Natus Medical Issues 2007 Guidance

SAN CARLOS, Calif.--

Natus Medical Incorporated (Nasdaq:BABY) today issued 2007 revenue and earnings guidance.

Full Year 2007 Guidance

For the full year 2007, the Company expects revenue to range from $114 million to $116 million and earnings per share to range from $0.47 to $0.51. The guidance is based on an effective tax rate for book purposes of approximately 45%. While the Company is currently evaluating measures to lower its effective tax rate for book purposes, Natus believes it is premature to incorporate any effect of these measures into its 2007 guidance. Because the Company will utilize tax net operating loss carryforwards to significantly reduce its taxable income in 2007, it expects that it will pay taxes at a rate of only 12% to 15% for the year.

2007 Quarterly Guidance

For the first quarter 2007, the Company expects revenue to range from $25.5 million to $26.0 million and earnings per share to range from $0.07 to $0.08. This compares to revenue of $19.4 million and a loss per share of ($0.25) reported in the first quarter 2006. Results for the 2006 period included the impact of a $5.9 million charge for in-process research and development associated with the acquisition of Bio-logic. On a non-GAAP basis, excluding the IPR&D charge, the Company reported earnings per share of $0.06.

For the second quarter 2007, the Company expects revenue to range from $27.5 million to $28.0 million and earnings per share to range from $0.10 to $0.11. This compares to revenue of $20.0 million and earnings per share of $0.07 reported in the second quarter 2006.

The Company's 2007 guidance is on a GAAP basis, including the impact of expensing employee equity-based compensation, however it excludes the impact of any one-time acquisition or restructuring related charges. All earnings per share amounts are on a diluted basis.


Jim Hawkins, President and Chief Executive Officer of Natus, commented, "We are very pleased to have recently received premarket approval from the Food and Drug Administration to market the Olympic Cool-Cap(R), a Class III medical device. Because this product, and its head cooling therapy, is so new, we lack visibility about the speed with which it may be adopted as a standard of care. Consequently, we have been very conservative in our estimates for its contribution in 2007."

Mr. Hawkins will make a presentation at the Needham & Company, LLC Ninth Annual Growth Conference today at 10:30 a.m. Eastern Time (7:30 a.m. PST). Investors may listen to the live webcast and view a copy of the slide presentation online via the "Investors" section of the Company's web site at The recorded webcast will be accessible online for at least 30 days.

Use of Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with GAAP, this release contains a non-GAAP financial measure for the three-month period ended March 31, 2006 that excludes a charge for in-process research and development associated with the January 5, 2006 acquisition of Bio-logic Systems Corp. The Company believes that the presentation of results excluding the acquisition-related charge provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results. The Company believes the in-process research and development charge is not indicative of resources devoted to ongoing research and development efforts. Therefore, the Company believes the non-GAAP financial measure facilitates comparison of operating results across reporting periods. A reconciliation between the Company's results of operations on a GAAP and non-GAAP basis for the period reported is included in this release.

The Company believes that both management and investors benefit from referring to this non-GAAP financial measure in assessing the Company's performance and when planning, forecasting, and analyzing future periods. The non-GAAP financial measure also facilitates management's internal comparisons to the Company's historical performance. The non-GAAP financial measure 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.

About Natus Medical Incorporated

Natus is a leading provider of healthcare products used for the screening, detection, treatment, monitoring and tracking of common medical ailments such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders, newborn jaundice and newborn metabolic testing.

Additional information about Natus Medical can be found at

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, but are not limited to, statements regarding revenue, earnings per share, and tax rates for 2007. These statements relate to future events or Natus' future financial performance or results, 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. Our future results could differ materially due to a number of factors, including the effects of competition, the demand for our products and services, our ability to expand our sales in international markets, our ability to maintain current sales levels in a mature domestic market, our ability to control costs, and risks associated with bringing new products to market and integrating acquired businesses. 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, 2005, and its quarterly reports on Form 10-Q, and in other reports filed from time to time by Natus with the U.S. Securities and Exchange Commission.

               (in thousands, except per share amounts)

                                                   Three Months Ended
                                                     March 31, 2006

GAAP net (loss) as reported                             $ (4,679)

(Loss) per share
   Basic                                                $  (0.25)
   Diluted                                              $  (0.25)

Weighted-average shares used to compute
  basic and diluted loss per share                        18,485

non-GAAP adjustments:
      Acquired in-process research and development
       (see note below)                             (a)    5,900

      Non-GAAP net income                               $  1,221

non-GAAP earnings per share
   Basic                                                $   0.07
   Diluted                                              $   0.06

Weighted-average shares used to compute
  Non-GAAP basic earnings per share                       18,485
  Non-GAAP diluted earnings per share                     20,267

(a) A charge of $5.9 million for acquired in-
 process research and development expense related
 to the acquisition of Bio-logic Systems Corp. on
 January 5, 2006. Management believes that
 excluding this charge facilitates comparisons to
 Natus' core operating results during periods when
 there were no acquisitions.

Source: Natus Medical Incorporated