IntriCon Corporation (IIN) 2017 Q3 法說會逐字稿

Good day, everyone, and welcome to the IntriCon Third Quarter 2017 Results Conference Call. Today's conference is being recorded.

And at this time, I would like to turn the conference over to Scott Longval, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Joining me on today's call is Mark Gorder, IntriCon's CEO.

Before we begin, I'd 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 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. Important factors that could cause such differences include, among others, those set forth under the headings Risk Factors and Management's Discussion Analysis of Financial Condition and Results of Operations in our 10-K filing for the year ended December 31, 2016.

With that, I'd like to introduce Mark for a strategic look of IntriCon's third quarter.

Thank you, Scott, and thank you, everyone, for joining us today. I would like to begin by reviewing key highlights and results for the third quarter. After that, Scott will cover the financials in more detail, and then we will take your questions.

By this time, most of you have had a chance to review our third quarter press release. The company reported another record quarter with net sales of $24 million, up 54.4% from $15.6 million in the prior year period. Gains in medical and value hearing health drove the strong performance. In addition, we're successfully cultivating a new direct-to-consumer channel to deliver superior, outcomes-based, affordable hearing health care, meeting several key milestones during the third quarter.

Looking at our 2 primary businesses. Our medical business increased 68.4% in the 2017 third quarter from the prior year period. The gain was primarily driven by the continued production ramp of Medtronic's MiniMed 640G and 670G wireless glucose monitoring systems. We remain very well positioned with Medtronic long term, providing both continuous glucose monitor, or CGM, and sensor assembly.

As part of their earnings release on August 22, 2017, Medtronic announced strong global demand for their diabetes technology, including the MiniMed 640G in international markets and the world's first hybrid, closed-loop system, MiniMed 670G, in the United States. These systems have increased their installed base and market share, driving a large increase in CGM demand. As a result, overall sensor unit demand, a key component of CGMs, has more than doubled, temporarily outstripping Medtronic's production capacity. Medtronic expects to have increased sensor production capacity by the end of their fourth quarter, which we anticipate will drive significantly higher sensor assembly sales for us in fiscal 2018.

Furthermore, in October 2017, Animas Corporation, one of the Johnson & Johnson diabetes care companies, announced that it intends to discontinue the manufacture and sale of insulin pumps and has selected Medtronic as its partner of choice to facilitate a seamless transition for patients, caregivers and health care providers. Patients using an Animas insulin pump will be offered the option to transfer to a Medtronic pump. Approximately 90,000 patients currently use Animas pumps and products. We expect this partnership to be another driver for Medtronic growth throughout 2018.

Turning to hearing health. Sales in this business grew 53.8% from the prior year third quarter, primarily stemming from our growing traction in value hearing health, including 94.1% growth from insurance-based sales, the addition of new private-label, direct-to-consumer partners, and a $1.8 million contribution from HHE, partially offset by declining conventional channel sales. As previously announced, we acquired a 20% stake in DeKalb, Illinois-based HHE, a direct-to-consumer, mail-order hearing aid provider, in the fourth quarter of 2016. In January 2017, we exercised our option to acquire the remaining 90% stake in HHE that is expected to close during the fourth quarter.

Since taking our initial stake in HHE, we have made substantial progress integrating and optimizing the organization. During the first part of the year, we relocated the business, hired a vice president of direct-to-consumer sales, and introduced IntriCon's digital hearing aids into the HHE portfolio. Those activities are paying off, driving key third quarter metrics over the sequential quarter, including a 49% increase in new leads, a more than twofold increase in net new hearing aid customers, 20% increase in backlog and a 38% growth in hearing aid orders.

We continue to be pleased with our HHE traction. Hearing aid orders rose 38% over the 2017 second quarter, and 82% of the devices we're selling through HHE are IntriCon devices, a significant milestone given that we launched IntriCon's first device through HHE during the 2017 second quarter. We expect continued sequential growth in the fourth quarter and throughout 2018. Based on these metrics, we intend to increase our investment in advertising in the fourth quarter and into early 2018 to further accelerate growth.

In addition to HHE, in April 2017, we entered into an agreement to acquire a 49% stake in Soundperience, headquartered in Frankfurt, Germany. Just recently, we made our final payment on the $1.3 million investment. We do not anticipate the Soundperience business will have a notable financial impact on operating results, but rather, it will provide us with exclusive access in the United States to critical software technology. Soundperience has designed the first psychoacoustic way of analyzing peripheral hearing and central hearing processing, branded as the Sentibo Smart Brain System. The software is a sophisticated self-fitting hearing aid and brain-training software technology that is being used in the German market today, most notably through our previously disclosed Signison joint venture with Soundperience.

In addition to its international application, we began piloting a U.S. cloud-based version of the Sentibo Smart Brain System during the third quarter. Incorporating self-fitting technology is a critical step in creating our high-quality, low-cost hearing health care ecosystem. While it is too early to draw absolute conclusions from our U.S. pilot, we believe Soundperience's technology harbors the potential to drastically reduce the price of hearing aids, drive greater access and increase customer satisfaction.

Looking at some of the international hearing health care initiatives. We continue to focus sales into the National Health Service clinics in the U.K. While our efforts to make inroads to the NHS have proven to take longer than expected, during the quarter, we made advancements in several clinics and recently began taking initial orders.

Shifting to public policy. There have been significant developments during 2017. Legislation was signed into law by President Donald Trump, which includes the Over-the-Counter Hearing Aid Act of 2017. The legislation is designed to enable adults with mild to moderate hearing loss to access OTC hearing aids without being seen by a hearing care professional. Echoing what we have said before, this is an important step forward in hearing health. The OTC Hearing Aid Act is designed to provide greater public access to OTC hearing aids at a lower cost. We believe that this new law can remove the significant barriers today that prevent innovative hearing health solutions and provide affordable and accessible solutions to millions of unserved or underserved Americans. By signing the OTC Hearing Aid Act into law, we've entered a new era in hearing health care. IntriCon is at the forefront and spearheading an effort to create innovative solutions that provide greater device access at a much lower cost.

Now I'd like to turn the call over to Scott for a review of our financials.

Thank you, Mark. I'll begin by reviewing our third quarter financials in more detail. In the 2017 third quarter, the company reported net sales of $24 million, up 54.4% from the $15.6 million in the prior year period. The increase was primarily due to year-over-year revenue gains from our largest medical customer as well as continued traction in value hearing health. IntriCon posted net income attributable to shareholders of $1.1 million or $0.15 per diluted share versus a net loss attributed to shareholders of $1.3 million or $0.19 per share for the 2016 third quarter.

Third quarter gross profit margins were 31.5%, up significantly from 22.7% in the prior year third quarter. The increase primarily stemmed from greater volume and the inclusion of HHE direct-to-consumer business in 2017 as well as more IntriCon devices being sold into the HHE channel. We expect this trend to continue in the fourth quarter.

Operating expenses for the third quarter were $6.1 million compared to $4.3 million in the prior year third quarter. The increase was largely due to the inclusion of HHE in 2017 and key initiatives to drive business growth.

Turning to other financial metrics. Despite significant investments in value hearing health care, we reduced our total debt to $7.8 million, down from $9.3 million at the end of the second quarter and $9.7 million at the end of 2016.

As Mark previously mentioned, in January 2017, we exercised our option to acquire the remaining 80% stake in HHE. That is expected to close during the fourth quarter. As previously discussed on our second quarter earnings call, as part of the closing, we will likely absorb a portion of the losses allocated to the majority owner. That amount we may have to absorb could range between $500,000 and $700,000. Losses incurred by HHE to date include noncash amortization, acquisition-related costs and operating results, all of which are related to prior year periods and have no future cash impact.

In terms of guidance, based on the information that's currently available, we anticipate the 2017 fourth quarter net sales to range between $22 million and $23 million compared to $17.7 million in the prior year period, and positive pro forma EPS, excluding a loss of $0.07 to $0.10 to absorb the portion of the losses previously allocated to the HHE majority owner. For the year, we are raising our net sales guidance to range between $88.1 million and $89.1 million compared to 86 -- excuse me, compared to $68 million in 2016.

Looking forward to 2018, we anticipate continued strong growth with annual revenues ranging from $100 million to $104 million.

Now I'd like to turn the call back to the operator so we can take any question.

(Operator Instructions) And our first question will come from Andrew D'Silva with B. Riley FBR, Inc.

First of all, glad to see you're making progress on several fronts here. So just so I can better understand some of the dynamics that are going on internally, you noted Medtronic orders were very strong. Should we think of any sort of, kind of a larger stocking order taking place during the period? Or is this really the new run rate we should be expecting as we close out '17 and '18?

Yes. As we look through the transition, we talk about Medtronic business, Andrew. We really try to defer to what they have said publicly. Clearly, we've seen a ramp-up over the second half of the year. And if you look at all commentary that they have made surrounding these products, that's been very well accepted in the marketplace. So I don't want to get too far ahead of ourselves and start commenting on specific customer orders coming in, but we did make comments in the release that we anticipate a very strong 2018 coming down the pipe. And obviously, they would be a big contributor to that.

Okay, fantastic. And just moving over to the hearing side of the business. I'm glad to see that the hearing bill passed. Maybe you can give us a little bit of a sense of what needs to take place next from a regulation standpoint and perhaps what a realistic time line is. I know the FDA usually has a pretty large grace period here, but is there anything you're hearing or perhaps any discussions you've been involved in that help us maybe pinpoint a time that's more realistic than a few years out?

Andrew, this is Mark, yes. I just was out in Washington, D.C. last week and meeting with all the interested parties, the FTC, the -- Senator Warren's office. And nobody's willing to really speak to how quickly they're going to go about this actually getting the regulation done. They have 3 years to do it. I did get a sense that they thought that the FDA would move sooner rather than later and that the specification -- draft specification could be out as soon as 6 months after the passage, which would put us maybe -- I think it passed in July.

August.

August. So we're probably looking at February, March of next year for a draft specification. And then they have to go through comment periods and people get to weigh in, obviously, the traditional industry -- the oligopoly will -- they have been trying to prevent this and fight it. They'll try to slow it down. But we understand that Senator Warren has spoken to the head of the FDA and encouraged them to move quickly so that consumers will benefit from these very positive changes. So I would guess, my -- if you ask me, I think it will be approximately a year from the passage and they will have written the regulation.

Okay, great. And actually, that gives me a good segue into my next question. From a strategic point, I'm just kind of interested how you see yourself set up in the macro dynamic now after -- a year from now, whenever this -- the regulations are passed. Obviously, as you mentioned, very large players in the market, can they capitalize on this in a similar fashion that you're trying to? Or is there any benefits to them? Or is it you guys being smaller and nimble going to help you gain market share in total over them as they're not going to be able to have the sales and marketing dynamics set up to be able to transfer this kind of a process?

Well, that's a good question and I -- our strategy has been to position ourselves in this emerging market that's creating an ecosystem of care. We don't think that the OTC legislation, in and of itself, is sufficient to drive growth in the market. We have found that a significant customer care element exists through getting people to accept and wear the hearing devices. And we anticipate that you not only have to have an over-the-counter presence but a strong customer care presence, providing hearing assistance to not only fitting the device but learning how to use it and, in addition, follow-up care. So we see this as creating an ecosystem of care, managing the patient from start to finish. And we think that, that gives us a competitive advantage over people who are coming in, say, from the hearable space, which should be an unregulated space and in -- on the other end is the traditional model with the oligopoly, which is really the very -- the high-end, gold -- they call it the gold standard. We think that our position is in between those 2 segments. And we're building -- using technology to build this ecosystem of care and positioning ourselves carefully in between a quasi or unregulated segment to a -- to the more traditional model going through the bricks-and-mortar audiologists.

Got it. One more question, sorry. On the flip side, are there any barriers that you're seeing for perhaps consumer tech companies that will make it more difficult for them to enter the market now that the regulations are expected to be changing sometime fairly soon?

Well, the regulation, when it's written, will still be an FDA -- will have an FDA requirement for a submittal and meeting the FDA manufacturing standards. So consumer electronics people who traditionally don't have that expertise, if they're going to sell these devices, they're going to have to put in FDA-certified manufacturing facilities and be medically certified. And that's not that they couldn't do that, but you have to take that step. And in addition, you're going to have to build up audiological expertise to provide the -- what we call the ecosystem of care to get people to not only wear the devices initially but to keep them. So we think that those barriers will be in there for the consumer electronics companies. They're stepping into a medical realm. Now many of them -- there are some that are interested in doing that, like Amazon, but we still think this customer care is going to be critical.

(Operator Instructions) We'll hear next from Dick Ryan with Dougherty.

Say, Mark, the commentary on Medtronic, the capacity issues that has nothing to do with you, but I'm wondering with the hurricanes and their Puerto Rican operations, if anything there kind of impacts the CGM side of their business.

Dick, this is Scott. We really can't comment on it. They came out publicly -- I believe it was last month, and put out a piece that communicated on their facilities were impacted by the hurricane, but they had them up and running by early October. But we really can't comment on that as well on what that means to us or to them. Really, we're just kind of waiting and seeing and getting real-time information from them.

However, Dick, in the guidance that we built into the press release, we anticipate strong growth in 2018 year-over-year in spite of any short-term issues that they may or may not have in Puerto Rico. So we anticipate no major impact on us.

Okay. And Mark, you mentioned 82% of the devices from HHE were IntriCon's. Can you -- is it too early to give a sense of the success for the digital units coming through?

It's probably a little too early. First of all, the transition from analog to digital, we're having to train everybody down there on how to do that. We've had a few difficulties initially in getting the right settings on the IntriCon devices sold into this new channel, but we're learning very quickly and we're adapting and making some of those changes. I would sense that by -- certainly during the first quarter of next year, we should have enough data to give you a sense for how that is going. But we do anticipate that it should be a positive impact.

Okay. And on the NHS side, you said you're making progress on the clinics. I think on the last call, you were hoping to get -- I can't remember the number, thousands or something by the end of October, November and do that on a monthly basis. Any current thoughts on the NHS ramp opportunity?

Well, we're not moving along as quickly as we thought, but we did have a decent order already from one of the clinics and we're starting to make progress with several others. So even though this is a slow take-up, it's still the largest single purchaser of hearing aids in the global market. So we feel we've got to be there and we had to tough it out, but we are making progress and we expect to continue to make progress.

Okay. Scott, do you have the stock-based comp? I don't think I saw the depreciation, amortization numbers.

Stock-based comp was $210,000, and depreciation, amortization was $555,000.

Great. What was Medtronic in the quarter?

Medtronic revenue in the quarter was $12.2 million.

(Operator Instructions) We'll go next to Larry Haimovitch with HMTC.

The gross margin was up significantly, beat all of our estimates. Is this the best gross margin quarter you've ever had in terms of percentage?

Since I've been here for 12 years, it is.

Okay. You didn't talk much on the call about what it was that drove the gross margins. Obviously, volumes help gross margins. We all know that. That's easy. Could you go a little -- into a little more detail, Scott? Give us a little more color on the gross margin story.

Sure. And we've been talking about this, Larry, for quite some time even when our gross margins were in the low 20s that we needed volume to fill up these facilities because we had the excess capacity. And largely, what you're seeing is just greater volume. But on top of that, we're also seeing greater margins coming through from our Hearing Help Express business. Now those margins are in the 70-plus range. So as that business continues to grow, becomes a larger piece of the overall revenue makeup, we are going to get some expansion on the margin. So those are really the 2 big components to driving margin this quarter.

Scott and Mark, as sales continues to grow, should we expect gross margin to further expand?

Yes.

What do you think the upper limit is in a reasonable sense? What would you think you could -- you can get?

I would say in our current facility footprint with the business that we have today and the makeup that we have today, eventually, we think we can get into the upper 30s.

Upper 30s.

For gross margin.

That would have some really nice leverage on the income statement, wouldn't it?

Correct.

Last call, we talked about raising money. You guys said you didn't think you wanted to do it at this point. I think we would all anticipate tomorrow the stock will move up and may continue to move up in anticipation of strong fourth quarter and the guidance you provided for 2018. Do you still feel that an offering is not in your best interest at this point that you're -- either you're looking for a better stock price or you just feel like you can run the business very well without needing to raise more money?

I would say, Larry, short term, we still feel that we're in a good position with what we're doing, but we're always looking at all our alternatives to see what the best approach would be. And I think we've said in past calls that we feel at some point that we want to find a branding partner to help us in -- accelerate growth in our emerging hearing health business. But in the short term, we're -- as you can see, we're in pretty good shape. Whatever we'll do, there will be strategic -- and it would depend on opportunities that come across our bow here over the next 6 to 12 months.

And Mark, I'm not a duck hunter. I've never been to Minnesota to duck hunt, but I understand the duck hunters up there have a very, very thoughtful saying, which is, "If the ducks are quacking, feed them."

Well, that's kind of what we feel about the advertising at HHE. We know that if we spend more money in advertising HHE, we'll continue to drive revenue.

We'll take our next question from [George Moreno] with [Faredo Ventures].

First question kind of echoes the last caller on the business model going forward, on the value hearing aid business. I'm trying to understand what happens over the next 1 to 5 years in that -- to the model. And then you talked about a branding partner. I'm not sure I fully understand what that means. What would that look like? And how would that feather into your current facilities? And I'm trying to understand the business model when I look out in years ahead, what it looks like.

Well, let --- maybe just break that into 2 parts. The -- in the short term, the next few years, we can gain a lot of traction just continuing to build our HHE model and driving advertising. There's a huge untapped market, which we estimate about 20% of the total hearing health market in the U.S. is underserved or unserved. And simply by continuing to work on our ecosystem of care and with HHE, we anticipate to continue to drive very strong growth there over the next few years. In addition to that, we're anticipating that at some point, it makes sense to accelerate what we're doing. Well, we've demonstrated that we've got a scalable model that can be taken to a much higher level. So for example, you may be familiar with companies like Warby Parker, where they've gone direct -- where they manufacture the consumer in eyeglasses. The exact nature of the model of treating elderly hearing patients is going to be different than what Warby Parker is doing, but we anticipate that at some point, there will be an opportunity to expand or scale our model to the next level. At that point, it would be helpful to have somebody who had experience in doing that, working with us. So we think that, as we mentioned in the -- prior in the call, that there's a strong customer care element here. There may also be a service element that's required, where you have places where people can go to get service in addition to a direct-to-consumer online or direct mail approach. And we've seen that, watching Warby Parker, that they started out all direct-to-consumer but they've segued into adding bricks-and-mortar service centers in several areas around the country. I don't know how many they've got now total, but some of the people that I'm talking to think that, that kind of a model may be required if I looked 2 or 5 to 6 years down the road. This is not something we're going to do over the next 1 to 3 years, but that's kind of my take on it.

So -- and then in your 2018 guidance, are you -- is this mostly driven by HHE growth or half-and-half with the medical side? Or where's the growth mostly coming from in -- for '18?

It's -- it would be very similar to 2017. It would be a huge component of Medtronic but also very strong contribution from HHE, our private-label partners and our direct-to-insurance model. All 3 of those will contribute on the hearing health side and then Medtronic, so strong contributions from all of those.

Okay. And then also to echo the cash concerns. On your debt, what are the covenants for the minimum cash balance requirements to stay in good standing?

We don't have any covenants for minimum cash. The only covenants that we have relate to the leverage ratio and the fixed charge ratio. And we are well in bounds with those covenants.

Okay, yes. Would like to see more cash on the balance sheet for safety but I understand you're profitable and all, but be nice to have more cash, investment in the business, in my thoughts, but -- well, anyway, a good quarter and I look forward to the next.

We'll go to our next question from Scott Billeadeau with Walrus Partners.

A couple of my questions have been asked but -- and I missed a little bit of the earlier part of the call. So you may have went over this. But I'm just wondering -- so you have full ownership of HHE now. So that -- did that impact Q3 or will impact Q4? Or I should say the next quarter. Can you kind of update me on that, Scott?

Sure. So Scott, we will be closing on Hearing Health Express in this quarter. So the impact of that transaction will happen in the fourth quarter.

Okay. And then you'll carry the full expense burden then of HHE, okay. And I think you -- was that -- did you -- did I hear you say something about $0.07 for Q4, if that was going to be? Or was I hearing something different?

Range between $0.07 and $0.10 in the fourth quarter.

$0.07 and $0.10, okay, great. And then another question is -- do a little big picture on -- as you strategize about how to build your kind of the service model or the ecosystem, will there be -- will this kind of be a leverage because you're still going to need an -- even though it's over-the-counter, you will need an audiologist?

Scott, with the new legislation, the OTC Act of 2017, you don't need to use a professional to fit an over-the-counter hearing aid. So what we would anticipate in the direct-to-consumer model is you would have 2 categories of devices that we would be dispensing. One would be the OTC model, and the other would be the traditional hearing aids that we are already dispensing. In the case of OTC, you would not need a professional. And what we're excited about there is that as we anticipate implementing the self-fitting software, a consumer could fit themselves using this technology in the convenience of their home or other remote location once we put that in place without having a professional involved. In the case of the traditional hearing aids, we still need the professional but -- so the use of that technology in the traditional market would be not yet determined but won't necessarily need a professional depending on the type of device that you're dispensing.

Okay. I just wondered, but there could -- but you say from a service perspective or from a good outcomes perspective, even having someone or some type of center, whether it's Warby Parker that you were talking about or have, I can see some, in fact, because someone could build a business model on providing that service...

And you are correct, Scott.

Without having to go and get audiologist -- without having to be a doctor to do it, right? I mean, that's a very different -- there's a different model that could be built there.

Yes. And in either case, whether it would be the OTC or the traditional hearing aid coming through our HHE model, in both cases, we would be providing strong customer care.

And our next question will come from Beth Lilly with Crocus Hill Partners.

I had a question in terms of the self-fitting technology, and you talked about piloting the U.S. cloud-based version. Can you say a little bit more in terms of the pilots and then when do you think it's going to be ready to be commercialized?

Well, we have 2 initiatives going on, but the main one is in Germany with Soundperience and Signison. What we're doing there is -- because the technology was invented in Germany and the gentleman that created it is local there, we thought it would be easier to pilot it in Germany because we still consider it a technology in progress and we wanted to make sure we debugged it in a manner that was very efficient. So we decided to start there. He is making good progress in using it through Signison in the German market. We were just over at a trade show in Europe called the European Hearing Aid Congress. And he has made good progress there, but it does take a lot of handholding to get people to figure out how to use it. So he goes and visits the shops, and he's actually putting it in through shops. And because, in both Germany and the U.S. -- the regulation has not yet been passed in the U.S., you still need a professional involved to use this fitting technology. So we -- what we're doing in the U.S. is we're piloting and through our Hearing Help Express -- we call it HHP, which is a professional outlet that's staffed by audiologists and dispensers in DeKalb, Illinois. And we're using the fitting technology there under the supervision of a licensed audiologist or dispenser. Once the OTC legislation has passed, we can then use this in a way where we don't need a license dispenser or audiologist to oversee the process. So right today, we're still debugging the technology with the oversight of a licensed professional.

Great. And so can you -- and I know we've spoken about this, but let's just fast-forward to 9 months from now, and let's suppose the legislation has passed and it's -- so you're able to get hearing aids OTC. Can you walk us through then how this technology works for a consumer? Let's suppose I need to get a pair of hearing aids.

Well, the kind of patient that would -- that we would intend to attack first here would be ones that are elderly but also tech-savvy. And the way the initial launch would go is we would send out an iPad with the device and we would -- and there would be training materials and videos along with it. And you would sit down at an iPad. The iPad would wirelessly interface with your hearing aids through a low-energy Bluetooth connection. And as you were walking through the questionnaire that you would get on the iPad as well as listening to sounds generated from the iPad, you would manipulate the screen to produce a -- well, in your estimation, you -- gives you the best result. And when you're done going through this entire process, you would actually have a prescription for your hearing loss based on how you answered the questionnaire and manipulated the dials. And you simply then need to hit the fit sequence and you self-fit your hearing aids. So that's the way this would work initially as we would zero in on tech-savvy hearing loss patients, probably more likely between the ages of 55 and 75, send them an iPad and then assist them to walk through the training process. But this will have -- this could only happen once the OTC legislation passes. And the devices would be within the category designated by the FTC and FDA as OTC hearing aids.

And is the hope then eventually that you don't have to send out a hearing aid -- an iPad with the hearing aids? Maybe they could tap on an app or something like that?

Yes. Well, there'd be an app on here, but the problem you've got is standardizing your access into someone's home with a system that's easy to use. And if you allow too many variables, it becomes almost impossible for elderly people to figure that out. And we know that it has to be simple. And so tech-savvy is all relative. So it's going to be a challenge for us to pilot this and figure out what is it the right combination of simplicity and technology to allow it to be effectively used.

That will conclude our question-and-answer session for today. For closing remarks, I would like to turn the conference over to Mark Gorder, CEO.

Well, thank you, again, for all the great questions and taking the time out of your day to join our call. In closing, I'd like to reiterate that I'm excited with the direction we're headed. We have never been in a better position to drive growth in both our value hearing health and medical businesses. Our medical business is thriving with tremendous long-term prospects. And additionally, we continue to gain momentum in the value hearing health space, beating critical milestones, driving sales and positioning the business for success. Thank you again.

That will conclude today's conference. Thank you all for joining, and you may now disconnect.