Natus Medical Incorporated (NASDAQ:BABY) today announced
financial results for the three and nine months ended September 30,
2011.
The Company reported revenue of $51.3 million for the third
quarter ended September 30, 2011, compared to revenue of $53.2
million reported in the comparable quarter of the previous year.
Embla Systems, which the company acquired on September 15, 2011,
contributed $1.3 million of revenue. Net income was $153,000 or
$0.01 per diluted share, compared to net income of $3.6 million or
$0.12 per diluted share for the third quarter of 2010.
For the nine months ended September 30, 2011, the Company
reported net income of $5.6 million, or $0.19 per diluted share,
compared to net income of $6.7 million, or $0.23 per diluted share,
for the comparable period in 2010.
The Company reported non-GAAP earnings per share of $0.07 per
diluted share for the third quarter of 2011 compared to $0.16 per
diluted share for the same period in 2010. Non-GAAP net income was
$2.1 million in the 2011 period compared to $4.8 million in the
third quarter of 2010. For the nine months ended September 30, 2011
non-GAAP net income was $9.9 million, or $0.34 per share, compared
to $12.0 million or $0.41 per share for the same period in
2010.
In commenting on the third quarter revenue results, Jim Hawkins,
Chief Executive Officer of the Company said, “The third quarter
revenue shortfall, which is consistent with the expected results we
announced on October 10th, was primarily attributable to our
neurology business where we experienced order delays in both
domestic and international markets and also a reduction in order
size in the United States. Our Medix subsidiary, with newborn care
products sold primarily in Latin America, also experienced a
shortfall that was due to delayed orders. Our other newborn care
products, including our newborn hearing screening, newborn brain
monitoring, and phototherapy product lines performed to
expectations in the third quarter.”
“In the third quarter we experienced a reduction in large
capital equipment orders over $300,000, primarily in our domestic
neurology business. Although some orders we expected were placed
during the quarter at significantly reduced order size, other
orders were not placed at all. We believe that the orders we were
working on during the third quarter have not been lost, but have
been merely delayed, and we expect that they will eventually be
placed with Natus,” added Hawkins. “We experienced similar sales
activity in late 2008 and early 2009 and then saw those delayed
orders placed in following quarters.”
“We look forward to capitalizing on the opportunity that
recently acquired Embla Systems brings to our neurology business as
we are now a leader in the growing worldwide market for diagnostic
sleep products,” added Hawkins. “We expect the Embla acquisition to
be accretive to our earnings in 2012, adding approximately $0.08 to
non-GAAP earnings per share.”
As of September 30, 2011, the Company had cash, cash
equivalents, and short-term investments of $30.8 million,
stockholders' equity of approximately $275 million, and working
capital of approximately $89 million.
Financial Guidance
Natus updated its 2011 financial guidance. For the full year
2011, the Company expects to report revenue of approximately $234
million and non-GAAP earnings per share of approximately $0.48.
For the fourth quarter 2011, the Company expects to report
revenue of approximately $65 million and non-GAAP earnings per
share of approximately $0.15. This compares to revenue of $63.2
million and non-GAAP earnings per share of $0.24 reported in the
fourth quarter of 2010.
The Company's fourth quarter and full year 2011 non-GAAP
earnings per share guidance excludes amortization expense
associated with acquisition-related intangible assets, which the
Company expects to be approximately $5.2 million and $1.3 million
for the full year and fourth quarter 2011, respectively, and which
the Company expects will reduce GAAP earnings per share by
approximately $0.11 and $0.03 for the full year and quarter,
respectively. The non-GAAP earnings per share guidance for those
periods also excludes the effects of restructuring charges that the
Company expects it may incur in the fourth quarter of 2011, the
amount and timing of which have not yet been determined, as well as
the impact any future acquisitions might have on its results of
operations.
The Company's non-GAAP 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 for the three and nine months
ended September 30, 2011 exclude amortization expense associated
with certain acquisition-related intangible assets, restructuring
charges associated primarily with employee severance costs, and
directs costs of the Embla acquisition, and its fourth quarter and
full year guidance exclude such amortization expenses,
restructuring charges, and acquisition costs, and the impact of any
future acquisitions.
The Company believes that the presentation of historical results
and guidance excluding these items 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. A reconciliation
between the Company's historical results of operations on a GAAP
and non-GAAP basis for the periods reported is included as part of
the condensed consolidated statements of operations at the end of
this release.
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, October 27, 2011. Individuals
interested in listening to the conference call may do so by dialing
866-277-1182 for domestic callers, or 1-617-597-5359 for
international callers, and entering reservation code 23189279. A
telephone replay will be available for 48 hours following the
conclusion of the call by dialing 888-286-8010 for domestic
callers, or 1-617-801-6888 for international callers, and entering
reservation code 85016916.
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. Product offerings include computerized neurodiagnostic
systems for audiology, neurology, polysomnography, and neonatology,
as well as newborn care products such as hearing screening systems,
phototherapy devices for the treatment of newborn jaundice,
head-cooling products for the treatment of brain injury in
newborns, incubators to control the newborn's environment, and
software systems for managing and tracking disorders and diseases
for public health laboratories.
Additional information about Natus Medical can be found at
www.natus.com.
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 revenue and non-GAAP
profitability in the fourth quarter and full year 2011 and the
accretive contribution to earnings per share of Embla Systems.
These statements relate to current estimates and assumptions of our
management as of the date of this press release, and future events
or Natus' future financial performance or results, 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, 2010,
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) Three Months Ended Nine
Months Ended September September September September 2011 2010 2011
2010
Revenue $ 51,338 $ 53,179 $ 168,541 $ 155,485 Cost of
revenue 23,765 21,757 73,165
62,700
Gross profit 27,573 31,422
95,376 92,785
Operating expenses: Marketing and selling 14,688 12,817 44,818
40,334 Research and development 6,120 4,820 18,577 15,188 General
and administrative 7,809 8,074
24,828 26,875
Total operating expenses 28,617 25,711
88,223 82,397
Income (loss) from operations (1,044 ) 5,711
7,153 10,388
Other income/(expense): Interest income 6 34 23 30 Interest expense
(47 ) (13 ) (160 ) (49 ) Other income, net 227
(197 ) 109 28
Total other income/(expense) 186 (176 )
(28 ) 9
Income (loss)before provision for income tax (858 ) 5,535 7,125
10,397 Provision for income tax (benefit) expense
(1,011 ) 1,898 1,507 3,727
Net income $ 153 $ 3,637 $ 5,618 $ 6,670
Earnings per share: Basic $ 0.01 $ 0.13 $ 0.20 $ 0.24 Diluted $
0.01 $ 0.12 $ 0.19 $ 0.23 Weighted-average shares used to
compute Basic earnings (loss) per share 28,643 28,212 28,477 28,021
Diluted earnings (loss) per share 29,387 29,261 29,566 29,170
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES RECONCILIATION
OF NON-GAAP ADJUSTMENTS (UNAUDITED) (in thousands, except per share
amounts) Three Months Ended Nine
Months Ended September September September September 2011 2010 2011
2010
GAAP based results: Income (loss) before provision for
income tax (benefit) $ (858 ) $ 5,535 $ 7,125 $ 10,397
Non-GAAP adjustments:
Amortization expense associated with
certain acquired intangible assets reported as a component of:
(a) Cost of revenue 530 510 1,592 1,530 Marketing and
selling 393 329 1,218 989 Research and development 250 370 990
1,111
Restructuring charge reported as a
component of general and administrative expense
1,363 2,156 3,107 (b) Direct costs of acquisitions 290 179
290 179 (c)
Costs associated with the discontinuance
of the Sonamed Clarity hearing screener reported as a component
of:
(d) Cost of revenue 323 1,081 Marketing and selling 300
Non-GAAP income before provision for
income tax
1,968 7,246 13,371 18,694 Provision for income tax (benefit)
expense, as adjusted (128 ) 2,475 3,450
6,668
Non-GAAP net income $ 2,096 $ 4,771 $ 9,921
$ 12,026
Non-GAAP earnings per share: Basic $ 0.07 $ 0.17 $ 0.35 $ 0.43
Diluted $ 0.07 $ 0.16 $ 0.34 $ 0.41
Weighted-average shares used to
compute
Basic non-GAAP earnings per share 28,643 28,212 28,477 28,021
Diluted non-GAAP earnings per share 29,387 29,261 29,566 29,170
Memo, Gross profit percentage: GAAP basis 53.7 % 59.1 % 56.6
% 59.7 % non-GAAP basis 54.7 % 60.7 % 57.5 % 61.4 %
Note:The Company has elected to provide
non-GAAP financial results that exclude the items below as this
presentation is common among companies that are active acquirors
and whose results are, accordingly, affected by such charges,
because this information is used by management to evaluate
operating results and because it believes this information will
assist investors in making period to period comparisons of the
Company's operating results.
(a) Amortization expense associated with acquired intangible
assets with definite lives.
(b) Restructuring charge including
accruals for severance benefits and exit and disposal costs.
(c) Direct costs of acquisitions that are expensed pursuant
to the requirement of ASC 805.
(d) Charge associated with discontinuance
of the Sonamed Clarity newborn hearing screener. Costs include
concessions given to customers purchasing a replacement hearing
screener, write-down of inventory, and write-off of tradenames.
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