U.S. Markets open in 5 hrs 2 mins

Edited Transcript of IIN earnings conference call or presentation 2-Aug-17 9:00pm GMT

Thomson Reuters StreetEvents

Q2 2017 IntriCon Corp Earnings Call

ARDEN HILLS Aug 13, 2017 (Thomson StreetEvents) -- Edited Transcript of IntriCon Corp earnings conference call or presentation Wednesday, August 2, 2017 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* J. Scott Longval

IntriCon Corporation - CFO, Treasurer and Secretary

* Mark S. Gorder

IntriCon Corporation - CEO, President and Director

================================================================================

Conference Call Participants

================================================================================

* Larry Haimovitch

Haimovitch Medical Technology Consultants - President

* Richard Allen Ryan

Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials

* Ross Strehlow

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the IntriCon Second Quarter 2017 Results Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Scott Longval, Chief Financial Officer. Please go ahead.

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [2]

--------------------------------------------------------------------------------

Thank you, operator. Joining me on today's call is Mark Gorder, IntriCon's CEO. Before we begin, I would like to practice our remarks with the customary safe harbor statement.

Today's conference call contains certain forward-looking statements. These statements are based on current estimates and assumptions of IntriCon's management and are subject to uncertainty and changes in circumstances. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Actual results may vary materially from the expectations contained in today's call. Important factors that cause such differences include, among others, those set forth under the headings: Risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations in our 10-K filing for the year ended December 31, 2016.

With that, I'd like to turn it over to Mark for a strategic look at IntriCon's second quarter.

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [3]

--------------------------------------------------------------------------------

Thank you, Scott, and thank you, everyone, for joining us today. I would like to begin by reviewing key highlights and results for the second quarter. After that, Scott will cover the financials in more detail. And then we'll be glad to take your questions.

By this time, most of you have had a chance to review our second quarter press release. The company reported record net sales of $22 million, up 32.1% from the $16.6 million in the prior year period. Gains in medical and value hearing health drove the strong performance, and we expect that to continue in the third quarter. In addition, we're making meaningful progress in creating and cultivating a new channel to deliver superior outcomes-based affordable hearing health care directly to consumers.

Looking at our 3 businesses. Our medical business increased 45.9% in the 2017 second quarter from the earlier -- year-earlier period. The gain was primarily driven by the expected production ramp of Medtronic's MiniMed 630G and 670G wireless glucose monitoring systems.

In June, Medtronic announced the U.S. launch of the MiniMed 670G system, the world's first Hybrid Closed Loop system for people with Type I diabetes.

Medtronic began fulfilling orders from patients enrolled in their Priority Access Program, which they anticipate will continue into the fall of 2017. In parallel, Medtronic began taking new orders from interested customers who want to be next in line to receive the system after the Priority Access orders are filled. We remain well positioned with Medtronic, with 2017 second half sales also expected to be at record levels.

Turning to hearing health. Sales in this business grew 32.5% from the prior year second quarter, primarily stemming from growing traction in our value hearing health initiatives, including a 55% growth from hi HealthInnovations and a $1.4 million contribution from HHE, partially offset by declining conventional channel sales.

As previously announced, we acquired a 20% stake in DeKalb, Illinois-based HHE, a direct-to-consumer mail order hearing aid provider in the fourth quarter of 2016.

In January 2017, we exercised our option to acquire the remaining 80% stake in HHE. That is expected to close during the fourth quarter.

Since taking our initial stake in HHE, we have made substantial progress, integrating and optimizing the organization. In 2017, we completed the relocation of the business, merging 2 locations into one, hired Jim Houlihan as Vice President of direct-to-consumer hearing health sales and President of HHE; enhanced HHE's sales and marketing capabilities and increased advertising; and finally, introduced IntriCon's digital hearing devices into the HHE portfolio, most recently adding the Apollo 6200, the Apollo 6310 and the Ranger 7610 digital hearing aids.

From a financial perspective, we are seeing great traction in our direct-to-consumer model. As compared to the 2017 first quarter, during the second quarter, HHE increased hearing aid orders by 75%, grew total backlog 62%, doubled the number of new qualified leads to our database and doubled the number of net new customers to our database. Based on these metrics, we intend to increase our investment and advertising in the second half of the year in order to further accelerate growth.

While the increased investment will have a minimal impact in 2017, as our HHE hearing aid revenue is deferred 2 months, it will position HHE for a more robust growth in 2018. That said, we do anticipate second half revenue to be up 35% over the first half of 2017.

Along with the addition of HHE in April 2017, we entered into an agreement to acquire a 49% stake in Soundperience, headquartered in Frankfurt, Germany. Soundperience has designed the first-psycho acoustic way of analyzing peripheral hearing and central hearing processing, branded as the Sentibo Smart Brain System. The software is a sophisticated self-fitting hearing aid and brain-training software technology that is being used in the German market today, most notably through IntriCon's previously disclosed Signison joint venture with Soundperience.

Sentibo is currently being integrated with our wireless hearing aids, and we anticipate an initial rollout in Germany during the current quarter.

In addition to its international application, we also view this software as a critical component to our domestic value-based hearing health care model. Sentibo as well as our other proprietary fitting systems, are designed to improve both channel productivity and the quality of first-time fittings, resulting in lower prices, greater access and increased customer satisfaction. Just recently, we began piloting a cloud-based version of the Sentibo Smart Brain System in the United States and anticipate a broader commercial launch in the first half of 2018.

Looking at some of the other international hearing health initiatives, we continue to focus sales efforts into the National Health Service clinics in the U.K. While our efforts to make inroads to the NHS have proven to taken longer than expected, in April, we received formal approval from the NHS for a third device, the Kamplex 940D, which will enhance IntriCon's sales opportunities. The Kamplex 940D, which is a traditional behind-the-ear device, is very appealing to the NHS because of its broad-fitting range and advanced features.

During the quarter, we identified 12 initial NHS reference sites. We intend to place a qualified IntriCon employee in those NHS clinics to support patient fittings and gather feedback. Once the initial 12 clinics have been engaged, we will reach, attract and convert further NHS sites. Our goal was to be delivering 1,000 hearing aids a month to the NHS by the end of 2017.

Shifting to public policy. There have been significant developments during the first half of 2017. Legislation was introduced in the House and Senate to make hearing aids available over-the-counter for those with mild to moderate hearing loss. The proposed legislation would require the FDA to write regulations, ensuring that this new category of over-the-counter hearing aids, meets the same high standards for safety, consumer labeling and manufacturing protections as all medical devices, providing consumers the option of an FDA-regulated device at lower cost.

On July 12, the House of Representatives passed by voice vote, H.R. 2430, the FDA Reauthorization Act, which includes the Over-the-Counter Hearing Aid Act of 2017. The legislation will go before the full U.S. Senate for consideration. Although no timeline has yet been set for a floor vote, the Senate is expected to act prior to the August recess.

We believe this legislation has the potential to remove the significant barriers existing today that prevent innovative hearing health solutions. We believe that this legislation will invigorate competition, spur innovation and facilitate the development of an ecosystem of hearing health care that provides affordable and accessible solutions to millions of unserved or underserved Americans.

Additionally, these public policy changes all further support our strategic focus to gain direct access to consumers in the underserved market.

With that, as said, I'd like to turn the call over to Scott.

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [4]

--------------------------------------------------------------------------------

Thank you, Mark. I'll begin by reviewing our second quarter financial results in more detail.

In the 2017 second quarter, we reported net sales of $22 million, up 32.1% from the $16.6 million in the prior year period. The increase was primarily due to year-over-year revenue gains from our largest customer as well as growing traction in our value hearing health.

IntriCon posted net income attributable to shareholders of $610,000 or $0.08 per diluted share versus a net loss attributed to shareholders of $1.5 million or $0.23 per diluted share in the 2016 second quarter.

Second quarter gross profit margins were 30%, up significantly from 23.1% in the prior year second quarter. The increase was primarily driven by greater volume and the impact of higher direct-to-consumer business in 2017 results.

Operating expenses for the second quarter were $6 million compared to $4.7 million in the prior year second quarter. The increase was largely due to the inclusion of Hearing Health Express in 2017.

In terms of guidance, based on the information that is currently available, we anticipate the 2017 third quarter net sales to range between $22 million and $23 million, which represents an increase of 42% to 48% over the prior year comparable period and positive EPS.

For the year, we anticipate net sales to range between $86 million and $88 million, which is up 26% to 29% over the prior year.

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

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Dick Ryan with Dougherty.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [2]

--------------------------------------------------------------------------------

Question on Medtronic. How much of the business was Medtronic? And I think a few weeks back, they talked about some supply issues with their CGM's, and I'm wondering if that had any impact on your business, or could that in maybe the second half?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [3]

--------------------------------------------------------------------------------

Dick, good question. For the second quarter, Medtronic made up about 49% of our total revenue, about $10.8 million. And to the second question, we saw a very little disruption with that hiccup that they had. I know that they're in the process of remedying that. And as we look out for the second half of the year, we don't see that having, really, any impact on our business with them going forward.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [4]

--------------------------------------------------------------------------------

So second half outlook versus Q2, is it kind of plateau, or is there sequential growth from what occurred in Q2?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [5]

--------------------------------------------------------------------------------

We're anticipating sequential growth in, definitely, in Q3. And we anticipate there could be in Q4. I think it's a little bit early to speculate there. But clearly, that business is strengthening, if you're following any of the news releases that Medtronic has put out. They've had a very good reception for the 670G system. I know that they're starting out to look -- to get approval for OUS, which will only be additive in the future periods.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [6]

--------------------------------------------------------------------------------

Okay. I saw the comment on hi HealthInnovations growth. Are we awakening a sleeping giant? Or what's going on with that relationship?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [7]

--------------------------------------------------------------------------------

Well, Dick, as we've said in past press conferences that even though we were disappointed back with the early takeoff with hi Health, they have made steady, continuous progress over the last several -- last few years. And now we are seeing a slight acceleration. I wouldn't say it's a rocket ship taking off, but it's definitely good, steady growth that obviously, year-over-year, that was pretty impressive percentage increase for them. They are our largest hearing aid purchaser at this point.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [8]

--------------------------------------------------------------------------------

Are they -- do they have their infrastructure in place, the number of audiologists that they need? In that sort of infrastructure requirements, do you know?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [9]

--------------------------------------------------------------------------------

Dick, they -- obviously, for them, there's not a lot of restrictions on resources. And from our understanding, they are in this business to sell insurance policies. And they simply providing the hearing aids as a benefit to their insurees. So as the number of claims comes in, they add to their capacity to meet that requirement.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [10]

--------------------------------------------------------------------------------

Okay. You mentioned on the DTC side, you're going to be looking at increasing advertising expense. Can you kind of quantify that effort?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [11]

--------------------------------------------------------------------------------

Yes. What -- we're very pleased with the initial tryouts that we have done in terms of experimenting with different market -- media mixes, in terms of what produces a best outcome. We think we're zeroing in on a particular formula that produces a very good revenue-to-advertising ratio. And Jim Houlihan, VP of Direct-to-consumer business and President down there, has a good handle on that. And so based on his recommendation, we are going to up the expenditure there and we anticipate that, that will result in a good increase in revenue. Although, as we said here, it won't result in anything meaningful until Q1 of next year. But we're going to set the table by...

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [12]

--------------------------------------------------------------------------------

Okay. Scott, just a couple housecleaning. What was professional audio? I missed that and depreciation and stock-based comp.

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [13]

--------------------------------------------------------------------------------

For the third quarter, we had - excuse me, for the second quarter, Professional Communications was $1.5 million and depreciation was roughly $0.5 million and stock-based comp was 218 -- excuse me, $207,000.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question comes from Ross Strehlow with RBC Wealth Management.

--------------------------------------------------------------------------------

Ross Strehlow, [15]

--------------------------------------------------------------------------------

Can you break down for me your profitability on the hearing side? How are you doing on that issue?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [16]

--------------------------------------------------------------------------------

Well, we currently don't break profitability out by our different business lines. It's a little bit premature to do that, but I can tell you, and what we've stressed over a number of calls in public releases, is that the medical business is obviously, the foundation that's generating a lot of cash and profitable. And we're using those funds to invest in, what we think, can be a breakout opportunity on the hearing health side. To Mark's points and comments earlier, as we're beginning to invest a little bit heavier on the direct-to-consumer side, we're anticipating to see those top line numbers accelerate and drive the overall hearing health business to profitability and beyond in the short term.

--------------------------------------------------------------------------------

Ross Strehlow, [17]

--------------------------------------------------------------------------------

Okay. So again, in other words, you're still not profitable on the hearing side, is that safe to say?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [18]

--------------------------------------------------------------------------------

Overall, I would say that is accurate.

--------------------------------------------------------------------------------

Ross Strehlow, [19]

--------------------------------------------------------------------------------

Okay. And so if you can give me an idea, when do you expect that hearing side of the business to become profitable? That'd be great to know.

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [20]

--------------------------------------------------------------------------------

Based on what we are planning, Ross, and with the growth -- continued growth we see, in both the HHE and with other direct-to-consumer partners that we are developing, we anticipate, probably by mid-2018, that, that business will also be profitable.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question will come from Larry Haimovitch with HMTC.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [22]

--------------------------------------------------------------------------------

Looking at the press release, something that I didn't quite understand that I wanted to try to get a better handle on. Quote from Mark Gorder, "In second quarter HHE increased hearing aid orders 75% over the first quarter." Now -- and then second quarter -- second half revenue will be up 35%. I'm trying to understand, same-store sales, apples-to-apples sales, can you help me understand what the growth rate is, not based on when you acquired it, but is there some way to look at it from a same store or apples-to-apples basis?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [23]

--------------------------------------------------------------------------------

Well, I think, Larry, the way you're looking at it to the way that we laid out is a pretty good representation. So we do have a little bit of the delay from revenue recognition to the increased hearing aid orders. There's a 2-month delay based on a warranty period that we provide. So orders that were shipped in May and June will be recognized here in July and August and so forth. As we step back and look at the business and the key metrics that are important for us to ensure that we're driving this business forward. What are the current hearing aid orders? And we saw a significant increase in the second quarter, Mark quoted the 75%. The other components of that business that you're not seeing here is there is a large battery component to that business. It makes up, roughly, 40% of the overall revenue, 35% to 40%. And that is not growing quite as rapidly as the hearing aid business, because we're really more focused on growing device sales and not the battery sales at this point.

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [24]

--------------------------------------------------------------------------------

And I would add to Scott's comment that, Larry, that some of the -- in the call here, we indicated not just the increase in hearing aid orders, but we're starting to publish some predictive measures, like the backlog, the number of new qualified leads. Because, obviously, you need qualified leads in order to get orders. So those are -- all those numbers have to be increased in order for us to drive revenue. So we're going to start talking about those numbers on a consistent basis now. And if we continue to increase those numbers, you'll see continued increase in revenue on a quarter-over-quarter basis.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [25]

--------------------------------------------------------------------------------

Yes. Well, that's very helpful. Guys, with all due respect to your brilliant management abilities, this 75% increase in hearing aid orders is probably not what the growth rate was before you acquired the company. I don't know exactly what it was, but I don't think they were growing in anywhere near 75%. So what accounts for the fact that since you acquired it, all of a sudden this business is just going to the moon. I mean this is quite an impressive...

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [26]

--------------------------------------------------------------------------------

There's a couple of -- first, it's a huge untapped market. When you look at the penetration of the conventional channel into the market, according to the statistics that the government is using in this legislation, our penetration is only at 14%. And we've got an aging population and affordability and access are huge barriers, so by getting professional management at HHE, which Jim Houlihan now represents. And he's applying very sound marketing principles to drive new leads, convert those leads and generate orders. That's why we're seeing this tremendous increase, because we're coming from a base where we didn't have that kind of management in there to one where we do, and the market is untapped and very large. So we don't know to what level we can continue to scale and drive this, but to the extent that we can increase advertising and continue to get a good result, we'll continue to do that. So what we'll probably show you guys is we'll continue to report these predictive measures, and we will continue to report that, based on what we're seeing, we're going to increase the advertising quarter-over-quarter. So now we're going to take a particular -- we're going to increase it to a particular level and see what kind of result we get. And if we keep getting growth results, we'll keep increasing the advertising.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [27]

--------------------------------------------------------------------------------

So what I'm hearing you say, Mark is, you guys are putting more professional management to run the business as well as increasing marketing expenditures to bring business in? Is that a fair characterization of what you just said?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [28]

--------------------------------------------------------------------------------

Yes. And then, we're backing that up with support from IntriCon by putting in all the state-of-the-art digital products. So we've significantly increased the quality of the products at HHE as well.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [29]

--------------------------------------------------------------------------------

Okay. Regarding Jim Houlihan, it's great to see you brought someone on board. It took an awfully long time to come to that decision. Why did it take so long?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [30]

--------------------------------------------------------------------------------

Well, we acquired the -- we didn't really acquire the business till November. And at that time, we hired Jim as a consultant to come in and stabilize the business. And it turned out that not only was Jim a great stabilizer, he was also the right person for the permanent position. So you could argue it might have taken us a quarter too long to actually get the -- get him in place. But at the end of the day, we got the right person in there.

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [31]

--------------------------------------------------------------------------------

Yes, I will echo those remarks from Mark. If you recall, when we first took over we needed someone to some professional leadership. And the first things that Jim needed to do was get his arms around that business. And also, had a lot of administrative things to do, relocating the business, rightsizing the business, et cetera. But the skill sets that we needed most was expertise in online marketing and digital marketing. And over the last, I would say, 6 months, that Jim really displayed his abilities to do those skill sets in very efficiently and effectively, as you can tell, in some of the numbers we published. So we wanted to take our time, make sure it was the right add. It's a critical position for us, going forward. And we're happy to have Jim on board.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [32]

--------------------------------------------------------------------------------

Great. One more question, I'll jump back in queue. Were you cash flow positive in the quarter?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [33]

--------------------------------------------------------------------------------

We were.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [34]

--------------------------------------------------------------------------------

Okay. How much was it?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [35]

--------------------------------------------------------------------------------

Generated about $2 million of EBITDA.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [36]

--------------------------------------------------------------------------------

Okay, great. And free cash? Something less than that?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [37]

--------------------------------------------------------------------------------

Correct. Yes.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [38]

--------------------------------------------------------------------------------

Because I'm looking at your balance sheet here, the cash and restricted cash number is fairly low. Not that you've ever been a cash-rich company, but I've got to think that running the business as it's growing so much with about $1 million of cash is a little bit uncomfortable for you, Scott, being the CFO?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [39]

--------------------------------------------------------------------------------

It's a little bit of a challenge, but I'll say this, we've been very fortunate that we've seen a lot of strength in our base medical business and other pockets, which generated a lot of cash. It's allowed us to be aggressive in pockets where we wanted to drive the value-hearing health.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

And we'll take a follow-up question with Dick Ryan from Dougherty.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [41]

--------------------------------------------------------------------------------

So, Mark, on the NHS side, just a couple of things. You want to get to, I think, you said what, 1,000 hearing aids a month. Can you give us a perspective where that is today? But I thought you said you were going to add one dedicated employee in 12 sites. And I mean, first what's the -- what's your headcount over there now? And how much did PC Werth's contribute in the quarter?

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [42]

--------------------------------------------------------------------------------

We don't need to have 12 people out there. We've got everybody in place that we need. And it's a matter of just sending them to the clinics for 3 or 4 days for intense training. So we have selective 12 clinics, and our goal is to get 100 hearing aids per month out of 12 clinics by the end of the year. And we think that's doable. We've got the right products over there now. And we've got the right sales people in place. So we're not adding any more people to do this.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [43]

--------------------------------------------------------------------------------

And what was PC Werth's contribution in the quarter?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [44]

--------------------------------------------------------------------------------

About $800,000.

--------------------------------------------------------------------------------

Richard Allen Ryan, Dougherty & Company LLC, Research Division - VP & Senior Research Analyst of Industrials [45]

--------------------------------------------------------------------------------

Now is that much hearing aid business? Or is it more they're testing and accessories?

--------------------------------------------------------------------------------

J. Scott Longval, IntriCon Corporation - CFO, Treasurer and Secretary [46]

--------------------------------------------------------------------------------

Almost all that is test equipment and new accessories.

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [47]

--------------------------------------------------------------------------------

But all -- but majority of it going to the NHS. Hearing related, it's not hearing-aid related.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

It appears, there are no further questions at this time. I'd like to turn the conference back to Mark Gorder, CEO, for any additional or closing remarks.

--------------------------------------------------------------------------------

Mark S. Gorder, IntriCon Corporation - CEO, President and Director [49]

--------------------------------------------------------------------------------

Once again, we appreciate you taking time out of your day to join the call. In closing, I'd like to reiterate that I'm excited with the direction we are headed. We delivered a strong first half, and the future looks bright. As our medical business thrives, we're also gained critical momentum in value hearing health. And we continue to believe that this effort will drive success for IntriCon and deliver value for our shareholders. We look forward to sharing our successes with you in the future, and thanks again, for joining the call.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

And that does conclude today's conference. We thank you for your participation.