Natus Medical Announces First Quarter Financial Results
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Reports record first quarter revenue of $128.6 million
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Reports
first quarter GAAP loss per share of $0.10 and non-GAAP earnings per share of $0.24
PLEASANTON, Calif. (April 25, 2018) - Natus Medical Incorporated (NASDAQ: BABY) today announced financial results for the three months and full year ended March 31, 2018.
For the first quarter ended March 31, 2018, the
Company reported revenue of $128.6 million, an increase of 3.1% compared to $124.7 million reported for the first quarter 2017. Revenue for the first quarter of 2017 included $9.0 million from our contract with the government of Venezuela which did not reoccur in 2018. GAAP gross profit margin was 55.7% vs. 53.5% in the first quarter 2017. GAAP net loss was $3.1 million, or $0.10
per share, compared with GAAP net income of $0.3 million, or $0.01 per diluted share in the first quarter 2017.
Non-GAAP earnings per diluted share was $0.24 for the first quarter 2018, compared to $0.30 in the first quarter 2017. Non-GAAP net income was $8.0 million for the first quarter 2018
compared to the prior year's first quarter non-GAAP net income of $9.8 million. Non-GAAP gross profit margin was 59.0% vs. 57.8% reported for the first quarter of 2017.
The Company repurchased $4.7 million of its stock and repaid $25.0 million of outstanding debt during the first quarter of 2018.
“I am very pleased with our first quarter
revenue and non-GAAP earnings per share that came in at the high end of our guidance. We achieved organic revenue growth of 3% during the quarter, driven by revenue strength in our Otometrics business. Our Neuro and Newborn Care business units reported solid revenue and profitability during the quarter as well,” said Jim Hawkins, President and Chief Executive Officer of Natus.
“As planned, we invested during the first quarter in Otoscan®, our breakthrough 3D digital ear scanning solution. Otoscan® was introduced last week at the American Academy of Audiology, the world's largest gathering of audiologists. We will continue this investment throughout 2018 and anticipate Otoscan® revenues in the second half of the year,” Hawkins continued.
Financial Guidance
For
the second quarter of 2018, the Company provided revenue guidance of $129.0 million to $131.0 million and non-GAAP earnings per share guidance of $0.25 to $0.27.
For the full year 2018, the Company retained revenue guidance of $535.0 million to $540.0 million and non-GAAP earnings per share to $1.60 to $1.65.
The Company's non-GAAP earnings per share guidance excludes charges for amortization expense associated with intangible assets from prior acquisitions, certain other expenses, and related tax effects, which the
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Company
expects to be approximately $8.4 million and $38.1 million for the second quarter 2018 and full year, respectively, and which the Company expects will reduce GAAP earnings per share by approximately $0.21 and $0.92 for the respective periods.
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 and excludes all but restructuring charges from the calculation of non-GAAP gross margin: 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 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. 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.
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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, April 25, 2018. Individuals interested in listening to the conference call may do so by dialing 1-844-634-1441 for domestic callers, or 1-508-637-5658 for international callers, and entering reservation code 3261649. 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 3261649. 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 newborn care, hearing impairment, neurological dysfunction, neurosurgery, 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 Otoscan® revenues in the second half of 2018 and our investment in the Otoscan® product, the anticipated revenue and GAAP and non-GAAP earnings per share for the second quarter and full year 2018 and the impact of amortization expense associated with acquisition-related intangible assets. 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. Our future results could differ materially due to a number of factors, including the effects of competition, our ability to successfully integrate and achieve our profitability goals from recent acquisitions, the demand for our products and services, the impact of adverse global economic conditions and changing governmental regulations, including foreign exchange rate changes, 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 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, 2017, and its subsequent 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
Jonathan A. Kennedy
Executive Vice President and Chief Financial Officer