IIN - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the IntriCon Corp's Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today Investor Relations Ms. Salvo. Leigh you. Thank madam. ahead, Please go

Leigh Salvo

Thank you, Megan.

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

today's materially Given statements. Actual forward-looking these on from expectations reliance the these uncertainties, you undue should call. contained in may not vary place results

of company's the most risks quarter XX-Q, please on Scott of we'll uncertainties and for results For associated that Risk like that, Mark? business, to a description introduce and respectively, open and list IntriCon's COO reports in our at and refer call With SEC. Factors CEO, cover I with review and company's Form quarterly Longval, the more performance. XX-K the Mark Form the section the point recent will the a would Gorder, the with to then CFO, and financial questions. now detail, second of our annual your for

Mark Gorder

you, all Thank healthy. safe and Good the recognizing would joining you call IntriCon I our to by remaining like start and you hope team. Leigh. us. We for afternoon are thank

also while appointment knowledge I role. to together as to the qualities operations observed financial incredible all choice environment. coming the next as him a fill the began demonstrate Scott's past Over it as new few apparent months, to to our meet I More adapting obvious the contemplate and year deep transition, would to a Longval well was made at I true CEO level, ago have as like Scott IntriCon's highest my that challenges, our structure, leadership on organization CEO. resilience than operate of working congratulate and his

a of Board, in commitment growth his driving our the move sheer we phase the of decision the next to year. value. began steps transition shareholder With made We to and to last vision support taking the smooth ensure into full enhancing forward, confident necessary

throughout growth a to an that and of the address meantime, played evolve I has Scott commenced confident enable best us throughout in numerous working medical our role result, delivering actively markets. Scott successful As In search. business After in key forward we year. the past to outcome critical will milestones strategically have I the the X, advisory look of year, October an the am our with remainder CFO instrumental capacity

support end ample the hope have Scott, a is have While and to the financial and we the of in In the priority to our the we currently organization place quarter, strong very lead identifying the by the the right grow assure to we place candidate in meantime, transition. team have someone with company. mechanisms under finance through

initial second call shutdowns May environment. were QX's The cover medical questions. our our the your expectations like depth largest the the the the the accomplishments over $XX.X at to over visibility I'd early we that the call continued the deliver forward, on customers, of the priorities ordering our review enter this of patterns carried IntriCon May. to impacting second with us current by established our year, financial year and our quarter despite results. to through from of open the earnings Scott we the quarter business to to the thoughts XX% then and call strength of macro were in some up more We'll as then Now our and going some quarter in the highlights second turn some performance. prior well degree able additional for in as Total earlier I'll decline of the quarter. afforded a representing in time million revenues Due at our exceeded of in of proud year, to I'm for against outset April

quarter, the we enabled patients measures operation our to ensure This capacity their in support highlighted and us their several customers processes and we our to without to ongoing to critical As and our quickly while effectively business. the plan of remainder our to of and customers interruption implemented our for at last families, best operate maintaining our quarter the continue employees partners. health

and addition, solid to segment consumer than expected our to indirect to access due performed Health better Hearing end orders customers. In our impart renewed from audiologists,

As cautious the year. exited a as of the half the quarter with we result, second optimism we enter

of coupled the first taken the overall over Importantly take improvement year business. to quarter. made Starting bottom in navigation, and customer each line core our progress comment growth restructuring the during surgical contributed health core of drug delivery. stability with to next markets, our total the on the our in adjustments market, and revenue half XX% to to meaningful diabetes, minutes medical high second of significant hearing few sales to largest including I'd with represented actions our diabetes pandemic like the provided

in originally by experience actual factors. two the driven year-over-year quarter results anticipated, in Medtronic did were largely decline we anticipated While the business, better than

saw strength compliance using systems. insulin continued to sensors pump we those from First, greater disposable from due diabetics

standalone home. than safely hospitals stronger keep and at to Second, enable provide due anticipated transmitter monitoring than growing to in CGM CGMs orders remote patients diabetes were interest

ever. relationship as to are as continue strong Our bands we well global prepared look that their of and are And Group year second Diabetes confident as meet value upgrades. anticipated Medtronic and remains to towards product half launches with support the we the

especially From excited we as well capabilities and opportunities our segment leverage EMS. existing Emerald Services Next, medical and turning technologies, or as coil new to up following the opportunity recent both growth micro precision Medical acquisition to molding market the miniature electronics, this a opportunity. surgical navigation about tremendous our as of opening see are market, is we

electrophysiology demand, from the deliver driven coil medical over to the the strong pulmonology results quarter, customer Our serving and up continued business prior during over XX% interventional year second markets.

delivering has of addressing range history last pulmonology As peripheral applications catheters a on vascular, and a complex the radiology successful call, of neurology, markets. in interventional cardiology, EMS we noted our

can catheter if provide an their and quarter. we of to our existing enhance for addition believe biopsy The we EMS driving growth not contributed lung and EMS precise business, mapping going is heart exceeding our content in the well, ablation. In billion for $X.X interventional pulmonology expectations integration the electrophysiology an to in revenues original and

remainder We to continue business the income accretive to will the throughout be anticipate XXXX to in and grow the this for year. that low-double-digits of

streamlining initial the of functions on accelerating will of critical integration, focused business completing activities, months, Over space, of renovation few processes. we while next of administrative the and phase including be development consolidation

our discuss to like Health Hearing I'd business. Next,

to aids, to care our we consumer high includes in hearing During remaining continue progress Help towards platform, within our market. that the to Express focusing quarter, good partners the profile further value an targeting ecosystem superior make ability that which indirect resources, opportunities care Hearing customer our of self-fitting to an channel, end including software, deliver operations U.S.

Health addition and actively As greater retailers, continue with anticipated growth pursuing losses. including these high engage reduce healthcare end branding to in synergistic initiatives that specifically on discussions several are opportunities, partners in commercial we disruption the associated to substantially pharmacies. Hearing providing more market a entities COVID-XX Despite also focus resulting for and widespread pandemic the actions solutions customer from the

and regulation from virus that guidance aid draft of of We an software However, the update of make consumer self-fitting we the shifts enthusiasm ahead trial on clinical today, elected our timing and time remain priorities we high hearing of in the legislative OTC safety tremendous such remains and FDA this Earlier resulting participants. confident, attention for to there can cost as aids postpone given hearing uncertain. the year, change, trial the health potential and the however, ensure market. until

on and anticipate initiating this trial initially by We have with the mid-XXXX. the clinical of goal year, - trial of been by completing end measures working a the safety

the aid the drug today an of delivery medical expertise. and We focus needle prior And including be our revenue our of micro flat our remained miniature a miniature demands of aligns development steadfast technology market for joint the business. with mechanical non-diabetes emerging term complete And trends assembly that remain cover manufacturing micro pursue business accelerating Scott? pipeline driving At Two, on products, like views to some quarters. and partner assemblies software, that Lastly, to diversification affordable devices, enable best the customer in over point, relatively microelectronics, organizational which commitment utilize the assemblies, in secure to life leading despite the the leveraging our our our this changes encouraged business. the and four core opportunities. the of platforms. those the One, the the priorities partnerships we that call And global implementing we unchanged. quality of and remain priorities wake and electronics, in growth serve. turn landscape those care healthcare accessible technology, self-fitting evolution healthcare we've progress lastly, I'd diabetes, for see with by meeting unprecedented Three, on a his continuing structure improve importantly, can the we second COVID-XX. to on to established year Scott of the the half already to made volume by sustainable of longer I'm of year. serves for hearing

Scott Longval

the operational in recent where established the honored been and on for competencies but team. to part work markets, in our a transitions will growth and result, successor, this implementation these I'm our about dedicated can drive business. me growth. a to of to confident by best a our It's of to the synergistic, medical excited to greatest to changes the enable in in Mark. enable IntriCon more and priorities company pleasure strategy not focus impact, you, the success been achieve opportunity measures enable the have confidence us that Mark's forward. will as only Board's us Thank high of meaningful the lead year, I'm alongside we've as rest appointing continue we the core will They've

our business. As strengthening seeing trends we we're QX, enter broadly across medical into

the weathered patterns the our remains with fluid, particularly on has I strengthening of several healthcare storm including environment believe IntriCon medical encouraging milestones order the While business, coil macro worst across customer horizon, structure as largest uncertain environment. to provide Mark our business greater and our adjusted cost noted, our diabetes in previously segment, with today's in medical business Furthermore, the we've stability business. the

growth. Importantly, that to us key resources to of establish focus have a are we as will that long-term opportunities enable to restructuring, structure market strategic on part better begun our this

financials. our to Turning

the segment, innovations. to in Hearing relatively was which XX% quarter. segment and consistent due revenue this our on the from to were XXXX. from increase medical revenues represented no year the decrease diabetes total the over $XX.X the Once in absence the $XX.X the net of other the quarter medical The company from quarter, hearing primarily diabetes revenue contribution legacy health XXXX in business $X.X revenue largely again, Medical which in to channel. on decrease decline million year prior second in and the Again, we was in Health offset in May this was our In impact revenue largely due the our versus total $XX.X COVID-XX innovations the XX% was By million year, decrease with million, COVID-XX legacy quarter. health comparable by business second COVID-XX business down impact revenue, on second quarter core due the acquired XX% year-over-year prior Services, For Emerald million revenue a business in for impact high of $X hearing health the period. of was million reported health channels XX% prior

$X.X segment the consumer Hearing renewed specifically, orders consumer OEM our revenue customers. the noted see in a through $X.X to and solid Express as within Direct impart indirect million. consumer million, end and end upside to to our was business Help However, Mark we segment revenue More end legacy to million. due earlier, $X.X access to Hearing from did audiologists indirect also revenue Health was was some

COVID-XX quarter. our announced quarter and As management. at Directors $XXX,XXX fully including The our for salary temporary by balance beginning steps we the several charges, press one-time measures and in included table a of operating by EMS restored reduce we This than $X.X several the restructuring footnotes, to of salary April, cost and of summarizing in reduction took the expenses the payments charges items. company reductions that and reductions, included second more CEO for million, have incurred retirement from offset $XXX,XXX. acquisition Singapore non-GAAP of expenses. In $XXX,XXX in The headcount the structure, third strengthen a also to costs Government previously totaling were release reconciliation of those $XXX,XXX expenses sheet lowered million impacted of relief $X.X partially

quarter second lower million prior XX%, for offset gross by in period. primarily quarter flat due volumes. Second $X.X initiatives the favorable mix, cost and were margins to to relatively $XX.X were year-over-year, expenses year Operating the compared the reduction million

that we quarter, As one-time several million. during charges totaling $X.X previously incurred mentioned,

million We the or XXXX diluted we to posted $X.XX comparable to a the of attributable a for or net impairment $X.X During year loss $X.XX loss million of attributed incurred period, $X versus per second million prior net per share quarter. $X.X shareholders stakeholders charge. diluted share

of $XXX,XXX share share second As an press diluted versus or quarter. reconciliation presented the million second the $X.X of $X.XX of company the non-GAAP loss in XXXX measures the per in posted net loss in a adjusted XXXX quarter net per release, of $X.XX diluted table for the or

balance end approximately was of our the Lastly, brings to at $XX guidance. quarter cash us which the million,

unable restructuring XXXX. variable meaningful that it stabilizing. to appears to to believe best to our Furthermore, trends for find into half drastically year environment We are our market a structure continue and and high our That enter enable our growth we range a remain medical opportunities create we a markets. ability impeding said, pursue will better the not our provide second efforts result, demands, as business competencies pursue broadly accelerated leverage targeted for that uncertainties, business also without we reduced costs of meet positions we outbreak us to core but as guidance IntriCon the COVID-XX the as us only have customer related

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

Operator

Stifel. Jon Your the question Instructions] Block, from first line [Operator comes from of

is line Your open. now

Jon Block

you? Scott, hey, are How Mark. Hey,

Mark Gorder

Jon. Hi,

Scott Longval

are you, Jon? How

Jon Block

should some comments making have you closed here. thanks. Scott, Maybe Good,

sheet. fragmented I'll have pick I think is guys to EMS environment but additional to the that. to additional deals. plan, So environment you And lend discuss ability can do you a little well, going seems just I highly you ahead wanted the opportunities. IntriCon's The of would itself mention obviously up balance be integration to and bit

EMS just next X think from your hands XX standpoint, think have you So how an pursue organizational some full deals we that about talk the can of other those should with you You parts? over about moving still can to you months.

Scott Longval

great strategy. could so to we've Yes, growth our a growth M&A organic highly Thanks, augmented do little EMS and but laid think is a important of with out disruption. what that very that's is great needs And a activity. Obviously, of we with Jon. achievable be question. part do we example strategy, one that

our business in past, with As the we mentioned on corporate team the management can call at that no easily the that we disruption integrate believe Singapore level.

corporate begun that, our a be So potential efforts do at during to position to something sometime look with XXXX. and we build And a acquisitions have would to to enhance and to to pipeline. other our in be development accelerate look begin goal

accomplished be that knowledge Emerald based to something with and feel we we're get markets balance that in XXXX. So based on sitting greater in on our sheet, into the we where want ability will to pursue an

Jon Block

side. to helpful. it. going Got hearing Very to Mark, over shift And I'm the

hearing you're just color there may more mild structure In there? got eventually And or just How mid-'XX. the Is in the you're certainly on with out put in of quick when regard? then a are government maybe Washington But there. are and anything full might any on more constructed the of But regs - fair. define regs their Who question. of just approved out trial, be that's with curious the moderate. coming hands that going timing se, normal terms lot but mild the hearing likely it? per one mentioned to I more knows? regs the And that of to they when they on be line has how You put I'm the if out in

Mark Gorder

the the with in middle regulations activities. participated the health And was would would decisions technology likely they the in really most I that, be self-fitting delayed on that in that. Hearing would best highly that's de normal doubt there. we year. itself the other awash considered out that continually relative submission for industry from and priority. meeting specifications. by And of were mid-next - it case that that And totally Well, sources to novo all a that FDA, assuming our Industries was low we up likely haven't the that when was that the a the lot nothing they're regulation the the know, new of I July. going the all it curious, forthcoming And Bose from But Association response hearing requirements. new COVID-XX relative Having heard for to significantly we clear FDA it's made statutory away was they they than was anything followed would than recently be what authorized had de the will shift there application be was come said to other a novo And most approved with FDA their

So if the most of at and could the is be for levels out the the think, so Bose kind I they likely specifications moderate, power forth figure guidance idea that mild what to one looked when device, to skill issued. forthcoming would

Jon Block

And up advantage play and in tag and others, it which it. having still large to its would to would to moderate of a your to chunk the still terms correct? opening the market you that the of mild Got open up moderate

Mark Gorder

and moderate. those the clear more to it's for access liberal narrow will definition the for of industry And Correct. try greater will definition of moderate a fight consumer

Jon Block

Understood. one me, And Very for last Scott. helpful.

'XX gross tightly in was year very being your was thought the to the in gross million of have one on, below $X The line the margin, correlated yet While you positive lot XQ top-line. we million top to still the I margin essentially $X a line saw a still ago, your CFO surprises, head in past. levels with

$X line million million recapture below. $X we're seeing it despite the or Here, that's top

we can the other about guys. mix, maybe you've alluded base, this I forward, going line? GM? out decline, is XX% margin more favorably maybe whether stick but this Thanks, talk about the model to you things think and when And the that for ish some importantly, gross new the think

Scott Longval

the Jon, Thanks, for Yeah. question.

that that Our second of things XXX impact gross that impacted for about margin mentioned had possibly; couple the margin. temporary we but reductions on basis the the were a points quarter has we the instituted salary during one, had quarter

As the I play in mentioned, quarter. those back into we added third

And points half back into a So get as roughly that from we about impact positive of the we basis perspective, favorable year. won't mix. XXX of benefit a the the of mixed move from

to don't again, we move we So expect But done of into the mix the year. favorable have reducing that be lot our terms structure. cost back as the in we of half a

we into base of terms is So year lower. that with in that the our entered now cost of sales

Jon Block

Got Thanks, it guys. perfect.

Mark Gorder

Jon. you, Thank

Operator

question line from of next Your comes from Securities. Colliers Bauser Kyle the

Your now line open. is

Kyle Bauser

all evening. here. Good for the Hi. Thanks updates

Just a questions couple here.

So we business its drive massive outside obviously saw into diabetes pipeline. investment Medtronic's a to

business changed It the getting that within in has a attention perspective? is changes now this management partnership, if to lot there IntriCon's How upside Medtronic? well. seems diabetes given key of all as at that from several course, like right all Of be anything should

Mark Gorder

me; that much for the bigger the to that coupled great be a for Medtronic big deal Thanks. coming question. But diabetes development diabetes billion the was things fund group announcement Yeah, and commitment they overall segments. of piece that Medtronic of pie. of to business the Blackstone market obviously to that envision And in market, couple development one, with ADA Medtronic the the out future research $XXX that initiatives of was

where opportunity with So that us forward can they spend thinking more in speaks an exciting. it's us, It gives think research for I place. there, in volumes agreement development. more Medtronic, very with And and work be and to money commitment that

has them market, is that development we've our As there our engineers set provide more just diabetes who the adjoint design provides out engineers solutions it an to opportunity. for manufacturer, set design somebody

a is it great So going a affects I great positive And to Medtronic. for think obviously us it's be believe very something way. that agreement likewise, be in that and we can

at and platforms, three their five if look said, that be years. future investments, earmarked are you they're to can those being platforms and that Now, these what for out

a out growth we out benefit immediate get that can position to of again, of going not that but long-term to put we're the us it, sustain market. coming anticipate diabetes in So

Kyle Bauser

I Agreed. it. Got appreciate that.

from And Obviously, been sort perspective holding previous how stock one I and curious are ramping direction I obviously, now be the aid shareholder valuation is names you question. opportunity pattern right mean, to you've shares to mean, the other which might EMS, hearing there. cash transition nice I get the the kind has is is midst the not of here. a on cheap following of Medtronic's option of spending economical business about nice addition. in IntriCon state in very But up of buy I'm here. acquisition an most out in in a back a a easily price. thinking considering COVID value what mean, just options But perhaps here? right the despite been moving a

Mark Gorder

significant it's the frustrating out stock That's getting much other see a than you around clip When our been to higher valuations great businesses been. way that Clearly, a see you look question. the being there has us. markets at it as depressed and

one, than Look, plays the idea in just significant stock see going medical of us. as of it in pure the space, hearing money. of of raising much the you amount multiples And bullet see cheap. That's a and back higher across significantly more not last the buying with some problem. that over solve no our silver there's I are look to liked then our you'll as You health weeks ago year couple

position of if to to story additive the strategic be back tell and we some focus is be and coming laid think execute go and We quarters where both have out grow that problem. and out build organically And we in that And we inorganically. we've a can plan over out do credibility. our the a and will our

care will the of stock itself. I take think definitely

execution up any So other than prop short-term I forward. doing us stock better activities to don't see the going

Kyle Bauser

the place? next enroll approval And self-fitting mid if all got sites later trial Okay, set at this on is it. of enroll taking you How the did again, enroll many year. But more where to at can beginning it? that me to is may. when And remind potentially that one I be year? the then begin And to you year, software going

Mark Gorder

anticipating site us currently not did partnership in the would we're a very laboratory conducting and anyone. proven and enroll one that trial. with we We're University experienced a assist exploring And

point gotten to We just going hit couldn't have When we're coming of elderly to we patients safety start enrollment. completely where down the not COVID because we the that guarantee any shut in.

anticipate end the we So the year, we complete of in to towards start hoping - would the it that the next trial year. we're and mid by

Kyle Bauser

Got it.

helpful. the That's taking for Thanks questions. Okay.

Operator

of Your from next Riley question Andrew the FBR. comes from D'Silva line B.

is Your line now open.

Andrew D'Silva

recent Hey, it patent my question partnership thank very My relates much the Tandem. benefiting CGM was the or just everybody's you for as and with well. hope I doing that see relates with space curious taking Medtronic's to first you just Medtronic? agreement impacting I how to questions. business cross your

Mark Gorder

thought was was struck to were there and they back that infringing agreement of to each technologies when my where think knowledge best other's both I related the pump. Andy where in Yeah, understanding some my maybe forth the on

of going So this clean settlement forward. a was that

term, impact see I with our Medtronic. terms longer having really don't So much in business that of

Andrew D'Silva

was as total what out Do Okay, CGM Medtronic of with came stick really the and Medtronic, EMS you concentration far customer to - revenue as including know is EMS? great. just quickly, that with And Medtronic.

Mark Gorder

of out for group. the about $XX.X for Medtronic and EMS so the diabetes cardio quarter, into Yeah, roughly $XXX,XXX was million

Andrew D'Silva

And and engine from as perfect. Help development sales and far that relates move utilizing development changing testing And into to for describe still that Are you the for product just what Hearing being sales engine company? not, marketing have as Express initiatives it as can you transition? so engine testing them and you, a you learned Okay, them you marketing using by as if and arm? you a and

Mark Gorder

branding go were in was that XX was direction Well, to past explore And with going teleaudiology we telemarketing to we that over XX if we learned to that path tried customer partners pursue. to to and they thing, going months started as and for outbound care placed good the to - be service. retailers was clear a not us the working value on one it

a Express the the in operations. still were So Hearing significantly on of while cost Help putting restructuring where place, position, reducing in the predominantly required focused assets

we're HHE So in wrapping good for We this developer hardware, of think that we complete this providing a offering feel into being point, retailers. and at branding service a the the customer good restructured partners that very fitting care with and very business point, into shape and IntriCon at software and position. we've

Andrew D'Silva

Okay. has sales. my last just And to do with question CGM

been, or kind we're started from of to a in see was XXX the what you of just of about And second that adopters far forward? than benefit bit orders all the of XXXX transmitters years of two going earlier more XXXG? since has had a thus as think you reasonably inventory it's out issues. So little search rolled Have to scale the want get rid

Scott Longval

Yes, the have then we've Andy replacement. cycle into transmitter and that this of XXX question, two go back years, to XXX, the typical seen, that's kind and you the that And natural right? Scott. great the if is you the last will XXXG So

see seeing to seeing revenue started the up we big chunk patients from in early XXXX, replacement XXX those coming our And as today, transmitters. we're of top-line now frankly, a on of that's So in ramp what units. terms we're

excited we that the we're has some second lost for we to and shares the market back to half of and about that believe into over Medtronic platforms of plough XXXX, last a XXXG the potential the great begin look several of are quarters. the As XXXG into year forward the

Andrew D'Silva

or last on of so, just the And question year Okay. calls. for one me. a Maybe about talked this conference we ago

sensors further an semi on for process moving manual sort change some automated at have least were You from a to that and would revenue. of

over transition think assemblies? would that would automated be moved you be revenue little sensor place? that different. to but gross I the number the for net a taken Has same, the bit system the Have

Mark Gorder

No. We anticipate probably order. And over of that be will widened couple Andy. a begin years in short this will

will six, you we significant think be least was to over thought next will impact so the the it I see than So farthered eight quarters. more believe now, probably in at what initial be

Andrew D'Silva

Thank of Okay, very forward. you and going much best luck, wonderful.

Mark Gorder

you, Thank Andy.

Scott Longval

Thank Andy. you,

Operator

at I don't any question continue. see this you may time,

Mark Gorder

and time, again, for your great you evening continued a call. Thank IntriCon. you Have thank for interest and in joining our

Intricon (IIN) 10 Aug 202020 Q2 Earnings call transcript