Natus Medical Announces Second Quarter 2021 Financial Results

  Q2-2021   Key Results
Revenue (millions) $116.0   • Revenue increased 37% compared to Q2 2020
• Generated $19.4 million in operating cash flow
• GAAP and Non-GAAP EPS increased by $0.36 and $0.42, respectively compared to Q2 2020
GAAP EPS $0.10  
Non-GAAP EPS $0.29  
     

PLEASANTON, Calif., Aug. 05, 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 and six months ended June 30, 2021.

For the second quarter ended June 30, 2021, the Company reported revenue of $116.0 million, an increase of 36.8% compared to $84.8 million reported for the second quarter 2020. GAAP gross margin was 57.3% during the second quarter of 2021 compared to 47.8% in the second quarter 2020. GAAP net income was $3.5 million, or $0.10 earnings per diluted share, compared with GAAP net loss of $8.9 million, or $0.26 loss per share in the second quarter 2020.

Non-GAAP gross margin was 60.1% in the second quarter 2021 compared to 51.5% reported for the second quarter of 2020. Non-GAAP earnings per diluted share was $0.29 for the second quarter 2021, compared to loss per share of $0.13 in the second quarter 2020. Non-GAAP net income was $9.9 million in the second quarter 2021 compared to net loss of $4.4 million in the second quarter 2020.

For the six months ended June 30, 2021, the Company reported revenue of $230.9 million, an increase of 18.9% compared to $194.2 million reported for the same period in 2020. GAAP gross margin was 57.6% vs. 53.2% reported for the same period in 2020. GAAP net income was $5.9 million, or $0.17 per diluted share, compared with GAAP net loss of $12.5 million, or $0.37 loss per share in the same period in 2020.

Non-GAAP earnings per diluted share was $0.45 for the first six months in 2021, compared to loss per share of $0.09 in the same period in 2020. The Company reported non-GAAP net income of $15.3 million for the six months ended June 30, 2021, compared to the prior year's non-GAAP net loss of $3.1 million. Non-GAAP gross margin was 59.9% in 2021 vs. 55.8% reported for the same period in 2020.

“We are pleased with the recovery in our overall revenues and earnings compared to the second quarter last year, which was the most challenging quarter for Natus in 2020. Total revenues increased by 37%, led by Neuro, which increased by 62% and Hearing & Balance, which increased by 34% compared to second quarter last year,” said Jonathan Kennedy, President and Chief Executive Officer of Natus.

“We remain focused on our strategy of investing to refresh our market leading products and launch new innovations, which we believe will drive our growth and future financial performance. We experienced another quarter of very healthy cash flow from operations and we ended the quarter with no debt,” Mr. Kennedy concluded.

Financial Guidance

For the third quarter 2021, the Company's revenue is expected to be between $113.0 million and $117.0 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 updated revenue is expected to be between $468.0 million and $475.0 million and non-GAAP earnings per share is expected to be between $1.13 and $1.25.

The Company began to experience supply chain delays and constraints in the second quarter of 2021. The guidance above reflects similar impacts for the third quarter, but does not factor in possible further delays or constraints.

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 $5.4 million and $19.7 million for the third quarter 2021 and full year, respectively, which the Company expects will reduce GAAP earnings per share by approximately $0.16 and $0.58 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. 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 8:00 a.m. Eastern Time (5:00 a.m. Pacific Time) tomorrow, August 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 1379298. 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 1379298. 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   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
Revenue $ 115,978       $ 84,780       $ 230,904       $ 194,163    
Cost of revenue 47,843       42,573       94,531       87,506    
Intangibles amortization 1,734       1,654       3,485       3,322    
Gross profit 66,401       40,553       132,888       103,335    
Gross profit margin 57.3   %   47.8   %   57.6   %   53.2   %
Operating expenses:                                      
Marketing and selling 29,488       22,802       58,459       53,532    
Research and development 14,249       14,336       28,289       31,905    
General and administrative 12,610       11,187       27,462       24,368    
Intangibles amortization 3,919       3,644       7,816       7,305    
Restructuring 121       621       327       1,492    
Total operating expenses 60,387       52,590       122,353       118,602    
Income (loss) from operations 6,014       (12,037 )     10,535       (15,267 )  
Interest expense (556 )     (976 )     (1,322 )     (1,693 )  
Other income (expense), net (95 )     219       (985 )     (558 )  
Income (loss) before provision for (benefit from) income tax 5,363       (12,794 )     8,228       (17,518 )  
Provision for (benefit from) income tax 1,899       (3,891 )     2,368       (5,018 )  
Net income (loss) $ 3,464       $ (8,903 )     $ 5,860       $ (12,500 )  
Net income (loss) per share:              
Basic $ 0.10       $ (0.26 )     $ 0.17       $ (0.37 )  
Diluted $ 0.10       $ (0.26 )     $ 0.17       $ (0.37 )  
Weighted-average shares:              
Basic 33,637       33,827       33,628       33,624    
Diluted 33,871       33,827       33,845       33,624    
                               


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
       
  June 30,   December 31,
  2021   2020
ASSETS      
       
Current assets:      
Cash and investments $ 62,494      $ 82,082   
Accounts receivable 92,793      93,133   
Inventories 68,350      75,650   
Other current assets 22,062      20,837   
Total current assets 245,699      271,702   
       
Property and equipment 23,552      24,516   
Operating lease right-of-use assets 10,946      11,669   
Goodwill and intangible assets 230,536      244,040   
Deferred income tax 26,349      27,563   
Other assets 19,136      20,904   
Total assets $ 556,218      $ 600,394   
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
       
Current liabilities:      
Accounts payable $ 26,892      $ 23,429   
Current portion of long-term debt —      50,000   
Accrued liabilities 45,253      44,236   
Deferred revenue 24,465      21,308   
Current portion of operating lease liabilities 5,853      6,779   
Total current liabilities 102,463      145,752   
       
Long-term debt —      5,840   
Deferred income tax 10,038      10,298   
Long-term operating lease liabilities 8,061      8,959   
Other long-term liabilities 17,829      18,451   
Total liabilities 138,391      189,300   
Total stockholders’ equity 417,827      411,094   
Total liabilities and stockholders’ equity $ 556,218      $ 600,394   
               


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
           
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
Operating activities:                              
Net income (loss) $ 3,464     $ (8,903 )   $ 5,860     $ (12,500 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Provision for losses on accounts receivable 186     426     287     948  
Depreciation and amortization 7,193     6,683     14,450     13,677  
Loss on equity method investment 129         265      
(Gain) loss on disposal of property and equipment 1     (20 )   9     22  
Warranty reserve 673     576     1,014     1,280  
Share-based compensation 2,508     2,373     5,622     4,664  
(Gain) loss on commencement of sales-type leases (3 )   800     3     1,095  
Changes in operating assets and liabilities:              
Accounts receivable (2,759 )   11,636     2,203     27,248  
Inventories 2,895     (7,751 )   7,034     (11,194 )
Prepaid expenses and other assets 3,232     (3,007 )   (796 )   (4,066 )
Accounts payable 2,311     (1,714 )   3,614     4,324  
Accrued liabilities (1,191 )   (7,014 )   (19 )   (16,343 )
Deferred revenue 712     (1,888 )   3,444     302  
Deferred income tax 42     52     1,106     155  
   Net cash provided by (used in) operating activities 19,393     (7,751 )   44,096     9,612  
Investing activities:              
Purchase of property and equipment (1,236 )   (3,352 )   (1,967 )   (6,927 )
Purchase of equity method investments (1,000 )       (1,000 )    
   Net cash used in investing activities (2,236 )   (3,352 )   (2,967 )   (6,927 )
Financing activities:              
Proceeds from stock option exercises and ESPP 612     658     612     658  
Repurchase of common stock             (10,495 )
Taxes paid related to settlement of equity awards (94 )   (43 )   (1,244 )   (1,926 )
Principal payments of financing lease liability (91 )   (109 )   (216 )   (242 )
Proceeds from long-term borrowings             60,000  
Payments on borrowings (37,000 )   (13,000 )   (57,000 )   (28,000 )
   Net cash used in financing activities (36,573 )   (12,494 )   (57,848 )   19,995  
Exchange rate changes effect on cash and cash equivalents 1,361     1,459     (2,869 )   (1,099 )
Net increase (decrease) in cash and cash equivalents (18,055 )   (22,138 )   (19,588 )   21,581  
Cash and cash equivalents, beginning of period 80,549     107,016     82,082     63,297  
Cash and cash equivalents, end of period $ 62,494     $ 84,878     $ 62,494     $ 84,878  
                               


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
               
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
GAAP based results:              
Income (loss) before provision for income tax $ 5,363      $ (12,794 )   $ 8,228      $ (17,518 )
                               
Non-GAAP adjustments:                              
Intangibles amortization (COGS) 1,734     1,654     3,485     3,322  
Restructuring and other non-recurring costs (COGS) 1,621     1,486     2,232     1,776  
COVID-19 relief (COGS)         (402 )    
Intangibles amortization (OPEX) 3,919     3,644     7,816     7,305  
Direct costs of acquisitions (OPEX)         20      
Restructuring and other non-recurring costs (OPEX) 229     590     808     1,407  
COVID-19 relief (OPEX) 55         (2,458 )    
Non-GAAP income (loss) before provision for (benefit from) income tax 12,921     (5,420 )   19,729     (3,708 )
               
Income tax expense (benefit), as adjusted $ 3,070     $ (1,009 )   $ 4,466     $ (600 )
               
Non-GAAP net income $ 9,851      $ (4,411 )   $ 15,263      $ (3,108 )
Non-GAAP earnings per share:              
Basic $ 0.29     $ (0.13 )   $ 0.45     $ (0.09 )
Diluted $ 0.29     $ (0.13 )   $ 0.45     $ (0.09 )
               
Weighted-average shares used to compute              
Basic non-GAAP earnings per share 33,637     33,827     33,628     33,624  
Diluted non-GAAP earnings per share 33,871     33,827     33,845     33,624  
               


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
               
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
GAAP Gross Profit $ 66,401       $ 40,553       $ 132,888       $ 103,335    
Amortization of intangibles 1,734       1,654       3,485       3,322    
COVID-19 relief             (402 )        
Restructuring and other non-recurring costs 1,621       1,486       2,232       1,776    
Non-GAAP Gross Profit $ 69,756       $ 43,693       $ 138,203       $ 108,433    
Non-GAAP Gross Margin 60.1    %   51.5    %   59.9    %   55.8    %
               
GAAP Operating Income (Loss) $ 6,014       $ (12,037 )     $ 10,535       $ (15,267 )  
Amortization of intangibles 5,653       5,298       11,301       10,627    
COVID-19 relief 55             (2,860 )        
Restructuring and other non-recurring costs 1,850       2,076       3,040       3,286    
Direct cost of acquisitions             20          
Non-GAAP Operating Income $ 13,572       $ (4,663 )     $ 22,036       $ (1,354 )  
Non-GAAP Operating Margin 11.7    %   (5.5 ) %   9.5    %   (0.7 ) %
               
GAAP Income Tax Expense (Benefit) $ 1,899       $ (3,891 )     $ 2,368       $ (5,018 )  
Effect of accumulated change of pretax income 1,954       2,524       2,959       4,091    
Effect of change in annual expected tax rate (244 )     358       (322 )     327    
Difference in GAAP vs Non-GAAP discrete (539 )           (539 )        
Non-GAAP Income Tax Expense (Benefit) $ 3,070       $ (1,009 )     $ 4,466       $ (600 )  
               
               
  Three Months
Ended
  Twelve Months
Ended
       
  September 30,
2021
  December 31,
2021
       
GAAP EPS Guidance $0.10 - $0.16   $0.55 - $0.67        
Amortization of intangibles 0.16
  0.64
       
Restructuring and other non-recurring costs 0.05
  0.08
       
Tax effect (0.05)   (0.14)        
Non-GAAP EPS Guidance $0.26 - $0.32   $1.13 - $1.25        


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
       
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
Neuro:              
Revenue $ 70,454     $ 43,548     $ 139,696     $ 108,899  
Cost of revenue 27,561     19,694     55,084     44,903  
Intangibles amortization 749     826     1,525     1,705  
Gross profit $ 42,144     $ 23,028     $ 83,087     $ 62,291  
Gross profit margin 59.8 %   52.9 %   59.5 %   57.2 %
               
Newborn Care:              
Revenue $ 26,347     $ 26,917     $ 52,111     $ 51,149  
Cost of revenue 10,988     13,401     21,896     23,284  
Intangibles amortization 68     64     135     127  
Gross profit $ 15,291     $ 13,452     $ 30,080     $ 27,738  
Gross profit margin 58.0 %   50.0 %   57.7 %   54.2 %
               
Hearing & Balance:              
Revenue $ 19,177     $ 14,315     $ 39,097     $ 34,115  
Cost of revenue 9,294     9,478     17,551     19,319  
Intangibles amortization 917     764     1,825     1,490  
Gross profit $ 8,966     $ 4,073     $ 19,721     $ 13,306  
Gross profit margin 46.8 %   28.5 %   50.4 %   39.0 %
               
Consolidated:              
Revenue $ 115,978     $ 84,780     $ 230,904     $ 194,163  
Cost of revenue 47,843     42,573     94,531     87,506  
Intangibles amortization 1,734     1,654     3,485     3,322  
Gross profit $ 66,401     $ 40,553     $ 132,888     $ 103,335  
Gross profit margin 57.3 %   47.8 %   57.6 %   53.2 %
               


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
               
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
Neuro:              
GAAP Gross Profit $ 42,144      $ 23,028      $ 83,087        $ 62,291   
Amortization of intangibles 749      826      1,525        1,705   
COVID-19 relief —      —      (121 )     —   
Restructuring and other non-recurring costs 1,341      414      1,637        704   
Non-GAAP Gross Profit $ 44,234      $ 24,268      $ 86,128        $ 64,700   
Non-GAAP Gross Margin 62.8  %   55.7  %   61.7    %   59.4  %
               
Newborn Care:              
GAAP Gross Profit $ 15,291      $ 13,452      $ 30,080        $ 27,738   
Amortization of intangibles 68      64      135        127   
Restructuring and other non-recurring costs 160      —      363        —   
Non-GAAP Gross Profit $ 15,519      $ 13,516      $ 30,578        $ 27,865   
Non-GAAP Gross Margin 58.9  %   50.2  %   58.7    %   54.5  %
               
Hearing & Balance:              
GAAP Gross Profit $ 8,966      $ 4,073      $ 19,721        $ 13,306   
Amortization of intangibles 917      764      1,825        1,490   
COVID-19 relief —      —      (281 )     —   
Restructuring and other non-recurring costs 120      1,072      232        1,072   
Non-GAAP Gross Profit $ 10,003      $ 5,909      $ 21,497        $ 15,868   
Non-GAAP Gross Margin 52.2  %   41.3  %   55.0    %   46.5  %
               
Consolidated:              
GAAP Gross Profit $ 66,401      $ 40,553      $ 132,888        $ 103,335   
Amortization of intangibles 1,734      1,654      3,485        3,322   
COVID-19 relief —      —      (402 )     —   
Restructuring and other non-recurring costs 1,621      1,486      2,232        1,776   
Non-GAAP Gross Profit $ 69,756      $ 43,693      $ 138,203        $ 108,433   
Non-GAAP Gross Margin 60.1  %   51.5  %   59.9    %   55.8  %


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GEOGRAPHIC REVENUE (unaudited)
(in thousands)
               
  Three Months Ended   Six Months Ended
  June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
Consolidated Revenue:              
United States $ 70,737     $ 51,175     $ 138,508     $ 119,513  
International 45,241     33,605     92,396     74,650  
Totals $ 115,978     $ 84,780     $ 230,904     $ 194,163  
               
United States 61 %   60 %   60 %   62 %
International 39 %   40 %   40 %   38 %
Totals 100 %   100 %   100 %   100 %

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Source: Natus Medical Incorporated