The following management discussion and analysis ("MD&A") provides information that the Company believes is useful in better understanding the operating results, cash flows and financial condition of the Company. Quantitative information is provided about the material revenue and expense drivers as well as any other significant factors we believe are useful for understanding our results. The MD&A should be read in conjunction with both the condensed consolidated financial information and related notes included in this Form 10-Q, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended
December 31, 2021. This discussion contains various "Non-GAAP Financial Measures" and also contains various "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled "Non-GAAP Financial Measures" and "Forward-Looking Information and Cautionary Statements" located at the end of Item 2 of this report. Business Overview Intricon Corporation(together with its subsidiaries referred herein as the "Company", or "Intricon", "we", "us" or "our") is an international joint development manufacturer ("JDM") of micromedical components, sub-assemblies and final devices. The Company serves as a JDM partner to leading medical device original equipment manufacturers ("OEMs") by designing, developing, engineering, manufacturing, packaging and distributing micromedical products for high growth markets, such as diabetes, peripheral vascular, interventional pulmonology, electrophysiology and hearing healthcare. Our mission is to improve, extend and save lives by advancing innovative micromedical technologies through joint development and manufacturing partnerships with industry leading medical device companies. Market Overview Intriconserves as a JDM to leading medical device OEMs by designing, developing, engineering, manufacturing, packaging and distributing micromedical products, microelectronics, micro-mechanical assemblies, complete assemblies and software solutions. Revenue from these markets is reported on the respective diabetes, other medical, hearing health value based direct-to-end-consumer (DTEC), hearing health value based indirect-to-end-consumer (ITEC), hearing health legacy OEM, and professional audio communications in the discussion of our results of operations in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 "Revenue Recognition" to the Company's condensed consolidated financial statements included herein. The Company manufactures microelectronics, micro-mechanical assemblies, high-precision injection-molded plastic components and complete body-worn devices for leading and emerging medical device manufacturers. Intriconcurrently serves this market by offering medical device manufacturers the capabilities to design, develop, engineer, manufacture, package and distribute medical devices that are easier to use, smaller, lighter and use less power. Increasingly, the medical device industry is looking to outsource the manufacturing, assembly and packaging of their products. The Company believes several factors have come together over the last few years to enable the emergence of a US market disruptive value hearing aid. These factors include the continued consolidation of retail (causing escalating hearing aid prices), consumer outcry, consumer education, advancements in technology (such as behind-the-ear devices, advanced digital signal processing, low-power wireless, and self-fitting software) and pending regulatory change to allow the sale of over-the-counter ("OTC") hearing aids. On October 19, 2021, the FDA proposed a draft regulations to establish a new regulatory category of OTC hearing aids that when finalized, would allow hearing aids to be sold throughout the country directly to consumers in stores or online without a medical exam or a fitting by a licensed practitioner, such as an audiologist. To best approach this market opportunity, the Company has sharpened its focus to identify potential high-profile branding partners that value Intricon'sability to deliver superior hearing aids, self-fitting software, and customer care to the U.S. market. The Company is committed to increasing investments to support its medical business development efforts. In early 2019, the Company hired a vice president of medical business development and in August 2021the Company hired a vice president of research and development. The Company expanded our core competencies and diversified our revenue base with the acquisition of EMSin 2020. The Company believes it has significant opportunities to serve the emerging home care markets through its already developed core competencies and capabilities to develop devices that are more technologically advanced, smaller and lightweight.
Daugiau informacijos apie Bendrovės rinkas ir pagrindines technologijas rasite pasibaigusių metų Bendrovės 10-K formos metiniame pranešime.
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Table of Contents Results of Operations Overall Results
2022 m. pirmojo ketvirčio rezultatai buvo tokie:
? GAAP diluted net loss per share was
$0.07. ? Adjusted non-GAAP diluted net income per share was $0.24.
? Palyginti su ankstesniais metais, bendros pajamos padidėjo 4,1 proc., o tai paskatino paklausos augimas
mūsų produktai nuo diabeto.
? Bendrasis pelnas, išreikštas procentais nuo pajamų, padidėjo 1,0 %, iš dalies dėl padidėjusio
apimtis ir produktų mišinys.
? Ketvirčio veiklos nuostolis buvo (
Revenue, net Below is a summary of our revenue by main markets for the three months ended
March 31, 2022and 2021: Change Three Months Ended March 31, 2022 2021 Dollars Percent Diabetes $ 20,323 $ 18,364 $ 1,95910.7 % Interventional Catheters 3,271 3,802 (531 ) -14.0 % Other Medical 3,699 2,958 741 25.1 % Hearing Health Value Based DTEC 685 937 (252 ) -26.9 % Hearing Health Value Based ITEC 1,144 1,301 (157 ) -12.1 % Hearing Health Legacy OEM 2,726 3,421 (695 ) -20.3 % Professional Audio Communications 1,212 985 227 23.0 % Total Net Revenue $ 33,060 $ 31,768 $ 1,2924.1 %
Už tris pasibaigusius mėnesius
Intervencinių kateterių grynosios pajamos per tris pasibaigusius mėnesius
Other medical net revenue for the three months ended
March 31, 2022increased 25.1% compared to the same period in 2021. The increase was driven by commercialization of newly developed products as the Company continues to expand its surgical navigation product offering. 20
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Net revenue in our hearing health value based DTEC business for the three months ended
March 31, 2022decreased 26.9% compared to the same period in 2021 due to the reduced investment and restructuring of this business beginning in the second quarter 2020. Net revenue in our hearing health value based ITEC business for the three months ended March 31, 2022decreased 12.1% compared to the same period in 2021. The decline was due to supply chain constraints of key components. Net revenue in our hearing health legacy OEM business for the three months ended March 31, 2022decreased 20.3% compared to the same period in 2021 due to timing of orders and supply chain constraints. Net revenue to the professional audio communications sector for the three months ended March 31, 2022increased 23.0% compared to the same period in 2021 due to increased product demand and easing of COVID restrictions in Singapore. Gross Profit
Bendrasis pelnas, išreikštas doleriais ir procentais nuo pajamų, per tris pasibaigusius mėnesius
Three Months Ended March 31, 2022 2021 Change Percent Percent Dollars of Revenue Dollars of Revenue Dollars Percent Gross Profit
$ 8,87226.8 % $ 8,21025.8 % $ 6628.1 % Gross profit as a percentage of revenue for the three months ended March 31, 2022increased 1.0% from the prior period due, in part, to increased demand and product mix. Operating Expenses Operating expenses for the three months ended March 31, 2022and 2021 were as follows: Three Months Ended March 31, 2022 2021 Change Percent Percent Dollars of Revenue Dollars of Revenue Dollars Percent Sales and marketing $ 2,3187.0 % $ 1,9826.2 % $ 33617.0 % General and administrative 4,310 13.0 % 4,052 12.8 % 258 6.4 % Research and development 1,587 4.8 % 1,293 4.1 % 294 22.7 % Merger-related costs 1,032 3.1 % - 0.0 % 1,032 100.0 % Other operating expenses 54 0.2 % 35 0.1 % 19 54.3 %
Pardavimų ir rinkodaros išlaidos už tris pasibaigusius mėnesius
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General and administrative expenses for the three months ended
March 31, 2022, increased from the prior year period due to higher salaries, wages, incentives, and third-party fees.
Tyrimų ir plėtros išlaidos už tris pasibaigusius mėnesius
padidėjo, palyginti su praėjusių metų laikotarpiu dėl naujų produktų kūrimo plėtros.
Su susijungimu susijusios išlaidos apima teisinius, konsultavimo ir apskaitos mokesčius, susijusius su derybomis dėl Susijungimo sutarties ir jos vykdymu su subjektais, susijusiais su
Kitos veiklos sąnaudos yra susijusios su neapibrėžtojo atlygio įsipareigojimo tikrosios vertės pokyčiais.
Interest expense, net
Palūkanų sąnaudos, grynosios už tris pasibaigusius mėnesius
Other expense, net Other expense, net for the three months ended
March 31, 2022was $152compared to $77for the same periods in 2021. The increase in expense over the prior year period was due to a reduction in funds received from the Singaporegovernment paid to our subsidiaries for COVID-19 relief and employment credits received in 2021. Income tax expense Income tax expense for the three months ended March 31, 2022was $15compared to $90for the same periods in 2021. The change in income tax expense relates to a decrease in estimates for foreign income taxes for the year-to-date period. 22
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Table of Contents Net (Loss) Income
Grynosios (nuostolio) pajamos ir ne GAAP pakoreguotos grynosios pajamos yra šios:
Three Months Ended
March 31, March 31, 20222021
Grynosios (nuostolio) pajamos – GAAP priskiriamos
$ 714Identified adjustments attributable to Intricon: Depreciation (1) 874
Amortization of intangibles (2) 528 497 Stock-based compensation (3) 481 453 Other amortization (4) 58 102 Fair value of contingent consideration (5) 38 35 COVID-19 Singapore government support (6) - (121 ) Merger Related Costs (7) 1,032 -
Ne GAAP pakoreguotos grynosios pajamos, priskirtinos
Average basic shares outstanding 9,256
Average diluted shares outstanding 9,712
Non-GAAP adjusted net income attributable to
Intriconper diluted share $ 0.24 $ 0.26(1) Depreciation represents the expense of property, plant and equipment. (2) These expenses represent amortization expenses of intangible assets. (3) Stock-based compensation represents expenses related to awards under the Company's equity incentive plans. (4) These expenses represent amortization of other assets. (5) These expenses represent changes in the fair value of contingent consideration in the period for the purchase of EMS. (6) The Singapore Government provided COVID-19 financial assistance to our Singaporesubsidiaries during the first quarter of 2021. (7) In February of 2022, the Company entered into a Merger Agreement with affiliates of Altaris Capital Partners LLC. In connection with the negotiation and execution of the Merger Agreement, the Company incurred $1,032in legal, accounting and consulting fees. (8) None of these adjustments have material income tax impacts due to the Company's net loss position as of March 31, 2022.
Likvidumas ir kapitalo ištekliai
We continue to maintain adequate liquidity to operate our businesses. As of
March 31, 2022, we had $5,311of cash and cash equivalents on hand as well as $15,457of short-term investment securities maturing within the next twelve months for a total of $20,768of liquid capital. Sources of our cash for the three months ended March 31, 2022have been from our operating and investing activities, as described below. The Company's cash flows from operating, investing and financing activities, as reflected in the statement of cash flows, are summarized as follows: Three Months Ended March 31, 2022 March 31, 2021 Cash provided by (used in): Operating activities $ (1,658 ) $ 5,865 Investing activities 1,627 (2,511 ) Financing activities (311 ) (245 ) Effect of exchange rate changes on cash 62
Net (decrease) increase in cash $ (280 ) $ 3,131 Net cash used in operating activities was
$1,658for the three months ended March 31, 2022, compared to $5,865net cash provided by for the same period in 2021 primarily due to increasing inventories to meet forecasted demand as well as inflationary pressures. 23
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Net cash provided by investing activities was
$1,627for the three months ended March 31, 2022, compared to $2,511used in investing activities, for the same period in 2021. The variance was primarily the result of timing of purchases and maturities of the Company's investments. Net cash used in financing activities was $311for the three months ended March 31, 2022compared to $245for the same period in 2021 primarily due to payments on liabilities related to intangible assets.
Bendrovė sudarė tokius banko susitarimus
Domestic Credit Facilities The Company and its domestic subsidiaries are parties to a credit facility with
CIBC Bank USA. The credit facility, as amended through the date of this filing, provides for a $12,000revolving credit facility, with a $200sub facility for letters of credit. Under the revolving credit facility, the availability of funds depends on a borrowing base composed of stated percentages of the Company's eligible trade receivables and eligible inventory, and eligible equipment less a reserve. The credit facility matures on December 15, 2022.
Bendrovė laikėsi visų taikomų kredito sutarties sąlygų
Foreign Credit Facility In addition to its domestic credit facilities, the Company's wholly-owned subsidiary,
Intricon, PTE LTD., has an international senior secured credit agreement with Oversea-Chinese Banking Corporation Ltd. that provides for an asset-based line of credit. Borrowings bear interest at a rate of .75% to 2.5% over the lender's prevailing prime lending rate. Capital Adequacy We believe that funds expected to be generated from operations, funds maintained in liquid investments and funds available under our revolving credit loan facility will be sufficient to meet our anticipated cash requirements for operating needs for at least the next 12 months. While management believes that we will be able to meet our liquidity needs for at least the next 12 months, no assurance can be given that we will be able to do so. As of March 31, 2022, and December 31, 2021, the Company had a total borrowing capacity under its credit facilities of $14,291and $14,294, respectively, with no borrowings outstanding at the end of each reporting period. 24
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Svarbių apskaitos politikų santrauka
The Company's significant accounting policies are detailed in "Note 1: Summary of Significant Accounting Policies" of the Company's Annual Report on Form 10-K for the year ended
December 31, 2021. The Company follows these policies in preparation of the condensed consolidated financial statements.
Ne GAAP finansinės priemonės
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Item 2, contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the
U.S.(GAAP). These non-GAAP measures include adjusted net income and adjusted net income per diluted share. These non-GAAP financial measures reflect adjustments for expenses and gains that the Company believes do not reflect the Company's core operating performance. The Company has presented these non-GAAP financial measures because the Company believes this presentation, when reconciled to the corresponding GAAP measures, provides useful information to investors in evaluating the Company's operational performance. Management uses these non-GAAP measures internally to evaluate our performance and in making financial, operational and planning decisions, including with respect to incentive compensation. The Company believes that the presentation of these measures provides investors with greater transparency with respect to the Company's results of operations and that these measures are useful for period-to-period comparison of results and trends. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in comparing the Company's financial results with the financial results of other companies. The Company periodically reassesses the components of non-GAAP adjustments for changes in how the Company evaluates its performance, changes in how the Company makes financial and operational decisions, and considers the use of these measures by Intricon'scompetitors and peers to ensure the adjustments are still relevant and meaningful. 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. 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.
Į ateitį žvelgiantys ir įspėjamieji pareiškimai
Certain statements included in this Quarterly Report on Form 10-Q or documents the Company files with the
Securities and Exchange Commission, which are not historical facts, or that include forward-looking terminology such as "may", "will", "believe", "anticipate", "expect", "should", "optimistic" "continue", "estimate", "intend", "plan", "would", "could", "guidance", "potential", "opportunity", "project", "forecast", "confident", "projections", "scheduled", "designed", "future", "discussion", "if" or the negative thereof or other variations thereof, are forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, and the regulations thereunder), which are intended to be covered by the safe harbors created thereby. These statements may include, but are not limited to statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to the Company's Condensed Consolidated Financial Statements" such as risks in connection with the Merger Agreement and the Merger, estimates of future results, the expected results and impacts of the EMSacquisition, statements regarding the effects of the COVID-19 pandemic, statements regarding the estimated costs and expenses of the restructuring and estimated annual expense savings, net operating loss carryforwards, the ability to meet cash requirements for operating needs, the ability to meet liquidity needs, assumptions used to calculate future level of funding of employee benefit plans, the adequacy of insurance coverage and the impact of new accounting pronouncements and litigation. Forward-looking statements also include, without limitation, statements as to the Company's expected future results of operations and growth, strategic alliances and their benefits, government regulation, potential increases in demand for the Company's products, the Company's ability to meet working capital requirements, the Company's business strategy, the expected increases in operating efficiencies, anticipated trends in the Company's markets, estimates of goodwill impairments and amortization expense of other intangible assets, the effects of litigation and the amount of insurance coverage, and statements as to trends or the Company's or management's beliefs, expectations and opinions. Forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this Quarterly Report on Form 10-Q, certain risks, uncertainties and other factors can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including those described within "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2021and the other risks described elsewhere in this Quarterly Report on Form 10-Q, or in other filings the Company makes from time to time with the Securities and Exchange Commission. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. 25
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