Intricon Corporation (IIN) Misses Q2 EPS by 14c

Intricon Corporation (NASDAQ: IIN) reported Q2 EPS of ($0.23), $0.14 worse than the analyst estimate of ($0.09). Revenue for the quarter came in at $17 million versus the consensus estimate of $16.71 million.

Business UpdateHearing health sales increased 7 percent during the second quarter from the prior-year quarter, primarily as a result of contributions from PC Werth. During the quarter, IntriCon experienced gains in value hearing aids, personal sound amplifier products (PSAP) and assisted listening devices. These were partially offset by anticipated decreases in conventional channel sales. For some time, IntriCon has focused on opportunities in value hearing health versus the conventional channel.

Over the past 12 months several institutions including the U.S. Food and Drug Administration (FDA), the President’s Council of Advisors on Science and Technology (PCAST) and most recently, the National Academies of Sciences, Engineering and Medicines (NASEM), have recognized that untreated hearing loss in the United States is a substantial national problem. High device costs and inadequate innovation in distribution channels are creating significant barriers to access for most Americans. Each institution, individually, has released statements indicating their support for improving hearing health access and affordability for consumers, thereby improving market penetration.

“As a company, we are aligned with the FDA, PCAST and NASEM efforts to overcome barriers to device access and spur development and innovation in cost-effective technology,” said Gorder. “All of these pivotal events point to a groundswell for fundamental change. They highlight the need for an outcomes-based hearing healthcare model in which the best value-added devices and software technology are combined with varying levels of practitioner intervention, to provide the most efficient, lowest cost solution, to consumers across the country.”

The company’s recent initiative to improve affordability in the U.S. market was providing the independent audiologist the best value-added devices at the best price, by establishing earVenture, a joint venture with the Academy of Doctors of Audiology (ADA). While earVenture has not yet generated significant revenue, it is an important strategic element in IntriCon’s approach. Over 450 ADA members have registered to join the earVenture program. earVenture is focused on sales and marketing efforts to convert those members into consistent customers, as well as solicit non-registered ADA members to join.

In the United Kingdom, IntriCon’s integration plan for PC Werth is proceeding on schedule. Over the last several months IntriCon has delivered initial devices to targeted National Health Service (NHS) clinics, with positive feedback. The company is directing sales and marketing efforts at additional clinics during the second half of the year.

“The ADA and NHS leadership have embraced our offering, which is a groundbreaking first step in advancing our value-based model,” said Gorder. “In order to drive meaningful growth in both of these markets, we must focus our efforts on marketing to and educating the practitioner.”

Lastly, the company is also aggressively exploring initiatives to expand its offering into alternative distribution channels that require less practitioner intervention. These models have demonstrated the ability to scale more quickly than efforts into traditional channels.

Sales in IntriCon’s medical business decreased 4 percent in the 2016 second quarter, primarily driven by IntriCon’s largest customer, Medtronic. Sales to Medtronic were lower as they manage the transition of their pending FDA product approval and launch for the MiniMed 630G system. Long-term, IntriCon believes it’s well positioned for growth with Medtronic. In addition to the MiniMed 630G system, IntriCon is also designed into the MiniMed 670G system which was recently submitted to the FDA for Premarket Approval.

Second-quarter 2016 professional audio communication sales declined 5 percent from the prior-year period. IntriCon anticipates second half 2016 revenue in this business to be flat with the prior-year comparable period. The company is working on several opportunities that management believes will provide modest revenue growth in 2017.

While lower revenue levels are expected to be temporary, IntriCon has taken measured actions to reduce operating expenses. These reductions, which will not impact the company’s ability to execute strategic initiatives, should result in approximately $600,000 in annual savings. The majority of the savings will begin to be realized in the 2016 fourth quarter.

For earnings history and earnings-related data on Intricon Corporation (IIN) click here.

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