NTUS - Natus Medical Announces Third Quarter 2020 Financial Results
| Q3-2020 |
| Key Results |
| Revenue (millions) |
| $ |
| 102.8 |
|
| GAAP loss per share |
| $ |
| 0.28 |
| Non-GAAP EPS |
| $ |
| 0.09 |
PLEASANTON, Calif., Oct. 29, 2020 (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, 2020.
For the third quarter ended September 30, 2020, the Company reported revenue of $102.8 million, a decline of 16.8% compared to $123.5 million reported for the third quarter 2019. GAAP gross margin was 46.2% during the third quarter of 2020 compared to 59.4% in the third quarter 2019. GAAP net loss was $9.3 million, or $0.28 loss per share, compared with GAAP net income of $8.2 million, or $0.24 earnings per diluted share in the third quarter 2019.
Non-GAAP gross margin was 56.2% in the third quarter 2020 compared to 61.5% reported for the third quarter of 2019. Non-GAAP earnings per diluted share was $0.09 for the third quarter 2020, compared to $0.35 in the third quarter 2019. Non-GAAP net income was $3.2 million in the third quarter 2020 compared to $11.9 million in the third quarter 2019.
For the nine months ended September 30, 2020, the Company reported revenue of $297.0 million, a decrease of 18.4% compared to $363.8 million reported for the same period in 2019. GAAP gross margin was 50.8% vs. 58.1% reported for the same period in 2019. GAAP net loss was $21.8 million for the nine months ended September 30, 2020, or $0.65 per share, compared with GAAP net loss of $18.7 million, or $0.55 per share in the same period in 2019.
Non-GAAP gross margin was 56.0% in 2020 vs. 60.1% reported for the same period in 2019. Non-GAAP earnings per diluted share was $0.00 for the nine months ended September 30, 2020, compared to $0.75 in the same period in 2019. The Company reported non-GAAP net income of $0.1 million for the nine months ended September 30, 2020, compared to prior year's non-GAAP net income of $25.2 million.
“We are very encouraged by the rate of business recovery in the third quarter. Our revenue grew by 21% compared to the second quarter of 2020. The revenue increase was led by Neuro and Hearing & Balance, respectively. Our Newborn Care end market continues to be the least impacted by the pandemic compared to last year. Although, revenues remain below historical levels, we generated $7.5 million of cash flows from operations, paid down $20.0 million of debt and returned to a net cash position. Looking ahead, we expect further business recovery in the fourth quarter,” said Jonathan Kennedy, President and Chief Executive Officer of Natus.
“We expect revenues from all three of our end markets to increase sequentially in the fourth quarter. Our supplies revenue increased sequentially 26% during the third quarter, indicating a return toward a more normal pace of hospital activity. Device sales increased from the previous quarter as well, up 21%, highlighting an increase in capital spending. Our backlog and pipeline rose in the fourth quarter compared the third quarter, increasing the confidence in our outlook for the fourth quarter,” Mr. Kennedy continued.
Financial Guidance
For the fourth quarter 2020, the Company's revenue guidance is expected to be between $104.0 million and $114.0 million and non-GAAP earnings per share guidance is expected to be between $0.19 and $0.31.
For the full year 2020, the Company's revenue guidance is expected to be between $401.0 million and $411.0 million and non-GAAP earnings per share guidance is expected to be between $0.20 and $0.31.
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 $4.1 million and $26.1 million for the fourth quarter 2020 and full year, respectively, and which the Company expects will reduce GAAP earnings per share by approximately $0.12 and $0.77 for the respective periods.
Guidance for the fourth quarter assumes a steady, but gradual increase in our business and does not consider the potential of a significant COVID-19 resurgence and its impact, if any, on the economy and our customers.
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. 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.
Conference Call
Natus has scheduled a conference call to discuss this announcement beginning at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) today, October 29, 2020. 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 7889667. 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 7889667. 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 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 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, 2019, Quarterly Report on Form 10-Q for the period ended March 31, 2020, and Quarterly Report on Form 10-Q for the period ended June 30, 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, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| Revenue |
| $ |
| 102,803 |
| $ |
| 123,463 |
| $ |
| 296,966 |
| $ |
| 363,759 |
| Cost of revenue |
| 47,160 |
| 48,389 |
| 134,665 |
| 147,291 |
| Intangibles amortization |
| 8,117 |
| 1,736 |
| 11,440 |
| 5,237 |
| Gross profit |
| 47,526 |
| 73,338 |
| 150,861 |
| 211,231 |
| Gross profit margin |
| 46.2 |
| % |
| 59.4 |
| % |
| 50.8 |
| % |
| 58.1 |
| % |
| Operating expenses: |
| Marketing and selling |
| 26,035 |
| 30,787 |
| 79,567 |
| 96,841 |
| Research and development |
| 14,670 |
| 14,447 |
| 46,574 |
| 41,166 |
| General and administrative |
| 12,384 |
| 15,394 |
| 36,754 |
| 44,390 |
| Intangibles amortization |
| 4,025 |
| 3,751 |
| 11,330 |
| 11,300 |
| Restructuring |
| 350 |
| 1,106 |
| 1,842 |
| 41,147 |
| Total operating expenses |
| 57,464 |
| 65,485 |
| 176,067 |
| 234,844 |
| Income (loss) from operations |
| (9,938 |
| ) |
| 7,853 |
| (25,206 |
| ) |
| (23,613 |
| ) |
| Interest expense |
| (1,107 |
| ) |
| (1,165 |
| ) |
| (2,800 |
| ) |
| (4,059 |
| ) |
| Other income (expense), net |
| 160 |
| (444 |
| ) |
| (398 |
| ) |
| (862 |
| ) |
| Income (loss) before provision for (benefit from) income tax |
| (10,885 |
| ) |
| 6,244 |
| (28,404 |
| ) |
| (28,534 |
| ) |
| Benefit from income tax |
| (1,569 |
| ) |
| (1,987 |
| ) |
| (6,588 |
| ) |
| (9,852 |
| ) |
| Net income (loss) |
| $ |
| (9,316 |
| ) |
| $ |
| 8,231 |
| $ |
| (21,816 |
| ) |
| $ |
| (18,682 |
| ) |
| Net income (loss) per share: |
| Basic |
| $ |
| (0.28 |
| ) |
| $ |
| 0.24 |
| $ |
| (0.65 |
| ) |
| $ |
| (0.55 |
| ) |
| Diluted |
| $ |
| (0.28 |
| ) |
| $ |
| 0.24 |
| $ |
| (0.65 |
| ) |
| $ |
| (0.55 |
| ) |
| Weighted-average shares: |
| Basic |
| 33,828 |
| 33,655 |
| 33,577 |
| 33,666 |
| Diluted |
| 33,828 |
| 33,738 |
| 33,577 |
| 33,666 |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
| (in thousands) |
| September 30, |
| December 31, |
| 2020 |
| 2019 |
| ASSETS |
| Current assets: |
| Cash and investments |
| $ |
| 74,536 |
| $ |
| 63,297 |
| Accounts receivable |
| 84,107 |
| 115,889 |
| Inventories |
| 80,135 |
| 71,368 |
| Other current assets |
| 27,740 |
| 19,195 |
| Total current assets |
| 266,518 |
| 269,749 |
| Property and equipment |
| 24,245 |
| 24,702 |
| Operating lease right-of-use assets |
| 11,960 |
| 15,046 |
| Goodwill and intangible assets |
| 241,746 |
| 261,166 |
| Deferred income tax |
| 28,749 |
| 30,355 |
| Other assets |
| 23,672 |
| 21,509 |
| Total assets |
| $ |
| 596,890 |
| $ |
| 622,527 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| Current liabilities: |
| Accounts payable |
| $ |
| 27,597 |
| $ |
| 27,253 |
| Current portion of long-term debt |
| 40,000 |
| 35,000 |
| Accrued liabilities |
| 39,034 |
| 54,451 |
| Deferred revenue |
| 20,034 |
| 20,246 |
| Current portion of operating lease liabilities |
| 5,343 |
| 5,871 |
| Total current liabilities |
| 132,008 |
| 142,821 |
| Long-term debt |
| 25,697 |
| 19,665 |
| Deferred income tax |
| 14,786 |
| 14,251 |
| Operating lease liabilities |
| 9,358 |
| 12,051 |
| Other long-term liabilities |
| 19,574 |
| 17,616 |
| Total liabilities |
| 201,423 |
| 206,404 |
| Total stockholders’ equity |
| 395,467 |
| 416,123 |
| Total liabilities and stockholders’ equity |
| $ |
| 596,890 |
| $ |
| 622,527 |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
| (in thousands) |
| Three Months Ended |
| Nine Months Ended |
| September 30, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| Operating activities: |
| Net income (loss) |
| $ |
| (9,316 |
| ) |
| $ |
| 8,230 |
| $ |
| (21,816 |
| ) |
| $ |
| (18,682 |
| ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
| Provision for losses on accounts receivable |
| 209 |
| 711 |
| 1,158 |
| 3,934 |
| Impairment of intangible assets |
| 6,678 |
| — |
| 6,678 |
| — |
| Depreciation and amortization |
| 7,312 |
| 7,519 |
| 20,989 |
| 22,946 |
| Loss on disposal of property and equipment |
| 127 |
| — |
| 149 |
| 482 |
| Warranty reserve |
| (151 |
| ) |
| 911 |
| 1,129 |
| 2,588 |
| Share-based compensation |
| 2,395 |
| 1,915 |
| 7,059 |
| 6,377 |
| Loss on commencement of sales-type leases |
| 766 |
| — |
| 1,861 |
| — |
| Impairment charge for held for sale assets |
| — |
| — |
| — |
| 24,571 |
| Changes in operating assets and liabilities: |
| Accounts receivable |
| 3,120 |
| (2,057 |
| ) |
| 30,367 |
| 14,850 |
| Inventories |
| 4,777 |
| 32 |
| (6,417 |
| ) |
| (2,074 |
| ) |
| Prepaid expenses and other assets |
| (7,012 |
| ) |
| 856 |
| (11,078 |
| ) |
| (9,527 |
| ) |
| Accounts payable |
| (4,343 |
| ) |
| 5,291 |
| (19 |
| ) |
| 2,076 |
| Accrued liabilities |
| 2,499 |
| 3,693 |
| (13,844 |
| ) |
| 1,073 |
| Deferred revenue |
| (1,243 |
| ) |
| (368 |
| ) |
| (941 |
| ) |
| 2,371 |
| Deferred income tax |
| 1,671 |
| (2,867 |
| ) |
| 1,826 |
| (3,072 |
| ) |
| Net cash provided by operating activities |
| 7,489 |
| 23,866 |
| 17,101 |
| 47,913 |
| Investing activities: |
| Purchase of property and equipment |
| (690 |
| ) |
| (953 |
| ) |
| (7,617 |
| ) |
| (3,872 |
| ) |
| Purchase of intangible assets |
| — |
| — |
| — |
| (13 |
| ) |
| Net cash used in investing activities |
| (690 |
| ) |
| (953 |
| ) |
| (7,617 |
| ) |
| (3,885 |
| ) |
| Financing activities: |
| Proceeds from stock option exercises and ESPP |
| — |
| 519 |
| 658 |
| 2,193 |
| Repurchase of common stock |
| — |
| (10,495 |
| ) |
| — |
| Taxes paid related to settlement of equity awards |
| (10 |
| ) |
| (23 |
| ) |
| (1,936 |
| ) |
| (1,596 |
| ) |
| Deferred debt issuance costs |
| (1,175 |
| ) |
| — |
| (1,175 |
| ) |
| — |
| Principal payments of financing lease liability |
| (173 |
| ) |
| (139 |
| ) |
| (415 |
| ) |
| (404 |
| ) |
| Proceeds from long-term borrowings |
| — |
| — |
| 60,000 |
| — |
| Payments on borrowings |
| (20,000 |
| ) |
| (10,000 |
| ) |
| (48,000 |
| ) |
| (35,000 |
| ) |
| Net cash used in financing activities |
| (21,358 |
| ) |
| (9,643 |
| ) |
| (1,363 |
| ) |
| (34,807 |
| ) |
| Exchange rate changes effect on cash and cash equivalents |
| 4,217 |
| (2,217 |
| ) |
| 3,118 |
| (2,532 |
| ) |
| Net increase (decrease) in cash and cash equivalents |
| (10,342 |
| ) |
| 11,053 |
| 11,239 |
| 6,689 |
| Cash and cash equivalents, beginning of period |
| 84,878 |
| 52,009 |
| 63,297 |
| 56,373 |
| Cash and cash equivalents, end of period |
| $ |
| 74,536 |
| $ |
| 63,062 |
| $ |
| 74,536 |
| $ |
| 63,062 |
| 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, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| GAAP based results: |
| Income (loss) before provision for income tax |
| $ |
| (10,885 |
| ) |
| $ |
| 6,244 |
| $ |
| (28,404 |
| ) |
| $ |
| (28,534 |
| ) |
| Non-GAAP adjustments: |
| Intangibles amortization (COGS) |
| 8,117 |
| 1,736 |
| 11,440 |
| 5,237 |
| Recall accrual and remediation efforts (COGS) |
| (366 |
| ) |
| — |
| (366 |
| ) |
| 67 |
| Restructuring and other non-recurring costs (COGS) |
| 2,457 |
| — |
| 4,233 |
| 989 |
| Direct costs of acquisitions (COGS) |
| — |
| 917 |
| — |
| 1,040 |
| Intangibles amortization (OPEX) |
| 4,025 |
| 3,751 |
| 11,330 |
| 11,300 |
| Direct costs of acquisitions (OPEX) |
| — |
| 698 |
| — |
| 956 |
| Restructuring and other non-recurring costs (OPEX) |
| 353 |
| 1,855 |
| 1,760 |
| 42,112 |
| Litigation (OPEX) |
| — |
| 5 |
| — |
| 702 |
| Non-GAAP income (loss) before provision for (benefit from) income tax |
| 3,701 |
| 15,206 |
| (7 |
| ) |
| 33,869 |
| Income tax expense (benefit), as adjusted |
| $ |
| 505 |
| $ |
| 3,325 |
| $ |
| (95 |
| ) |
| $ |
| 8,666 |
| Non-GAAP net income |
| $ |
| 3,196 |
| $ |
| 11,881 |
| $ |
| 88 |
| $ |
| 25,203 |
| Non-GAAP earnings per share: |
| Basic |
| $ |
| 0.09 |
| $ |
| 0.35 |
| $ |
| 0.00 |
| $ |
| 0.75 |
| Diluted |
| $ |
| 0.09 |
| $ |
| 0.35 |
| $ |
| 0.00 |
| $ |
| 0.75 |
| Weighted-average shares used to compute |
| Basic non-GAAP earnings per share |
| 33,828 |
| 33,655 |
| 33,577 |
| 33,666 |
| Diluted non-GAAP earnings per share |
| 33,841 |
| 33,738 |
| 33,637 |
| 33,772 |
| 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, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| GAAP Gross Profit |
| $ |
| 47,526 |
| $ |
| 73,338 |
| $ |
| 150,861 |
| $ |
| 211,231 |
| Amortization of intangibles |
| 8,117 |
| 1,736 |
| 11,440 |
| 5,237 |
| Direct cost of acquisitions |
| — |
| 917 |
| — |
| 1,040 |
| Recall accrual and remediation efforts |
| (366 |
| ) |
| — |
| (366 |
| ) |
| 67 |
| Restructuring and other non-recurring costs |
| 2,457 |
| — |
| 4,233 |
| 989 |
| Non-GAAP Gross Profit |
| $ |
| 57,734 |
| $ |
| 75,991 |
| $ |
| 166,168 |
| $ |
| 218,564 |
| Non-GAAP Gross Margin |
| 56.2 |
| % |
| 61.5 |
| % |
| 56.0 |
| % |
| 60.1 |
| % |
| GAAP Operating Income (Loss) |
| $ |
| (9,938 |
| ) |
| $ |
| 7,853 |
| $ |
| (25,206 |
| ) |
| $ |
| (23,613 |
| ) |
| Amortization of intangibles |
| 12,142 |
| 5,487 |
| 22,770 |
| 16,537 |
| Recall accrual and remediation efforts |
| (366 |
| ) |
| — |
| (366 |
| ) |
| 67 |
| Litigation |
| — |
| 5 |
| — |
| 702 |
| Restructuring and other non-recurring costs |
| 2,810 |
| 1,855 |
| 5,993 |
| 43,101 |
| Direct cost of acquisitions |
| — |
| 1,615 |
| — |
| 1,996 |
| Non-GAAP Operating Income |
| $ |
| 4,648 |
| $ |
| 16,815 |
| $ |
| 3,191 |
| $ |
| 38,790 |
| Non-GAAP Operating Margin |
| 4.5 |
| % |
| 13.6 |
| % |
| 1.1 |
| % |
| 10.7 |
| % |
| GAAP Income Tax Expense (Benefit) |
| $ |
| (1,569 |
| ) |
| $ |
| (1,987 |
| ) |
| $ |
| (6,588 |
| ) |
| $ |
| (9,852 |
| ) |
| Effect of accumulated change of pretax income |
| 2,402 |
| 3,140 |
| 6,493 |
| 8,847 |
| Effect of change in annual expected tax rate |
| (328 |
| ) |
| (1,134 |
| ) |
| — |
| (1,740 |
| ) |
| Repatriation tax adjustment |
| — |
| — |
| — |
| (177 |
| ) |
| Restructuring and other expenses |
| — |
| 3,306 |
| — |
| 11,588 |
| Non-GAAP Income Tax Expense (Benefit) |
| $ |
| 505 |
| $ |
| 3,325 |
| $ |
| (95 |
| ) |
| $ |
| 8,666 |
| Three Months Ended |
| Year Ended |
| December 31, 2020 |
| December 31, 2020 |
| GAAP EPS Guidance |
| $0.07 - $0.19 |
| ($0.57) - ($0.46) |
| Amortization of intangibles |
| 0.16 |
| 0.83 |
| Restructuring and other non-recurring costs |
| — |
| 0.17 |
| Tax effect |
| (0.04) |
| (0.23) |
| Non-GAAP EPS Guidance |
| $0.19 - $0.31 |
| $0.20 - $0.31 |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| GROSS MARGIN BY END MARKETS (unaudited) |
| (in thousands) |
| Three Months Ended |
| Nine Months Ended |
| September 30, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| Neuro: |
| Revenue |
| $ |
| 58,735 |
| $ |
| 72,192 |
| $ |
| 167,681 |
| $ |
| 206,179 |
| Cost of revenue |
| 27,157 |
| 25,207 |
| 73,765 |
| 75,749 |
| Intangibles amortization |
| 7,163 |
| 938 |
| 8,869 |
| 2,819 |
| Gross profit |
| $ |
| 24,415 |
| $ |
| 46,047 |
| $ |
| 85,047 |
| $ |
| 127,611 |
| Gross profit margin |
| 41.6 |
| % |
| 63.8 |
| % |
| 50.7 |
| % |
| 61.9 |
| % |
| Newborn care: |
| Revenue |
| $ |
| 25,711 |
| $ |
| 27,005 |
| $ |
| 76,744 |
| $ |
| 83,105 |
| Cost of revenue |
| 12,610 |
| 11,359 |
| 37,105 |
| 35,238 |
| Intangibles amortization |
| 66 |
| 64 |
| 193 |
| 193 |
| Gross profit |
| $ |
| 13,035 |
| $ |
| 15,582 |
| $ |
| 39,446 |
| $ |
| 47,674 |
| Gross profit margin |
| 50.7 |
| % |
| 57.7 |
| % |
| 51.4 |
| % |
| 57.4 |
| % |
| Hearing & balance: |
| Revenue |
| $ |
| 18,357 |
| $ |
| 24,266 |
| $ |
| 52,541 |
| $ |
| 74,475 |
| Cost of revenue |
| 7,393 |
| 11,823 |
| 23,795 |
| 36,304 |
| Intangibles amortization |
| 888 |
| 734 |
| 2,378 |
| 2,225 |
| Gross profit |
| $ |
| 10,076 |
| $ |
| 11,709 |
| $ |
| 26,368 |
| $ |
| 35,946 |
| Gross profit margin |
| 54.9 |
| % |
| 48.3 |
| % |
| 50.2 |
| % |
| 48.3 |
| % |
| Consolidated: |
| Revenue |
| $ |
| 102,803 |
| $ |
| 123,463 |
| $ |
| 296,966 |
| $ |
| 363,759 |
| Cost of revenue |
| 47,160 |
| 48,389 |
| 134,665 |
| 147,291 |
| Intangibles amortization |
| 8,117 |
| 1,736 |
| 11,440 |
| 5,237 |
| Gross profit |
| $ |
| 47,526 |
| $ |
| 73,338 |
| $ |
| 150,861 |
| $ |
| 211,231 |
| Gross profit margin |
| 46.2 |
| % |
| 59.4 |
| % |
| 50.8 |
| % |
| 58.1 |
| % |
| Note: The revenue and gross margin for our AccuScreen® newborn hearing screening product has been reclassified from Hearing & Balance to Newborn Care for both the current and prior periods. Hearing & Balance was formerly named Audiology. |
| 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, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| Neuro: |
| GAAP Gross Profit |
| $ |
| 24,415 |
| $ |
| 46,047 |
| $ |
| 85,047 |
| $ |
| 127,611 |
| Amortization of intangibles |
| 7,163 |
| 938 |
| 8,869 |
| 2,819 |
| Direct costs of acquisitions |
| — |
| 917 |
| — |
| 1,040 |
| Restructuring and other non-recurring costs |
| 1,588 |
| — |
| 2,292 |
| — |
| Non-GAAP Gross Profit |
| $ |
| 33,166 |
| $ |
| 47,902 |
| $ |
| 96,208 |
| $ |
| 131,470 |
| Non-GAAP Gross Margin |
| 56.5 |
| % |
| 66.4 |
| % |
| 57.4 |
| % |
| 63.8 |
| % |
| Newborn care: |
| GAAP Gross Profit |
| $ |
| 13,035 |
| $ |
| 15,582 |
| $ |
| 39,446 |
| $ |
| 47,674 |
| Amortization of intangibles |
| 66 |
| 64 |
| 193 |
| 193 |
| Recall accrual and remediation efforts |
| (366 |
| ) |
| — |
| (366 |
| ) |
| (571 |
| ) |
| Restructuring and other non-recurring costs |
| 322 |
| — |
| 322 |
| 814 |
| Non-GAAP Gross Profit |
| $ |
| 13,057 |
| $ |
| 15,646 |
| $ |
| 39,595 |
| $ |
| 48,110 |
| Non-GAAP Gross Margin |
| 50.8 |
| % |
| 57.9 |
| % |
| 51.6 |
| % |
| 57.9 |
| % |
| Hearing & balance: |
| GAAP Gross Profit |
| $ |
| 10,076 |
| $ |
| 11,709 |
| $ |
| 26,368 |
| $ |
| 35,946 |
| Amortization of intangibles |
| 888 |
| 734 |
| 2,378 |
| 2,225 |
| Recall accrual and remediation efforts |
| — |
| — |
| — |
| 638 |
| Restructuring and other non-recurring costs |
| 547 |
| — |
| 1,619 |
| 175 |
| Non-GAAP Gross Profit |
| $ |
| 11,511 |
| $ |
| 12,443 |
| $ |
| 30,365 |
| $ |
| 38,984 |
| Non-GAAP Gross Margin |
| 62.7 |
| % |
| 51.3 |
| % |
| 57.8 |
| % |
| 52.3 |
| % |
| Consolidated: |
| GAAP Gross Profit |
| $ |
| 47,526 |
| $ |
| 73,338 |
| $ |
| 150,861 |
| $ |
| 211,231 |
| Amortization of intangibles |
| 8,117 |
| 1,736 |
| 11,440 |
| 5,237 |
| Direct costs of acquisitions |
| — |
| 917 |
| — |
| 1,040 |
| Recall accrual and remediation efforts |
| (366 |
| ) |
| — |
| (366 |
| ) |
| 67 |
| Restructuring and other non-recurring costs |
| 2,457 |
| — |
| 4,233 |
| 989 |
| Non-GAAP Gross Profit |
| $ |
| 57,734 |
| $ |
| 75,991 |
| $ |
| 166,168 |
| $ |
| 218,564 |
| Non-GAAP Gross Margin |
| 56.2 |
| % |
| 61.5 |
| % |
| 56.0 |
| % |
| 60.1 |
| % |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| GEOGRAPHIC REVENUE (unaudited) |
| (in thousands) |
| Three Months Ended |
| Nine Months Ended |
| September 30, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| Consolidated Revenue: |
| United States |
| $ |
| 63,553 |
| $ |
| 73,553 |
| $ |
| 183,181 |
| $ |
| 213,055 |
| International |
| 39,250 |
| 49,910 |
| 113,785 |
| 150,704 |
| Totals |
| $ |
| 102,803 |
| $ |
| 123,463 |
| $ |
| 296,966 |
| $ |
| 363,759 |
| United States |
| 62 |
| % |
| 60 |
| % |
| 62 |
| % |
| 59 |
| % |
| International |
| 38 |
| % |
| 40 |
| % |
| 38 |
| % |
| 41 |
| % |
| Totals |
| 100 |
| % |
| 100 |
| % |
| 100 |
| % |
| 100 |
| % |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| REVENUE AFTER EXITED PRODUCTS (unaudited) |
| (in millions) |
| Three Months Ended |
| Nine Months Ended |
| Year Ended |
| September 30, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
| December 31, 2019 |
| December 31, 2018 |
| Revenue |
| $ |
| 102.8 |
| $ |
| 123.5 |
| $ |
| 297.0 |
| $ |
| 363.8 |
| $ |
| 495.1 |
| $ |
| 530.9 |
| Newborn care* |
| — |
| (0.6 |
| ) |
| — |
| (4.6 |
| ) |
| (4.5 |
| ) |
| (20.6 |
| ) |
| Neuro* |
| — |
| (0.2 |
| ) |
| — |
| (1.2 |
| ) |
| (1.2 |
| ) |
| (14.3 |
| ) |
| Hearing & balance* |
| — |
| — |
| — |
| (0.1 |
| ) |
| (0.1 |
| ) |
| (11.3 |
| ) |
| Revenue after exited products |
| $ |
| 102.8 |
| $ |
| 122.7 |
| $ |
| 297.0 |
| $ |
| 357.9 |
| $ |
| 489.3 |
| $ |
| 484.7 |
| *Newborn care, Neuro, and Hearing & balance include exited businesses (GND, Neurocom, Medix) and other end of sales products. |