IntriCon Reports Second Quarter 2019 Results

Aug 06, 2019

ARDEN HILLS, Minn., Aug. 06, 2019 (GLOBE NEWSWIRE) -- IntriCon Corporation (NASDAQ: IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its second quarter ended June 30, 2019.

Recent Highlights:

  • Quarterly revenue of $29.3 million
    • Revenue from largest medical customer grew 3.7% year-over-year
  • Gross margin of 28%
  • Net loss per diluted share of $0.57 versus net income of $0.25 per diluted share in the 2018 second quarter
  • Signed four-year Supply Agreement with largest Medical customer
  • Repositioned hearing aid sales in the UK through new distribution agreement with Puretone Ltd. and sold accessory business assets of its UK Limited subsidiary

“Over the past several quarters, we have taken important steps towards best positioning our business for the growth opportunities we see emerging in Medical Biotelemetry and Hearing Health, including bolstering our leadership team, expanding our manufacturing facilities, and realigning certain areas of our hearing health business. Our recent restructuring efforts will have a substantial effect on our bottom line, while at the same time allowing us to focus resources on new growth opportunities,” said Mark Gorder, president and chief executive officer of IntriCon. “We remain confident in our ability to achieve our long-term goals and secure our position as the partner of choice in micro-miniature device production.”

Second Quarter 2019 Financial Results
For the 2019 second quarter, the company reported net revenue of $29.3 million versus $29.4 million in the comparable prior-year period. Revenue excludes contributions from the discontinued operations of its UK Limited subsidiary.

Revenue in IntriCon’s Medical business in the second quarter of 2019 was $20.9 million, an increase from $20.2 million in the comparable prior-year period. Growth was driven primarily by sales to diabetes and medical coil customers.  

Hearing Health revenue was $6.7 million in the second quarter of 2019 compared to $7.7 million in the prior-year second quarter. The revenue decline during the quarter was largely attributed to order delays associated with restructuring activity within a large insurance customer’s hearing health business that are expected to continue through the remainder of 2019.

Gross margin in the second quarter of 2019 was 28%, down from 33% in the prior-year second quarter. Gross margins were constrained by ongoing validation and qualification expense and excess capacity related to the recent manufacturing expansion to meet the anticipated higher volume requirements of our existing and future customers.

Operating expenses for the second quarter were $11.6 million, compared to $6.7 million in the comparable prior-year period. The increase stemmed from the $3.8 million write-off of Hearing Help Express goodwill and intangible assets, higher non-cash stock compensation expense, increased advertising investments in our Direct-to-End-Consumer business and support costs related to key new business development initiatives. 

The company posted a net loss of approximately $5.0 million or $0.57 per diluted share in the second quarter of 2019, versus net income of approximately $2.0 million or $0.25 per diluted share, for the 2018 second quarter.  The company reported a second-quarter net loss from continuing operations of $3.5 million, or $0.40 per diluted share, which includes the Hearing Help Express goodwill and intangible asset write-off of approximately $3.8 million, or $0.43 per diluted share.

2019 Guidance
As previously announced, IntriCon revised its guidance for the full year 2019. The company anticipates revenue in the range of $115 million to $117.5 million and gross margins in the range of 27% to 28.5% for the full year 2019. 

Conference Call
IntriCon’s management team will hold a conference call today, Tuesday, August 6, 2019, beginning at 4:00 p.m. CT / 5:00 p.m. ET. Investors interested in listening to the conference call may do so by dialing (866) 795-7248 for domestic callers or (470) 495-9160 for international callers, using conference ID: 5294699. A live and archived webcast will be available on the “Investors” sections of the company’s website at: www.IntriCon.com.

Forward-Looking Statements
Statements made in this release and in IntriCon’s other public filings and releases that are not historical facts or that include forward-looking terminology, including estimates of future results, are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be affected by known and unknown risks, uncertainties and other factors that are beyond IntriCon’s control, and may cause IntriCon’s actual results, performance or achievements to differ materially from the results, performance and achievements expressed or implied in the forward-looking statements. These risks, uncertainties and other factors are detailed from time to time in the company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2018. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.

About IntriCon Corporation
Headquartered in Arden Hills, Minn., IntriCon Corporation designs, develops and manufactures miniature and micro-miniature body-worn devices. These advanced products help medical, healthcare and professional communications companies meet the rising demand for smaller, more intelligent and better-connected devices. IntriCon has facilities in the United States, Asia, and Europe. The company’s common stock trades under the symbol “IIN” on the NASDAQ Global Market. For more information about IntriCon, visit www.intricon.com.

Investor Contact
Leigh Salvo
(415) 937-5404 
investorrelations@intricon.com


INTRICON CORPORATION
MARKET REVENUE
(Unaudited) 

   SECOND QUARTER    YEAR TO DATE
($ in 000's) 2019   2018   Change   2019   2018   Change
                               
Medical $  20,892   $   20,198   3.4 %   $   41,685   $   36,131   15.4 %
Diabetes   17,950     17,307   3.7 %     35,114     30,869   13.8 %
Other Medical   2,942     2,891   1.8 %     6,571     5,262   24.9 %
                               
Hearing Health     6,675       7,730   -13.6 %       13,685       14,546   -5.9 %
Value Based Direct-to-End-Consumer   1,736     2,052   -15.4 %     3,366     3,837   -12.3 %
Value Based Indirect-to-End-Consumer   2,399     2,634   -8.9 %     4,976     4,608   8.0 %
Legacy OEM   2,540     3,044   -16.6 %     5,343     6,101   -12.4 %
                               
Professional Audio Communications     1,769       1,520    16.4 %       3,536       3,349    5.6 %
                               
Total  $   29,336    $   29,448    -0.4 %    $   58,906    $   54,026    9.0 %


INTRICON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

     Three Months Ended      Six Months Ended
    June 30,     June 30,     June 30,     June 30,
    2019       2018       2019       2018  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
                       
Revenue, net $ 29,336     $   29,448     $   58,906     $   54,026  
Cost of goods sold     21,121         19,727         42,133         36,202  
Gross profit     8,215         9,721         16,773         17,824  
                       
Operating expenses:                      
Sales and marketing     3,072         2,637         6,461         5,240  
General and administrative     3,650         2,751         6,836         5,502  
Research and development     1,097         1,316         2,062         2,475  
Impairment loss     3,765         -         3,765         -  
Total operating expenses      11,584         6,704         19,124         13,217  
Operating income (loss)     (3,369 )       3,017         (2,351 )       4,606  
                       
Interest income (expense), net     248         (211 )       463         (405 )
Other expense, net     (272 )       (196 )       (406 )       (401 )
Income (loss) from continuing operations before income taxes and discontinued operations     (3,393 )       2,610         (2,294 )       3,800  
Income tax expense     116         269         247         455  
Income (loss) from continuing operations before discontinued operations     (3,509 )       2,341         (2,541 )       3,345  
Loss on disposal of discontinued operations     (1,116 )       -         (1,116 )       -  
Loss from discontinued operations, net of income taxes     (405 )       (333 )       (597 )       (570 )
Net income (loss) $   (5,030 )   $   2,008     $   (4,254 )   $   2,775  
                       
Basic income (loss) per share attributable to IntriCon shareholders:                      
Continuing operations $   (0.40 )   $   0.34     $   (0.29 )   $   0.48  
Discontinued operations     (0.17 )       (0.05 )       (0.20 )       (0.08 )
Net income (loss) per share: $   (0.57 )   $   0.29     $   (0.49 )   $   0.40  
                       
Diluted income (loss) per share attributable to IntriCon shareholders:                      
Continuing operations $   (0.40 )   $   0.29     $   (0.29 )   $   0.42  
Discontinued operations     (0.17 )       (0.04 )       (0.20 )       (0.07 )
Net income (loss) per share: $   (0.57 )   $   0.25     $   (0.49 )   $   0.35  
                       
Average shares outstanding:                      
Basic   8,743       6,991       8,724       6,930  
Diluted   8,743       8,118       8,724       8,021  


INTRICON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(In Thousands, Except Per Share Amounts)

    June 30,     December 31,
    2019       2018  
    (Unaudited)     (Unaudited)
Current assets:          
Cash, cash equivalents and restricted cash $   9,801     $   8,047  
Short-term investments     19,688         38,093  
Accounts receivable, less allowance for doubtful accounts of $308 at June 30, 2019 and $807 at December 31, 2018     9,746         11,266  
Inventories     18,251         18,163  
Contract assets     7,116         5,624  
Other current assets     1,216         2,146  
Current assets of discontinued operations     648         1,205  
Total current assets     66,466         84,544  
           
  Machinery and equipment     39,155         36,725  
Less:  Accumulated depreciation     26,276         25,303  
Net machinery and equipment     12,879         11,422  
           
Goodwill     9,551         10,808  
Intangible assets, net     -         2,585  
Operating lease right of use asset     4,396         -  
Investment in partnerships     1,445         2,091  
Long-term investments     15,357         -  
Other assets, net     6,234         3,427  
Noncurrent assets of discontinued operations     -         371  
Total assets $   116,328     $   115,248  
           
Current liabilities:          
Current financing leases $   102     $   -  
Current operating leases     1,620         -  
Accounts payable     12,000         12,871  
Accrued salaries, wages and commissions     3,456         4,409  
Other accrued liabilities     4,260         4,031  
Liabilities of discontinued operations     606         336  
Total current liabilities     22,044         21,647  
           
Noncurrent financing leases     69         -  
Noncurrent operating leases     2,971         -  
Other postretirement benefit obligations     355         377  
Accrued pension liabilities     737         706  
Other long-term liabilities     1,224         544  
Total liabilities     27,400         23,274  
Commitments and contingencies          
Shareholders’ equity:          
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,754 and 8,664 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively     8,754         8,664  
Additional paid-in capital     85,729         84,999  
Accumulated deficit     (4,764 )       (509 )
Accumulated other comprehensive loss     (538 )       (927 )
Total shareholders' equity     89,181         92,227  
Non-controlling interest     (253 )       (253 )
Total equity     88,928         91,974  
Total liabilities and equity $   116,328     $   115,248  

 

IntriCon Logo SMALL.jpg

Source: IntriCon Corporation