Natus Medical Announces Second Quarter 2014 Financial Results

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| Source: Natus Medical Incorporated
  • Reports organic revenue growth of 5% for the quarter
  • Reports record non-GAAP EPS of $0.28
  • Increases annual revenue and non-GAAP earnings guidance

SAN CARLOS, Calif., July 23, 2014 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (Nasdaq:BABY) today announced financial results for the three months ended June 30, 2014.

For the second quarter ended June 30, 2014, the Company reported revenue of $86.3 million, an increase of 5% compared to $82.3 million reported for the second quarter of 2013. Net income was $7.7 million, or $0.24 per diluted share, compared with net income of $4.0 million, or $0.13 per diluted share in the second quarter of 2013.

The Company reported record second quarter non-GAAP earnings of $0.28 per diluted share, up 33% compared to $0.21 per diluted share reported for the second quarter of 2013.

The Company reduced total debt by $16.5 million and repurchased $1.2 million of company stock during the second quarter. Cash and cash equivalents decreased by $3.6 million to $56.0 million during the quarter.

"I am very pleased with our second quarter results as our record revenues and earnings exceeded our guidance. I am most satisfied with our 5% organic revenue growth in the quarter as reestablishing consistent organic revenue growth is a goal for Natus in 2014. Our non-GAAP operating margin increased to 13% up from 11% last year in the quarter. We continue to make progress toward our long term full year non-GAAP operating margin goal of 20%."

"Both Neurology and Newborn Care again performed well in all geographies. Our recently launched Hearing Screening Service grew rapidly during the quarter and we ended the quarter with 22 hospitals under contract. We continue to be very excited about this opportunity."

Financial Guidance

The Company provided revenue and earnings guidance for the third quarter and increased its non-GAAP EPS guidance for the full year 2014.

For the third quarter of 2014, the Company expects revenue of $86 million to $89 million and non-GAAP earnings per share of $0.28 to $0.32.

The Company updated its non-GAAP earnings guidance for the full year 2014 and now expects to report non-GAAP earnings per share of $1.20 to $1.23, an increase from previous guidance of $1.18 to $1.21. Full year 2014 revenue was increased to $347.5 million to $352.5 million compared to previous guidance of $345.0 million to $350.0 million.

The Company's non-GAAP earnings guidance excludes amortization of acquisition related intangibles, acquisition related charges, restructuring charges, 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, direct costs of acquisitions and the related tax effects. 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, July 23, 2014. Individuals interested in listening to the conference call may do so by dialing 1-866-515-2915 for domestic callers, or 1-617-399-5129 for international callers, and entering reservation code 23770449. 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 43159437.

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 our long term goal of driving non-GAAP operating margins to 20%, revenue and non‑GAAP profitability in the third quarter and full year 2014. These statements relate to estimates and assumptions regarding future events including Natus' future financial performance, 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, 2013, 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 
  June 30,
2014
June 30,
2013
June 30,
2014
June 30,
2013
         
Revenue  $ 86,325  $ 82,250  $ 171,948  $ 168,084
Cost of revenue  35,295  33,859  71,028  70,460
Gross profit  51,030  48,391  100,920  97,624
Gross profit margin 59.1% 58.8% 58.7% 58.1%
Operating expenses:        
Marketing and selling  22,028  21,848  43,451  43,969
Research and development  7,873  8,626  15,380  16,801
General and administrative  10,823  11,759  23,103  25,837
Total operating expenses  40,724  42,233  81,934  86,607
Income from operations  10,306  6,158  18,986  11,017
Other income/(expense), net  795  (523)  1,107  (856)
Income before tax  11,101  5,635  20,093  10,161
Provision for income tax expense  3,359  1,615  6,101  2,699
Net income   $ 7,742  $ 4,020  $ 13,992  $ 7,462
Earnings per share:        
Basic  $ 0.25  $ 0.14  $ 0.45  $ 0.25
Diluted  $ 0.24  $ 0.13  $ 0.43  $ 0.24
         
Weighted-average shares:        
Basic  31,424  29,666  31,244  29,685
Diluted  32,444  30,468  32,315  30,470
         
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands) 
 
  June 30, June 30,
  2014 2013
ASSETS Q2-14 Q2-13
     
Current assets:    
Cash and cash equivalents   $ 56,018  $ 28,910
Accounts receivable, net  76,910  87,557
Inventories   35,503  38,906
Other Current Assets  21,429  14,606
Total current assets   189,860  169,979
     
Property and equipment, net   21,108  25,842
Goodwill and Intangible assets  198,939  200,544
Other assets   9,806  8,445
Total assets   $ 419,713  $ 404,810
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable   $ 24,979  $ 25,811
Current debt  10,409  10,182
Accrued liabilities   23,428  24,007
Deferred revenue   11,410  11,951
Total current liabilities   70,226  71,951
     
Long-term liabilities:    
Long-term debt, net  6,000  40,381
Other long-term liabilities   13,075  13,120
Total liabilities   89,301  125,452
Total stockholders' equity   330,412  279,358
Total liabilities and stockholders' equity   $ 419,713  $ 404,810
     
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts) 
 
   Quarter Ended   Year to Date 
  June 30,
2014
June 30,
2013
June 30,
2014
June 30,
2013
GAAP based results:        
         
Income before provision for income tax   $ 11,101  $ 5,635  $ 20,093  $ 10,161
         
Non-GAAP adjustments:        
         
Amortization of acquired intangibles:        
Cost of revenue  157  791  1,202  1,565
Marketing and selling  (32)  684  757  1,335
Research and development  679  313  1,023  626
         
Intangible Asset Impairment Charges (M&S)  --  --  --  --
Restructuring charges (G&A)  218  1,040  853  653
Direct costs of acquisitions (G&A)  144  436  339  1,203
Non-GAAP income before provision for income tax  12,266  8,899  24,267  15,543
         
Income tax expense, as adjusted  3,336  2,509  7,050  4,596
         
Non-GAAP net income   $ 8,930  $ 6,390  $ 17,217  $ 10,947
Non-GAAP earnings per share:        
Basic  $ 0.28  $ 0.22  $ 0.55  $ 0.37
Diluted  $ 0.28  $ 0.21  $ 0.53  $ 0.36
         
Weighted-average shares used to compute        
Basic non-GAAP earnings per share  31,424  29,666  31,244  29,685
Diluted non-GAAP earnings per share  32,444  30,468  32,315  30,470
         
GAAP Gross profit  51,030  48,391  100,920  97,624
Amortization of intangibles  157  791  1,202  1,565
Non-GAAP Gross Profit  51,187  49,182  102,122  99,189
Non-GAAP Gross Margin 59.3% 59.8% 59.4% 59.0%
         
GAAP Operating profit  10,306  6,158  18,986  11,017
Amortization of intangibles  804  1,788  2,982  3,526
Restructuring and other charges  362  1,476  1,192  1,856
Non-GAAP Operating profit  11,471  9,422  23,160  16,399
Non-GAAP Operating margin 13.3% 11.5% 13.5% 9.8%
COMPANY CONTACT:
Natus Medical Incorporated
Jonathan A. Kennedy
Sr. Vice President and Chief Financial Officer
(650) 802-0400