GlobeNewswire Inc | Aug 10, 2020 04:05PM EDT

August 10, 2020

ARDEN HILLS, Minn., Aug. 10, 2020 (GLOBE NEWSWIRE) -- IntriCon Corporation (NASDAQ: IIN), an international company engaged in designing, developing, engineering and manufacturing miniature interventional, implantable and body-worn medical devices, today announced financial results for its second quarter ended June 30, 2020.

The IntriCon team continued to deliver against the priorities we established at the outset of this year and I'm proud of our accomplishments in the second quarter, despite new challenges in the current business landscape. While we entered the quarter with some degree of visibility afforded to us by ordering patterns earlier in the year from our largest medical customers, our business further stabilized throughout the quarter and as a result, were stronger than initially anticipated. Importantly, the significant restructuring actions taken over the first half of the year, coupled with adjustments made during the pandemic, contributed to meaningful bottom line improvement and provided stability to our core business as we navigate through these uncertain times, said Mark Gorder, president and chief executive officer.

Operationally, we continue to make great progress on the integration of Emerald Medical Services, as well as implementing measures that will enable us to evolve our business to best address key medical growth markets. I look forward to working closely with Scott Longval, who will take over the helm as CEO on October 1, throughout the next few months to ensure a smooth transition in responsibilities and on-going priorities.

Second Quarter Highlights:

-- Revenue of $23.6 million compared to $29.3 million in the prior year Revenue from the companys largest medical customer declined 24.7% year-over-yearOther medical revenue increased 56.3%, which included the contribution from recently acquired Emerald Medical Services -- Gross margin of 28%, relatively flat year-over-year -- Net loss per diluted share of $0.26 versus net loss of $0.57 per diluted share in the prior year period -- Adjusted net loss per diluted share of $0.02 -- Acquired Emerald Medical Services Pte. Ltd., a privately held provider of joint development medical device manufacturing services for complex catheter applications -- Appointed Scott Longval as President and Chief Executive Officer effective October 1, 2020 to succeed Mark Gorder, who will retire from the position on September 30, 2020

While the macroeconomic environment remains uncertain, we are encouraged by recent business trends, and believe IntriCon has weathered the worst of the storm, with several encouraging milestones on the horizon. Importantly, we are managing our business for the long-term with investments focused on driving our growth and remain as confident as ever in the durability of our business, concluded Gorder.

Second Quarter 2020 Financial ResultsFor the 2020 second quarter, the company reported net revenue of $23.6 million versus $29.3 million in the comparable prior-year period.

Revenue in IntriCons Medical business was $18.1 million, a decrease from $20.9 million in the comparable prior-year period. The year over year decline was driven primarily by the reduction in orders due to uncertainty surrounding the COVID-19 pandemic, partially offset by a 21% increase in other medical and the impact of Emerald Medical Services which the company acquired in May 2020.

Hearing Health revenue was $4.5 million in the second quarter of 2020 compared to $6.7 million in the prior-year second quarter. The revenue decline during the second quarter was largely attributed to the absence of hi Health Innovations revenue and the COVID-19 pandemic impact on the Legacy hearing health channel.

As previously announced, in April of 2020 the company took several steps to strengthen its balance sheet and reduce its cost structure, including headcount reductions and temporary salary reductions for directors and management. The temporary salary reductions reduced expenses for the second quarter by more than $750,000. Salaries were fully restored at the beginning of the third quarter. In addition to the salary reductions, there were several additional items that impacted the comparability of our operating expenses year over year, see Non-GAAP Financial Measures.

Gross margin in the second quarter of 2020 was 28%, flat compared to the prior-year second quarter, primarily due to the cost reduction initiatives and favorable mix, offset by lower volumes.

Operating expenses for the second quarter were $9.2 million, compared to $11.6 million in the comparable prior-year period. The change in operating expenses year over year was due to the cost reduction initiatives and other items included in our Non-GAAP Financial Measures.

The company posted a net loss of $2.3 million or $0.26 per diluted share in the second quarter of 2020, versus net loss of $5.0 million or $0.57 per diluted share, for the 2019 second quarter. As presented in the Reconciliation of Non-GAAP Measures table below, the company posted an adjusted net loss of $143,000 or $0.02 per diluted share in the second quarter of 2020, versus net loss of $1.3 million or $0.14 per diluted share, for the 2019 second quarter.

2020 GuidanceAs previously reported, IntriCon is not providing 2020 financial guidance due to the continued uncertainties from the impact of the COVID-19 pandemic.

Non-GAAP Financial Measures In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release also contains non-GAAP financial measures. The reasons why we believe these measures provide useful information to investors and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these non-GAAP measures are included in the supplemental schedule attached.

Conference Call IntriCons management team will hold a conference call today, August 10, 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: 3544449. A live and archived webcast will be available on the Investors sections of the companys website at: www.IntriCon.com.

Forward-Looking StatementsStatements made in this release and in IntriCons other public filings and releases that are not historical facts orthat include forward-looking terminology, including estimates of future results, the impact of the Emeraldacquisition, statements regarding the estimated costs and expenses of the restructuring and estimated annual expense savings, are forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. These forward-looking statements may be affected by known and unknown risks, uncertainties and other factors that are beyond IntriCons control, including without limitation, the impacts of the COVID-19 pandemic and measures taken in response, the risks associated with the Emerald acquisition, the actual number of employee headcount reductions in our strategic restructuring, the results of our lease negotiations, actual cash expenditures that may be made by the company in connection with the reduction in force and the amount, use and impact of any savings generated by the reduction in force and restructuring, and may cause IntriCons 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 companys filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. 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.

AboutIntriCon Corporation Headquartered inArden Hills, Minn.,IntriCon Corporationdesigns, develops and manufactures miniature interventional, implantable and 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.IntriConhas facilities inthe United States,Asia, andEurope. The companys common stock trades under the symbol IIN on theNASDAQ Global Market. For more information aboutIntriCon, visitwww.intricon.com.

Investor Contact Leigh Salvo (415) 937-5404investorrelations@intricon.com

INTRICON CORPORATIONMARKET REVENUE(Unaudited)

SECOND QUARTER YEAR TO DATE($ in 000's) 2020 2019 Change 2020 2019 Change Medical $ 18,118 $ 20,892 -13.3 % $ 34,476 $ 41,685 -7.3 %Diabetes 13,521 17,950 -24.7 % 27,051 35,114 -23.0 %Other Medical 4,597 2,942 56.3 % 7,425 6,571 13.0 % Hearing Health -33.0 % 13,685 -39.0 % 4,473 6,675 8,354Value Based 1,387 1,736 -20.1 % 2,560 3,366 -23.9 %Direct-to-End-ConsumerValue Based 1,365 2,399 -43.1 % 2,109 4,976 -57.6 %Indirect-to-End-ConsumerLegacy OEM 1,721 2,540 -32.2 % 3,685 5,343 -31.0 % Professional Audio -42.8 % 3,536 -35.7 %Communications 1,011 1,769 2,275 Total $ 23,602 $ 29,336 -19.5 % $ 45,105 $ 58,906 -23.4 %

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

Three Months Ended Six Months Ended(unaudited) June 30, June 30, June 30, June 30, 2020 2019 2020 2019 Revenue, net $ 23,602 $ 29,336 $ 45,105 $ 58,906 Cost of goods 16,996 21,121 33,927 42,133 soldGross profit 6,606 8,215 11,178 16,773 Operating expenses:Sales and 1,680 3,072 3,673 6,461 marketingGeneral and 4,603 3,650 8,019 6,836 administrativeResearch and 1,209 1,097 2,410 2,062 developmentRestructuring 1,171 - 1,171 - chargesImpairment loss - 3,765 - 3,765 Acquisition 493 - 493 - costsTotal operating 9,156 11,584 15,766 19,124 expensesOperating loss (2,550) (3,369) (4,588) (2,351) Interest 97 248 281 463 income, netOther income 208 (272) 101 (406) (expense), netLoss fromcontinuingoperationsbefore income (2,245) (3,393) (4,206) (2,294) taxes anddiscontinuedoperationsIncome tax 29 116 47 247 expenseLoss fromcontinuingoperations (2,274) (3,509) (4,253) (2,541) beforediscontinuedoperationsLoss ondisposal of - (1,116) - (1,116) discontinuedoperationsLoss fromdiscontinued - (405) - (597) operationsNet loss (2,274) (5,030) (4,253) (4,254) Less: Incomeallocated to 7 - 7 - non-controllinginterestNet lossattributable to $ (2,281) $ (5,030) $ (4,260) $ (4,254) IntriConshareholders Basic loss pershareattributable to IntriConshareholders:Continuing $ (0.26) $ (0.40) $ (0.48) $ (0.29) operationsDiscontinued - (0.17) - (0.20) operationsNet loss per $ (0.26) $ (0.57) $ (0.48) $ (0.49) share: Diluted lossper shareattributable to IntriConshareholders:Continuing $ (0.26) $ (0.40) $ (0.48) $ (0.29) operationsDiscontinued - (0.17) - (0.20) operationsNet loss per $ (0.26) $ (0.57) $ (0.48) $ (0.49) share: Average shares outstanding:Basic 8,881 8,743 8,847 8,724 Diluted 8,881 8,743 8,847 8,724

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

(unaudited) June 30, December 31, 2020 2019 Current assets: Cash and cash equivalents $ 7,056 $ 8,523 Restricted cash 629 639 Short-term investment securities 19,921 23,451 Accounts receivable, less allowance for doubtfulaccounts of $598 at June 30, 2020 and $325 at 10,447 8,993 December 31, 2019Inventories 21,034 16,377 Contract assets 8,111 10,237 Other current assets 1,587 1,975 Current assets of discontinued operations - 80 Total current assets 68,785 70,275 Machinery and equipment 44,646 41,073 Less: Accumulated depreciation 30,215 27,522 Net machinery and equipment 14,431 13,551 Goodwill 13,592 9,551 Intangible assets 11,779 5,545 Operating lease right-of-use assets, net 3,421 4,372 Investment in partnerships 695 1,160 Long-term investment securities 3,023 8,629 Other assets, net 326 510 Total assets $ 116,052 $ 113,593 Current liabilities: Current financing leases $ 53 $ 101 Current operating leases 1,483 1,729 Accounts payable 9,469 9,876 Accrued salaries, wages and commissions 3,757 2,274 Other accrued liabilities 4,680 2,869 Liabilities of discontinued operations - 77 Total current liabilities 19,442 16,926 Noncurrent financing leases 5 30 Noncurrent operating leases 2,148 2,937 Other postretirement benefit obligations 360 382 Accrued pension liabilities 655 655 Deferred tax liabilities, net 1,124 - Other long-term liabilities 3,888 2,171 Total liabilities 27,622 23,101 Commitments and contingencies Shareholders? equity: Common stock, $1.00 par value per share; 20,000shares authorized; 8,934 and 8,781 shares issued and 8,934 8,781 outstanding at June 30, 2020 and December 31, 2019,respectivelyAdditional paid-in capital 88,772 86,770 Accumulated deficit (8,546) (4,286) Accumulated other comprehensive loss (484) (520) Total shareholders' equity 88,676 90,745 Non-controlling interest (246) (253) Total equity 88,430 90,492 Total liabilities and equity $ 116,052 $ 113,593

Reconciliation of GAAP to Non-GAAP Financial MeasuresSecond Quarter Ended June 30, 2020

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release also contains certain financial measures not derived in accordance with GAAP, including adjusted net income (loss) attributable to IntriCon shareholders, adjusted basic loss per share attributable to IntriCon shareholders and adjusted diluted loss per share attributable to IntriCon shareholders. These non-GAAP financial measures reflect adjustments for expenses and gains that the Company believes do not reflect the Companys core operating performance. Non-GAAP financial measures should not be used as a substitute for GAAP measures, or considered in isolation, for the purpose of analyzing our operating performance. We have presented these non-GAAP financial measures because we believe this presentation, when reconciled to the corresponding GAAP measures, provides useful information to investors in evaluating the Companys operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results, trends, and growth, as well as in comparing the Companys financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different from and not directly comparable to the measures presented by other companies. Management uses these non-GAAP financial measures in making financial, operating, and planning decisions and in evaluating our performance.The presentation of these non-GAAP financial measures should not be construed as an inference that future results will not be affected by similar items. The Company may incur expenses and gains that are the same as, or similar to, some of the adjustments in this presentation in the future.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are set forth below.

Three Months Ended Six Months Ended (unaudited) June 30, June 30, June 30, June 30, Adjusted netincome (loss)attributed to 2020 2019 2020 2019 IntriConshareholders Net lossattributable to $ (2,281 ) $ (5,030 ) $ (4,260 ) $ (4,254 ) IntriConshareholdersAdjustments tonet lossattributable to IntriConshareholdersRestructuring 1,171 - 1,171 - charges (1)Impairment loss - 3,765 - 3,765 (2)EMS acquisition 493 - 493 - costs (3)CEO retirement 823 - 823 - costs (4)COVID-19Singapore (349 ) - (349 ) - GovernmentSupport (5)Total adjustmentsto net lossattributable to 2,138 3,765 2,138 3,765 IntriConshareholders (6) Adjusted net lossattributed to $ (143 ) $ (1,265 ) $ (2,122 ) $ (489 ) IntriConshareholders Adjusted basicloss per shareattributable to IntriConshareholders:Net loss per $ (0.02 ) $ (0.14 ) $ (0.24 ) $ (0.06 ) share: Adjusted dilutedloss per shareattributable to IntriConshareholders:Net loss per $ (0.02 ) $ (0.14 ) $ (0.24 ) $ (0.06 ) share: Average shares outstanding:Basic 8,881 8,743 8,847 8,724 Diluted 8,881 8,743 8,847 8,724 (1) On May 20, 2020, the Company announced a strategic restructuring plandesigned to accelerate the Company?s future growth by focusing resources on thehighest potential growth areas. Total restructuring charges for the three andsix months ended June 30, 2020 were $1,171, including $732 related to one-timeemployee termination benefits, $326 for lease modification costs at HearingHelp Express and $113 for losses on disposal of assets.(2) The June 30, 2019 impairment losses related to a write-off of goodwill andintangible assets due to negative cash flows within our Hearing Help Expressreporting unit.(3) These costs represent legal and other professional acquisition relatedcosts for the purchase of Emerald Medical Services.(4) The CEO Transition Agreement signed in June 2020 includes payment of $443(equal to one year?s salary) and $400 of RSUs issuable to our CEO.(5) The Singapore Government provided $349 COVID-19 financial assistance to ourSingapore Subsidiaries throughout the second quarter.(6) None of these adjustments have income tax impacts