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IntriCon Reports Fourth Quarter and Full Year 2019 Results

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ARDEN HILLS, Minn., Feb. 24, 2020 (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 fourth quarter and year ended December 31, 2019.

Full Year 2019 Financial Highlights:

  • Revenue of $113.5 million
    • Revenue from largest medical customer increased 5% year-over-year
    • Medical coil revenue increased 82% year-over-year
  • Gross margin of 27.3%
  • Net loss per diluted share of $0.43 versus net income of $0.64 per diluted share in the prior year

Fourth Quarter 2019 Financial Highlights:

  • Revenue of $27.7 million
    • Revenue from largest medical customer increased 1% year-over-year
  • Gross margin of 26.9%
  • Net income per diluted share of $0.08 versus net income of $0.09 per diluted share in the prior year

“In 2019, our team committed to continuing to meet the volume demands of our key customers and partners, while pursuing new business opportunities that could best leverage our core competencies to accelerate future growth and diversify our revenue base. We made meaningful progress throughout the year that ultimately has enabled us to enter 2020 focused on what we do best – serving as a joint development manufacturer to deliver complex micro-miniature devices requiring specialized design expertise and high production volumes,” said Mark Gorder, president and chief executive officer of IntriCon.

“We continue to see meaningful revenue contribution from our long-standing relationship with our largest customer Medtronic despite the stern competitive pressures they are facing domestically. We are also especially encouraged by opportunities we have identified to expand our medical business into other market segments that can significantly leverage our microelectronics, medical coil and specialty molding expertise. Similarly, we have identified new potential partnerships that we believe will position us as a leading supplier in the much-anticipated emergence of over-the-counter hearing aid sales. In order to concentrate our resources on this opportunity, we have decided to pivot our direct-to-end-consumer initiatives through Hearing Help Express entirely towards supporting product development in order to best capture the near-term benefits we see through an indirect-to-end consumer approach.”

Fourth Quarter 2019 Financial Results
For the 2019 fourth quarter, the company reported net revenue of $27.7 million versus $30.4 million in the comparable prior-year period.

Revenue in IntriCon’s Medical business in the fourth quarter of 2019 was $21.3 million, an increase from $20.2 million in the comparable prior-year period. The year over year increase was driven primarily by strong medical coil sales.  

Hearing Health revenue was $4.9 million in the fourth quarter of 2019 compared to $8.3 million in the prior-year fourth quarter.  Revenue decline during the fourth quarter was largely attributed to the anticipated restructuring activities within a large insurance customer’s hearing health business, as they pivoted towards a more traditional “brick-and-mortar” approach in the second half of 2019 that no longer aligned 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 fourth quarter of 2019 was 26.9%, down from 29.9% in the prior-year fourth quarter. Gross margins continued to be 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 fourth quarter were $6.7 million, compared to $7.7 million in the comparable prior-year period. The decrease was driven by a substantial reduction in advertising expense at Hearing Help Express.

The company posted net income of approximately $768,000 or $0.08 per diluted share in the fourth quarter of 2019, versus net income of approximately $868,000, or $0.09 per diluted share, for the 2018 fourth quarter.

Full Year 2019 Financial Results
For the full year ended December 31, 2019, IntriCon reported revenue of $113.5 million, relativity flat from $113.9 million in 2018. Revenue attributable to the company’s Medical business was $82.1 million, an increase from $75.6 million in the comparable prior-year period. Hearing Health revenue was $24.9 million for the full year 2019 compared to $31.1 million in the prior year.

Gross margin was 27.3%, down from 31.8% in the prior year. The decrease in margin was primarily due to excess capacity related to the manufacturing expansion to meet the anticipated higher volume requirements of the company’s existing and future customers.

Operating expenses were $33.0 million, compared to $27.9 million in the prior year. The increase is a result of $3.8 million in impairments as well as higher administrative costs.

Net loss attributable to shareholders was $3.8 million, or $0.43 per diluted share, versus net income of $5.5 million, or $0.64 per diluted share, in 2018.

Guidance for Full Year 2020
The company expects 2020 revenue to range between $110 million to $114 million. Gross margin for the 2020 full year is expected to be approximately 26% to 27%. The company anticipates a more tempered diabetes business in 2020 due to domestic competitive pressures facing its largest customer, and continued diversification into other medical markets. In the Hearing Health business, without definitive timing on the finalization of the pending OTC hearing aid regulation, the company is considering minimal 2020 financial impact from this channel.

Conference Call
IntriCon’s management team will hold a conference call today, Monday, February 24, 2020, 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: 2652858. 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)
                             
                               
  FOURTH QUARTER   YEAR TO DATE
($ in 000’s) 2019   2018   Change   2019   2018   Change
                               
Medical $ 21,309   $ 20,158   5.7 %   $ 82,093   $ 75,645   8.5 %
Diabetes   17,769     17,666   0.6 %     68,606     65,197   5.2 %
Other Medical   3,540     2,492   42.1 %     13,487     10,448   29.1 %
                               
Hearing Health   4,879     8,313   -41.3 %     24,922     31,064   -19.8 %
Value Based Direct-to-End-Consumer   1,244     1,525   -18.4 %     6,120     6,858   -10.8 %
Value Based Indirect-to-End-Consumer   1,491     3,681   -59.5 %     8,910     11,949   -25.4 %
Legacy OEM   2,144     3,107   -31.0 %     9,892     12,257   -19.3 %
                               
Professional Audio Communications   1,506     1,886   -20.1 %     6,478     7,239   -10.5 %
                               
Total $ 27,694   $ 30,357   -8.8 %   $ 113,493   $ 113,948   -0.4 %
                               

INTRICON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
 
 
    Three Months Ended     Twelve Months Ended
    December 31,     December 31,     December 31,     December 31,
    2019      2018      2019      2018 
          (as adjusted)           (as adjusted)
                       
Revenue, net $ 27,694     $ 30,358     $ 113,493     $ 113,948  
Cost of sales   20,254       21,282       82,507       77,717  
Gross profit   7,440       9,076       30,986       36,231  
                       
Operating expenses:                          
Sales and marketing   2,428       3,444       11,498       11,467  
General and administrative   3,382       3,289       13,933       11,718  
Research and development   928       978       3,830       4,671  
Impairment loss               3,765        
Total operating expenses   6,738       7,711       33,026       27,856  
Operating income (loss)   702       1,365       (2,040 )     8,375  
                       
Interest income (expense), net   217       139       920       (314 )
Other expense, net   (284 )     (165 )     (743 )     (815 )
Income (loss) from continuing operations before income taxes and discontinued operations   635       1,339       (1,863 )     7,246  
                       
Income tax expense (benefit)   (133 )     126       201       484  
Income (loss) from continuing operations before discontinued operations   768       1,213       (2,064 )     6,762  
Loss on disposal of discontinued operations, net of income taxes               (1,116 )      
Loss from discontinued operations, net of income taxes         (345 )     (597 )     (1,215 )
Net income (loss)   768       868       (3,777 )     5,547  
Less: Loss allocated to non-controlling interest                      
Net income (loss) attributable to shareholders $ 768     $ 868     $ (3,777 )   $ 5,547  
                       
                       
Basic income (loss) per share attributable to shareholders:                      
Continuing operations $ 0.09     $ 0.14     $ (0.23 )   $ 0.89  
Discontinued operations         (0.04 )     (0.20 )     (0.16 )
Net income per share: $ 0.09     $ 0.10     $ (0.43 )   $ 0.73  
                       
Diluted income (loss) per share attributable to shareholders:                      
Continuing operations $ 0.08     $ 0.13     $ (0.23 )   $ 0.78  
Discontinued operations         (0.04 )     (0.20 )     (0.14 )
Net income per share: $ 0.08     $ 0.09     $ (0.43 )   $ 0.64  
                       
Average shares outstanding:                      
Basic   8,779       8,647       8,748       7,599  
Diluted   9,398       9,439       8,748       8,630  
                       
INTRICON CORPORATION
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Amounts)
           
    December 31,     December 31,
    2019       2018  
Current assets:          
Cash, cash equivalents and restricted cash $ 9,162     $ 8,047  
Short-term investments   23,451       38,093  
Accounts receivable, less allowance for doubtful accounts of $325 at December 31, 2019 and $807 at December 31, 2018   8,993       11,266  
Inventories   16,377       18,163  
Contract assets   10,237       5,624  
Other current assets   1,975       2,146  
Current assets of discontinued operations   80       1,205  
Total current assets   70,275       84,544  
           
  Machinery and equipment   41,073       36,725  
Less: Accumulated depreciation   27,522       25,303  
Net machinery and equipment   13,551       11,422  
           
Goodwill   9,551       10,808  
Intangible assets, net         2,585  
Operating lease right of use assets, net   4,372        
Investment in partnerships   1,160       2,091  
Long-term investments   8,629        
Other assets, net   6,055       3,427  
Noncurrent assets of discontinued operations         371  
Total assets $ 113,593     $ 115,248  
           
Current liabilities:          
Current financing leases $ 101     $  
Current operating leases   1,729        
Accounts payable   9,876       12,871  
Accrued salaries, wages and commissions   2,274       4,409  
Other accrued liabilities   2,869       4,031  
Liabilities of discontinued operations   77       336  
Total current liabilities   16,926       21,647  
           
Noncurrent financing leases   30        
Noncurrent operating leases   2,937        
Other postretirement benefit obligations   382       377  
Accrued pension liabilities   655       706  
Other long-term liabilities   2,171       544  
Total liabilities   23,101       23,274  
Commitments and contingencies          
Shareholders’ equity:          
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,781 and 8,664 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively   8,781       8,664  
Additional paid-in capital   86,770       84,999  
Accumulated deficit   (4,286 )     (509 )
Accumulated other comprehensive loss   (520 )     (927 )
Total shareholders’ equity   90,745       92,227  
Non-controlling interest   (253 )     (253 )
Total equity   90,492       91,974  
Total liabilities and equity $ 113,593     $ 115,248  
           
(See accompanying notes to the consolidated financial statements)
           

 

 

 

 

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