Natus Medical Announces First Quarter 2021 Financial Results

  Q1-2021   Key Results
Revenue (millions) $114.9   • Revenue increased 5% compared to Q1 2020 and in-line with Q1 2019
GAAP EPS $0.07   • Generated $24.7 million in operating cash flow
Non-GAAP EPS $0.16   • GAAP and Non-GAAP EPS increased by $0.18 and $0.12, respectively compared to Q1 2020
       

PLEASANTON, Calif., May 06, 2021 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (NASDAQ:NTUS) (the “Company” or “Natus”), a leading provider of medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages, today announced financial results for the three months ended March 31, 2021.

For the first quarter ended March 31, 2021, the Company reported revenue of $114.9 million, an increase of 5.1% compared to $109.4 million reported for the first quarter 2020. GAAP gross margin was 57.9% during the first quarter of 2021 compared to 57.4% in the first quarter 2020. GAAP net income was $2.4 million, or $0.07 earnings per diluted share, compared with GAAP net loss of $3.6 million, or $0.11 loss per share in the first quarter 2020.

Non-GAAP gross margin was 59.6% in the first quarter 2021 compared to 59.2% reported for the first quarter of 2020. Non-GAAP earnings per diluted share was $0.16 for the first quarter 2021, compared to $0.04 in the first quarter 2020. Non-GAAP net income was $5.4 million in the first quarter 2021 compared to $1.3 million in the first quarter 2020.

“Our revenues in the first quarter of 2021 grew 5% compared to first quarter in 2020, which was impacted by the pandemic late in the quarter. Our Neuro, Newborn Care and Hearing and Balance end markets all experienced growth compared to the first quarter of 2020. Our Non-GAAP earnings per share grew significantly from the first quarter of 2020 and 100% compared to the first quarter of 2019 on similar revenues, as a result of the operating expense improvements we delivered over the last two years,” said Jonathan Kennedy, President and Chief Executive Officer of Natus.

“We are optimistic in the pace of our revenue recovery in 2021 compared to 2020. We continue to believe our efforts to reduce our cost structure and continued investments in new products will drive long term revenue growth and profitability. We see strong customer interest in our newly released Retcam® Envision and Algo® 7i newborn hearing screener and our Otoscan® digital ear scanner continues to build momentum in the market,” Mr. Kennedy concluded.

Financial Guidance

For the second quarter 2021, the Company's revenue is expected to be between $112.0 million and $116.0 million and non-GAAP earnings per share is expected to be between $0.26 and $0.32.

For the full year 2021, the Company's revenue is expected to be between $463.5 million and $473.5 million and non-GAAP earnings per share is expected to be between $1.11 and $1.26.

The Company's non-GAAP earnings per share guidance excludes charges for amortization expense associated with intangible assets from prior acquisitions, certain other expenses, and related tax effect, which the Company expects to be approximately $4.4 million and $16.0 million for the second quarter 2021 and full year, respectively, which the Company expects will reduce GAAP earnings per share by approximately $0.13 and $0.47 for the respective periods.

Use of Non-GAAP Financial Measures

The Company presents in this release its non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP gross margin and non-GAAP operating margin results which exclude amortization expense associated with certain acquisition-related intangibles, restructuring charges, certain discrete 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 or gains provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and better reflects the ongoing economics of the Company's operations. The Company believes these non-GAAP financial measures facilitate comparison of operating results across reporting periods.

Specifically, the Company excludes the following charges, gains, and their related tax effects in the calculation of non-GAAP net income, non-GAAP earnings per diluted share and non-GAAP operating profit: 1) Non-cash amortization expense associated with certain acquisition-related intangibles. The charges reflect an estimate of the cost of acquired intangible assets over their estimated useful lives. 2) Restructuring and other non-recurring charges. The Company has over time completed multiple acquisitions of other companies and businesses. Following an acquisition, the Company will, as it determines appropriate, initiate restructuring events to eliminate redundant costs. Restructuring expenses, which are excluded in the non-GAAP items, are exclusively related to permanent reductions in our workforce and redundant facility closures. Other non-recurring costs are associated with the transition of the executive management team. These costs can include stock compensation from accelerated vesting of stock, severance payouts and related payroll expenses. 3) Certain discrete items. These items represent significant infrequent charges or gains that management believes should be viewed outside of normal operating results, and each significant discrete transaction is evaluated to determine whether it should be excluded from non-GAAP reporting. These items are specifically identified when they occur. 4) Direct costs of acquisitions. These are direct acquisition-related costs that occur when the Company makes an acquisition, such as professional fees, due diligence costs, and earn-out adjustments.

The Company applies GAAP methodologies in computing its non-GAAP tax provision by determining the annual expected effective tax rate after taking into account items excluded for non-GAAP financial reporting purposes.  The Company’s non-GAAP tax expense and its non-GAAP effective tax rate are generally higher than its GAAP tax expense and GAAP effective tax rate because the income subject to taxes would be higher due to the effect of the expenses excluded from non-GAAP financial reporting. The nature of each quarterly discrete transaction will be evaluated to determine whether it should be excluded from non-GAAP reporting.

The Company's management uses these non-GAAP financial measures in assessing the Company's performance and when planning, forecasting, and analyzing future periods and the Company believes that investors also benefit from being able to refer to these non-GAAP financial measures along with the GAAP operating results. 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 a conference call to discuss this announcement beginning at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today, May 6, 2021. Individuals interested in listening to the conference call may do so by dialing 1-844-634-1441 for domestic callers, or 1-508-637-5658 for international callers, and entering reservation code 5608595. A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-855-859-2056 for domestic callers, or 1-404-537-3406 for international callers, and entering reservation code 5608595. 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 website for 90 days following the completion of the call.

About Natus Medical Incorporated

Natus is a leading provider of medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

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

Forward-Looking Statements

This press release contains forward-looking statements, which are generally statements that are not historical facts. Forward-looking statements can be identified by the words “expects”, “anticipates”, “believes”, “intends”, “estimates”, “plans”, “will”, “outlook” and similar expressions. Forward-looking statements are based on management's current plans, estimates, assumptions and projections, and speak only as of the date they are made. These statements relate to current estimates and assumptions of our management as of the date of this press release and 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. The Company's future results could differ materially due to a number of factors, including the business, social and economic impact of the COVID-19 pandemic on the Company's business and results of operations, the ability of the Company to realize the anticipated benefits from its new structure or from its consolidation strategy, effects of competition, the Company's ability to successfully integrate and achieve its profitability goals from recent acquisitions, the demand for Natus products and services, the impact of adverse global economic conditions and changing governmental regulations, including foreign exchange rate changes, on the Company's target markets, the Company's ability to expand its sales in international markets, the Company's ability to maintain current sales levels in a mature domestic market, the Company's ability to control costs, risks associated with bringing new products to market, and the Company's ability to fulfill product orders on a timely basis, as well as those factors identified under the heading Item 1A “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Natus disclaims any obligation to update information contained in any forward-looking statement, except as required by law.

Natus Medical Incorporated
Drew Davies
Executive Vice President and Chief Financial Officer
(925) 223-6700
InvestorRelations@Natus.com

NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
       
  Three Months Ended
  March 31, 2021   March 31, 2020
Revenue $ 114,927       $ 109,383    
Cost of revenue 46,688       44,933    
Intangibles amortization 1,751       1,668    
Gross profit 66,488       62,782    
Gross profit margin 57.9   %   57.4   %
Operating expenses:      
Marketing and selling 28,971       30,730    
Research and development 14,040       17,569    
General and administrative 14,855       13,182    
Intangibles amortization 3,897       3,661    
Restructuring 205       871    
Total operating expenses 61,968       66,013    
Income (loss) from operations 4,520       (3,231 )  
Interest expense (766 )     (717 )  
Other expense, net (890 )     (777 )  
Income (loss) before provision for (benefit from) income tax 2,864       (4,725 )  
Provision for (benefit from) income tax 468       (1,128 )  
Net income (loss) $ 2,396       $ (3,597 )  
Net income (loss) per share:      
Basic $ 0.07       $ (0.11 )  
Diluted $ 0.07       $ (0.11 )  
Weighted-average shares:      
Basic 33,611       33,800    
Diluted 33,782       33,800    


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
       
  March 31,   December 31,
  2021   2020
ASSETS      
       
Current assets:      
Cash and investments $ 80,549     $ 82,082  
Accounts receivable 91,326     93,133  
Inventories 69,467     75,650  
Other current assets 24,477     20,837  
Total current assets 265,819     271,702  
       
Property and equipment 23,282     24,516  
Operating lease right-of-use assets 10,776     11,669  
Goodwill and intangible assets 234,762     244,040  
Deferred income tax 26,321     27,563  
Other assets 20,408     20,904  
Total assets $ 581,368     $ 600,394  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
       
Current liabilities:      
Accounts payable $ 24,486     $ 23,429  
Current portion of long-term debt 36,523     50,000  
Accrued liabilities 45,792     44,236  
Deferred revenue 23,669     21,308  
Current portion of operating lease liabilities 6,006     6,779  
Total current liabilities 136,476     145,752  
       
Long-term debt     5,840  
Deferred income tax 9,915     10,298  
Long-term operating lease liabilities 8,181     8,959  
Other long-term liabilities 17,864     18,451  
Total liabilities 172,436     189,300  
Total stockholders’ equity 408,932     411,094  
Total liabilities and stockholders’ equity $ 581,368     $ 600,394  


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
   
  Three Months Ended
  March 31,
2021
  March 31,
2020
Operating activities:      
Net income (loss) $ 2,396       $ (3,597 )  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Provision for losses on accounts receivable 101       522    
Depreciation and amortization 7,257       6,994    
Loss on equity method investment 136          
(Gain) loss on disposal of property and equipment 8       42    
Warranty reserve 341       704    
Share-based compensation 3,114       2,291    
Loss on commencement of sales-type leases 6       295    
Changes in operating assets and liabilities:      
Accounts receivable 4,962       15,612    
Inventories 4,139       (3,443 )  
Prepaid expenses and other assets (4,028 )     (1,060 )  
Accounts payable 1,303       6,038    
Accrued liabilities 1,172       (9,329 )  
Deferred revenue 2,732       2,190    
Deferred income tax 1,064       103    
Net cash provided by operating activities 24,703       17,362    
Investing activities:      
Purchase of property and equipment (731 )     (3,575 )  
Net cash used in investing activities (731 )     (3,575 )  
Financing activities:      
Repurchase of common stock       (10,495 )  
Taxes paid related to settlement of equity awards (1,150 )     (1,883 )  
Principal payments of financing lease liability (125 )     (133 )  
Proceeds from long-term borrowings       60,000    
Payments on borrowings (20,000 )     (15,000 )  
Net cash provided by (used in) financing activities (21,275 )     32,489    
Exchange rate changes effect on cash and cash equivalents (4,230 )     (2,557 )  
Net increase (decrease) in cash and cash equivalents (1,533 )     43,719    
Cash and cash equivalents, beginning of period 82,082       63,297    
Cash and cash equivalents, end of period $ 80,549       $ 107,016    


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
       
  Three Months Ended
  March 31,
2021
  March 31,
2020
GAAP based results:      
Income (loss) before provision for income tax $ 2,864       $ (4,725 )  
       
Non-GAAP adjustments:      
Intangibles amortization (COGS) 1,751       1,668    
Restructuring and other non-recurring costs (COGS) 611       290    
COVID-19 relief (COGS) (402 )        
Intangibles amortization (OPEX) 3,897       3,661    
Direct costs of acquisitions (OPEX) 21          
Restructuring and other non-recurring costs (OPEX) 579       817    
COVID-19 relief (OPEX) (2,512 )        
Non-GAAP income (loss) before provision for (benefit from) income tax 6,809       1,711    
       
Income tax expense (benefit), as adjusted $ 1,397       $ 410    
       
Non-GAAP net income $ 5,412       $ 1,301    
Non-GAAP earnings per share:      
Basic $ 0.16       $ 0.04    
Diluted $ 0.16       $ 0.04    
       
Weighted-average shares used to compute      
Basic non-GAAP earnings per share 33,611       33,800    
Diluted non-GAAP earnings per share 33,782       33,886    
       


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
       
  Three Months Ended
  March 31, 2021   March 31, 2020
GAAP Gross Profit $ 66,488       $ 62,782    
Amortization of intangibles 1,751       1,668    
COVID-19 relief (402 )        
Restructuring and other non-recurring costs 611       290    
Non-GAAP Gross Profit $ 68,448       $ 64,740    
Non-GAAP Gross Margin 59.6   %   59.2   %
       
GAAP Operating Income (Loss) $ 4,520       $ (3,231 )  
Amortization of intangibles 5,648       5,329    
COVID-19 relief (2,914 )        
Restructuring and other non-recurring costs 1,190       1,107    
Direct cost of acquisitions 21          
Non-GAAP Operating Income $ 8,465       $ 3,205    
Non-GAAP Operating Margin 7.4   %   2.9   %
       
GAAP Income Tax Expense (Benefit) $ 468       $ (1,128 )  
Effect of accumulated change of pretax income 1,006       1,568    
Effect of change in annual expected tax rate (77 )     (30 )  
Non-GAAP Income Tax Expense (Benefit) $ 1,397       $ 410    
       
       
  Three Months Ended   Twelve Months Ended
  June 30, 2021
  December 31, 2021
GAAP EPS Guidance $0.13 - $0.19       $0.64 - $0.79    
Amortization of intangibles 0.16       0.63    
Restructuring and other non-recurring costs 0.01       (0.02)    
Tax effect (0.04)       (0.14)    
Non-GAAP EPS Guidance $0.26 - $0.32       $1.11 - $1.26    


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
   
  Three Months Ended
  March 31, 2021   March 31, 2020
Neuro:      
Revenue $ 69,055     $ 65,350  
Cost of revenue 27,508     25,249  
Intangibles amortization 776     879  
Gross profit $ 40,771     $ 39,222  
Gross profit margin 59.0 %   60.0 %
       
Newborn Care:      
Revenue $ 25,939     $ 24,232  
Cost of revenue 10,928     9,898  
Intangibles amortization 67     63  
Gross profit $ 14,944     $ 14,271  
Gross profit margin 57.6 %   58.9 %
       
Hearing & Balance:      
Revenue $ 19,933     $ 19,801  
Cost of revenue 8,252     9,786  
Intangibles amortization 908     726  
Gross profit $ 10,773     $ 9,289  
Gross profit margin 54.0 %   46.9 %
       
Consolidated:      
Revenue $ 114,927     $ 109,383  
Cost of revenue 46,688     44,933  
Intangibles amortization 1,751     1,668  
Gross profit $ 66,488     $ 62,782  
Gross profit margin 57.9 %   57.4 %
       
Note: In 2020 the cost of Field Service within cost of revenue has been restated to reflect the appropriate allocation to Hearing & Balance.


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
       
  Three Months Ended
  March 31, 2021   March 31, 2020
Neuro:      
GAAP Gross Profit $ 40,771       $ 39,222  
Amortization of intangibles 776       879  
COVID-19 relief (121 )      
Restructuring and other non-recurring costs 296        
Non-GAAP Gross Profit $ 41,722       $ 40,101  
Non-GAAP Gross Margin 60.4   %   61.4 %
       
Newborn Care:      
GAAP Gross Profit $ 14,944       $ 14,271  
Amortization of intangibles 67       63  
Restructuring and other non-recurring costs 203       290  
Non-GAAP Gross Profit $ 15,214       $ 14,624  
Non-GAAP Gross Margin 58.7   %   60.3 %
       
Hearing & Balance:      
GAAP Gross Profit $ 10,773       $ 9,289  
Amortization of intangibles 908       726  
COVID-19 relief (281 )      
Restructuring and other non-recurring costs 112        
Non-GAAP Gross Profit $ 11,512       $ 10,015  
Non-GAAP Gross Margin 57.8   %   50.6 %
       
Consolidated:      
GAAP Gross Profit $ 66,488       $ 62,782  
Amortization of intangibles 1,751       1,668  
COVID-19 relief (402 )      
Restructuring and other non-recurring costs 611       290  
Non-GAAP Gross Profit $ 68,448       $ 64,740  
Non-GAAP Gross Margin 59.6   %   59.2 %


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GEOGRAPHIC REVENUE (unaudited)
(in thousands)
       
  Three Months Ended
  March 31, 2021   March 31, 2020
Consolidated Revenue:      
United States $ 67,772     $ 68,338  
International 47,155     41,045  
Totals $ 114,927     $ 109,383  
       
United States 59 %   62 %
International 41 %   38 %
Totals 100 %   100 %


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
REVENUE AFTER EXITED PRODUCTS (unaudited)
(in millions)
               
  Three Months Ended   Twelve Months Ended
  March 31, 2021   March 31, 2020   December 31,
2020
  December 31,
2019
Revenue $ 114.9     $ 109.4     $ 415.7     $ 495.1    
Newborn care*             (4.5 )  
Neuro*             (1.2 )  
Hearing & balance*             (0.1 )  
Revenue after exited products $ 114.9     $ 109.4     $ 415.7     $ 489.3    
               
*Newborn care, Neuro, and Hearing & balance include exited businesses (GND, Neurocom, Medix) and other end of sales products.

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Source: Natus Medical Incorporated