Q3-2021 Key Results
Revenue (millions)$113.9 • Revenue increased 11% compared to Q3 2020
GAAP EPS$0.16 • Generated $7.1 million in operating cash flow
Non-GAAP EPS$0.28  
    

PLEASANTON, Calif., Nov. 04, 2021 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (NASDAQ:NTUS) (the “Company” or “Natus”), a leading provider of medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages, today announced financial results for the three and nine months ended September 30, 2021.

For the third quarter ended September 30, 2021, the Company reported revenue of $113.9 million, an increase of 10.8% compared to $102.8 million reported for the third quarter of 2020. GAAP gross margin was 59.5% during the third quarter of 2021 compared to 46.2% in the third quarter of 2020. GAAP net income was $5.6 million, or $0.16 earnings per diluted share, compared with GAAP net loss of $9.3 million, or $0.28 loss per share in the third quarter of 2020.

Non-GAAP gross margin was 61.0% in the third quarter of 2021 compared to 56.2% reported for the third quarter of 2020. Non-GAAP earnings per diluted share was $0.28 for the third quarter of 2021, compared to $0.09 in the third quarter of 2020. Non-GAAP net income was $9.3 million in the third quarter of 2021 compared to $3.2 million in the third quarter of 2020.

For the nine months ended September 30, 2021, the Company reported revenue of $344.8 million, an increase of 16.1% compared to $297.0 million reported for the same period in 2020. GAAP gross margin was 58.2% vs. 50.8% reported for the same period in 2020. GAAP net income was $11.4 million, or $0.34 per diluted share, compared with GAAP net loss of $21.8 million, or $0.65 loss per share in the same period in 2020.

Non-GAAP earnings per diluted share was $0.73 for the first nine months in 2021, compared to $0.00 in the same period in 2020. The Company reported non-GAAP net income of $24.6 million for the nine months ended September 30, 2021, compared to the prior year's non-GAAP net income of $0.1 million. Non-GAAP gross margin was 60.2% in 2021 vs. 56.0% reported for the same period in 2020.

“We are encouraged by the 11% increase in revenue in the third quarter of 2021 compared to the same quarter in 2020 despite recent supply chain constraints. Demand for our products and services continued to improve throughout the quarter,” said Jonathan Kennedy, President and Chief Executive Officer of Natus.

“We saw the benefits of our investments in innovation this quarter with the release of the new Retcam Envision newborn eye imaging system in the United States, the first successfully performed clinical case using Natus’ newly launched XactTrode™ family of platinum subdural electrodes and another quarter of growing sales for our UltraPro EMG device, which was released in the fourth quarter of 2020,” Mr. Kennedy concluded.

Financial Guidance

For the fourth quarter of 2021, the Company's revenue is expected to be between $124.0 million and $128.0 million and non-GAAP earnings per share is expected to be between $0.41 and $0.46.

For the full year of 2021, the Company's updated revenue guidance is expected to be between $468.8 million and $472.8 million and non-GAAP earnings per share is expected to be between $1.13 and $1.18.

Supply chain delays and constraints have impacted our ability to ship products in the last few quarters, and as a result, we have seen backlog for certain products continue to grow. The guidance above reflects further supply chain delays anticipated in the fourth quarter of 2021.

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 effect, which the Company expects to be approximately $4.4 million and $17.3 million for the fourth quarter and full year of 2021, respectively, which the Company expects will reduce GAAP earnings per share by approximately $0.13 and $0.51 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 diluted 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 diluted share and non-GAAP operating profit: 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. 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.

Conference Call

Natus has scheduled a conference call to discuss this announcement beginning at 8:00 a.m. Eastern Time (5:00 a.m. Pacific Time) tomorrow, November 5, 2021. 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 3842689. 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 3842689. 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 website for 90 days following the completion of the call.

About Natus Medical Incorporated

Natus is a leading provider of medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

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 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 supply chain delays and constraints, the business, social and economic impact of the COVID-19 pandemic on the Company's business and results of operations, 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, 2020. 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)
        
 Three Months Ended Nine Months Ended
 September 30,
2021		 September 30,
2020		 September 30,
2021		 September 30,
2020
Revenue$113,877   $102,803   $344,782   $296,966  
Cost of revenue44,487   47,160   139,019   134,665  
Intangibles amortization1,642   8,117   5,126   11,440  
Gross profit67,748   47,526   200,637   150,861  
Gross profit margin59.5 % 46.2 % 58.2 % 50.8 %
Operating expenses:       
Marketing and selling28,260   26,035   86,719   79,567  
Research and development14,267   14,670   42,556   46,574  
General and administrative12,853   12,384   40,316   36,754  
Intangibles amortization3,681   4,025   11,497   11,330  
Restructuring142   350   469   1,842  
Total operating expenses59,203   57,464   181,557   176,067  
Income (loss) from operations8,545   (9,938)  19,080   (25,206) 
Interest expense(332)  (1,107)  (1,655)  (2,800) 
Other income (expense), net(716)  160   (1,700)  (398) 
Income (loss) before provision for (benefit from) income tax7,497   (10,885)  15,725   (28,404) 
Provision for (benefit from) income tax1,924   (1,569)  4,292   (6,588) 
Net income (loss)$5,573   $(9,316)  $11,433   $(21,816) 
Net income (loss) per share:       
Basic$0.17   $(0.28)  $0.34   $(0.65) 
Diluted$0.16   $(0.28)  $0.34   $(0.65) 
Weighted-average shares:       
Basic33,638   33,828   33,649   33,577  
Diluted33,865   33,828   33,877   33,577  


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
    
 September 30, December 31,
 2021 2020
ASSETS   
    
Current assets:   
Cash and investments$68,779  $82,082 
Accounts receivable97,370  93,133 
Inventories71,545  75,650 
Other current assets23,977  20,837 
Total current assets261,671  271,702 
    
Property and equipment22,837  24,516 
Operating lease right-of-use assets9,946  11,669 
Goodwill and intangible assets222,895  244,040 
Deferred income tax26,296  27,563 
Other assets17,606  20,904 
Total assets$561,251  $600,394 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
    
Current liabilities:   
Accounts payable$28,322  $23,429 
Current portion of long-term debt—  50,000 
Accrued liabilities44,575  44,236 
Deferred revenue25,737  21,308 
Current portion of operating lease liabilities5,167  6,779 
Total current liabilities103,801  145,752 
    
Long-term debt—  5,840 
Deferred income tax9,826  10,298 
Long-term operating lease liabilities7,370  8,959 
Other long-term liabilities17,732  18,451 
Total liabilities138,729  189,300 
Total stockholders’ equity422,522  411,094 
Total liabilities and stockholders’ equity$561,251  $600,394 


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
      
 Three Months Ended Nine Months Ended
 September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Operating activities:       
Net income (loss)$5,573  $(9,316) $11,433  $(21,816)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:               
Provision for losses on accounts receivable(14) 209  273  1,158 
Impairment of intangible assets—  6,678  —  6,678 
Depreciation and amortization6,887  7,312  21,337  20,989 
Loss on equity method investment178  —  443  — 
(Gain) loss on disposal of property and equipment(1,525) 127  (1,516) 149 
Warranty reserve509  (151) 1,523  1,129 
Share-based compensation2,649  2,395  8,271  7,059 
Loss on commencement of sales-type leases—  766  3  1,861 
Changes in operating assets and liabilities:       
Accounts receivable(2,631) 3,120  (428) 30,367 
Inventories(3,379) 4,777  3,655  (6,417)
Prepaid expenses and other assets(3,082) (7,012) (3,878) (11,078)
Accounts payable1,615  (4,343) 5,229  (19)
Accrued liabilities(803) 2,499  (822) (13,844)
Deferred revenue1,185  (1,243) 4,629  (941)
Deferred income tax(46) 1,671  1,060  1,826 
   Net cash provided by operating activities7,116  7,489  51,212  17,101 
Investing activities:       
Purchase of property and equipment(982) (690) (2,949) (7,617)
Purchase of equity method investments—  —  (1,000) — 
Proceeds from sale of property and equipment2,674  —  2,674  — 
   Net cash provided by (used in) investing activities1,692  (690) (1,275) (7,617)
Financing activities:       
Proceeds from stock option exercises and ESPP—  —  612  658 
Repurchase of common stock—  —  —  (10,495)
Taxes paid related to settlement of equity awards(10) (10) (1,254) (1,936)
Deferred debt issuance costs—  (1,175) —  (1,175)
Principal payments of financing lease liability(110) (173) (326) (415)
Proceeds from long-term borrowings—  —  —  60,000 
Payments on borrowings—  (20,000) (57,000) (48,000)
   Net cash used in financing activities(120) (21,358) (57,968) (1,363)
Exchange rate changes effect on cash and cash equivalents(2,403) 4,217  (5,272) 3,118 
Net increase (decrease) in cash and cash equivalents6,285  (10,342) (13,303) 11,239 
Cash and cash equivalents, beginning of period62,494  84,878  82,082  63,297 
Cash and cash equivalents, end of period$68,779  $74,536  $68,779  $74,536 


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
        
 Three Months Ended Nine Months Ended
 September 30, 2021 September 30,
2020		 September 30,
2021		 September 30,
2020
GAAP based results:               
Income (loss) before provision for income tax$7,497   $(10,885) $15,725   $(28,404)
                
Non-GAAP adjustments:               
Intangibles amortization (COGS)1,642   8,117   5,126   11,440  
Recall accrual and remediation efforts (COGS)—   (366) —   (366)
Restructuring and other non-recurring costs (COGS)136   2,457   2,369   4,233  
COVID-19 relief (COGS)(82) —   (484) —  
Intangibles amortization (OPEX)3,681   4,025   11,497   11,330  
Direct costs of acquisitions (OPEX)—   —   21   —  
Restructuring and other non-recurring costs (OPEX)292   353   1,101   1,760  
COVID-19 relief (OPEX)(668) —   (3,125) —  
Restructuring and other non-recurring costs (OI&E)(80) —   (80) —  
Non-GAAP income (loss) before provision for (benefit from) income tax12,418   3,701   32,150   (7)
        
Income tax expense (benefit), as adjusted$3,087   $505   $7,554   $(95)
        
Non-GAAP net income$9,331   $3,196   $24,596   $88  
Non-GAAP earnings per share:       
Basic$0.28   $0.09   $0.73   $0.00  
Diluted$0.28   $0.09   $0.73   $0.00  
        
Weighted-average shares used to compute       
Basic non-GAAP earnings per share33,638   33,828   33,649   33,577  
Diluted non-GAAP earnings per share33,865   33,841   33,877   33,637  
        


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited)
(in thousands, except per share amounts)
        
 Three Months Ended Nine Months Ended
 September 30,
2021		 September 30,
2020		 September 30,
2021		 September 30,
2020
GAAP Gross Profit$67,748   $47,526   $200,637   $150,861  
Amortization of intangibles1,642   8,117   5,126   11,440  
Recall accrual and remediation efforts—   (366)  —   (366) 
COVID-19 relief(82)  —   (484)  —  
Restructuring and other non-recurring costs136   2,457   2,369   4,233  
Non-GAAP Gross Profit$69,444   $57,734   $207,648   $166,168  
Non-GAAP Gross Margin61.0  % 56.2  % 60.2  % 56.0  %
        
GAAP Operating Income (Loss)$8,545   $(9,938)  $19,080   $(25,206) 
Amortization of intangibles5,323   12,142   16,623   22,770  
COVID-19 relief(750)  —   (3,609)  —  
Recall accrual and remediation efforts—   (366)  —   (366) 
Restructuring and other non-recurring costs428   2,810   3,470   5,993  
Direct cost of acquisitions—   —   21   —  
Non-GAAP Operating Income$13,546   $4,648   $35,585   $3,191  
Non-GAAP Operating Margin11.9  % 4.5  % 10.3  % 1.1  %
        
GAAP Income Tax Expense (Benefit)$1,924   $(1,569)  $4,292   $(6,588) 
Effect of accumulated change of pretax income1,456   2,402   4,415   6,493  
Effect of change in annual expected tax rate(293)  (328)  (614)  —  
Difference in GAAP vs Non-GAAP discrete—   —   (539)  —  
Non-GAAP Income Tax Expense (Benefit)$3,087   $505   $7,554   $(95) 
        
        
 Three Months
Ended		 Twelve Months
Ended		    
 December 31, 2021 December 31, 2021    
GAAP EPS Guidance$0.28 - $0.33 $0.62 - $0.67    
Amortization of intangibles0.16
 0.65
    
Restructuring and other non-recurring costs—
 (0.01)    
Tax effect(0.03) (0.13)    
Non-GAAP EPS Guidance$0.41 - $0.46 $1.13 - $1.18    


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
    
 Three Months Ended Nine Months Ended
 September 30,
2021		 September 30,
2020		 September 30,
2021		 September 30,
2020
Neuro:       
Revenue$70,047  $58,781  $209,743  $167,679 
Cost of revenue26,507  24,418  81,598  69,297 
Intangibles amortization750  7,163  2,274  8,869 
Gross profit$42,790  $27,200  $125,871  $89,513 
Gross profit margin61.1% 46.3% 60.0% 53.4%
        
Newborn Care:       
Revenue$24,474  $25,710  $76,586  $76,860 
Cost of revenue10,036  12,440  31,923  35,690 
Intangibles amortization—  66  135  193 
Gross profit$14,438  $13,204  $44,528  $40,977 
Gross profit margin59.0% 51.4% 58.1% 53.3%
        
Hearing & Balance:       
Revenue$19,356  $18,312  $58,453  $52,427 
Cost of revenue7,944  10,302  25,498  29,678 
Intangibles amortization892  888  2,717  2,378 
Gross profit$10,520  $7,122  $30,238  $20,371 
Gross profit margin54.4% 38.9% 51.7% 38.9%
        
Consolidated:       
Revenue$113,877  $102,803  $344,782  $296,966 
Cost of revenue44,487  47,160  139,019  134,665 
Intangibles amortization1,642  8,117  5,126  11,440 
Gross profit$67,748  $47,526  $200,637  $150,861 
Gross profit margin59.5% 46.2% 58.2% 50.8%
        


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP GROSS MARGIN BY END MARKETS (unaudited)
(in thousands)
        
 Three Months Ended Nine Months Ended
 September 30,
2021		 September 30,
2020		 September 30,
2021		 September 30,
2020
Neuro:       
GAAP Gross Profit$42,790   $27,200   $125,871   $89,513  
Amortization of intangibles750   7,163   2,274   8,869  
COVID-19 relief(27)  —   (149)  —  
Restructuring and other non-recurring costs87   1,588   1,724   2,292  
Non-GAAP Gross Profit$43,600   $35,951   $129,720   $100,674  
Non-GAAP Gross Margin62.2  % 61.2  % 61.8  % 60.0  %
        
Newborn Care:       
GAAP Gross Profit$14,438   $13,204   $44,528   $40,977  
Amortization of intangibles—   66   135   193  
Recall accrual and remediation efforts—   (366)  —   (366) 
Restructuring and other non-recurring costs—   322   363   322  
Non-GAAP Gross Profit$14,438   $13,226   $45,026   $41,126  
Non-GAAP Gross Margin59.0  % 51.4  % 58.8  % 53.5  %
        
Hearing & Balance:       
GAAP Gross Profit$10,520   $7,122   $30,238   $20,371  
Amortization of intangibles892   888   2,717   2,378  
COVID-19 relief(55)  —   (335)  —  
Restructuring and other non-recurring costs49   547   282   1,619  
Non-GAAP Gross Profit$11,406   $8,557   $32,902   $24,368  
Non-GAAP Gross Margin58.9  % 46.7  % 56.3  % 46.5  %
        
Consolidated:       
GAAP Gross Profit$67,748   $47,526   $200,637   $150,861  
Amortization of intangibles1,642   8,117   5,126   11,440  
Recall accrual and remediation efforts—   (366)  —   (366) 
COVID-19 relief(82)  —   (484)  —  
Restructuring and other non-recurring costs136   2,457   2,369   4,233  
Non-GAAP Gross Profit$69,444   $57,734   $207,648   $166,168  
Non-GAAP Gross Margin61.0  % 56.2  % 60.2  % 56.0  %


NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GEOGRAPHIC REVENUE (unaudited)
(in thousands)
        
 Three Months Ended Nine Months Ended
 September 30,
2021		 September 30,
2020		 September 30,
2021		 September 30,
2020
Consolidated Revenue:       
United States$72,114  $63,553  $210,624  $183,181 
International41,763  39,250  134,158  113,785 
Totals$113,877  $102,803  $344,782  $296,966 
        
United States63% 62% 61% 62%
International37% 38% 39% 38%
Totals100% 100% 100% 100%


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Source: Natus Medical Incorporated

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