IntriCon Corporation
Q1 2020 Earnings Call Transcript

Published: 20 May 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to IntriCon First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today Leigh Salvo, Investor Relations. Thank you. Please go ahead, madam.

[Leigh Salvo:]

Thank you, Christine. 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 IntriCon’s 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 risks and uncertainties associated with our business, please refer to the Risk Factors 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 IntriCon’s CEO, Mark Gorder, for a review of the company’s first quarter performance. Scott Longval, the company’s COO and CFO, will then cover the financial results in more detail, and at that point we’ll open the call for your questions. Mark?

[Mark Gorder:]

Thank you, Leigh, and thank you everyone for joining us today.Before we begin the discussion today I’d like to first express our deep appreciation to front-line health care professionals that continue to tirelessly fight the COVID-19 battle. We are truly grateful for your dedication, compassion and inspiration. I would also like to thank the entire IntriCon team. I'm impressed by your resilience, flexibility and commitment to our customers as well as to each other.The past several months have undoubtedly been extraordinary on many levels. As we highlighted in our business update release in early April IntriCon’s first priority focused on protecting and supporting the health and well-being of our employees, our communities and our customers by limiting the potential transmission of COVID-19. Following recommendations from federal and local government and healthcare agencies we quickly transitioned most employees to our remote work environment.For our employees who were essential in supporting our manufacturing, assembly and other related operation and critical processes we followed best practices recommendations including social distancing and shift modifications. In addition we took steps to strengthen our balance sheet and reduce our cost structure including the deferral of non-strategic investments, employees furloughs as well as salary reductions for directors and management. And what we started the year on track by mid-March we began to see the impact of COVID-19 on our customers and in turn had several components of our business.Total revenue for the quarter was $21.5 million in addition to the estimated $1.5 million to $2.5 million adverse impact from COVID-19. We’ll occurred a one-time adverse adjustment of $1.2 million in first quarter it reflected a change in our revenue recognition methodology for certain medical customers. We do not anticipate any additional adjustments from this action going forward.Despite the challenges presented by the unprecedented global pandemic our strategic priorities remain intact, beating the volume demands of key customers and partners, pursuing new business opportunities and partnerships that best leverage core competencies to accelerate growth and importantly diversify our revenue base. We recently completed a number of transformational actions that I am confident have set our business on an exciting growth trajectory and best positioned us for success.As many of you know our platform technology currently addresses several high growth medical markets, including diabetes, surgical navigation, hearing health and drug delivery. I'd like to take the next few minutes to highlight important activities in several of these markets segments. Starting with our exciting acquisition of Emerald Medical Services announced earlier today. This strategic acquisition provides synergistic joint development and manufacturing capability that expands our market opportunity in surgical navigation.It provides immediate access to a technology platform serving new high growth medical end markets with complex interventional catheters. Diversifies our customer base and is expected to be accretive to revenue and earnings in 2020. Emerald Medical Systems is a privately held engineering and manufacturing services organization based in Singapore with its facility conveniently located in the same building as our existing Singapore operations.Driven by an excellent team of engineers and robust manufacturing capabilities EMS has a successful history of delivering complex interventional catheters addressing a range of applications in the cardiology, peripheral vascular, neurology, radiology and pulmonology markets. We have been selective with our M&A activity, but our confident that EMS directly meets the core criteria we identified for a successful candidate.This included access to a key technology platform, complementary skills, customer diversification, and a strong management team with a proven track record. Furthermore, we specifically look for synergies with our existing businesses. The potential for business development to expand into markets with steep technology curves, existing strong intellectual property, and most importantly the ability to deliver a technology platform that would enable us to leverage our existing capabilities and rapidly expand our opportunity in surgical navigation.Emerald Medical Systems met all our criteria. As we’ve highlighted in previous calls, surgical navigation is a broad market segment we identified for meaningful near-term upside that we will confidently present significant opportunities to leverage our existing capabilities and micro-miniature electronics, precision molding and medical coil technologies. Our business in this market today consists primarily an interventional pulmonology for lung biopsy in an electrophysiology for heart mapping and precise ablation.EMS can enhance the content to which we can provide these markets. The agreement to acquire Emerald Medical Systems includes an upfront payment of approximately $7.1 million 80,000 shares of IntriCon common stock and a cash earn-out based on the achievement of specific sales milestones over a three-year period. Each milestone signifies a revenue generating event which we believe has the potential to drive substantial long-term growth. Scott will share with you shortly some additional financial details of the transaction.The acquisition of EMS also immediately adds complementary skills and engineering capacity to support growth in medical coil and catheter assemblies to meet the demands of current surgical navigation customers. This includes production capability that consists of a full range of design, development and manufacturing testing and non-sterile packaging services. An attractive component to be EMS acquisition is our ability to immediately diversify our revenue base.EMS currently has more than 20 customers including its largest customer Medtronic cardiac and vascular group, for which it currently serves as the sole manufacturer for Medtronic’s Chocolate PTA balloon catheter. Chocolate, a key product in Medtronic’s peripheral vasculature catheter portfolio is designed and clinically proven to reduce vessel trauma by providing a balloon inflation that is predictable, controlled and uniform.EMS revenues in 2019 were approximately $7.5 million with a compound annual growth rate from 2016 through 2019 of 34%. We anticipate the acquisition to be accretive to our 2020 revenues and earnings. With regard to integration, we believe the EMS team brings a wealth of knowledge and intellectual property in this space and as such plan to maintain most business operations in the Singapore facilities to ensure continuity and scalability by leveraging our ERP and QMS systems.The facility includes offices, manufacturing and assembly space of approximately 8,200 square feet along with the 4,400 square foot ISO 7 and ISO 8 clean room storage. From a business development perspective while we plan to leverage our team in the U.S., EMS quality reputation and location in the region considered the center of excellence in Singapore for medical device innovation, provides us with a higher profile for expansion into the Asian markets. We are obviously delighted to move forward with this truly transformational acquisition.Next I'd like to discuss our hearing health business. As we highlighted on our last quarterly call, we believe our long-term success in this market will largely be driven by our indirect to end consumer channel. Earlier this year, we began reprioritizing our investments to more clearly focus on securing high profile partners that value our ability to deliver an ecosystem of peer platform which includes superior hearing aids, self-fitting software and customer care to the U.S. market.Despite the widespread disruption resulting from the COVID-19 pandemic we continue to engage in discussions with several commercial entities and are actively pursuing end consumer healthcare initiatives. And specifically solutions for hearing health market, including retailers, branding partners and pharmacies. However, shifts and legislative attention and FDA priorities resulting from the virus make the timing of an update on the draft guidance of the OTC Hearing Aid Regulation uncertain.We are confident however that given the high cost of hearing aids today and consumer enthusiasm for change there remains tremendous potential ahead in this market. Importantly following our decision last quarter to no longer pursue a direct-to-consumer approach to the hearing health market, we recently made the decision to transition our remaining direct-to-consumer operations at Hearing Help Express to solely support our partnership initiatives.As we have accelerated this restructuring, we anticipate incurring a $1.2 million to $1.5 million charge in the second quarter for severance, lease termination and inter operations related expenses. We anticipate these actions in addition to providing a greater focus on more synergistic high growth opportunities will also substantially reduce associated losses as Scott will detail later in his comments.In addition as we included in our first quarter preannouncement, we have postponed our anticipated self-fitting software clinical trial until such time as we can ensure the health and safety of trial participants. Lastly turning to our diabetes market sales to our largest customer represented 63% of total revenue in the first quarter. As we signaled on our last call, we had anticipated tempered growth in 2020 with the onset of COVID 19 further impacted anticipated sales resulting in an approximately 21% year-over-year decline.In the U.S. Medtronic signaled further challenges presented by COVID-19 pandemic in resulting continued challenges in insulin pump starts that carry glucose transmitters. In Europe, new insulin pump system starts also remained notably impacted. Encouraging, we are seeing continued strength from disposable sensors and growing interest in standalone CGMs that enable hospitals to provide remote monitoring and keep the diabetes patients safely at home.As we noted in our Q1 pre-announcement, we already anticipated an impact on ordering and inventory expectations that would impact our second quarter. However, we continue to expect that we will see improvement in the second half of the year. In addition to the reduction in staff associated with our Hearing Help Express business, we have completed a global net workforce reduction of approximately 25 administrative and support employees, partially offset by a few key hires.We anticipate the net effect of these actions to further reduce our operating expense by approximately $1.5 million. Undoubtedly, IntriCon has taken a number of significant transformational actions with each of these strategic decisions was made over time and through careful planning and execution in order to best position the company for long-term growth and shareholder value by focusing on what we do best delivering complex micro-miniature devices that require specialized design expertise and high production volumes.We remain steadfast in our commitment to be a leading joint development manufacturing partner for miniature medical devices including micro-miniature products micro-electronics, micro-mechanical assemblies and complete assemblies that enable affordable and accessible healthcare and improve the quality of life for those we serve.Our priorities for the year remain unchanged and include

[Scott Longval:]

Thank you, Mark.Turning to our financial results for the 2020 first quarter, we reported net revenue of $21.5 million versus $21.6 million in the comparable prior year period. The decrease was primarily due to the COVID-19 impacts on our diabetes and legacy hearing health channels, absence of revenue from hi HealthInnovations and a one-time adjustment of $1.3 million to reflect the change in our revenue recognition methodology to certain medical customers.By core business segment, revenue in our Medical business for the quarter were $16.4 million, a 21% decrease year-over-year and represented 76% of total revenue. Again, this decline was largely due to the COVID-19 impacts on diabetes, the one-time revenue recognition adjustments, partially offset by strong medical coil demand.In our Hearing Health business segment, total revenue in the first quarter was $3.9 million, down 45% over the prior year first quarter. Once again, this decrease was largely due to no revenue from hi HealthInnovations and a COVID-19 impact on our legacy hearing health channel.Within the Hearing Health segment, indirect-to-end-consumer revenue was $744,000, direct-to-end consumer revenue through our Hearing Help Express business was $1.2 million and legacy OEM revenue was $2 million. First quarter gross margins were 21.3% down from 28.9% in the prior year first quarter. Margins were constrained primarily due to excess manufacturing capacityOperating expenses for the first quarter were $6.6 million, compared to $7.5 million in the prior year period, the decrease stem from the substantial reduction in advertising and administrative expense at Hearing Help Express. We posted - a net loss attributable to shareholders of $2 million or $0.22 per diluted share versus net income attributable to shareholders of $775,000 or $0.08 per diluted share for the 2019 first quarter.Turning to guidance, as this was communicated in our first quarter preannounced on April 7, IntriCon suspended guidance until such time we have enough visibility to confidently forecast key financial metrics. We did however want to provide more color on our accelerated HHE restructuring efforts. During the second quarter, we further eliminated certain HHE sales, marketing, administrative positions resulting in the annual cost savings of approximately $900,000.In addition, we significantly cut our consumer advertising investments resulting in additional $2 million reduction in operating expenses in 2020 as compared to 2019. Based on these actions we anticipate reducing our loss with HHE from roughly $4.5 million in 2019 excluding impairment charges to $1.6 million in 2020 of which $400,000 was attributed to the second half of 2020. Furthermore, while continued uncertainties remain in the COVID-19 pandemic we want to highlight many of the steps that we've taken to decrease our expenditure profile and current spending limit.In early April, we instituted furloughs and temporary salary reductions for doctors and management. And last week, we completed a global net workforce reduction of approximately 25 physicians including many of the previously furloughed physicians resulting in an annual savings of $1.5 million. In connection with the HHE restructuring and global workforce reduction, we anticipate incurring $1.2 million to $1.5 million restructuring charge in the second quarter.Importantly, however, these actions were done without impeding or compromising our ability to execute our long-term strategic initiatives. And lastly, we’re not providing comprehensive guidance for the full year 2020 at this time. We did want to highlight some other factors that will have an impact on our P&L, including additional color on Emerald Medical Systems acquisitions financials. First, as noted on April 7 Update, we anticipate a novel inventory level adjustment from our largest customer that will negatively impact our second quarter results.As it relates to Emerald Medical Systems as Mark previously mentioned in 2019 they posted revenue of $7.5 million. We anticipate this business to grow in the low double-digits in 2020. We also anticipate the acquisition to be accretive to net income for the year. During the second quarter, we incurred approximately $400,000 in professional fees associated with the transaction. And lastly our cash balance post transaction is approximately $30 million.Now I'd like to turn the call back over to the operator so Mark and I can take your questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Jon Block from Stifel. Your line is open.

[Jon Block:]

Mark maybe just to kick things off on EMS, I mean why now for the acquisition, it seems like you may have known these guys for a while, you mentioned you were literally in the same building in Singapore. And Scott just to sort of tack on to that same topic I think you alluded to low double-digit growth for EMS for 2020, but there was a mid-30 CAGR number that was sort of there longer term?So is that low double-digit growth is that because of COVID call it, I mean should we expect the growth rate to accelerate on the back end and just more clarity I guess on the de-sell versus the CAGR that was given and then, I've got a couple of follow ups? Thanks.

[Mark Gorder:]

Jon, just - your question on the reason for the acquisition then I'll turn the rest of it over to Scott. I think we’ve mentioned a couple of quarters ago we started to talk about the importance of surgical navigation in our future. And we were making good inroads designing our medical coils into catheter assemblies that were going into interventional pulmonology and electrophysiology applications as well as others. And as part of our criteria looking at acquisitions, we raised that money back in August of 2018 and have been looking for the right partner since then.And we became aware of Emerald Medical sometime during the 2019 and began to look at them earnestly as a potential candidate. And the more we got into it the more we realized that their position in neurovascular, cardiovascular, and peripheral vascular type applications would give us a substantial new platform that we could not only grow the platform with them into interventional catheters but also their expertise was going to be able to help us grow our business in surgical navigations, the applications in pulmonology and electrophysiology and some of the core technologies excellent that EMS would allow us to accelerate growth in that area. So we are very excited about this and we think it’s a perfect fit.

[Scott Longval:]

And Jon related to the question low double-digit growth is a little bit in there for 2020 obviously the uncertainly with COVID-19 and what that could mean if we wanted to be able to put a conservative view on what we think the transaction could do over the first 7.5 months. And also some product launch timing that could impact that number and make it stronger than we've outlined, but again we want to come in with a number that we felt very comfortable with in this environment.

[Jon Block:]

Got it very helpful. And maybe two more and just to follow up on the self-fitting trial as you mentioned you disclosed it was postponed you reiterated that again on this call but just it also when that trial might pick back up and time to approval once the trial is initiated would be helpful?

[Mark Gorder:]

The original date for the FDA required to provide guidance was August of this year. However, we realized that the overwhelming demands on the FDA from the COVID-19 pandemic relative to a number of factors, equipments, vaccines testing methodologies is just overwhelming. And we don't think that the OTC guidance is going to get a lot of priority in the short-term here. So we're anticipating I don't have any good data from anyone now as to when this is going to be reengaged.We're planning that we might be able to - they might be able to get it done by April 1 of next year - just somewhere around between April 1 and July 1. And so, we're doing our planning to get our technology ready and our ecosystem of care ready by on April 1 date that we can control. But we can’t really control the FDA’s attention to this. So my guess is it's definitely going to be delayed. How much delayed I don’t know.

[Jon Block:]

Okay, and I'm sorry, just to clarify Mark and that was - in answering the question it was - you think the FDA might push until early to mid of next year and you think your self-fitting might be around that that same time, I just want to make sure I've got that correct?

[Mark Gorder:]

Yes, that's correct. So we're hoping that we can start doing trials later in the year. The problem with doing trials with our age group, the average hearing aid were somewhere around 72 to 75 that's the age group most potentially vulnerable to the COVID virus. So our ability to recruit will be an issue. So, we're hoping we can start doing something later in the year as this thing - as we get more clarity.

[Jon Block:]

Yes, yes. And final one - thanks for that final one, Scott, you mentioned pro forma for EMS I think about $30 million in cash and I know you don't want to give explicit guidance. But is there a way to think about burn levels for the balance of the year? I'm not trying to back into a revenue number you just talked at length about some of the OpEx initiatives that you guys are going through. So how do we think about burn for the balance of 2020? Thanks for your time guys.

[Scott Longval:]

Yes great question. Thanks, Jon. Well, obviously, we've taken some pretty aggressive steps to reduce our cost structure. At the same time, we've done that, we've really positioned ourselves to drive our business forward. So we look at to be moving in the second half of the year, we believe that our business will be in a position where it’s generating cash. So from that perspective and protecting the P&L we’ve taken - excuse me, the balance sheet we have taken some aggressive steps and feel very well positioned as we enter in the last seven months of the year.

[Operator:]

Your next question comes from line of Andrew D'Silva from B. Riley FBR. Your line is open.

[Andrew D'Silva:]

I'm glad to hear everybody is sounds healthy and congratulations on the acquisition. Just to start a couple of quick bookkeeping questions from me. What was depreciation and amortization stock-based comp, cash flow from operations and CapEx for the quarter? And then also were there any severance or other one-time costs in the first quarter that we should account for?And then while that's being pulled it just seems that since you decided to pivot away from that DTC hearing aid business that tele-health initiatives have been gaining significant traction due to COVID-19 and I was just curious if that changed anything with your approach with HHE?

[Mark Gorder:]

We supply a lot of these other direct-to-consumer people. People like Eargo, MDHearing, Hearing Assist the names you'd see out there. We are providing them with technology so like Intel Inside. However, we think that no one has yet proven a scalable model and we feel that our best approach is to work very closely with potential branding partners and retailers in order to figure out what that scalable model might look like. And we're very comfortable with our position now we've positioned our HHE business as a test platform.And they currently have both tele-audiology capability and - customer service capability which is going to be essential to support branding partners and retailers. So we think we maintain the key building blocks necessary to build an ecosystem of care, work with a branding partner to supply high quality hearing aids through an ecosystem of care into a retailer. So we're very comfortable with that approach and we believe there are going to be a position in the market for that approach.

[Andrew D'Silva:]

Okay great. And then…

[Scott Longval:]

Andy this is Scott, in terms of depreciation and amortization in the first quarter was $921,000, stock-based was $376,000. We had cash used from operations of $1.2 million and purchase of equipment CapEx was $1.7 million in the quarter and in terms of any one-time unusual expenses in the first quarter there was much to speak of.

[Andrew D'Silva:]

But I heard something about M&A related costs is that in the first quarter or was that in the second quarter?

[Scott Longval:]

That will be incurred in the second quarter the $400,000 of professional fees that will all be expense in the second quarter.

[Andrew D'Silva:]

Okay, great. And then just as it relates to OTC Hearing Aid Act is it even possible to get the final rules out by the three year August deadline at this point or could drop the guidance in the commentary period? Okay all right, I sort of figure it. And then, go ahead.

[Mark Gorder:]

I would just say it's not because they have a six-month comment period that they have to allow by - by statute. And even if they were to issue them now six months would put it well into the fall.

[Andrew D'Silva:]

Okay that's what I figured. And then I know you're holding off on the self-fitting trials, but Phonak recently launched a remote fitting platform and I was just curious if you had any thoughts on that and what it does to the competitive landscape at this point?

[Mark Gorder:]

The each of the large manufacturers in the oligopoly that that serves the traditional market through the audiologist has put out some type of a tele-audiology platform to serve both shops or I would point out that that's still the traditional model going through the audiologist and then through the audiologist to the consumer. And what we're anticipating is through all centers in an ecosystem of care that we are going directly into a retailer through branding partners. So we think that that channel is somewhat unique and it takes particular expertise to figure out how to get into that retail environment.It's no doubt that the - the only oligopoly would dominate any type of technology implemented through the traditional channels. So, we don't think in the long run that affects our ability to do an ecosystem of care into the retailers.

[Andrew D'Silva:]

Okay, thanks. Good color. Thank you very much. And then, you mentioned that your largest customer might have an inventory level adjustment, though it impacted fact the second quarter. Was that the 1.3 rev rec adjustment that you talked about during the first quarter or is that an additional adjustment we should be thinking about in the second quarter or if you have any metrics that we should consider that be useful?

[Scott Longval:]

Sure. That is separate, Andy, the $1.2 million that was recognized in the first quarter had to do with the change of methodology in revenue recognition from our non-Medtronic, non-Smiths [ph] revenue. The adjustment that we highlighted back at the beginning of April again today relates to our largest customer and we're still quantifying what that number is going to be. But it could be anywhere upwards of $3 million too early to tell and we'll continue to work that throughout the quarter, but that would be kind of max exposure as we move into the second quarter.

[Andrew D'Silva:]

Okay. And can you help I guess bridge the gap between the context of Medtronic provided? They said that their diabetes group is seeing patients increase, their on-hand level supplies due to COVID-19. I'm kind of curious how that translated to your first quarter diabetes revenue? And then, what we just discussed with the second quarter and I would assume that some of the supplies have to be very CGM components that you're involved with correct?

[Mark Gorder:]

Yes great question, Andy. So if you go back and look at what they have about is part of their April 21st update on COVID and how it was impacting the various groups. Diabetes is one that was highlighted. And if you look at the diabetes group and you break down the revenue, the impact we’ve had on the revenue you'll see diabetes supplies was something that wasn't necessarily electric [ph] and performing well and frankly that translated into our first quarter as it related some of the disposable products that we do for Medtronic.Unfortunately, some of the more electric products that that faced headwinds some of the more elective products that faced headwinds were insulin pump new starts. And as you know, these insulin pump systems that are sold come with a continuous group of transmitter. So, it’s a headwind with the new pumps starts that's directly going to affect us, which is the largest percentage of growth that we have go into Medtronic.So we believe as we move forward throughout the year and some of the economies start opening up that will fall and we will begin to see improvement. But right now, they are continuing to feel some of the pressure for the new insulin pump starts.

[Operator:]

Your next question comes from line of Kyle Bauser from Daugherty & Company. Your line is open.

[Kyle Bauser:]

Thanks for taking my questions and thanks for the updates here. So following up on Jon's prior question I realized trials across the board have been postponed and then your self-fitting software trial have to be put on hold as well. But just for clarity, can you talk about what the status was before COVID-19 ahead I mean, was - was the trial design finalized? I think you were targeting like 85 patients and had you received kind of the green light to move forward?

[Mark Gorder:]

Yes, Kyle. We had - the trial was all set to launch when COVID kicked in and we had a nod from the FDA on the trial design and we're ready to go with we were in the process of trying to line up and start doing recruiting. So it really threw a monkey wrench in there. But you know we’ll - we deal with.

[Kyle Bauser:]

Right.

[Mark Gorder:]

With it when we can get back to it, we'll start recruiting.

[Kyle Bauser:]

Right makes sense. And was it about the 85-patient level or was it higher than that, lower?

[Mark Gorder:]

No. 85 is what we are shooting for.

[Kyle Bauser:]

Okay.

[Mark Gorder:]

Probably we would had recruit a few more than that to end up with 85. So, it's - but the 85 was best design goal.

[Kyle Bauser:]

Right. Got it. And you have the Bose predicate out there, which makes it a bit easier from a regulatory perspective, which is great. So, just kind of interested in what your sense is for the number of other ongoing trials that will be using Bose as the predicate for a 5010(k) any sense?

[Mark Gorder:]

We've heard of a couple of them. There was one that was - we’re under NDA we're working with them to supply some product. So I'm aware of at least one other one that's looking at self-fitting. But I'm sure there will be others.

[Kyle Bauser:]

Sure. Right. Thanks. And you of course talked about that EMS deals being accretive and this is even in the midst of COVID-19. So it sounds like EMS has been able to maintain a strong double digit growth profile. I know that's down a little bit from there, their CAGR over the past several years. But just kind of wondering how they’ve been able to not only hang in there, but actually grow sales in a tough environment? I mean, is this a function of the company selling into non-elective procedures like PTCA and AAA, neuro, just any kind of color here will be great?

[Scott Longval:]

Yes. Most of the product line they have mentioned there was coming from Medtronic products which offer PTCA and those are really elective procedures as you know with your back and kind of that type of procedure is something that would occur to prevent imputation. And so that what they're seeing is continued strength in that business. And they feel very bullish in terms of where that's going to go and even in this type of environment we believe that we can achieve what types of growth - but we believe that we can achieve those types of growth rates.

[Operator:]

I'm showing no further questions at this time. I would now like to turn the conference back to Mark Gorder, CEO.

[Mark Gorder:]

Thank you. Thank you again for joining us today. Well the past several months have been undoubtedly extraordinary on many levels and the pandemic is broadly impacted the business environment. We have made important strides to secure the future for IntriCon.First, we significantly reduced our cost structure to better align with current revenue levels. Importantly we have done this without impeding or compromising our ability to execute on long term strategic initiatives. Second, with our acquisition of Emerald Medical Services - through our acquisition of Emerald Medical Services we gained immediate access to new high growth end markets and diversified our customer base.Lastly we are prudently approaching the emerging OTC/DTC channel by focusing our investments on securing partners and eliminating higher risk investments such as consumer advertising. We believe the combination of these actions enable us to successfully manage through the current pandemic business environment and positions us with strong longer term sustain growth.I would like to thank the IntriCon team as well as our shareholders for your continued support. We look forward to updating you on our progress over the coming quarters in the meantime stay healthy and have a great evening.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.