Market Overview

Interlink Electronics Reports Second Quarter 2019 Results

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Interlink Electronics, Inc. (OTC:LINK), a world-leading trusted advisor and technology partner in the advancing world of human-machine interface (HMI) and force-sensing technologies, today announced its financial results for the three and six months ended June 30, 2019. GAAP net income for the quarter was $109 thousand or $0.02 per share, both reflecting a significant decrease from the prior year's results.

Consolidated Financial Highlights

(Amounts in thousands except per share data and percentages)

 

 

Three months ended June 30,

 

Six months ended June 30,

Consolidated Financial Results

 

2019

 

 

2018

 

 

$ ∆

 

% ∆

 

 

2019

 

2018

 

$ ∆

 

% ∆

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

2,006

 

 

$

2,683

 

 

$

(677)

 

(25.2)

%

 

$

3,456

 

$

5,256

 

 

$

(1,800)

 

(34.2)

%

Gross profit

 

$

1,053

 

 

$

1,548

 

 

$

(495)

 

(32.0)

%

 

$

1,753

 

$

2,959

 

 

$

(1,206)

 

(40.8)

%

Gross margin

 

 

52.5

%

 

 

57.7

%

 

 

 

 

 

 

 

 

50.7

%

 

56.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

$

371

 

 

$

430

 

 

$

(59)

 

(13.7)

%

 

$

28

 

$

649

 

 

$

(621)

 

(95.7)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

109

 

 

$

359

 

 

$

(250)

 

(69.6)

%

 

$

(205)

 

$

477

 

 

$

(682)

 

NA

%

Earnings (loss) per share (basic and diluted)

 

$

0.02

 

 

$

0.05

 

 

$

(0.03)

 

 

 

 

$

(0.03)

 

$

0.06

 

 

$

(0.09)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA¹

 

$

464

 

 

$

491

 

 

$

(27

)

(5.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin2

 

 

23.1

%

 

 

18.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TTM EBITDA¹

 

$

404

 

 

$

1,582

 

 

$

(1,178)

 

(74.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

 


1 See attached schedules for reconciliation to GAAP numbers.

2 EBITDA margin is EBITDA divided by net revenue.

  • Revenue in the second quarter of 2019 decreased approximately 25% to $2.0 million from $2.7 million in the same year-ago period, primarily due to market challenges existing in many of the industries we serve.
  • Gross margin declined to 52.5% from 57.7% due to the decrease in revenues, as less revenue was available to cover fixed costs and production overhead costs.
  • Income from Operations was $371 thousand for the second quarter of 2019, compared with $430 thousand in the same period in 2018. The second quarter of 2019 included receipt of a milestone R&D incentive payment of $179 thousand from the Singapore government. However, in the face of unfavorable volume and timing-related mix, lower SG&A related costs mitigated the decline in operating income.
  • In the second quarter of 2019, after-tax net income was $109 thousand or $0.02 per basic and diluted share, compared to after-tax net income of $359 thousand or $0.05 per basic and diluted share in the same year-ago period. The deterioration of net income was primarily the result of higher income tax expense related to non-recurring foreign withholding taxes in the amount of $116 thousand.
  • EBITDA was $464 thousand for the quarter, compared to $491 thousand in the same period in 2018. On a trailing-twelve basis, EBITDA was $404 thousand, as the Company is starting to recover from the first quarter of 2019, which was the only quarter in five years for which the Company did not generate positive EBITDA.
  • The company ended the period with $5.4 million in cash and cash equivalents. Coupled with no debt, its balance sheet remains robust.

"We had a very solid quarter in our Medical market, with strong growth in orders and a pipeline that remains robust. In July 2018, the Company announced purchase orders of $880,000 from an existing prestigious medical customer. As these revenues begin to materialize, they are replacing revenues from other product lines that reached the end of their normal life cycle in prior reporting periods. Overall, we expect medical related revenues to show continued growth, although at a slower pace, then stabilize at historical levels," said Steven N. Bronson, CEO of Interlink Electronics, Inc.

"In other markets we continue to experience year-over-year declines, particularly in the Automotive and Industrial markets where we have seen a sharp drop-off in shipments to some of our largest customers," Mr. Bronson continued. "Given the headwinds across all markets, we have implemented a variety of countermeasures to adjust our cost structure and limit the impact." For the six-months ended June 30, 2019, total operating expenses were down 25.3% when compared to the six months ended June 30, 2018.

During the three months ended June 30, 2019 the Company repatriated approximately $1.2 million from its Chinese subsidiary. Cash on hand in China far exceeded capital levels necessary to maintain operations there, particularly in light of reduced exports to the U.S. Mr. Bronson explained, "We felt it was the right time to move excess cash back to the United States even with the additional tax expense.

Interlink makes available its annual financial statements, quarterly financial statements, and other significant reports and amendments to such reports, free of charge, on its website as soon as reasonably practicable after such reports are prepared. Please visit www.interlinkelectronics.com to view the Company's financial results in more detail.

About Interlink Electronics, Inc.

Interlink Electronics is a world-leading trusted advisor and technology partner in the advancing world of human-machine interface (HMI) and force-sensing technologies. Interlink Electronics has led the printed electronics industry in its commercialization of its patented Force-Sensing Resistor (FSR®) technology, which has enabled rugged and reliable HMI solutions. For over 30 years, Interlink Electronics' solutions have focused on handheld user input, menu navigation, cursor control, and other intuitive interface technologies for the world's top electronics manufacturers. Interlink Electronics has a proven track record of supplying HMI solutions for mission-critical applications in a wide range of markets, including, but not limited to, consumer electronics, automotive, industrial, and medical devices. Interlink Electronics serves a world-class customer-base from its our corporate headquarters in Camarillo, California (greater Los Angeles area), our global research and development center in Singapore, our printed-electronics manufacturing facility in Shenzhen, China and our global distribution and logistics center in Hong Kong. We also maintain technical and sales offices in Japan and at various locations in the United States. For more information, please see our website at www.interlinkelectronics.com.

Forward Looking Statements

This release contains forward-looking statements. Forward-looking statements include, but are not limited to, the Company's views on future financial performance and are generally identified by phrases such as "thinks," "anticipates," "believes," "estimates," "expects," "intends," "plans," and similar words. Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statement. These statements are based upon, among other things, assumptions made by, and information currently available to, management, including management's own knowledge and assessment of the Company's industry, R&D initiatives, competition and capital requirements. Other factors and uncertainties that could affect the Company's forward-looking statements include, among other things, the following: our success in predicting new markets and the acceptance of our new products; efficient management of our infrastructure; the pace of technological developments and industry standards evolution and their effect on our target product and market choices; the effect of outsourcing technology development; changes in the ordering patterns of our customers; a decrease in the quality and/or reliability of our products; protection of our proprietary intellectual property; competition by alternative sophisticated as well as generic products; continued availability of raw materials for our products at competitive prices; disruptions in our manufacturing facilities; risks of international sales and operations including fluctuations in exchange rates; compliance with regulatory requirements applicable to our manufacturing operations; and customer concentrations The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Information

A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP. Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results.

In addition to financial results presented in accordance with GAAP, this press release presents EBITDA and EBITDA margin, each of which is a non-GAAP measure. EBITDA is determined by taking net income and adding interest, income taxes, depreciation and amortization, and EBITDA margin is determined by dividing EBITDA by net revenue. Interlink believes that these non-GAAP measure, viewed in addition to and not in lieu of net income and gross margin, provide useful information to investors by providing more focused measures of operating results. These metrics are an integral part of Interlink's internal reporting to evaluate its operations and the performance of senior management. A reconciliation of EBITDA to net income, the most comparable GAAP measure, is available in the accompanying financial tables below. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies.

APPENDIX

Consolidated Financial Information and Reconciliations: Second Quarter and Six Months of 2019

INTERLINK ELECTRONICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

 

 

(in thousands, except par value)

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

5,404

 

 

$

 

6,102

 

Restricted cash

 

 

32

 

 

 

5

 

Accounts receivable, net

 

 

1,070

 

 

 

780

 

Inventories

 

 

1,251

 

 

 

1,071

 

Prepaid expenses and other current assets

 

 

218

 

 

 

303

 

Total current assets

 

 

7,975

 

 

 

8,261

 

Property, plant and equipment, net

 

 

743

 

 

 

701

 

Intangibles, net

 

 

133

 

 

 

121

 

Deferred income taxes

 

 

422

 

 

 

470

 

Other assets

 

 

59

 

 

 

59

 

Total assets

 

$

 

9,332

 

 

$

 

9,612

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

 

189

 

 

$

 

304

 

Accrued liabilities

 

 

288

 

 

 

297

 

Accrued income taxes

 

 

55

 

 

 

26

 

Total current liabilities

 

 

532

 

 

 

627

 

 

 

 

 

 

 

 

Total liabilities

 

 

532

 

 

 

627

 

 

 

 

 

 

 

 

Commitments and contingencies (see note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.01 par value: 1,000 shares authorized, no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value: 30,000 shares authorized, 6,560 and 6,483 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

7

 

 

 

7

 

Additional paid-in-capital

 

 

57,896

 

 

 

57,871

 

Accumulated other comprehensive income

 

 

(72

)

 

 

(67

)

Accumulated deficit

 

 

(49,031

)

 

 

(48,826

)

Total stockholders' equity

 

 

8,800

 

 

 

8,985

 

Total liabilities and stockholders' equity

 

$

 

9,332

 

 

$

 

9,612

 

INTERLINK ELECTRONICS, INC.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(unaudited)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands, except per share data)

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Revenue, net

 

$

2,006

 

 

$

2,683

 

 

$

3,456

 

 

$

5,256

 

Cost of revenue

 

 

953

 

 

 

1,135

 

 

 

1,703

 

 

 

2,297

 

Gross profit

 

 

1,053

 

 

 

1,548

 

 

 

1,753

 

 

 

2,959

 

Operating expenses:

 

 

 

 

 

 

 

 

Engineering, research and development

 

 

88

 

 

 

237

 

 

 

340

 

 

 

461

 

Selling, general and administrative

 

 

594

 

 

 

881

 

 

 

1,385

 

 

 

1,849

 

Total operating expenses

 

 

682

 

 

 

1,118

 

 

 

1,725

 

 

 

2,310

 

Income from operations

 

 

371

 

 

 

430

 

 

 

28

 

 

 

649

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

57

 

 

 

62

 

 

 

24

 

 

 

16

 

Income before income tax expense

 

 

428

 

 

 

492

 

 

 

52

 

 

 

665

 

Income tax expense

 

 

319

 

 

 

133

 

 

 

257

 

 

 

188

 

Net income (loss)

 

 

109

 

 

 

359

 

 

 

(205

)

 

 

477

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(55

)

 

 

(112

)

 

 

(5

)

 

 

(27

)

Comprehensive income (loss)

 

$

54

 

 

$

247

 

 

$

(210

)

 

$

450

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share, basic and diluted

 

$

0.02

 

 

$

0.05

 

 

$

(0.03

)

 

$

0.06

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

6,540

 

 

 

7,317

 

 

 

6,522

 

 

 

7,322

 

Weighted average common shares outstanding - diluted

 

 

6,581

 

 

 

7,407

 

 

 

6,563

 

 

 

7,410

 

INTERLINK ELECTRONICS, INC.

Reconciliation of Consolidated Net Income (Loss) to Consolidated EBITDA

(unaudited)

 

 

 

Three months ended

June 30,

 

Twelve months ended

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

109

 

 

$

359

 

 

$

(60

)

 

$

824

 

Adjustments to arrive at earnings before interest, income taxes, depreciation and amortization (EBITDA):

 

 

 

 

 

 

 

 

Interest expense (income), net

 

 

(11

)

 

 

 

(23

)

 

 

(3

)

Income tax expense

 

 

319

 

 

 

133

 

 

 

257

 

 

 

588

 

Depreciation and amortization expense

 

 

47

 

 

 

(1

)

 

 

230

 

 

 

173

 

EBITDA

 

$

464

 

 

$

491

 

 

$

404

 

 

$

1,582

 

 

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