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Intricon Reports Third Quarter 2019 Results

ARDEN HILLS, Minn., Nov. 04, 2019 (GLOBE NEWSWIRE) -- IntriCon Corporation (IIN), a designer, developer, manufacturer and distributor of miniature and micro-miniature body-worn devices, today announced financial results for its third quarter ended September 30, 2019.

Third Quarter Highlights:

  • Revenue of $26.9 million

    • Revenue from largest medical customer declined 5.6% year-over-year

  • Gross margin of 25.2%

  • Net loss per diluted share of $0.03 versus net income of $0.22 per diluted share

“In the third quarter, we continued to make progress growing our addressable market in our two core businesses: Medical Biotelemetry and Hearing Health. We also made important strides forward in identifying new partners in markets where our core competencies can provide value and significantly expand our market opportunity,” said Mark Gorder, president and chief executive officer of IntriCon. “We anticipate our diabetes business to gradually ramp-up with further acceleration in 2020, following recent international regulatory approvals. We have also begun to focus our efforts pursuing exciting opportunities within interventional pulmonology and electrophysiology, as these markets have high growth rates and steep technology curves that harbor significant potential for IntriCon. We eagerly await the draft guidance for over-the-counter hearing aids and have taken steps to ensure we are well positioned to address the need for an alternative to medically prescribed hearing aids.”

Third Quarter 2019 Financial Results
For the 2019 third quarter, the company reported net revenue of $26.9 million versus $29.6 million in the comparable prior-year period.

Revenue in IntriCon’s Medical business in the third quarter of 2019 was $19.1 million, a decrease from $19.4 million in the comparable prior-year period. The year over year decline was driven primarily by continued slower than expected international rollout from a large medical device customer, partially offset by increased sales to its medical coil customers.

Hearing Health revenue was $6.4 million in the third quarter of 2019 compared to $8.2 million in the prior-year third quarter. Similar to the second quarter of 2019, revenue decline during the third quarter was largely attributed to restructuring activities within a large insurance customer’s hearing health business, as they pivot towards a more traditional “brick-and-mortar” approach that no longer aligns with IntriCon’s partnership strategy to reach the end customer. In addition, as anticipated the company experienced a decline in its legacy OEM business.

Gross margin in the third quarter of 2019 was 25.2%, down from 31.6% in the prior-year third 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 its existing and future customers.

Operating expenses for the third quarter were $7.2 million, compared to $7.0 million in the comparable prior-year period. The increase stemmed from higher non-cash stock compensation expense of $648,000 and severance expense, slightly offset by decreases in research and development expense and advertising expense in its Direct-to-End-Consumer business.

The company posted a net loss of approximately $290,000 or $0.03 per diluted share in the third quarter of 2019, versus net income of approximately $1.9 million or $0.22 per diluted share, for the 2018 third quarter.

2019 Guidance
Due to lower than expected diabetes revenue, revenue loss from the company’s large insurance customer, and the result of conscious reduction in advertising spend at HHE, IntriCon now expects revenue in the range of $112 million to $113 million and gross margin in the range of 26.5% to 27.0% for the full year 2019. This compares to prior guidance of $115 million to $117.5 million and gross margins in the range of 27.0% to 28.5% for the full year 2019.

Conference Call
IntriCon’s management team will hold a conference call today, Monday, November 4, 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: 7296587. 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)

THIRD QUARTER

YEAR TO DATE

($ in 000's)

2019

2018

Change

2019

2018

Change

Medical



$

19,099



$

19,356



-1.3



%



$

60,784



$

55,487



9.5



%

Diabetes

15,723

16,662



-5.6



%

50,837

47,531



7.0



%

Other Medical

3,376

2,694



25.3



%

9,947

7,956



25.0



%

Hearing Health

6,358

8,206



22.5



%

20,044

22,750



-11.9



%

Value Based Direct-to-End-Consumer

1,510

1,490



1.3



%

4,876

5,327



-8.5



%

Value Based Indirect-to-End-Consumer

2,443

3,660



-33.3



%

7,419

8,923



-16.9



%

Legacy OEM

2,405

3,056



-21.3



%

7,749

8,500



-8.8



%

Professional Audio Communications

1,436

2,004



-28.3



%

4,972

5,353

-7.1

%

Total



$

26,893



$

29,566



-9.0



%



$

85,800



$

83,590



2.6



%



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

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2019

2018

2019

2018

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenue, net

$

26,893

$

29,566

$

85,800

$

83,590

Cost of goods sold

20,120

20,236

62,253

56,435

Gross profit

6,773

9,330

23,547

27,155

Operating expenses:

Sales and marketing

2,609

2,784

9,071

8,023

General and administrative

3,715

2,921

10,551

8,429

Research and development

840

1,251

2,902

3,693

Impairment loss

-

-

3,765

-

Total operating expenses

7,164

6,956

26,289

20,145

Operating income (loss)

(391

)

2,374

(2,742

)

7,010

Interest income (expense), net

240

(48

)

703

(453

)

Other expense, net

(52

)

(221

)

(458

)

(650

)

Income (loss) from continuing operations before income taxes and discontinued operations

(203

)

2,105

(2,497

)

5,907

Income tax expense

87

(97

)

334

358

Income (loss) from continuing operations before discontinued operations

(290

)

2,202

(2,831

)

5,549

Loss on disposal of discontinued operations

-

-

(1,116

)

-

Loss from discontinued operations, net of income taxes

-

(299

)

(597

)

(870

)

Net income (loss)

$

(290

)

$

1,903

$

(4,544

)

$

4,679

Basic income (loss) per share attributable to IntriCon shareholders:

Continuing operations

$

(0.03

)

$

0.28

$

(0.32

)

$

0.77

Discontinued operations

-

(0.04

)

(0.20

)

(0.12

)

Net income (loss) per share:

$

(0.03

)

$

0.24

$

(0.52

)

$

0.65

Diluted income (loss) per share attributable to IntriCon shareholders:

Continuing operations

$

(0.03

)

$

0.25

$

(0.32

)

$

0.66

Discontinued operations

-

(0.03

)

(0.20

)

(0.10

)

Net income (loss) per share:

$

(0.03

)

$

0.22

$

(0.52

)

$

0.56

Average shares outstanding:

Basic

8,764

7,825

8,738

7,249

Diluted

8,764

8,822

8,738

8,360



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

September 30,

December 31,

2019

2018

(Unaudited)

(Unaudited)

Current assets:

Cash, cash equivalents and restricted cash

$

8,688

$

8,047

Short-term investments

20,315

38,093

Accounts receivable, less allowance for doubtful accounts of $306 at
September 30, 2019 and $807 at December 31, 2018

8,425

11,266

Inventories

17,883

18,163

Contract assets

8,513

5,624

Other current assets

2,290

2,146

Current assets of discontinued operations

239

1,205

Total current assets

66,353

84,544

Machinery and equipment

40,525

36,725

Less: Accumulated depreciation

26,867

25,303

Net machinery and equipment

13,658

11,422

Goodwill

9,551

10,808

Intangible assets, net

-

2,585

Operating lease right of use asset

4,749

-

Investment in partnerships

1,409

2,091

Long-term investments

13,764

-

Other assets, net

6,196

3,427

Noncurrent assets of discontinued operations

-

371

Total assets

$

115,680

$

115,248

Current liabilities:

Current financing leases

$

108

$

-

Current operating leases

1,790

-

Accounts payable

11,407

12,871

Accrued salaries, wages and commissions

3,063

4,409

Other accrued liabilities

4,033

4,031

Liabilities of discontinued operations

393

336

Total current liabilities

20,794

21,647

Noncurrent financing leases

55

-

Noncurrent operating leases

3,296

-

Other postretirement benefit obligations

343

377

Accrued pension liabilities

725

706

Other long-term liabilities

1,162

544

Total liabilities

26,375

23,274

Commitments and contingencies

Shareholders’ equity:

Common stock, $1.00 par value per share; 20,000 shares authorized;
8,778 and 8,664 shares issued and outstanding at September 30, 2019
and December 31, 2018, respectively

8,778

8,664

Additional paid-in capital

86,358

84,999

Accumulated deficit

(5,054

)

(509

)

Accumulated other comprehensive loss

(524

)

(927

)

Total shareholders' equity

89,558

92,227

Non-controlling interest

(253

)

(253

)

Total equity

89,305

91,974

Total liabilities and equity

$

115,680

$

115,248