IIN - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, welcome to the IntriCon Corp.’s Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Ms. Leigh Salvo. Ma’am, please go ahead.

Leigh Salvo

operator. you, Thank

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

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

risks and section For associated and Scott CEO, recent the a respectively, of the SEC. that, to Form Factors list business, Longval. with our Risk annual on With turn refer call XX-Q I of uncertainties over please and reports description with most Form would to XX-K the to and now the quarterly our like

Scott Longval

through who development today’s Ellen advancing to technologies blends that would financial brings IntriCon’s you, unique extensive like experience. XXXX, am teams Ellen will continue. joint time. I Good employees, a unwavering extend and like suppliers on micromedical by us by to mission start the and have Despite I also and I to manufacturing welcome CFO, skill afternoon. many set very new confident joins innovative me this partners Scipta, save improve, partnerships. to our commitment through thanking lives a stuck rallied of call. through together our that support our difficult engineering Leigh. Thank would challenges with

continue are in technology. global expand our financial to and footprint We steward our team be will to as we sure she strong a micromedical advance

the established Services, XXXX then our for detail we IntriCon. transformational for on then in our ways, that operation financial briefly we kept was believed in and enable up by included us as the results leverage our many the priorities we our will and priorities year to XXXX. Medical focus with medical to earlier into the platform markets, see a Ellen start year, core with medical well progress XXXX as we and to our questions. We end access priorities surgical as it In like for accomplishments our I’d open more progress of today, would markets, acquisition navigation a strengths serving call EMS, financial in of each medical growth the and in in opportunity market complex will Key us ongoing cover interventional Emerald immediate new primary best On or XXXX technology highlighting provided expanded high-growth execution. diversified, high which markets catheters. of

and new changes organizational our development With attractive the leadership bolstered our fields. key several experience of that to in sector-specific pursue respective and us advancements enable with more diversified team addition and quickly their better a business and partnerships. also key in also with We board opportunities executives member rich came

We also footing. eye the keen order through expenses unprecedented balance financial landscape on solid order kept navigate to XXXX and maintain a our our to sheet of in in

emerge We needed strength we of also markets. closely current in in and could a medical ensure the managed to resources the new position

Corporate and that our governance well These corporate re-branding as Responsibility our to to are we an as new in in incorporated our demonstrating completed included our responsibility critical a of policies are recently section environmental, effort and evolution our the employees policies As website. our extensive social shareholders. our of renewed website a enhanced sign of publication the an commitment for that vision,

to year. exited approximately initial saw Total as grew fourth noted the year-over-year our we sequentially, momentum exceeding revenues X% our to quarter and, of the our encouraged we call, and on XX%, expectations. as Turning the that were increased remains remainder quarter, consistent million; we third revenues financial relatively we last throughout by $XX.X performance, the

and EMS medical we recognized our in contribution expectations, with in despite of growth in our strong the with a ongoing financial business-wide We outperform also combined Generally of diabetes continued line impact to which COVID. quarter-on-quarter improvement market, business our the further included strength.

have delivered the during a up actions $X.X profit restructuring on several cost some as in half $XXX,XXX continued we focused. to year. from of Diabetes I quarter. over quarter, key represented business, in Beginning the of result, diabetes In System launch profit of to and the XXXG sales the the And first to progress as an would the minutes efforts control significant launch increase dive we take impressive U.S. of a approximately fourth into taken We continued coupled emphasize currently XX% with new improvement in the like XX% to quarter, quarter. detail the momentum Group to with our the total third system in MiniMed few in our XXXG the have the MiniMed our in medical we’re the patient Medtronic’s quarter-over-quarter saw of markets due to million fourth markets revenue international

system geographic and system U.S., MiniMed as connectivity this from received approval has been submitted for across pump for countries. expansion XX SmartPhone MiniMed the continues FDA XXXG, patients system launched the The FDA has feedback utilize to insulin Following the XXXG XXXG approval. now they features. positive the In

the XXXX. contributions continues experience insulin our of systems growth these we in to business market this optimistic some While of COVID to the remain headwinds, pump about

in year. agreement. this be further it anticipate Japan, an which by XXXX of quarter originally expected, one since fourth acquisition. Medtronic’s has in in regions catheter million a to revenue to time, $X.X at catheter primary We growth greater $XXX,XXX EMS contribution continue global the continued contributing will of market, of approvals quarter of by required Balloon in than believe the to Chocolate the the short pace related EMS during proven faster Accordingly, our and a manufactured level growth the turning purchase the already other is drivers a period very us take surgical This fourth launch IntriCon. to Next, in was earn-out of for which million revenue drivers EMS. better-than-anticipated in the interventional in and $X.X integration Chocolate The be navigation the provision in charge to key we XXXX driven

we can Going are to Medtronic’s leverage vascular core group stability other this financial we and confident and forward, reputation IntriCon’s business strong market. cardiac with secure opportunities technologies EMS’ and that in

medical to demand continued be strong. our coil business Lastly,

due to the revenue for constraints, However, capacity $X.X fourth was quarter million.

and We capacity in are these working through XXXX anticipate constraints quarter. improved first

driver the the our Turning to in market to market, the legacy this The hearing X% was OEM for health compared business. growth of year delivered quarter, approximately fourth primary prior period. we

noted quarter throughout continued On the we the that third access and quarter the this the progressed, trend quarter. increased as call, audiologists to fourth

and our leverage the progress process, to that price with remain with well. we forward the hardware, pilots to and hearing our to post-sale market potential platform, partners engagement, interest, We forward firmware preparing the regulation, gauge look are to in over the the quarters draft opportunity technology we discussions next To end, health It’s but considerations. the tracking and optimistic of as calls. On required await the future topic guidance. our continued couple including on software. early few partners providing official aim move to investments end updates with We select a pending about are OTC pilots closely

our and postpone time ensure As elected we previously of to health trial trial disclosed, can safety last software until self-fitting the we year, clinical patients. such

We be to on COVID-safe. our working measures have protocol begun safety adapt clinical and

our of trial the moving there of a parts, goal quarter maintain third are of completing the in we While XXXX. number

As activities. look key highlight into I’d out and year, we the our to some operational like coming of goals

First and foremost, we continued year view of a as XXXX execution.

customer interventional. micromedical navigation drive and We seek end high-end key markets, In in specifically add XXXX, base, technology. diabetes, and to have growth a diversify surgical core partners, can in best our to our pursue to markets continue to that valuable growth significant leverage we plan opportunity competencies new opportunities

I plan call those and growth, will provide Ellen to are year for we quarter organic the new a XXXX. to to detail the and results putting our explore in With opportunities identify place now addition turn the initiatives. and on financial to pursue fourth to Ellen? full selectively over more In team best inorganic that,

Ellen Scipta

a is excellence. of incredible you, a Thank history to great and with innovation company Scott. a It people such join and pleasure

I Scott those will allow mentioned goals. prepared exceed finance have partnerships growth delivering his of in to ahead As number much forward us we to us that very a of and remarks, opportunities look

our million, the of Help $XX.X is the total company the a fourth fourth to increase share medical by driven quarter with $X.X fair part initiatives largely a total quarter prior operating margins quarter. to liability, period. to reported and legacy $XX.X our OEM This OEM reduction $XXX,XXX was million XX% prior solid our increase direct-to-end $XXX,XXX We within consumer quarter, fourth was to which were XXXX did EMS due net due our net and Express period. a acquisition. Help, orders the market an gross was Help in in audiologists renewed to year attributable year-over-year expenses slight business, Fourth expenses primarily More $X.XX lower compared revenue medical year per from in XXXX. quarter or EMS, Hearing Hearing up the in the and XX.X% X.X% this value revenues Hearing to of $X.X fourth upside second in to product $X.X attributable to indirect-to-end legacy compared due results, which business of partially in turning in $X.X quarter. We were an margin acquired year due from and was net over $XXX,XXX, $X.XX $X.X income of or fourth quarter. the indirect-to-end $X.X for to million, increase versus line. was per were million, of was consumer we revenue EMS business posted prior revenue diluted loss comparable product XXXX the share revenue, Core consumer than represented of XX.X% prior to our primarily and X.X% Hearing the earn-out prior through Operating period. see more $XXX,XXX, shareholders XXXX customers. Again, a revenue revenue due offset our the was specifically million XX.X% in the slightly related access increase year in Now our implemented expense The for Help to increase financial approximately was million approximately the for for cost EMS revenue the diluted shareholders quarter million, by In of mix. contribution $X.X The the May million. increase the million, over

expense-related costs year. in transition The million to by due reported $XXX,XXX in diluted $XX to offset agreement initiatives year December XXXX, million per IntriCon per December offset share margins revenue full earn-out by compared initiatives expenses ended primarily versus Net loss X.X% expenses, with earlier. year was XX.X% compared in partially of compared million the mix, in CEO to XX, in or due in EMS in or share approximately million, the $XX.X a XXXX. Gross $X.X volume XXXX. the For for cost prior of of ended was million operating reduction XXXX. million EMS fair operating $XXX.X diluted XX.X% million, of decrease in the were XX, $X.XX a year-over-year with signed $X.XX of $XXX Operating associated to value June The cost in and noted attributable product and liability, $XXX,XXX expenses to the increases pandemic-driven shift the was reduction I were change decrease $X.X reduction partially $X.X shareholders XXXX.

approximately as of quarter. $XX.X the investment mission in micromedical the our technology. December XXXX XX, our manufacturer Lastly, develop and million, focused underlying was on up entered from XXXX prior leading $X.X be to balance joint We combined million cash

exiting overall we business by every nearly a as encouraged seeing outperformance the identifying securing the momentum very partnerships progress in are and category, result acquisition. our early EMS QX. contributions stems new of This from We and our are confidence

risk and a uncertainties our we of that this but continued of to However, variances we high cautiously COVID-XX issuing number poses time. the pandemic to due reiterate COVID outlook, In cases, ‘XX guidance we be COVID continuing uncertainties financial are optimistic will to with the results. a not operating full maintaining at want year short, new

year, revenue We than quarter with variants first steady as XXXX the lower have the provided QX degree throughout COVID some of growth expect slightly headwind.

second the diminish half COVID-related We and a to begin normal commercial impacts see as return operations customers our to gain traction. some in also as acceleration XXXX of and expect

Catheter. from becomes widely We vaccine we can operations, of employment are to additional broader the products more market We protocols Chocolate diabetes from stemming further benefit is that, half confident normal commercial in anticipate approvals distributed MiniMed second support. our potential interventional resume once upside XXXG Medtronic’s our growth market in expansion IntriCon Medtronic’s from of true Balloon and the and of poised the

the regulation opportunity for the our guidelines hearing would moves to Additionally, exists continue the and now in mandatory health we we call are consumers operations protect meantime, as in employees. line support with an and the I Operator? protocols the manage in place forward that over-the-counter In offered offsite market preparing will with option. on-site our still all optimistically Scott appropriate and With like questions. to for non-production to open are that,

Operator

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

Your now line is open.

You your may question. ask

Jon Block

revenue I Gross is on Thanks. know got discussion three then but down the in or were a Good the good margin XQ. a expansion, there to revenue a well. that margins a Ellen, get just growth. if high-level mix revs welcome four, is you’re is an was were you and parts update to afternoon. would I’ll up hope lead have bit all is and gross guidance, giving talk But to can small amount maybe relationship? with there Scott, going moving directly queue. past, handful, And margin on the would, to especially you Thanks. tied gross not back I XQ sequentially. But to that other, In now dynamic? the is thought there one EMS. I if and if be and it the know shift,

Scott Longval

the Yes, you. for Jon, and thank to you talk to question, good

a fourth level. made will a we confident, quarter, we’re the margin couple quarter. But about I bit we’ve of fourth a additional there revenue, quarter. this in of drive from is the that very line, overall see And as there, So our through fall the We’ve of top the overall, that little we see a changes that, long we as will little disconnect a shift talked had while investments think bit improvements. We in thought process drive we fact don’t mix on margin. the

So nothing that changes from perspective.

Jon Block

your revenues just your Does Okay, great. And little on more that’s approvals thoughts or Ellen, And on it And then, as some more pipeline, your XXXX. just Medtronic’s throughout robust a event? just a a you expectations partner? pipeline. I assume thought there half contributor being from Scott, of assume more got U.S. robust talked Ellen questions. about any or no a Does bit directionally XXXX than XXXG partner’s and then that have

Scott Longval

the is look starts and a about questions. Medtronic’s market day, optimistic Look, they gains, the at and sure were Good hosting clearly Yes, you internationally for am yes. the I XXX with both very got chance to us. which from and results fantastic, other XXX pump insulin share

that If business believe speaks XXX, you volumes go. the that look the at I think on where that to feedback can they they’re getting

can hold pump last begin consumer systems, help of quarters of they that the delights. addition those In taking to over to couple ways does they and patients that the due addressing to and also It out in engage get COVID. couldn’t some

the additional be towards then, of on provide lift, steps as that systems back well for think we the along will us lift a for the on And kind with process, well. bode packaging of doing part manufacturing more half functionality in year, cloud as of in these natural us new labeling some I will we this that XXXX. the look and as business just COVID focused So and additional of kind technology small

Jon Block

my bundle of last question. I great. sort will Great,

of revenues about more So, bigger on of push you Are coil Are guys. it’s more partners? And Scott on maybe your hearing if you the events or revenue-generating DTC hear commentary leveraging quick the the of office, can the pilots, a into support some your side the those one then XQ on DTC capacity pilots, details that the great question, or are back is loss you constraints, the types to these ‘XX? provide, Thanks, of XQ for mentioned business. the And they the size side? any would, there the will division? be just

Scott Longval

capacity first constraints of that XXXX. quarter We push some of This the the pick question, first revenue in more some coil likely had the and us the with most up you’ll of more see work on second is start those. I’ll the Yes. side. we through in

Jon, terms about. talking a this the progression, In we’ve what pilots, of of is been

lot end We for and market. the points. different with we’re a will point potential We than mentioned that our market. the We’ve partners have on been they had garner now is the the price preparing you, market XXXX. to want a post-sale right to want more to pilots. ourselves in we’re These understand for preparing identify of are trying of getting We revenue to to OTC partners, And what this test notable engagement going where number pilots, I be though, discussions to tell that are drivers require. we information will

I in you that at us So look pilots more – development if think channel of think, them information. I lead would of of development terms XXXX, the in gather will to

look we to passed, when when we’re to finally OTC a in that. is position do So the scale regulation

frankly. what terms the to In going depends we’re offer, pilot, it of on

clearly, hardware each I be few and of pilots it well primarily will and But them, as our the we you of firmware because, the our anticipate, and way have market. back can office a do So supporting only software a pre-OTC in in will clearly, in pilots. these

Jon Block

color. guys. Thanks That’s great

Scott Longval

Jon. Thanks,

Operator

of Instructions] question from comes Thank you. Riley from Next line Andrew B. the Securities. [Operator D’Silva

Your line is now open.

question. a ask may You

Andrew D’Silva

Thanks questions. afternoon. Ellen, taking for good Yes, to pleasure meet my And you.

to earn-outs recruiter events am one-time for expenses, that’s that? the XXXX, fees I any I Just for model operations we amortization, of or could comp, bookkeeping have let to just quarter like somebody were a CapEx just related period, should cash curious, or quick pulled stock-based year. and couple unusual for get other flow questions, if first depreciation, And the while from just either full know of started, me the getting one-time in

Scott Longval

your would into quarter that or modeling. factor significant I material, Nothing first Andy

some comp, In amortization fixed purchases, terms the and items, of asset $XXX,XXX. stock-based quarter for was operations million $X.X $X.X $XXX,XXX. million, Cash of depreciation and the housekeeping from flow was

Andrew D’Silva

Okay, perfect. as Thank a did ones, few diabetes-related couple hearing you have well. for that. and questions And of then, aid a I

to it the an stands finished where yet? to and now as we Just are automated us having you that process facility but sensory could on effectively are really update give the finish, operating relates for you that you assembly quality and waiting manufacturing certification

Scott Longval

first do We running. have the Yes. up system and

but running of We and it are system, up producing still through that on parts. the is some working efficiencies and

Andrew D’Silva

Okay.

Okay, sales. the XXX, the see as the with XXXG, great. sensor business? curious, specifically launches the highlighted to XXX good I about diabetes do Obviously, to it’s think as you And uptick in it relates to Zeus dynamics see Zeus still process. How you you related was in CGM it Medtronic. am changing the your approval

Scott Longval

Yes.

think a good I question. very that’s

provider through sole the continuous they work last the going in of clearly, number very XXXG of use that’s glucose calibration. and are and to manufacturer that Medtronic the bricking of beginning years. the current from the a handhelds, customer of we away that required Zeus be And at record that approval While way excited in market on the that’s process. to that the position a and requires a a functionality back moving of day about solution that’s And puts eroded calibrations I multiple is over the And a as is strong one-time us very the something couple the transmitter XXXG long so that of that, share delight the go Bluetooth being one to platform to finger gripe calibrations a systems. and earning addresses with and the think areas continues the

Andrew D’Silva

hear. to good stimulated you diabetes thought just since with other side. just one the And the transmitter, referenced that’s Okay,

point to were transmitter transmitter past any somewhat to renewal? patients just second business, it X-year XXXG sort benefit they at or for this you are It you quarter? above As looking materially are relates and point starting a at for? that order a the what of was the we does the during went least Basically, have seeing

Scott Longval

with to level us that down get for hard information the it’s all resides Really, of Andy, detail. customer. that

We’re in demands that the they volume a to meet position require.

what those to hard me volumes like. specifically it’s replacement so look comment And on GST for

Andrew D’Silva

me back in for talk the place. utilizing Okay, you’re expect Is is about works, to just the back were that to of you is kind the that OTC not where go the or once to because to of on to focus going if pursue that obviously, I you’re some all is, you’re going the a okay. regulations Could really, to are how of of DTC And hearing health that And OTC business, period going your back back-end are am going pilots maintain you be for still. your you place? the just why core going that should referencing seemed of significant self-fitting regulations really something And side, support your in forward? office part and office for that very the capabilities last the question were in any in software interested applicable curtailed time? we be providing view, away before

Scott Longval

software channel. And be a of critical this clearly, for self-fitting providing required to absolutely. element the is going care that’s Yes, that ecosystem to

As office, an our going it an the And to our of going of be part be forward. to important it’s it’s relates to going important business, business. back part

think to number it’s of forms. different I a on take going

number capability, provide an in to to if box to want send some there end ability partners support, going very have that going And are us in want N also able, to consumer. necessary. to that to of one products Our ship to are is us They equals directly able is to instances, to important. be a a be

And offer that the to so time we’re be like. through of market define customers, as letting ultimately look to going especially we important what our period think really I it’s going able of to to it’s this continue that

and really cost in do to it good been Hearing that we’ve low run part very and are of our acquisition, a position. the we skill Those as Help think are at So sets basis. I a able

Andrew D’Silva

quarter the and Okay, time. Thank for good in congrats much the luck forward. you on very perfect. And fourth the going progress

Scott Longval

a Andy. day. Thanks, Have good

Operator

time. I turn sir. to would at Scott, am conference showing I back Thank the now no this further question to like you.

Scott Longval

look Be Great. everybody, a forward have the call today. us to joining We for Thank and on our progress XXXX. you, updating safe, continue throughout on great evening.

Operator

for this gentlemen, Thank concludes today’s have and and Ladies day. participation, wonderful a you conference.

You may all disconnect.

Intricon (IIN) 26 Feb 212020 Q4 Earnings call transcript