IntriCon Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Intercons Corporation's first quarter 2021 earnings conference call. At this time, all participants' line are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Linkhalva. Thank you. Please go ahead.

Thank you. Thank you, operator. Before we begin, I would like to preface our remarks with the customary Safe Harbor Statement. Today's conference call contains certain forward-looking statements. These statements are based on the current estimates and assumptions of Intercons management and are subject to uncertainty and changes in circumstances. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Actual results may vary materially from the expectations contained in today's call. For a list and description of the risk and uncertainties associated with our business, please refer to the risk factor section of our most recent annual and quarterly reports on Form 10-K and Form 10-Q, respectively, with the SEC. With that, I would now like to introduce Intracon CEO, Scott Longbaugh, for a review of the company's first quarter performance. Ellen Skipta, the company's CFO, We'll then cover the financial results in more detail, and at that point, we'll open the call for your questions.

Thank you, Lee. Good afternoon, and thank you for joining our 2021 first quarter conference call today. We entered the year strong, building on the momentum of the second half of 2020. As we reflect on an impressive first quarter, I'd like to take a moment to thank our employees, partners, and suppliers for their unwavering support throughout the many challenges the past year has presented. I continue to be encouraged by the significant opportunity we have to drive growth in our key markets, specifically diabetes, surgical navigation, interventional catheters, and hearing health. Throughout the remainder of the year ahead, we are focused on securing opportunities to diversify our customer base, adding valuable partners, and expanding into new high-growth end markets that can best leverage our core competencies in micro-medical technology and drive both organic and inorganic growth. Turning to our first quarter results, we saw strong financial performance and continued operational improvements. Total revenues increased approximately 48% year-over-year to $31.8 million, and sequentially, revenues increased 5%. Although we experienced some headwinds pertaining to COVID-related labor challenges, the results exceeded our initial expectations. This outperformance was largely due to the strength we saw in our diabetes and hearing health business lines, with each business posting double-digit growth year over year. Drilling down to each of our end markets, starting with diabetes, sales to Medtronic's diabetes group represented 58% of our total revenue in the first quarter. We saw renewed strength in this sector out of our business during the fourth quarter of 2020, stemming from Medtronic Minimed's 780G launch in certain international markets and the Minimed 770G launch in the U.S. That momentum carried into the first quarter, resulting in an impressive 36 percent growth over the first quarter of 2020 and 4 percent sequentially. We are optimistic sales of these new systems and other forthcoming Medtronic products will deliver increasing growth in the second half of the year and beyond. Both surgical navigation and the interventional catheter markets have proven to be important and exciting new growth drivers for us, and we are bullish on the long-term opportunities these markets can provide in terms of both top-line contribution and customer expansion. Revenue from Emerald Medical Services, EMS, in the first quarter totaled $3.8 million and continued to exceed our expectations, totaling $11.2 million in revenues for the first 10 months since acquisition. During the first quarter, we saw international adoption of Medtronic's Chaka balloon catheter manufactured by EMS, delivering 14% quarter-over-quarter revenue growth. We expect this catheter and the EMS business to continue to be primary growth drivers for this year and well into the future. Longer term, we are confident that we can leverage EMS's strong reputation with Medtronic's cardiac and vascular group and Intracon's core technologies and financial stability to secure other business opportunities in this market. In the first quarter, as expected, our medical coil product line, considered within our surgical navigation business, experienced staffing constraints due to COVID and our ability to hire skilled labor. impacting our capacity. We continue to work through these challenges in the second quarter. Medical revenue in the first quarter was $1.1 million, sequentially flat with the 2024 quarter. Turning to our hearing health market, in the first quarter, we delivered growth of approximately 46% compared to the prior year period. Growth was driven by our indirect and consumer business related to volumes required to support an initial OTC pilot. Additionally, our legacy hearing health business continued to benefit from increased access to audiologists as COVID restrictions were lifted. As we noted in our last earnings call, we are commencing pilot programs this year with select partners to leverage our comprehensive hearing aid technology platform, including hardware, firmware, and software. These pilots are not expected to drive material revenue this year, but rather aim to gauge end market interest required post-sale engagement, and price considerations. As expected, in early April, our first pilot with HEREX launched. This pilot offers Intercon firmware and hardware within the HEREX OTC products available in Walgreens stores in select states and online. We look forward to providing more insights on this pilot as it progresses throughout the year. Additionally, to support OTC and other hearing health products, we launch our self-fitting software clinical trial in April and expect completion of the trial by the end of the year, slightly behind our original schedule due to COVID-related slower than expected enrollment. That said, we do not anticipate this delay to impact our business. Turning to the pending OTC regulation, there remains widespread bipartisan support for providing lower cost solutions to a growing number of hearing impaired individuals in the U.S. However, the timeframe of draft guidance and eventually final regulation remains uncertain. There will undoubtedly be many participants in this market with a variety of profiles and contributions. As such, we continue to collaborate with potential partners as we await draft regulation. While we work through the lingering impacts of our business from COVID-19, most specifically staffing challenges, coupled with supply, input supply constraints, primarily associated with the February Texas storms, we continue to manage our business in a cost effective way. I'm confident with our constant focus on execution, we will overcome these short term challenges and deliver solid year over year growth. I'm excited about the meaningful progress we are making in the expansion of our business in the existing markets we serve, while at the same time making headway in entering new markets that can further support our long-term growth, as well as diversify our customer base. With that, I will now turn the call over to Ellen to provide more detail on our financial results for the first quarter of 2021. Ellen?