- GAAP loss per share changed to $0.89 from $0.74
- No change to non-GAAP earnings per share
PLEASANTON, Calif., May 06, 2019 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (NASDAQ: BABY) (the “Company” or “Natus”), a leading provider of medical devices and services, today announced an update to its previously announced financial results for the three months ended March 31, 2019. After the release of its financial results on April 25th, the Company identified non-cash currency translation adjustments and related tax effects that should have been accounted for in connection with the impairment charge for the divestiture of Medix. The additional impairment was identified through the Company's internal reconciliation process and resulted in an additional non-cash restructuring charge of $5.2 million, net of tax, related to deferred currency translation adjustments, for the three months ended March 31, 2019, resulting in a net loss of $30.0 million for the quarter (compared to $24.8 million previously reported) or $0.89 per share (compared to $0.74 per share previously reported). There was no impact to non-GAAP net income for the quarter. The financial statements within today's press release include the impact of this update, which will also be reflected in our Form 10-Q for the first quarter ending March 31, 2019. The Company also reclassified the assets and liabilities of Medix to held for sale on the balance sheet, which did not impact earnings per share.
Use of Non-GAAP Financial Measures
The Company presents in this release its non-GAAP net income, non-GAAP earnings per 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 share and non-GAAP operating expense: 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. Other non-recurring costs are associated with the transition of the executive management team. These costs can include stock compensation from accelerated vesting of stock, severance payouts and related payroll expenses. 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.
About Natus Medical Incorporated
Natus is a leading provider of neurology, newborn care, and hearing and balance assessment healthcare products and services used for the screening, treatment and monitoring of common medical conditions in newborn care, hearing, balance impairment, neurological dysfunction, and sleep disorders.
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 forward-looking statements include, without limitation, statements regarding creating a more efficient operating model, creating a stronger and more profitable company, enhancing focus on operational excellence, positioning the company for growth and driving long-term value for stakeholders. 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 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, 2018. 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) | |||||||
| Quarter Ended | |||||||
| March 31, 2019 | March 31, 2018 | ||||||
| Revenue | $ | 114,757 | $ | 128,609 | |||
| Cost of revenue | 46,370 | 55,369 | |||||
| Intangibles amortization | 1,756 | 1,587 | |||||
| Gross profit | 66,631 | 71,653 | |||||
| Gross profit margin | 58.1 | % | 55.7 | % | |||
| Operating expenses: | |||||||
| Marketing and selling | 33,729 | 35,872 | |||||
| Research and development | 13,058 | 15,443 | |||||
| General and administrative | 16,305 | 17,448 | |||||
| Intangibles amortization | 3,786 | 4,806 | |||||
| Restructuring | 37,372 | 812 | |||||
| Total operating expenses | 104,250 | 74,381 | |||||
| Income (loss) from operations | (37,619 | ) | (2,728 | ) | |||
| Interest expense | (1,506 | ) | (1,949 | ) | |||
| Other income (expense) | (606 | ) | 128 | ||||
| Income (loss) before tax | (39,731 | ) | (4,549 | ) | |||
| Provision for income tax expense (benefit) | (9,730 | ) | (1,401 | ) | |||
| Net loss | $ | (30,001 | ) | $ | (3,148 | ) | |
| Loss per share: | |||||||
| Basic | $ | (0.89 | ) | $ | (0.10 | ) | |
| Diluted | $ | (0.89 | ) | $ | (0.10 | ) | |
| Weighted-average shares: | |||||||
| Basic | 33,590 | 32,760 | |||||
| Diluted | 33,590 | 32,760 | |||||
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
| (in thousands) | |||||||
| March 31, | December 31, | ||||||
| 2019 | 2018 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and investments | $ | 53,423 | $ | 56,373 | |||
| Accounts receivable | 110,900 | 127,041 | |||||
| Inventories | 82,866 | 79,736 | |||||
| Other current assets | 26,793 | 22,625 | |||||
| Total current assets | 273,982 | 285,775 | |||||
| Property and equipment | 26,280 | 22,913 | |||||
| Current portion of operating lease right-of-use assets | 18,982 | — | |||||
| Goodwill and intangible assets | 279,595 | 287,097 | |||||
| Deferred income tax | 19,165 | 22,639 | |||||
| Other assets | 20,559 | 19,716 | |||||
| Total assets | $ | 638,563 | $ | 638,140 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 25,103 | $ | 28,805 | |||
| Short-term debt | 35,000 | 35,000 | |||||
| Accrued liabilities | 51,157 | 52,568 | |||||
| Deferred revenue | 19,017 | 17,073 | |||||
| Current portion of operating lease liabilities | 6,251 | — | |||||
| Liabilities and accrued impairment held for sale | 24,786 | — | |||||
| Total current liabilities | 161,314 | 133,446 | |||||
| Long-term liabilities: | |||||||
| Long-term debt | 64,522 | 69,474 | |||||
| Deferred income tax | 8,467 | 16,931 | |||||
| Operating lease liabilities | 15,234 | — | |||||
| Other long-term liabilities | 21,325 | 19,845 | |||||
| Total liabilities | 270,862 | 239,696 | |||||
| Total stockholders’ equity | 367,701 | 398,444 | |||||
| Total liabilities and stockholders’ equity | $ | 638,563 | $ | 638,140 | |||
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||||
| (in thousands) | |||||||
| Quarter Ended | |||||||
| March 31, 2019 | March 31, 2018 | ||||||
| Operating activities: | |||||||
| Net loss | $ | (30,001 | ) | $ | (3,148 | ) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
| Provision for losses on accounts receivable | 600 | 918 | |||||
| Depreciation and amortization | 7,711 | 7,915 | |||||
| (Gain) loss on disposal of property and equipment | 179 | 52 | |||||
| Warranty reserve | 354 | (1,125 | ) | ||||
| Share-based compensation | 2,554 | 2,362 | |||||
| Impairment charge on held for sale entity | 24,571 | — | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 15,555 | (2,242 | ) | ||||
| Inventories | (4,616 | ) | 2,885 | ||||
| Prepaid expenses and other assets | (7,703 | ) | (5,390 | ) | |||
| Accounts payable | (3,436 | ) | (622 | ) | |||
| Accrued liabilities | (1,319 | ) | 3,319 | ||||
| Deferred revenue | 1,982 | 1,314 | |||||
| Deferred income tax | 62 | 87 | |||||
| Net cash provided by (used in) operating activities | 6,493 | 6,325 | |||||
| Investing activities: | |||||||
| Purchases of property and equipment | (2,461 | ) | (2,473 | ) | |||
| Net cash used in investing activities | (2,461 | ) | (2,473 | ) | |||
| Financing activities: | |||||||
| Proceeds from stock option exercises and ESPP | 268 | 577 | |||||
| Repurchase of common stock | — | (4,736 | ) | ||||
| Taxes paid related to settlement of equity awards | (1,567 | ) | (19 | ) | |||
| Principal payments of financing lease liability | (165 | ) | — | ||||
| Contingent consideration earn-out | — | (147 | ) | ||||
| Payments on borrowings | (5,000 | ) | (25,000 | ) | |||
| Net cash used in financing activities | (6,464 | ) | (29,325 | ) | |||
| Exchange rate changes effect on cash and cash equivalents | (518 | ) | 994 | ||||
| Net decrease in cash and cash equivalents | (2,950 | ) | (24,479 | ) | |||
| Cash and cash equivalents, beginning of period | 56,373 | 88,950 | |||||
| Cash and cash equivalents, end of period | $ | 53,423 | $ | 64,471 | |||
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||
| RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited) | |||||||
| (in thousands, except per share amounts) | |||||||
| Quarter Ended | |||||||
| March 31, 2019 | March 31, 2018 | ||||||
| GAAP based results: | |||||||
| Loss before provision for income tax | $ | (39,731 | ) | $ | (4,549 | ) | |
| Non-GAAP adjustments: | |||||||
| Intangibles amortization (COGS) | 1,756 | 1,587 | |||||
| Recall accrual and remediation efforts (COGS) | (255 | ) | 268 | ||||
| Restructuring and other non-recurring costs (COGS) | 251 | — | |||||
| Direct costs of acquisitions (COGS) | 83 | 2,408 | |||||
| Intangibles amortization (OPEX) | 3,786 | 4,806 | |||||
| Direct costs of acquisitions (M&S) | 17 | 22 | |||||
| Recall accrual and remediation efforts (R&D) | — | 1,846 | |||||
| Direct costs of acquisitions (R&D) | 46 | 46 | |||||
| Restructuring and other non-recurring costs (OPEX) | 37,664 | 967 | |||||
| Direct costs of acquisitions (G&A) | 45 | 2,391 | |||||
| Restructuring and other non-recurring costs (OI&E) | — | 368 | |||||
| Litigation (OPEX) | 687 | 242 | |||||
| Non-GAAP income before provision for income tax | 4,349 | 10,402 | |||||
| Income tax expense, as adjusted | $ | 1,241 | $ | 2,375 | |||
| Non-GAAP net income | $ | 3,108 | $ | 8,027 | |||
| Non-GAAP earnings per share: | |||||||
| Basic | $ | 0.09 | $ | 0.25 | |||
| Diluted | $ | 0.09 | $ | 0.24 | |||
| Weighted-average shares used to compute | |||||||
| Basic non-GAAP earnings per share | 33,590 | 32,760 | |||||
| Diluted non-GAAP earnings per share | 33,709 | 33,149 | |||||
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | ||||||||||
| RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited) | ||||||||||
| (in thousands, except per share amounts) | ||||||||||
| Quarter Ended | ||||||||||
| March 31, 2019 | March 31, 2018 | |||||||||
| GAAP Gross Profit | $ | 66,631 | $ | 71,653 | ||||||
| Amortization of intangibles | 1,756 | 1,587 | ||||||||
| Direct cost of acquisitions | 83 | 2,408 | ||||||||
| Recall accrual and remediation efforts | (255 | ) | 268 | |||||||
| Restructuring and other non-recurring costs | 251 | — | ||||||||
| Non-GAAP Gross Profit | $ | 68,466 | $ | 75,916 | ||||||
| Non-GAAP Gross Margin | 59.7 | % | 59.0 | % | ||||||
| GAAP Operating Loss | $ | (37,619 | ) | $ | (2,728 | ) | ||||
| Amortization of intangibles | 5,542 | 6,393 | ||||||||
| Recall accrual and remediation efforts | (255 | ) | 2,114 | |||||||
| Litigation | 687 | 242 | ||||||||
| Restructuring and other non-recurring costs | 37,915 | 967 | ||||||||
| Direct cost of acquisitions | 191 | 4,867 | ||||||||
| Non-GAAP Operating Profit | $ | 6,461 | $ | 11,855 | ||||||
| Non-GAAP Operating Margin | 5.6 | % | 9.2 | % | ||||||
| GAAP Income tax benefit | $ | (9,730 | ) | $ | (1,401 | ) | ||||
| Effect of accumulated change of pretax income | 3,044 | 3,721 | ||||||||
| Effect of change in annual expected tax rate | (102 | ) | (53 | ) | ||||||
| Repatriation tax adjustment | (177 | ) | 188 | |||||||
| Stock-based compensation adjustment | — | (80 | ) | |||||||
| Restructuring expenses | 8,206 | — | ||||||||
| Non-GAAP Income tax expense | $ | 1,241 | $ | 2,375 | ||||||
| Quarter Ended | Year Ended | |||||||||
| June 30, 2019 | December 31, 2019 | |||||||||
| GAAP EPS Guidance | $0.10 -$0.17 | ($0.25) - $0.02 | ||||||||
| Amortization of Intangibles | 0.18 | 0.68 | ||||||||
| Restructuring and other non-recurring costs | 0.01 | 1.16 | ||||||||
| Litigation | — | 0.02 | ||||||||
| Direct cost of acquisitions | 0.01 | 0.01 | ||||||||
| Tax effect | (0.05) | (0.45) | ||||||||
| Non-GAAP EPS Guidance | $0.25 - $0.32 | $1.17 - $1.44 | ||||||||