Natus Medical Announces Record Third Quarter 2015 Financial Results

  • Record third quarter non-GAAP earnings per share of $0.39
  • Achieves third quarter 20% non-GAAP operating margin
  • Announces $232.5 million equipment and supply contract
  • Increases revenue and earnings guidance for fiscal year 2015

PLEASANTON, Calif., Oct. 21, 2015 (GLOBE NEWSWIRE) — Natus Medical Incorporated (NASDAQ:BABY) today announced financial results for the three months ended September 30, 2015.

For the third quarter ended September 30, 2015, the Company reported revenue of $94.6 million, an increase of 5.2% compared to $89.9 million reported for the third quarter 2014. On a constant currency basis, revenue would have increased 6.7% to $95.9 million. GAAP net income was $10.9 million, or $0.33 per diluted share, compared with GAAP net income of $7.8 million, or $0.24 per diluted share in the third quarter 2014.

The Company reported non-GAAP net income of $12.9 million for the third quarter ended September 30, 2015, an increase of 21.7% over the prior year of $10.6 million. Non-GAAP earnings per diluted share increased 18.1% to $0.39 for the third quarter 2015, compared to $0.33 in the third quarter 2014.

For the nine months ended September 30, 2015, the Company reported revenue of $275.9 million, an increase of 5.4% compared to $261.8 million reported for the same period in 2014. On a constant currency basis, year-to-date revenue would have increased 7.1% to $280.5 million. GAAP net income was $29.4 million, or $0.89 per diluted share, compared with net income of $22.0 million, or $0.68 per diluted share in the third quarter of 2014.

The Company reported non-GAAP net income of $34.4 million for the nine months ended September 30, 2015, an increase of 23.7% over the prior year of $27.8 million. Non-GAAP earnings per diluted share increased 20.9% to $1.04 for the third quarter 2015 from $0.86 per diluted share reported for the same period in the previous year.

Excluding share repurchases, cash and cash equivalents increased by $15.5 million to $82.2 million during the quarter. The Company repurchased $6.5 million of its stock during the third quarter.

“I am very pleased with our third quarter results as we reported record revenues and earnings. We also exceeded both our revenue and earnings guidance. I am also pleased that we were able to deliver revenue growth of 5.2% results despite a $1.3 million negative currency effect on revenue during the quarter,” said Jim Hawkins, President and Chief Executive Officer of the Company.

“I am most satisfied that we achieved a 20% non-GAAP operating profit margin during the quarter and am now confident that we will exceed our full year non-GAAP operating margin goal of 18%. We are increasingly confident that we can achieve and potentially exceed our long term operating margin goal of 20% in 2016.” Mr. Hawkins continued. “Both our Neurodiagnostic and Newborn Care businesses performed well in the quarter led again by outstanding performance in our domestic markets. Our new service business initiatives, Peloton, GND and NicView continue to report strong results. In addition to our record performance during the quarter, we recently secured a $232.5 million, three-year agreement between our Argentina subsidiary, Medix, and the Venezuelan Ministry of Health. This agreement will provide over fifty hospitals with a broad range of obstetric and neonatal devices, supplies and services including more than $50 million of Medix and Natus equipment and supplies.” said Hawkins.

Financial Guidance

The Company provided revenue and earnings guidance for the fourth quarter and increased its revenue and earnings guidance for the full year 2015.

For the fourth quarter of 2015, the Company increased its revenue guidance to $102.0 million to $105.0 million and guided non-GAAP earnings per share of $0.47 to $0.49.

Full year 2015 earnings guidance was increased with expected non-GAAP earnings per share of $1.51 to $1.53. Full year 2015 revenue guidance also increased to $378 million to $381 million compared to previous guidance of $376 million to $378 million.

The Company’s non-GAAP earnings guidance excludes amortization of acquisition related intangibles, acquisition related charges, restructuring charges, and their related tax effects. Non-GAAP earnings guidance includes the impact of expensing employee share based compensation. All non-GAAP earnings per share amounts are on a diluted basis.

Use of Non-GAAP Financial Measures

The Company’s non-GAAP results exclude amortization expense associated with certain acquisition-related intangibles, restructuring charges, certain discreet tax items, direct costs of acquisitions and the related tax effects. A reconciliation between non-GAAP and GAAP financial measures is included in this press release.

The Company believes that the presentation of results excluding these charges provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results. Therefore, the Company believes these non-GAAP financial measures facilitate comparison of operating results across reporting periods.

The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated.

Conference Call

Natus has scheduled an investment-community conference call to discuss this announcement beginning at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today, October 21, 2015. Individuals interested in listening to the conference call may do so by dialing 1-800-510-0146 for domestic callers, or 1-617-614-3449 for international callers, and entering reservation code 80435628. A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-888-286-8010 for domestic callers, or 1-617-801-6888 for international callers, and entering reservation code 23210688.The conference call also will be available real-time via the Internet at http://investor.natus.com, and a recording of the call will be available on the Company’s Web site for 90 days following the completion of the call.

About Natus Medical Incorporated

Natus is a leading provider of healthcare products and services used for the screening, detection, treatment, monitoring and tracking of common medical ailments in neurological dysfunction, epilepsy, sleep disorders, newborn care, hearing impairment and balance and mobility disorders.

Additional information about Natus Medical can be found at www.natus.com.

Forward-Looking Statements

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, particularly statements regarding the expectations, beliefs, plans, intentions and strategies of Natus. These forward-looking statements include statements regarding our long term goals of revenue growth and improved margins, revenue and non‑GAAP profitability for the fourth quarter and full year 2015. These statements relate to estimates and assumptions regarding future events including Natus’ future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are only predictions and the actual events or results may differ materially. Natus cannot provide any assurance that its future results or the results implied by the forward-looking statements will meet expectations. Our future results could differ materially due to a number of factors, including the effects of competition, the demand for our products and services, the impact of adverse global economic conditions on our target markets, negative effects of currency exchange rates, our ability to maintain current sales levels in a mature domestic market, our ability to control costs, risks associated with bringing new products to market and integrating acquired businesses, and our ability to fulfill product orders on a timely basis. Natus disclaims any obligation to update information contained in any forward looking statement.

More information about potential risk factors that could affect the business and financial results of Natus is included in Natus’ annual report on Form 10-K for the year ended December 31, 2014 and in other reports filed from time to time by Natus with the U.S. Securities and Exchange Commission.

NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
         
  Quarter Ended Year to Date
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
Revenue $ 94,583 $ 89,876 $ 275,915 $ 261,824
Cost of revenue 35,520 33,180 104,468 102,659
Intangibles amortization 683 1,054 2,048 2,257
Gross profit 58,380 55,642 169,399 156,908
Gross profit margin 61.7% 61.9% 61.4% 59.9%
Operating expenses:        
Marketing and selling 22,495 20,123 65,345 62,814
Research and development 7,700 7,462 21,866 22,272
General and administrative 10,031 12,746 33,239 34,543
Intangibles amortization 2,036 (408) 5,165 1,374
Restructuring 42 2,848 358 3,701
Total operating expenses 42,304 42,771 125,973 124,704
Income from operations 16,076 12,871 43,426 32,204
Other income/(expense), net 7 (1,441) (1,202) (334)
Income before tax 16,083 11,430 42,224 31,870
Provision for income tax expense 5,151 3,607 12,842 9,830
Net income $ 10,932 $ 7,823 $ 29,382 $ 22,040
Earnings per share:        
Basic $ 0.34 $ 0.25 $ 0.91 $ 0.70
Diluted $ 0.33 $ 0.24 $ 0.89 $ 0.68
Weighted-average shares:        
Basic 32,432 31,584 32,279 31,358
Diluted 33,253 32,615 33,194 32,426
 
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
       
  September 30, June 30, December 31,
  2015 2015 2014
ASSETS      
       
Current assets:      
Cash and cash equivalents $ 82,201 $ 73,238 $ 66,558
Accounts receivable, net 88,905 83,341 82,277
Inventories 46,108 44,873 40,051
Other current assets 30,309 26,909 28,919
Total current assets 247,523 228,361 217,805
       
Property and equipment, net 17,976 18,351 17,923
Goodwill and intangible assets 195,588 198,785 189,077
Other assets 8,795 8,361 10,016
Total assets $ 469,882 $ 453,858 $ 434,821
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
       
Current liabilities:      
Accounts payable $ 24,199 $ 19,270 $ 21,371
Accrued liabilities 39,193 35,988 36,024
Deferred revenue 10,191 11,112 11,745
Total current liabilities 73,583 66,370 69,140
       
Long-term liabilities:      
Other long-term liabilities 15,538 13,722 12,966
Total liabilities 89,121 80,092 82,106
Total stockholders’ equity 380,761 373,766 352,715
Total liabilities and stockholders’ equity $ 469,882 $ 453,858 $ 434,821
 
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)
         
  Quarter Ended Year to Date
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
GAAP based results:        
Income before provision for income tax $ 16,083 $ 11,430 $ 42,224 $ 31,870
         
Restatement adjustment (111) (457)
         
Non-GAAP adjustments:        
Amortization of intangibles:        
Cost of revenue 683 1,055 2,048 2,256
Marketing and selling 1,709 (260) 4,131 497
Research and development 327 592 1,034 1,615
         
Restructuring charges (G&A) 42 2,847 358 3,701
Direct costs of acquisitions (G&A) 339
Non-GAAP income before provision for income tax 18,844 15,553 49,795 39,821
         
Income tax expense, as adjusted 5,898 4,946 15,418 11,995
         
Non-GAAP net income $ 12,946 $ 10,607 $ 34,377 $ 27,826
Non-GAAP earnings per share:        
Basic $ 0.40 $ 0.34 $ 1.06 $ 0.89
Diluted $ 0.39 $ 0.33 $ 1.04 $ 0.86
         
Weighted-average shares used to compute        
Basic non-GAAP earnings per share 32,432 31,584 32,279 31,358
Diluted non-GAAP earnings per share 33,253 32,615 33,194 32,426
         
GAAP Gross profit $ 58,380 $ 55,642 $ 169,399 $ 156,908
Restatement adjustment (111) (457)
Amortization of intangibles 683 1,055 2,048 2,256
Non-GAAP Gross Profit $ 59,063 $ 56,586 $ 171,447 $ 158,707
Non-GAAP Gross Margin 62.4% 63.0% 62.1% 60.6%
         
GAAP Operating profit $ 16,076 $ 12,871 $ 43,426 $ 32,204
Restatement adjustment (111) (457)
Amortization of intangibles 2,719 1,387 7,213 4,368
Restructuring and other charges 42 2,847 358 4,040
Non-GAAP Operating profit $ 18,837 $ 16,994 $ 50,997 $ 40,155
Non-GAAP Operating margin 19.9% 18.9% 18.5% 15.3%
CONTACT: Natus Medical Incorporated
         Jonathan A. Kennedy
         Sr. Vice President and Chief Financial Officer
         (925) 223-6700
         InvestorRelations@Natus.com

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