Natus Medical Announces Record Fourth Quarter and Full Year 2015 Financial Results

  • Achieves Record Fourth Quarter non-GAAP Earnings Per Share of $0.51
  • Achieves Fourth Quarter 20.3% non-GAAP Operating Margin
  • Achieves Fourth Quarter Non-GAAP Gross Margin of 63.9%

PLEASANTON, Calif., Jan. 27, 2016 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (NASDAQ:BABY) today announced financial results for the three months and full year ended December 31, 2015.

For the fourth quarter ended December 31, 2015, the Company reported revenue of $100.0 million, an increase of 6.4% compared to $94.0 million reported for the fourth quarter 2014. On a constant currency basis, revenue would have increased 7.6% to $101.2 million. GAAP net income was $8.5 million, or $0.26 per diluted share, compared with GAAP net income of $10.4 million, or $0.32 per diluted share in the fourth quarter 2014.

The Company reported non-GAAP net income of $17.0 million for the fourth quarter ended December 31, 2015, an increase of 29.8% over the prior year of $13.1 million.  Non-GAAP earnings per diluted share increased 27.5% to $0.51 for the fourth quarter 2015, compared to $0.40 in the fourth quarter 2014.

For the twelve months ended December 31, 2015, the Company reported revenue of $375.9 million, an increase of 5.6% compared to $355.8 million reported for the same period in 2014. On a constant currency basis, year-to-date revenue would have increased 7.2% to $381.6 million. GAAP net income was $37.9 million, or $1.14 per diluted share, compared with net income of $32.5 million, or $1.00 per diluted share in the fourth quarter of 2014.

The Company reported non-GAAP net income of $51.4 million for the twelve months ended December 31, 2015, an increase of 25.7% over the prior year of $40.9 million. Non-GAAP earnings per diluted share increased 23.0% to $1.55 for the full year 2015 from $1.26 per diluted share reported for the previous year.

The Company recorded a one-time charge of approximately $5 million during the fourth quarter relating to the recall of a certain phototherapy product that was marketed and sold between 2004 and 2008. The recall is expected to be completed during the second half of 2016.

Excluding share repurchases and acquisitions, cash and cash equivalents increased by $4.9 million to $82.5 million during the quarter. The Company repurchased $2.2 million of its stock during the fourth quarter.

"2015 was truly a great year for Natus.  Fourth quarter revenues hit $100 million for the first time in our history and our annual non-GAAP earnings per share grew 23%.  Our profit margins set record levels during the quarter and the full year as we achieved non-GAAP gross margins of 63.9% for the quarter and 62.6% for the year.  Our non-GAAP operating margin was 20.3% during the quarter and 19.0% for the year, clearly exceeding our 2015 annual goal of 18%. As previously announced, the revenue shortfall in the quarter versus our guidance was due to a delay in our Venezuela order," said Jim Hawkins, President and Chief Executive Officer of the Company.

"As we enter 2016, I remain extremely optimistic about our new service initiatives: Peloton, GND and NicView.  They all have tremendous revenue and profitability growth potential over the coming years. We also expect organic growth in both our core neurology and newborn care business units giving 2016 the potential to be another exciting year at Natus," said Hawkins.

Financial Guidance

On January 11, 2016, the Company provided revenue and earnings guidance for the first quarter and the full year 2016.

For the first quarter of 2016, the Company provided revenue guidance of $96.5 million to $97.5 million and guided non-GAAP earnings per share of $0.34 to $0.35.

For the full year 2016, the Company provided revenue guidance of $445.0 million to $450.0 million and guided non-GAAP earnings per share of $1.84 to $1.88.

The revenue guidance provided by the Company on January 11, 2016 included revenue from our recently signed Venezuela supply contract of approximately $5.0 million for the first quarter of 2016 and $60.0 million revenue for the full year 2016.

The Company's non-GAAP earnings guidance excludes amortization of acquisition related intangibles, acquisition related charges, restructuring charges, product recall costs 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, January 27, 2016. Individuals interested in listening to the conference call may do so by dialing 1-888-765-3164 for domestic callers, or 1-503-406-4075 for international callers, and entering reservation code 23993319. 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 23993319. 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, risks associated with our Venezuela contract, risks associated with product recalls 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
  December 31,
2015
  December 31,
2014
  December 31,
2015
  December 31,
2014
Revenue $ 99,951     $ 94,010     $ 375,865     $ 355,834  
Cost of revenue 41,024     35,820     145,492     138,480  
Intangibles amortization 788     711     2,836     2,967  
Gross profit 58,139     57,479     227,537     214,387  
Gross profit margin 58.2 %   61.1 %   60.5 %   60.2 %
Operating expenses:              
Marketing and selling 22,330     22,915     87,675     85,729  
Research and development 8,567     7,828     30,434     30,100  
General and administrative 13,124     10,900     46,363     45,105  
Intangibles amortization 2,282     1,651     7,447     3,025  
Restructuring 1,787     541     2,145     4,581  
Total operating expenses 48,090     43,835     174,064     168,540  
Income from operations 10,049     13,644     53,473     45,847  
Other income/(expense), net 139     496     (1,063 )   161  
Income before tax 10,188     14,140     52,410     46,008  
Provision for income tax expense 1,643     3,700     14,485     13,530  
Net income $ 8,545     $ 10,440     $ 37,925     $ 32,478  
Earnings per share:              
Basic $ 0.26     $ 0.33     $ 1.17     $ 1.03  
Diluted $ 0.26     $ 0.32     $ 1.14     $ 1.00  
Weighted-average shares:              
Basic 32,358     31,916     32,348     31,499  
Diluted 33,130     32,908     33,241     32,568  
                       


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
           
  December 31,   September 30,   December 31,
  2015   2015   2014
ASSETS          
           
Current assets:          
Cash and cash equivalents $ 82,469     $ 82,201     $ 66,558  
Accounts receivable, net 99,080     88,905     82,277  
Inventories 48,572     46,108     40,052  
Other current assets 25,425     30,310     28,920  
Total current assets 255,546     247,524     217,807  
           
Property and equipment, net 16,854     17,976     17,923  
Goodwill and intangible assets 193,115     195,588     189,077  
Other assets 14,535     8,794     10,015  
Total assets $ 480,050     $ 469,882     $ 434,822  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current liabilities:          
Accounts payable $ 23,660     $ 24,199     $ 21,371  
Accrued liabilities 41,382     39,193     36,024  
Deferred revenue 11,311     10,191     11,745  
Total current liabilities 76,353     73,583     69,140  
           
Long-term liabilities:          
Other long-term liabilities 12,843     15,538     12,967  
Total liabilities 89,196     89,121     82,107  
Total stockholders’ equity 390,854     380,761     352,715  
Total liabilities and stockholders’ equity $ 480,050     $ 469,882     $ 434,822  
                       


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)
               
   Quarter Ended    Year to Date
  December 31,
2015
  December 31,
2014
  December 31,
2015
  December 31,
2014
GAAP based results:              
Income before provision for income tax $ 10,188     $ 14,140     $ 52,410     $ 46,008  
               
Restatement adjustment     457          
               
Non-GAAP adjustments:              
Intangibles Amortization - Cost of revenue 788     711     2,836     2,960  
Intangibles Amortization - Operating expense 2,282     1,053     7,447     3,187  
Intangible asset impairment - Operating expense     598         598  
Recall accrual 4,975         4,975      
Restructuring 1,787     541     2,145     4,580  
Direct costs of acquisitions (M&S) 456         456      
Direct costs of acquisitions (OI&E) 144         144      
Non-GAAP income before provision for income tax 20,620     17,500     70,413     57,333  
               
Income tax expense, as adjusted 3,587     4,398     19,005     16,393  
               
Non-GAAP net income $ 17,033     $ 13,102     $ 51,408     $ 40,940  
 Non-GAAP earnings per share:              
Basic $ 0.53     $ 0.41     $ 1.59     $ 1.30  
Diluted $ 0.51     $ 0.40     $ 1.55     $ 1.26  
               
Weighted-average shares used to compute              
Basic non-GAAP earnings per share 32,358     31,916     32,348     31,499  
Diluted non-GAAP earnings per share 33,130     32,908     33,241     32,568  
               
GAAP Gross profit 58,139     57,479     227,537     214,387  
Restatement adjustment     457          
Amortization of intangibles 788     711     2,836     2,960  
Recall accrual 4,975         4,975      
Non-GAAP Gross Profit 63,902     58,647     235,348     217,347  
Non-GAAP Gross Margin 63.9 %   62.4 %   62.6 %   61.1 %
               
GAAP Operating profit 10,049     13,644     53,473     45,847  
Restatement adjustment     457          
Amortization of intangibles 3,070     1,764     10,283     6,147  
Intangible asset impairment     598         598  
Recall accrual 4,975         4,975      
Restructuring and other costs 2,243     541     2,601     4,580  
Non-GAAP Operating profit 20,337     17,004     71,332     57,172  
Non-GAAP Operating margin 20.3 %   18.1 %   19.0 %   16.1 %
                       


Natus Medical Incorporated
Jonathan A. Kennedy
Sr. Vice President and Chief Financial Officer
(925) 223-6700
InvestorRelations@Natus.com

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