IntriCon Reports Fourth Quarter and Full Year 2018 Results

Medical and Value Hearing Health Performance Drive Record
Quarterly Revenue; Company Provides Guidance for 2019

ARDEN HILLS, Minn.–(BUSINESS WIRE)–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, 2018.


Recent Highlights:


Record quarterly revenue of $30.8 million, a 41.1 percent increase
over the prior-year fourth quarter;


Gross margin of 30.0 percent, consistent with the comparable
prior-year period;


Net income per share of $0.09 versus $0.05 in the 2017 fourth quarter;


Grew revenue from its largest medical customer by 74.8 percent
compared to fourth quarter 2017;


Increased indirect-to-end-consumer hearing healthcare revenue by 79.9
percent year over year;


Continued buildout of infrastructure to meet future demand;


Acquired source code from Soundperience for its Sentibo Smart Brain
self-fitting software; and


Hired Doug Pletcher as vice president of medical biotelemetry business
development.


“Our medical and indirect-to-end-consumer value hearing health
businesses continued to drive strong top-line performance, leading to
another quarter of record revenue,” said Mark S. Gorder, president and
chief executive officer of IntriCon. “I’m pleased with the meaningful
progress we made in 2018 towards advancing our key growth initiatives,
bolstering our medical leadership team, and expanding our technology.


“I am confident that we are entering 2019 in our strongest position to
date. We have the capital to pursue strategic initiatives and a
well-developed infrastructure to support our efforts in medical and
value hearing health. I believe that we are well positioned in the early
stages of long-term, sustained growth within our core markets. The
diabetes market is experiencing tremendous growth, with continuous
glucose monitoring (CGM) a critical component to serving the needs of
many diabetics. And as the value-hearing healthcare space emerges, we
believe we are at the forefront of providing affordable and accessible
solutions to unserved or underserved hearing-impaired Americans.”


Fourth Quarter 2018 Financial ResultsFor the 2018 fourth
quarter, the company reported net revenue of $30.8 million, up 41.1
percent from $21.8 million in the comparable prior-year period. The
increase was primarily due to year-over-year revenue gains from the
company’s largest medical customer and growth in its value-based
indirect-to-end-consumer hearing healthcare business.


Fourth-quarter gross margins were 30.0 percent, consistent with 30.0
percent in the prior-year fourth quarter. Gross margins in the quarter
were constrained by costs related to additional infrastructure
investments.


Operating expenses for the fourth quarter were $8.2 million, compared to
$6.1 million in the comparable prior-year period. The increase stemmed
from increased advertising investments at Hearing Help Express (HHE),
and support costs related to key initiatives to drive overall business
growth.


The company posted net income of $868,000, or $0.09 per diluted share,
versus $396,000 or $0.05 per diluted share, for the 2017 fourth quarter.


Full Year 2018 Financial ResultsFor the full year ended
December 31, 2018, the company reported revenue of $116.5 million, up
28.5 percent from $90.6 million in 2017.


Gross margins were 31.9 percent, up from 29.5 percent in 2017. The
increase in margin was primarily due to the increased volume throughout
2018.


Operating expenses were $30.0 million, compared to $24.2 million in the
prior year. The increase stemmed from increased advertising investments
at HHE, and support costs related to key initiatives to drive overall
business growth.


Net income attributable to shareholders was $5.5 million, or $0.64 per
diluted share, versus $2.1 million, or $0.28 per diluted share, in 2017.


Guidance for Full Year 2019The company anticipates 2019
revenue to range between $128 million to $133 million. Gross margins for
the 2019 full year are expected to be approximately 30.0 to 31.5
percent. In general, the company anticipates linear revenue growth and
gross margin improvement through 2019, however this could be impacted by
commercial product launch timing from its largest customer and mix
shifts between product lines.


Business UpdateRevenue in the company’s medical business
increased 64.8 percent in the 2018 fourth quarter over the comparable
prior-year period. The gain was primarily driven by the ongoing
production of wireless CGM systems for the company’s largest customer.
Revenue to this customer increased 74.8 percent in the fourth quarter
over the comparable prior year period. The company remains very well
positioned with this customer for 2019, providing key system components
including CGM systems, sensor assembly and related accessories.


During the year, the company expanded its infrastructure to support
anticipated growth from its current medical customers and other new
business development efforts. Expansion efforts include a newly leased
37,000-square-foot medical manufacturing and clean room facility in
Minnesota, an additional 10,000-square-foot medical assembly space in
Singapore, 13 new molding presses and a high-speed printed circuit board
assembly line. In addition to these investments, our current customers
invested several million dollars in tooling and automation within our
facilities. While the company has begun limited production on certain
products, it is still working with current medical customers to complete
required validation and qualification of several key production lines.


Recently, the company hired Doug Pletcher as Vice President of Medical
Business Development. Pletcher has more than 25 years of executive
management and business development experience in the medical device
industry. In this new role, Pletcher is responsible for sales and
marketing of new product platforms into the medical biotelemetry market.


On the hearing health front, total revenue increased by 10.3 percent
over the prior-year fourth quarter, led by the company’s value-based
indirect-to-end-consumer business, which posted strong revenue growth of
79.9 percent. This gain was partially offset by a temporary decline in
the direct-to-end-consumer channel and expected continued waning in the
conventional sales channel.


The company continues to build its value hearing health technology
portfolio, with wireless and self-fitting technologies. Last month, the
company closed on its acquisition of the Sentibo Smart Brain
self-fitting software source code from Soundperience, positioning the
company to capitalize on the pending over-the-counter (OTC) hearing aid
regulation. Sentibo Smart Brain self-fitting software is designed to
improve both channel productivity and the quality of first-time
fittings, resulting in lower prices, greater access and increased
customer satisfaction.


Conference CallThe company will hold a conference call
today, Tuesday, February 19, 2019, beginning at 4 p.m. CT. To join the
conference call, dial: 1-855-719-5012 and provide the conference ID
number 7881455 to the operator. To access the replay, dial
1-888-203-1112 and enter passcode 7881455.


About IntriCon CorporationHeadquartered 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, the United
Kingdom 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.


Forward-Looking StatementsStatements 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, 2017. 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.




 




 




 




 




 




 




INTRICON CORPORATION


MARKET REVENUE


(Unaudited)


























 






FOURTH QUARTER




YEAR TO DATE


($ in 000’s)




2018




2017




Growth




2018




2017




Growth


























 


Medical




$


20,158




$


12,232




64.8


%




$


75,645




$


53,452




41.5


%


Diabetes






17,666






10,104




74.8


%






65,197






43,365




50.3


%


Other Medical






2,492






2,128




17.1


%






10,448






10,087




3.6


%


























 


Hearing Health






8,761






7,943




10.3


%






33,578






31,019




8.2


%


Value Based Direct-to-End-Consumer






1,525






1,904




-19.9


%






6,858






6,492




5.6


%


Value Based Indirect-to-End-Consumer






3,681






2,046




79.9


%






11,949






7,908




51.1


%


Legacy OEM






3,555






3,993




-11.0


%






14,771






16,619




-11.1


%


























 


Professional Audio Communications




 


1,886




 


1,662




13.5


%




 


7,239




 


6,166




17.4


%


























 


Total




$


30,805




$


21,837




41.1


%




$


116,462




$


90,637




28.5


%






































 




 




 




 




 




INTRICON CORPORATION


Consolidated Condensed Statements of Operations


(In Thousands, Except Per Share Amounts)


(Unaudited)


















 






Three Months Ended




Twelve Months Ended






December 31,




December 31,




December 31,




December 31,






2018




2017




2018




2017










(as adjusted)








(as adjusted)


















 


Revenue, net




$


30,805






$


21,837






$


116,462






$


90,637




Cost of sales




 


21,568


 




 


15,290


 




 


79,299


 




 


63,890


 


Gross profit






9,237








6,547








37,163








26,747




















 


Operating expenses:


















Sales and marketing






3,640








2,590








12,369








9,447




General and administrative






3,575








2,378








13,009








10,339




Research and development




 


978


 




 


1,146


 




 


4,671


 




 


4,458


 


Total operating expenses




 


8,193


 




 


6,114


 




 


30,049


 




 


24,244


 


Operating income






1,044








433








7,114








2,503




















 


Interest (income) expense, net






139








(168


)






(314


)






(716


)


Other expense




 


(189


)




 


(39


)




 


(769


)




 


(367


)


Income from continuing operations before income taxes and
discontinued operations






994








226








6,031








1,420




















 


Income tax expense (benefit)




 


126


 




 


(157


)




 


484


 




 


8


 


Income before discontinued operations






868








383








5,547








1,412




Loss on sale of discontinued operations, net of income taxes






–








–








–








(164


)


Loss from discontinued operations, net of income taxes




 


–


 




 


–


 




 


–


 




 


(128


)


Net Income




 


868


 




 


383


 




 


5,547


 




 


1,120


 


Less: Loss allocated to non-controlling interest




 


–


 




 


(13


)




 


–


 




 


(938


)


Net Income attributable to shareholders




$


868


 




$


396


 




$


5,547


 




$


2,058


 


















 


















 


Basic income (loss) per share attributable to shareholders:


















Continuing operations




$


0.10






$


0.06






$


0.73






$


0.34




Discontinued operations




 


–


 




 


–


 




 


–


 




 


(0.04


)


Net income per share:




$


0.10


 




$


0.06


 




$


0.73


 




$


0.30


 


















 


Diluted income (loss) per share attributable to shareholders:


















Continuing operations




$


0.09






$


0.05






$


0.64






$


0.32




Discontinued operations




 


–


 




 


–


 




 


–


 




 


(0.04


)


Net income per share:




$


0.09


 




$


0.05


 




$


0.64


 




$


0.28


 


















 


Average shares outstanding:


















Basic






8,647








6,883








7,599








6,852




Diluted






9,439








7,646








8,630








7,307




































 




 




 




INTRICON CORPORATION


Consolidated Condensed Balance Sheets


(In Thousands, Except Per Share Amounts)


(Unaudited)










 






December 31,




December 31,






2018




2017






 




(as adjusted)


Current assets:










Cash, cash equivalents and restricted cash




$


8,047






$


1,017




Available for sale securities






38,093








–




Accounts receivable, less allowance for doubtful accounts of $807 at
December 31, 2018 and $332 at December 31, 2017






11,479








9,052




Inventories






18,981








13,708




Contract assets






5,624








2,979




Other current assets




 


2,320


 




 


1,544


 


Total current assets






84,544








28,300












 


Machinery and equipment






37,161








40,124




Less: Accumulated depreciation




 


25,429


 




 


32,949


 


Net machinery and equipment






11,732








7,175












 


Goodwill






10,808








10,808




Intangible assets






2,585








2,740




Investment in partnerships






2,091








1,616




Other assets, net




 


3,488


 




 


3,835


 


Total assets




$


115,248


 




$


54,474


 










 


Current liabilities:










Current maturities of long-term debt




$


–






$


2,040




Accounts payable






13,191








10,423




Accrued salaries, wages and commissions






4,409








3,113




Other accrued liabilities




 


4,014


 




 


3,739


 


Total current liabilities






21,614








19,315












 


Long-term debt, less current maturities






–








9,321




Other postretirement benefit obligations






377








455




Accrued pension liabilities






739








772




Other long-term liabilities




 


544


 




 


3,172


 


Total liabilities






23,274








33,035




Commitments and contingencies










Shareholders’ equity:










Common stock, $1.00 par value per share; 20,000 shares authorized;
8,664 and 6,900 shares issued and outstanding at December 31, 2018
and December 31, 2017, respectively






8,664








6,900




Additional paid-in capital






84,999








21,581




Accumulated deficit






(509


)






(6,056


)


Accumulated other comprehensive loss




 


(927


)




 


(733


)


Total shareholders’ equity






92,227








21,692




Non-controlling interest




 


(253


)




 


(253


)


Total equity




 


91,974


 




 


21,439


 


Total liabilities and equity




$


115,248


 




$


54,474


 


















 


Contacts

Lynn Pieper Lewis or Leigh Salvo(415) 937-5404investorrelations@intricon.com