IntriCon (IIN) Crushes Earnings: Can You Hear Me Now!?
Shares of our little hearing aid and continuous glucose monitor stock are rocketing higher today after the company turned in a far better quarter than expected. Revenues grew 33.9% to $30.2 million and beat by $4.1 million, while EPS of $0.25 was up 178% from $0.09 in the year-ago quarter. Instead of typing out the results by line of business, I put the figures in the following table:
As you can see, growth came from almost everywhere, with the biggest driver (Diabetes line) continuing to be sales of Medtronic’s (MDT) MiniMed wireless continuous glucose monitoring systems. Recall from my report that this business is booming and IntriCon is expanding operations into an additional 37,000 square foot manufacturing space, which will increase molding capacity and accommodate robotic assembly of medical components and systems. This manufacturing capacity should help drive costs down (some of that might get passed on to customers, however) and also help IntriCon source new business beyond Medtronic (it also currently does some work for Smiths Medical). Management said medical is still capacity constrained as far as what it can do for Medtronic and will remain so for a few quarters until the new automation capabilities are up and running.
The Hearing Health business is also going strong with the Direct-to-End-Consumer (this is the Hearing Health online business) growing the fastest (up 45.6%) but also representing the smallest proportion of hearing aid sales (although given the pace, that should soon change). The Indirect-to-End-Consumer business is doing just fine too, with some lumpy sales driving somewhat slower growth this quarter (but still up 16.9%). This business includes sales to companies including UnitedHealth, Eargo, MD Hearing, etc. Legacy OEM sales are performing about as expected, which means they’ll drift lower over time as market dynamics shift the focus toward the two aforementioned categories.
Management sounds excited about the release of the Lumen 155 product family, which allows these hearing aids to connect directly to various wireless accessories, and eventually with the Sentibo Smart Brain self-fitting software. On that note, management has a meeting with the FDA in mid-August regarding getting Sentibo approved here in the U.S. It sounds like the purpose of this meeting is to help IntriCon assess how Sentibo may or may not fit into the OTC hearing aid legislation that’s still in draft form. IntriCon would love to have Sentibo be part of devices covered by the legislation, but that means technologies like connectivity, self-fitting and remote adjustment need to be covered, and it’s too early to know if they will be. In terms of timing on the OTC legislation, we’re still expecting some revised draft guidance by the FDA by the end of the year.
The bottom line here is the business is doing well and there should be more fuel in the tank, especially once the new manufacturing capacity is online and the OTC legislation (assuming it’s favorable for IntriCon, which I expect) greases the wheels for a bigger advertising push in the hearing aid market. Management pushed up full-year guidance to a range of $115.5 million to $117 million, which implies roughly 31% growth. Given that consensus was calling for 20% growth, this is good!
Shares of IntriCon broke above their previous high last week and have traded up as much as 20% today.
It’s tough to tell where the dust is going to settle with the stock, but given that we’re up 66% in less than two months (and up over 20% this week alone) I suggest restricting new buys to very small positions. Officially, I’m moving back to Hold until I can better gauge the stock’s next move. I suspect this report and guidance was good enough to keep us in the mid-50s, but we’ll just have to wait and see! HOLD.