Natus Medical Announces Record Third Quarter 2013 Financial Results

  • Reports non-GAAP earnings per share of $0.30
  • Reports non-GAAP gross profit margin of 61%
  • Increases Q4’13 and Full Year revenue and earnings guidance

SAN CARLOS, Calif.-- Natus Medical Incorporated (NASDAQ: BABY) today announced financial results for the three months ended September 30, 2013.

For the third quarter ended September 30, 2013, the Company reported revenue of $85.4 million, up 5% from $81.0 million in the third quarter of the previous year. Net income was $6.3 million, or $0.20 per diluted share, compared with a net loss of $1.7 million, or $0.06 per share, in the third quarter of 2012.

For the nine months ended September 30, 2013, the Company reported revenue of $253.5 million, compared to $201.5 million in the comparable period of the previous year. Net income was $13.7 million, or $0.45 per diluted share, compared with a net loss of $1.1 million, or $0.04 per share, for the nine months ended September 30, 2012.

The Company reported non-GAAP earnings per share of $0.30 per diluted share for the third quarter 2013, up 88% from the $0.16 per diluted share reported for the third quarter of 2012, and $0.65 per diluted share for the nine months ended September 30, 2013, up 91% from the $0.34 per diluted share reported for the same period in the previous year.

The Company’s cash and cash equivalents increased $15.3 million to $44.2 million during the quarter and total debt was reduced by $2.5 million.

“I am very pleased to report our third quarter results. We exceeded our revenue and earnings guidance and improved our non-GAAP gross profit margin to 61%,” said Jim Hawkins, President and Chief Executive Officer of the Company. “This was driven by stronger than expected results from both our neurology and newborn care businesses. Both our domestic and international results exceeded our expectations and we saw noticeable improvements in the European market. We also ended the quarter with a higher order backlog.”

“Our third quarter non-GAAP operating margin of 15% is very satisfying and we now expect to reach our full-year 2013 non-GAAP operating profit margin goal of 12%. These results move us closer to our long-term non-GAAP operating profit margin goal of 13% to 17%,” Hawkins added. “We have made great progress in our operating results and cash generation while building market leading franchises in both Neurodiagnostics and Newborn Care.”

Financial Guidance

The Company increased revenue and earnings guidance for the fourth quarter and full year 2013.

For the fourth quarter 2013, the Company now expects revenue of $87 million to $90 million and non-GAAP earnings per share of $0.30 to $0.32. This compares to prior revenue guidance for the fourth quarter 2013 of $84 million to $88 million and non-GAAP earnings per share of $0.22 to $0.25.

For the full year 2013 the Company now expects revenue of $340 million to $343 million and non-GAAP earnings per share of $0.95 to $0.97. This compares to prior revenue guidance for the full year 2013 of $332 million to $338 million and non-GAAP earnings per share of $0.76 to $0.82.

Included in the Company’s 2012 third and fourth quarter revenues were one time shipments of proprietary product to CareFusion. Natus agreed to manufacture this product for CareFusion through a supply agreement that was part of the purchase of Nicolet. These one-time revenues totaled $3.4 million; $1.2 million in the third quarter and $2.2 million in the fourth quarter of 2012.

The Company's non-GAAP earnings guidance excludes amortization of acquisition related intangibles, acquisition related charges, restructuring charges, and their related tax effects.

The Company’s 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, and direct costs of acquisitions. A reconciliation between non-GAAP and GAAP financial measures is included on page 6 of 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 24, 2013. Individuals interested in listening to the conference call may do so by dialing 1-877-280-4953 for domestic callers, or 1-857-244-7310 for international callers, and entering reservation code 96300493. 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 66408345.

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 used for the screening, detection, treatment, monitoring and tracking of common medical ailments in newborn care, hearing impairment, neurological dysfunction, epilepsy, sleep disorders, 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 the benefit of cost improvement initiatives, the goal of driving non-GAAP operating margins to long-term goals of 13%-17%, revenue and non-GAAP profitability in the fourth quarter and full year 2013, the impact of amortization expense associated with acquisition-related intangible assets and any expected restructuring charges. These statements relate to current estimates and assumptions of our management as of the date of this press release, and 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, the impact of adverse global economic conditions on our target markets, 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, 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, 2012, 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.

   
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
   
Quarter Ended Year to Date

Sept. 30,
2013

Sept. 30,
2012

Sept. 30,
2013

Sept. 30,
2012

 
Revenue $ 85,392 $ 81,019 $ 253,475 $ 201,459
Cost of revenue   34,058     36,456     104,518     89,237  
Gross profit   51,334     44,563     148,957     112,222  
60.1 % 55.0 % 58.8 % 55.7 %
Operating expenses:
Marketing and selling 20,337 21,805 64,305 54,693
Research and development 7,536 8,513 24,337 21,844
General and administrative   14,323     18,811     40,160     39,206  
Total operating expenses   42,195     49,129     128,802     115,743  
Income from operations 9,138 (4,566 ) 20,155 (3,521 )
Other income/(expense), net   (580 )   (218 )   (1,437 )   259  
Income before tax 8,558 (4,784 ) 18,718 (3,262 )
Provision for income tax expense   2,271     (3,037 )   4,969     (2,128 )
Net income $ 6,287   $ (1,747 ) $ 13,749   $ (1,134 )
Earnings per share:
Basic $ 0.21 $ (0.06 ) $ 0.46 $ (0.04 )
Diluted $ 0.20 $ (0.06 ) $ 0.45 $ (0.04 )
 
Weighted-average shares:
Basic 30,096 29,062 29,823 28,947
Diluted 30,791 29,822 30,576 29,584
 

       
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)
 
Quarter Ended Year to Date

Sept. 30,
2013

Sept. 30,
2012

Sept. 30,
2013

Sept. 30,
2012

GAAP based results:
 
Income before provision for income tax $ 8,558 $ (4,784 ) $ 18,718 $ (3,262 )
 
Non-GAAP adjustments:
 
Amortization of acquired intangibles:
Cost of revenue 796 703 2,361 1,763
Marketing and selling 686 564 2,021 1,493
Research and development 341 338 967 1,013
 
Restructuring charges (G&A) 1,938 7,671 2,020 8,927
Direct costs of acquisitions (G&A) - 786 1,774 2,778
Accelerate ERP system depreciation (G&A) - - - 902
Backlog FMV Adjustments (Marketing & Sales) - 720 - 720
Inventory FMV adjustment (COGS)   -     571     -     626  

Non-GAAP income before provision for income tax

12,319 6,569 27,861 14,960
 
Income tax expense, as adjusted   3,231     1,928     7,932     4,768  
 
Non-GAAP net income $ 9,088   $ 4,641   $ 19,929   $ 10,192  
Non-GAAP earnings per share:
Basic $ 0.30 $ 0.16 $ 0.67 $ 0.35
Diluted $ 0.30 $ 0.16 $ 0.65 $ 0.34
 

Weighted-average shares used to compute

Basic non-GAAP earnings per share 30,096 29,062 29,823 28,947
Diluted non-GAAP earnings per share 30,791 29,822 30,576 29,584
 
GAAP Gross profit 51,334 44,563 148,957 112,222
Amortization of intangibles 796 703 2,361 1,763
Backlog FMV adjustment   -     571     -     626  
Non-GAAP Gross Profit 52,130 45,837 151,318 114,611
Non-GAAP Gross Margin 61.0 % 56.6 % 59.7 % 56.9 %
 
GAAP Operating profit 9,138 (4,566 ) 20,155 (3,521 )
Amortization of intangibles 1,823 1,605 5,349 4,269
Restructuring and other charges   1,938     9,748     3,794     13,953  
Non-GAAP Operating profit 12,899 6,787 29,298 14,701
Non-GAAP Operating margin 15.1 % 8.4 % 11.6 % 7.3 %
 

 

NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 

September 30,

June 30,
2013 2013
ASSETS Q3-13 Q2-13
 
Current assets:
Cash and cash equivalents $ 44,192 $ 28,910
Accounts receivable, net 84,803 87,557
Inventories 39,376 38,906
Other Current Assets   14,235   14,605
Total current assets 182,607 169,978
 
Property and equipment, net 24,425 25,842
Goodwill and Intangible assets 199,699 200,544
Other assets   9,037   8,445
Total assets $ 415,767 $ 404,810
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 26,497 $ 25,811
Current debt 10,562 10,182
Accrued liabilities 25,922 24,007
Deferred revenue   12,449   11,951
Total current liabilities 75,430 71,951
 
Long-term liabilities:
Long-term debt, net 37,500 40,381
Other long-term liabilities   14,125   13,120
Total liabilities   127,055   125,452
Total stockholders’ equity   288,712   279,358
Total liabilities and stockholders’ equity $ 415,767 $ 404,810
 

Natus Medical Incorporated
Jonathan A. Kennedy, 650-802-0400
Sr. Vice President and Chief Financial Officer
InvestorRelations@Natus.com

Source: Natus Medical Incorporated