Intricon (IIN) 11 May 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the IntriCon Corporation's First Quarter 2021 Earnings Conference Call. At this time, all participants' lines 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 speaker today, Ms. Leigh Salvo. you. Thank ahead. go Please

you, Thank operator. you. Thank

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

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

XXXX. Good call afternoon conference joining XXXX the for our and momentum strong, half you on thank quarter on second of Leigh. the the We first building entered today. you, year Thank

we base, in to As expanding leverage their that continue high-growth partners to opportunities impressive to technology quarter, we best ahead, year take growth. to organic I our markets presented. specifically the health. adding surgical encouraged growth and past drive customer both navigation, securing our have medical are remainder inorganic we has can diabetes, support first core drive catheters focused key Throughout reflect markets, many thank be a of the our the and end on throughout competencies and and into I'd partners on valuable to year unwavering micro hearing and new like moment interventional diversify the in for opportunity significant an employees, suppliers our challenges by the

performance X%. saw million, Total increased and continued increased first revenues to strong operational results. our financial approximately quarter XX% to Turning revenues We $XX.X sequentially, year-over-year improvements. and

headwinds our Group out of the each initial and expectations. XXXG certain in fourth COVID-related diabetes. international first from sector launch Although That We quarter first launch sequentially. of with we challenges, each MiniMed of XX% total an of with in in business momentum saw XXXG the health year-over-year. the and the in the Drilling XXXX lines, posting MiniMed's Diabetes in experienced largely growth revenue growth to our the represented Medtronic hearing resulting strength impressive the double-digit some saw labor end and we business markets business pertaining our XXXX quarter, This of renewed was over X% our to in quarter markets. into quarter. diabetes during Sales strength down due outperformance to to results this exceeded XX% first stemming our Medtronic the carried Starting U.S.

optimistic and of systems deliver these in beyond. are will other products half Medtronic forthcoming We second the of growth and the sales increasing year new

XX million $X.X revenue quarter customer continued in in new first from exciting $XX.X since expectations, Medical catheter surgical top proven million Services, long-term we bullish our the the to both Emerald totaling for months expansion, us exceed are While terms can revenues markets in markets on line and the EMS, and these important totaled to drivers first growth in acquisition. have interventional provide navigation for of contribution be and and opportunity the

delivering manufactured first by Medtronic's Chocolate the revenue EMS, Balloon saw adoption catheter we quarter, international growth. quarter-over-quarter XX% of During

business year and are due market. other considered and COVID future. well business, quarter, secure with In staffing and Cardiac EMS' We within to surgical expected, and labor primary the constraints line, Group medical can technologies this strong Longer expect navigation for the we in as experienced coil catheter to this be our we that hire and the reputation first business financial term, EMS Vascular capacity. growth drivers our product to leverage our our in opportunities Medtronic's stability continue confident to to impacting into skilled IntriCon's this core ability

We continue through quarter. Medical work the quarter. challenges first in the the to second million, with XXXX quarter sequentially fourth revenue was $X.X these in flat

indirect health prior growth delivered Turning quarter, compared year OTC market. driven the period. initial by to we business our first to Growth support an related volumes to pilot. approximately required XX% our hearing In end of consumer was to the

were access Additionally, our restrictions as legacy to hearing health COVID to benefit increased audiologists from lifted. business continued

call, programs required and partners select firmware post-sale software. platform, As we not and aim market are earnings last our to in pilots engagement commencing pilot gauge considerations. with end comprehensive leverage revenue technology year, our hearing hardware, These including to expected interest, we are material this drive rather to but noted this year price aid

offers pilot year. on within in and and providing as it available Walgreens April, expected, hardware in pilot first to As products with throughout this OTC hearX We IntriCon hearX stores select pilot states progresses early insights the more online. launched. in forward firmware This look our the

slower-than-expected end not OTC to health behind do self-fitting our to launched said, of schedule delay products, the software this support due other we business. anticipate impact our expect That April of we trial in clinical hearing enrollment. to the Additionally, by our original year, completion and COVID-related trial and the slightly

remains a the bipartisan Turning to hearing-impaired pending support in of providing widespread individuals the growing lower-cost to number for OTC U.S. solutions regulation. There

profiles a guidance regulation There and and in variety However, undoubtedly frame participants contribution. draft will uncertain. the remains market be many of eventually time of final this with

collaborate to continue we regulation. such, draft with await we as potential partners As

over business with challenges excited manage we will we short-term year-over-year deliver work progress a our our these meaningful way. we confident, While constant about with solid on business supply growth. existing to with associated challenges, in markets focus long-term I'm I more in lingering results making input that, in headway the overcome same detail Ellen? the are constraints COVID-XX, cost-effective and customer supply of storms, serve, at execution, now while XXXX. I'm the our making business to further our our diversify primarily to can through that most coupled new for financial -- time call from February impacts markets the provide of of we specifically the will turn With expansion first the entering Texas our on quarter growth to the as our the support we base. Ellen staffing as continue well

Thank you, Scott.

results. financial our to turning Now

the adopted in You directly the we of the comparable release call, on accompanying press the our our most we to of growth Reconciliations may in notice issued measures are a use clearer to have provide and GAAP reporting non-GAAP today. and transformation. release this picture tables provided

of a per $X.XX was versus $X.XX or million prior in the XXXX quarter prior $X.XX over due reported $X.X million $X prior revenues year contributions quarter of growing legacy to over quarter our and quarter-over-quarter. per per net the was the and is in million, total to first represented $X.XX $XXX,XXX slightly diluted up diluted health part, the period. quarter our the share the EMS to for due the and product the hearing of revenue, $X.X health versus from or XX% upside hearing We first The business $XXX,XXX share per access $XX.X net pilot loss adjusted the $XXX,XXX in share or net in first XX% period. share with GAAP For our medical was or primarily contributed XX% due, increase quarter diluted year-over-year loss $XX.X acquisition. our income In Core of XXXX, net which increase or audiologists in line. diluted year increase market the first year was were initial of net business, for of than more OTC medical year million, for EMS to $X.X million year XX% renewed quarter-over-quarter. the we Non-GAAP XX% quarter, the OEM total revenue hearX. million, income an see prior revenue quarter to prior a our period. a first of and did XX%

higher $XXX,XXX do the margins of to quarter, in comparable million in prior we First due and amortization of so expense; additional technology offset were $XXX,XXX operating to wages, Operating expense for reduction increase and expenses; million continue of restructuring. expenses with margin of higher quarter our higher marketing incentives with the $XXX,XXX to compared prior expenses year associated sales Hearing intangible agreements assets, due and In partially $XXX,XXX by will Health the mix. year Express XXXX. amortization and was due in $X.X of The primarily first was QX XXXX million volumes salaries, the classified was EMS access certain expenses a compensation $X.X and throughout associated quarter the to operating to in $X.X gross XX.X% first period. profit period. to The compared XX.X% stock-based

in R&D this throughout classified purposes, comparability For XXXX. amortization was

to of of increase As payables. the compared in was $XX.X Company had XXXX. XX, $XX.X million quarter-over-quarter strong investments flow XXXX, as $X.X March our QX million in driven and our of results cash increase as December The well as by a million XX, cash

return normalized AP balances We are addressing to QX. the of end and issue this expecting to by

input pandemic Turning that challenges near-term to operating uncertainties on the supply and We constraints a year. full reiterate COVID-XX pose our our outlook of staffing results. risk want for to the

not revenues million representing We of quarterly between regular XX% million, XXXX to anticipate $XXX expect year-over-year growth do We and $XXX to guidance. XX%. range providing

to with COVID-XX-related operations continue could revenue would first guidelines to mandatory input in meantime, pent-up our of With the constraints. in like our place recognized first I in and slightly Scott for the quarter line In due second pandemic quarter and our protect supply foresee appropriate demand challenges Operator? all support to off the questions. that, we manage and with to results lag open call remaining employees. our nonproduction and XXXX quarter However, regarding staffing present the on protocols now we site site

Andrew, Your of open. is is first your D'Silva Andrew Riley line Securities. question B. from

you relates Just MiniMed curious of me. XXX the sensors quick approved color have I was coming or curious in give to out that as just the it diabetes been that I a believe Could XXXG? strength little couple if was ones these don't of business. the yet. bit I'm XXX, because of a for really

So maybe later? to growth out I is where want where be and coming dynamics of there the understand and it could now

Good for in. question, Andy. calling Thanks Yes.

Zeus half year into the of XXXX. XXX catalysts to the the growth growth in XXX saw some the that really was from was market. about XXX for and launch we the that in the here of growth the back carried be More largely of the for the specifically, the we QX, the the due those also the So U.S. catalysts the platform, that of think we're And well back two and in half forward we internationally U.S. then and eyeing. business, talked can adoption year those in momentum diabetes here

We obviously in momentum those off haven't can't But of timing leave that strength Medtronic. we what forward that saw in of on carried and the I to come specific was I'll the seen up quarter. first through, fourth them. comment really again, quarter

sales bolus of durable? Okay. on. OEM surprised for it And over have place of and so seen just the I a XX% growth a quarter? OEM little just we sales us give the mean, lot sharing, is in would market a more elective you then the would aid this this short-term of given can the taking the a at And how quarter a been. obviously year? from that expect Is year-over-year. dynamics adoption kind the value-based hearing should standpoint, the color saw protocols thought and significant there? the on procedure I contributor I'm pandemic bit have strong have a little Or hearing be a some faster But that's

and shut our because really business seen seen in When pop We look up third to legacy There's audiologists, quarter, XXXX, at and that in flown couple pent-up a that of through, more that's that demand. that's really opened bit. COVID we've late legacy quarter, a access last business. took in second hit down quarters. the pent-up little demand, when where been pause the first over There's OEM some legacy quarter, we the you've and

the then to here and to conducted make with part the to think pilot even growth is the get in health I the consumer. greater some into XXXX. get begin were that value guidance And Andy, we business we that as late of We're for quarter quarter. levels draft late in last was hearing will to term, that calls, which longer the eventually, And strides in regulation back several first the space business place. that when we've see the final talked So where see in out normalize we second in we'll the end is about there, starting momentum where indirect drivers

that appear guidance for -- mean be and guidance. last just expect a to four that the we And just Is first related it -- quarter. quarters, you quarter your seasonality looking strong Great. very if the kind me watermark the quarter we Should fourth at bit just into Or of might it second separate would you and Okay. figure kind question high relative I take the should other quarter? the have a first quarter a little third fair any to more and assessment? in of

will remainder the a a talked be of in Andy. first and year quarter. quarter, we quarter Thanks, slight the we about, in maybe Yes. the pullback above in second And the from of anticipating the through likelihood, saw we QX, as where first then where are we're what seeing growth all in progression

for I natural of that's So progression second beginning rest quarter. a the the the year think in

is Jon of your Your is Block Stifel. Jon, open. from question next line

just Scott, revenue start gross the margin I'll of on sort dynamics.

very relative ahead So our estimates beat revenue and of another to gross more but lot nice a modestly. margins awesome

you maybe it driving still think if on term for margins gross So a put of bit, even sort that revenue to margins longer increase an just number still to is shift mix out-year could willing think gross on longer about? we really is that, out and comment term, margin and weighing you're us if when revenue the gross if

Thanks, Jon. Yes.

direct we That's direct in that the driven really margin, first So the up. has churn a demand's in labor thinking overtime the was labor outlined, because line. XXXX towards The XXXX. that the ran quarter into gross environment. of in our cost increased the of the challenge of end some sales inefficiencies had frankly, significant the we've And this within of about challenges some amount of we've and been has some clearly, that

in margin the line. able to some growth quarter, that we'll we the of on the to resolve and continue measures handle constraint be to of putting the in second succinctly people and early with of in handle some overtime suggest would see remedy the has and -- some correlate taking So that our as reducing we're that that, gross those indications that, caused half the But year. we'll be that the We'll Jon, challenges. get our of and think margin back a more around -- on kind churn, line. getting I able you'll less But gross board to the on revenue more begin growth see to

Okay. Very helpful.

calls, Is Scott, we more, you Do take as as and In XH of as you I is, responsibilities specific you question. just were XH bring same to of said one an increase? that words, more and partner that some on what on. thought a you previous sort some offshoot organization? about? labeling you're one responsibilities, packaging think do additional to same on side packaging with that does gave volumes And follow-up labor with that similar to the What's ASP and from partners talking sort constraints the that about that's was event. an your a it like-for-like the medical other Sorry, biggest And 'XX have details, of that an going 'XX were doing supply a if the around ASP perspective? on that -- still labeling, for about of what event? it these to if you would, to

Yes.

products, to products within on going not So certain It's geographies. labeling packaging all products. it's the those certain

certain that's of that get XX% ASPs some in of to we're to these going of products XXXX. making labor, products to of we get hopefully things to new see recognize terms in ramp the qualified quickly is in the as geographies. early place year that look, half those potentially of started revenue the one back sure think labor some in we'll this increase into We've and We approved. here But that focused more roughly on -- meet is on that demand. So XX% going can the

I you, And not of IntriCon. and seeing problem taking employees, move now. highest ways this labor retain strong one I and half type as to have the we've tell that priorities to have back that the into attract And the of of that's going we're year, a it's is be And But one we we that outlined. these think some with on. can we measures challenges in so we're impact of the a that and the constraints won't will of position, the unique

or Okay. two me. one And last for

always sorry, margin? that don't overall I or give mentioned imply, the the ASP when model to construct In higher XX% gross that $XX the Or the out might about take, these in margin in but way experiencing sense from because higher of structure And all, know, of you're any we in was a to the of that which conservatism? much other the walk and corporate. just as that we million how right, structure willing of and additional yet relative IDTEC to share? color think to the in giving, DTC the does higher as corporate what term, support the $XX first do you're put how we that XX% do ASP, pilots XH, out With think on Just this to and maybe words, XH just margin around maybe IDTEC, the view the a about we work longer do accretive back million gross you're year, regard? packaging guidance you and working last is the one, labeling,

Yes. Very good questions.

the the And we going on will want some just launches or half timing these the we how that of positive think of on front. about are products year this be, half, of point, much customer. because into last that aren't assured half terms the and that the it's select to back of to bake on remember, So first in when back we of didn't

I'm rambled term, for And long Scott? while, sorry, I IDTEC structure the but the margin Okay. a on just

Thank you. Yes. Yes.

think margin the OTC say, So to in Jon, we corporate the gross we're front see going makeup market, IntriCon the I that about us channels there's to within we XX% we several low participates. similar us, going that profitability giving opportunities of have XXs, that and the and a and expenses within our IDTEC, the several kind will in But ways envision be margin have pilots operating in of and ultimately where be the XXs and structure financial range. averages, in a to the should I

were Now obviously, see there's which lot the DTC margins. departure I -- at those But support in participating to the done that was we'll the get be volumes will market, your point, that to OTC needs term, we a to that's that HHE. doing be of work how down to effort those from long a

next Your your Colliers from open. question Securities. line is of Bauser Kyle, Kyle is

would just this that to understand or over quarters just coming trying to growth if any just anticipated, the profile growth the So talk the above I'm it, more not so I'll staff? in Medtronic-related again But very might at you be that was that, we come EMS I maybe kind model of how applied start expectations you you of acquisition Can profile? time great. about expectations sort a already with the but EMS, quarter-over-quarter well XX% sure mentioned line accretive. being of growth, and of think the

Yes.

quarter-over-quarter the from but they're doing job in other within a in Medtronic customers was growth alike. total their XX%, also demand and as coming business So EMS, meeting fantastic again,

to do able the I partner in built go regions the is continue, confidence and Medtronic, and for Emerald to there and world. be the stability take be other figure other customers with out IntriCon's serve -- how competencies But goal and abilities sell with out can other as Emerald and take they've financial in to -- of those obviously, it's we the to Medtronic Our technology, important highlighted, us we best be.

right think that growth is we of And Emerald. those us years. now so leverage that year, that that's Asia drivers those at in things capabilities we focusing important some one have partnerships will the over of on look as the a building be I And can out we're two, for three

continuing for and maybe And to OTC the guidelines it. wait Got us FDA. to to switching

to Just willingness kind today, you conversations still kind the least of and programs space ongoing have if you discussions? in develop? wondering just -- if holding in move the we're of here? at how pilot characterize potential would this success maybe your a of those given curious, just forward kind pattern And Or continued how to of partners with have

Yes. answer two on I'll fronts. that And

we simmer at or conversations of OTC, think in of saw I a in. that were the sort we already most were little I engaged the what business breath the and saw market looking a entrants that again working XXXX, large So bit. with people And internally the in think they took deep that

starting Now in are announced hearX to that see with COVID more the pilot with of we're the and we we the collaboration year that in there's with. partners first potential seeing the others half discussion and we're lift, here cloud engage. Obviously,

activity, would more than over I of in discussion couple seen say the years today, I've collaboration. of terms there's So and last Kyle,

curious, headcount? over positions a And you do hiring it, you just next, can Appreciate that. latest -- the the Great. six how or to lastly, fill call I'm the just would talk little months? constraints? many is ideally have constraints, supply bit what three about you And What open so

Yes.

pretty question. So that's broad a

We XXX have employees. roughly

constraint is a in the here where number international seeing And Now of greatest Minnesota. we're specifically, U.S. our in manufacturing the those facilities are and three market employees.

quite a direct term like So of position the closer in XXX. from I early again, what of to half labor think course back add we good -- some to from XXX would a anywhere in year. and in techniques, bit That's skilled we've here to seeing we XX% the labor. But new the be we'll next to adopted XX% in returns, of Minnesota, over find in trying quarter. have And the about over terms we're

Mr. to any like conference I Longval for time, turn comments. this to further the would Scott back At

time. look the you, for your good move on Stay today. year. a joining We we you giving appreciate updates Thank the I night. throughout to Great. forward as call Have everybody, healthy.

concludes this you today's gentlemen, for conference call. participating. and Ladies Thank

may You disconnect. now