would favorable specifications relative to legislation market. the a

probably I they we weeks issuance. November I far and was going discussions, pleased FDA FDA of Commissioner but we’re issued put a was be a a includes reference dig period. the and indicated So we’re confirm --I my out to don't issuance that Scott pretty can in regulation there know notable the hearing document. up document the ago, but what If comment that commissioner on the to FDA the so during a what few after have six has that the case, then public put public did to actually that's months that the the a

place. in optimistic the pretty we’re be regulations So that mid-XXXX, will

Andrew D'Silva

Sorry, and from actually or comment had months in XX Did period it’s XX six included more one I days then months? The there not plus the would can it four months if six question. be days

Mark Gorder

it the had, six Correct. we FDA that indicated months. legal they XX discussion has department included We and is days understand the a was this that in believe

Andrew D'Silva

to and Thank new best going of me. luck much that's Okay, forward. very you

Mark Gorder

you. Thank

Operator

from Our Dougherty. comes Dick next from question Ryan

line Your is open. now

Richard Ryan

or FDA. your Can can process your tag you to file the FDA XXXK your on submission? when that XXK in you Mark submission, file

Mark Gorder

I very are models a that meeting we to out we got we good give a they good a response as the the good outline the say had dialogue, a And Well, of this us positive collaborative clinical application FDA trial and proposing. were was they are relatively on we XXand request we dialogue pre-sub -- what guidance them. the put would in -- is and happens for

have give the the a weeks start a They’ll can we’ll within go have trial we the through review still you FDA. then our few to and trial So that clinical to but a you or to present and go no clinical findings go. and you

trial clinical take a will the months. that anticipating few we’re So

something the have probably at us of to we back looking submitted before end FDA. the we’re So year the would

Richard Ryan

Okay.

until wait So wouldn't if wouldn’t wait to have to mid-XXXX, to is file. you then have you it

that? still underway, okay. consumer What the out the on You can but taking one to what's and of you're guys you're you you where in your it the cost kind about are do of internal rationalizing of and talk or the up and doing the sales adding group people side, headcount running director processes can with

Mark Gorder

advertising more I speak I’d to to that really undertaking me pencils-up we’re What that result to realized really we speak we’ve producing are expect. but we take got approach the that sure expenditures make let say, the is can't a philosophically. that

So optimize cost the we're we really while sustainable and to to our model. prudent a reduce trying level

assure expect at in So of I all say, development outcomes are modes we order to prudently. the KPIs we’re measuring very in and systems so product the a to we’re in need we’re kind happening trying that of and going this measurement our actually put we that

that. we advertising So reducing I think costs last quarter, talked about started we

as an of doing but We’re line see business. in and we more should of speak the as to you year that rest the direct-to-consumer for you appraised that of the effect extended quarter-by-quarter improving the will keep bottom

Richard Ryan

side, Okay, indirect year. QX, pretty some the you are off indirect and numbers QX side? tailed had last the QX, QX.What in seeing They’ve on of decent that

Mark Gorder

we and of to carry partnerships partners. that, the for business some So potential we be because Buy, the end of like in outside was good to on year, as large will efforts Bose, but announcement our for could partners of continuing existing the anticipate on a one and those reason going looking main think insurance that Best development at make we we’re there, the to partners people our ones look rest restructuring indirect of consumer said offsetting trying very there and

short-term to the that So and took we’re place going that even though impact. disappointed restructuring that’s

and will growing driving these that also we’re other eventually -- expect relationships. then We recover

Scott Longval

I’ll that. on one comment top add of just Maybe

the we’re terms self-fitting technology software, nearer and partners that in of nearer they’re hearing support the One fulfillment aids, this are and the space customer is more more as interested and of is has. channels in for legislation IntriCon and of working different parties have the things coming that from type we're becoming our seeing numerous

there are make it’s our ourselves ones successful be be legislation, we models get to best longer and term. for choose position and as closer think the So be we that have to more more we case business and supplier these that which people the interested going sure could a as that can job partners to

Mark Gorder

down add there, what so an direct- of said in is technology some very have Scott but valuable looking teleaudiology support have have that end. care. devices, marketing have But these high I’ll pack we quality we to at are have back very to-consumer pick, business also that capability we only capabilities some And HHE, state-of-the-art ship the get and assets to do that our our IntriCon, into that And Not for things ecosystem good don't self-fitting a business. they we build needed to have capability. have we and critical are to which of partners

some we’re So ship to end exciting looking back devices teleaudiology very pack and at pick, only and partners. and but also providing not software

Richard Ryan

you. Thank great. Okay,

Operator

the to I'm for further like And back over remarks. Thank questions. turn you. no showing I now further Gorder And call any Mark would to

Mark Gorder

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

Operator

This today's in conference. today's Ladies program. you for thank concludes participating and gentlemen,

disconnect. have day. all a may great Everyone You

Intricon (IIN) 11 Aug 192019 Q2 Earnings call transcript