EXHIBIT 99.1
Natus Medical Announces Fourth Quarter and Full Year 2016 Financial Results
- Reports fourth quarter revenue of $107.7 million and full year revenue of $381.9 million
- Reports fourth quarter GAAP earnings per share of $0.31 and non-GAAP of $0.51
PLEASANTON, Calif., Feb. 01, 2017 (GLOBE NEWSWIRE) -- Natus Medical Incorporated (NASDAQ:BABY) today announced financial results for the three months and full year ended December 31, 2016.
For the fourth quarter ended December 31, 2016, the Company reported revenue of $107.7 million, an increase of 7.7% compared to $100.0 million reported for the fourth quarter 2015. Revenue from the Venezuela contract was $9.1 million during the quarter. GAAP Gross profit margin was 60.4% vs. 58.2% reported for the fourth quarter 2015. GAAP net income was $10.2 million, or $0.31 per diluted share, compared with GAAP net income of $8.5 million, or $0.26 per diluted share in the fourth quarter 2015, representing a 19% increase in GAAP earnings per diluted share.
Non-GAAP earnings per diluted share was $0.51 for the fourth quarter 2016, compared to $0.51 in the fourth quarter 2015. Non-GAAP net income was $16.8 million for the fourth quarter ended December 31, 2016 compared to the prior year's non-GAAP net income of $17.0 million. Non-GAAP Gross profit margin was 61.3% vs. 63.9% reported for the fourth quarter of 2015.
For the twelve months ended December 31, 2016, the Company reported revenue of $381.9 million, an increase of 1.6% compared to $375.9 million reported for the prior year 2015. GAAP Gross profit margin was 61.5% vs. 60.5% reported for the prior year. GAAP net income was $42.6 million, or $1.29 per diluted share, compared with GAAP net income of $37.9 million, or $1.14 per diluted share for prior year.
Non-GAAP earnings per diluted share increased 5% to $1.62 for the full year 2016, compared to $1.55 for the prior year. The Company reported non-GAAP net income of $53.5 million for the full year 2016, compared to the prior year's non-GAAP net income of $51.4 million.
Combined cash and investments increased by $141.1 million to $247.6 million during the quarter due to new borrowings in anticipation of the Otometrics acquisition. The Company repurchased $1.0 million of its stock during the fourth quarter of 2016.
"I am pleased with our 2016 accomplishments including the acquisition of Otometrics and RetCam as well as our record financial results considering the regulatory issues at our Seattle facility and the headwinds in some of our international markets. The acquisition of Otometrics will complement our current business and increase our growth potential. We believe Otometrics will achieve a revenue growth rate of 10 percent in 2017 and 2018 as they participate in growing markets for many of their products and services. In addition, we look forward to increasing the profitability of Otometrics from its current breakeven levels to our current operating margins over time. We look forward to an exciting year ahead and the opportunity for Natus to achieve over $500 million of revenue in 2017," said Jim Hawkins, President and Chief Executive Officer of the Company.
Financial Guidance
For the first quarter of 2017, the Company provided revenue guidance of $122.0 million to $124.0 million and guided non-GAAP earnings per share guidance of $0.32 to $0.34.
For the full year 2017, the Company provided revenue guidance of $505.0 million to $510.0 million and guided non-GAAP earnings of $1.80 to $1.85.
First quarter 2017 and the full year 2017 revenue guidance includes approximately $10 million from the prepaid portion of the Company's Venezuela supply agreement.
The Company's non-GAAP earnings per share guidance excludes charges for amortization expense associated with intangible assets from prior acquisitions, which the Company expects to be approximately $9.8 million and $3.1 million for the full year and first quarter 2017, respectively, and which the Company expects will reduce GAAP earnings per share by approximately $0.30 and $0.09 for the respective periods. Non-GAAP earnings per share also exclude the direct and transition costs of the Otometrics acquisition, which are estimated to be approximately $3 million to $4 million for the full year 2017 as well as the Otometrics related amortization of acquired intangible assets, which cannot be estimated at this time.
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 discreet 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 discreet items. These items represent significant infrequent charges or gains that management believes should be viewed outside of normal operating results. 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 items excluded from non-GAAP financial 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 an investment-community conference call to discuss this announcement beginning at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today, February 1, 2017. 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 49853976. 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 49853976. 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 neurological dysfunction, epilepsy, sleep disorders, newborn care, hearing impairment 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 Otometrics revenue growth rate, increasing the profitability of Otometrics, our achieving $500 million in revenue in 2017, the anticipated revenue and GAAP and non-GAAP earnings per share for the first quarter and full year 2017 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 the Otometrics acquisition and achieve our profitability goals for Otometrics, 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 integrating acquired businesses, shipments and revenue associated with our Medix' subsidiary's contract with the Venezuela Ministry of Health 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, 2015, 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 AND SUBSIDIARIES |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
| (in thousands, except per share amounts) |
| |
| | Quarter Ended | | Year to Date |
| | December 31,
2016 | | December 31,
2015 | | December 31,
2016 | | December 31,
2015 |
| Revenue | $ | 107,699 | | | $ | 99,951 | | | $ | 381,892 | | | $ | 375,865 | |
| Cost of revenue | 42,089 | | | 41,024 | | | 144,632 | | | 145,492 | |
| Intangibles amortization | 510 | | | 788 | | | 2,327 | | | 2,836 | |
| Gross profit | 65,100 | | | 58,139 | | | 234,933 | | | 227,537 | |
| Gross profit margin | 60.4 | % | | 58.2 | % | | 61.5 | % | | 60.5 | % |
| Operating expenses: | | | | | | | |
| Marketing and selling | 23,255 | | | 22,330 | | | 84,834 | | | 87,675 | |
| Research and development | 10,848 | | | 8,567 | | | 33,443 | | | 30,434 | |
| General and administrative | 13,652 | | | 13,124 | | | 50,877 | | | 46,363 | |
| Intangibles amortization | 2,242 | | | 2,282 | | | 8,983 | | | 7,447 | |
| Restructuring | 221 | | | 1,787 | | | 1,536 | | | 2,145 | |
| Total operating expenses | 50,218 | | | 48,090 | | | 179,673 | | | 174,064 | |
| Income from operations | 14,882 | | | 10,049 | | | 55,260 | | | 53,473 | |
| Other income/(expense), net | 54 | | | 139 | | | (357 | ) | | (1,063 | ) |
| Income before tax | 14,936 | | | 10,188 | | | 54,903 | | | 52,410 | |
| Provision for income tax expense | 4,704 | | | 1,643 | | | 12,309 | | | 14,485 | |
| Net income | $ | 10,232 | | | $ | 8,545 | | | $ | 42,594 | | | $ | 37,925 | |
| Earnings per share: | | | | | | | |
| Basic | $ | 0.32 | | | $ | 0.26 | | | $ | 1.31 | | | $ | 1.17 | |
| Diluted | $ | 0.31 | | | $ | 0.26 | | | $ | 1.29 | | | $ | 1.14 | |
| Weighted-average shares: | | | | | | | |
| Basic | 32,405 | | | 32,358 | | | 32,460 | | | 32,348 | |
| Diluted | 33,009 | | | 33,130 | | | 33,056 | | | 33,241 | |
| |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
| (in thousands) |
| |
| | December 31, | | September 30, | | December 31, |
| | 2016 | | 2016 | | 2015 |
| ASSETS | | | | | |
| | | | | | |
| Current assets: | | | | | |
| Cash and investments | $ | 247,570 | | | $ | 106,502 | | | $ | 82,469 | |
| Accounts receivable, net | 86,638 | | | 84,870 | | | 99,080 | |
| Inventories | 49,587 | | | 51,654 | | | 48,572 | |
| Other current assets | 22,004 | | | 22,939 | | | 11,235 | |
| Total current assets | 405,799 | | | 265,965 | | | 241,356 | |
| | | | | | |
| Property and equipment, net | 17,333 | | | 18,127 | | | 16,967 | |
| Goodwill and intangible assets | 190,277 | | | 194,693 | | | 194,002 | |
| Deferred income tax | 12,756 | | | 12,694 | | | 12,782 | |
| Other assets | 20,688 | | | 19,236 | | | 14,389 | |
| Total assets | $ | 646,853 | | | $ | 510,715 | | | $ | 479,496 | |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
| | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | $ | 18,700 | | | $ | 17,107 | | | $ | 23,660 | |
| Short-term borrowings | — | | | — | | | — | |
| Accrued liabilities | 37,895 | | | 38,712 | | | 42,137 | |
| Deferred revenue | 23,346 | | | 33,334 | | | 11,311 | |
| Total current liabilities | 79,941 | | | 89,153 | | | 77,108 | |
| | | | | | |
| Long-term liabilities: | | | | | |
| Long-term debt, net | 140,000 | | | — | | | — | |
| Deferred income tax | 1,525 | | | 3,819 | | | 3,897 | |
| Other long-term liabilities | 8,012 | | | 8,358 | | | 7,781 | |
| Total liabilities | 229,478 | | | 101,330 | | | 88,786 | |
| Total stockholders’ equity | 417,375 | | | 406,385 | | | 390,710 | |
| Total liabilities and stockholders’ equity | $ | 646,853 | | | $ | 507,715 | | | $ | 479,496 | |
| |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
| (in thousands) |
| |
| | Quarter Ended |
| | December 31,
2016 | | December 31,
2015 |
| Operating activities: | | | |
| Net income | $ | 10,232 | | | $ | 8,544 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Provision for losses on accounts receivable | 183 | | | 551 | |
| Excess tax benefit on the exercise of stock options | — | | | (1,800 | ) |
| Depreciation and amortization | 4,059 | | | 4,641 | |
| Loss on disposal of property and equipment | (8 | ) | | (5 | ) |
| Warranty reserve | (339 | ) | | 5,958 | |
| Share-based compensation | 2,051 | | | 1,571 | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | 424 | | | (8,591 | ) |
| Inventories | (1,315 | ) | | (5,218 | ) |
| Prepaid expenses and other assets | 1,874 | | | 1,907 | |
| Accounts payable | 1,097 | | | 33 | |
| Accrued liabilities | (479 | ) | | (2,581 | ) |
| Deferred revenue | (11,115 | ) | | 931 | |
| Deferred income tax | (2,480 | ) | | (4,017 | ) |
| Net cash provided by operating activities | 4,184 | | | 1,924 | |
| Investing activities: | | | |
| Acquisition of businesses, net of cash acquired | — | | | (2,725 | ) |
| Purchases of property and equipment | (1,010 | ) | | (1,078 | ) |
| Purchase of intangible assets | — | | | 32 | |
| Purchase of short-term investments | (8,590 | ) | | — | |
| Net cash used in investing activities | (9,600 | ) | | (3,771 | ) |
| Financing activities: | | | |
| Proceeds from stock option exercises and Employee Stock Purchase Program purchases | 1,080 | | | 4,172 | |
| Excess tax benefit on the exercise of stock options | — | | | 1,800 | |
| Repurchase of common stock | (1,032 | ) | | (2,173 | ) |
| Taxes paid related to net share settlement of equity awards | (170 | ) | | (38 | ) |
| Proceeds from long-term borrowings | 140,000 | | | — | |
| Net cash used in financing activities | 139,878 | | | 3,761 | |
| Exchange rate changes effect on cash and cash equivalents | (1,984 | ) | | (1,646 | ) |
| Net increase in cash and cash equivalents | 132,478 | | | 268 | |
| Cash and cash equivalents, beginning of period | 81,073 | | | 82,201 | |
| Cash and cash equivalents, end of period | $ | 213,551 | | | $ | 82,469 | |
| |
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED) |
| (in thousands, except per share amounts) |
| |
| | Quarter Ended | | Year to Date |
| | December 31,
2016 | | December 31,
2015 | | December 31,
2016 | | December 31,
2015 |
| GAAP based results: | | | | | | | |
| Income before provision for income tax | $ | 14,936 | | | $ | 10,188 | | | $ | 54,903 | | | $ | 52,410 | |
| | | | | | | | |
| Non-GAAP adjustments: | | | | | | | |
| Intangibles Amortization - Cost of revenue | 510 | | | 788 | | | 2,327 | | | 2,836 | |
| Intangibles Amortization - Operating expense | 2,242 | | | 2,282 | | | 8,983 | | | 7,447 | |
| Recall Accrual | — | | | 4,975 | | | 267 | | | 4,975 | |
| Remediation Efforts | 2,462 | | | — | | | 2,462 | | | — | |
| Restructuring 1 | 221 | | | 1,787 | | | 1,536 | | | 2,145 | |
| Direct costs of acquisitions (COGS) | 460 | | | — | | | 460 | | | — | |
| Direct costs of acquisitions (M&S) 2 | (19 | ) | | 456 | | | (3,429 | ) | | 456 | |
| Direct costs of acquisitions (G&A) | 1,523 | | | — | | | 1,902 | | | — | |
| Direct costs of acquisitions (OI&E) | 38 | | | 144 | | | 149 | | | 144 | |
| Non-GAAP income before provision for income tax | 22,373 | | | 20,620 | | | 69,560 | | | 70,413 | |
| | | | | | | | |
| Income tax expense, as adjusted | $ | 5,596 | | | $ | 3,587 | | | $ | 16,095 | | | $ | 19,005 | |
| | | | | | | | |
| Non-GAAP net income | $ | 16,777 | | | $ | 17,033 | | | $ | 53,465 | | | $ | 51,408 | |
| Non-GAAP earnings per share: | | | | | | | |
| Basic | $ | 0.52 | | | $ | 0.53 | | | $ | 1.65 | | | $ | 1.59 | |
| Diluted | $ | 0.51 | | | $ | 0.51 | | | $ | 1.62 | | | $ | 1.55 | |
| | | | | | | | |
| Weighted-average shares used to compute | | | | | | | |
| Basic non-GAAP earnings per share | 32,405 | | | 32,358 | | | 32,460 | | | 32,348 | |
| Diluted non-GAAP earnings per share | 33,009 | | | 33,130 | | | $ | 33,056 | | | $ | 33,241 | |
| | | | | | | | |
| GAAP Gross profit | 65,100 | | | 58,139 | | | 234,933 | | | 227,537 | |
| Amortization of intangibles | 510 | | | 788 | | | 2,327 | | | 2,836 | |
| Acquisition charges | 460 | | | — | | | 460 | | | — | |
| Recall Accrual | — | | | 4,975 | | | 267 | | | 4,975 | |
| Non-GAAP Gross Profit | 66,070 | | | 63,902 | | | 237,987 | | | 235,348 | |
| Non-GAAP Gross Margin | 61.3 | % | | 63.9 | % | | 62.3 | % | | 62.6 | % |
| | | | | | | | |
| GAAP Operating profit | 14,882 | | | 10,049 | | | 55,260 | | | 53,473 | |
| Amortization of intangibles | 2,752 | | | 3,070 | | | 11,310 | | | 10,283 | |
| Recall Accrual and Remediation Efforts | 2,462 | | | 4,975 | | | 2,729 | | | 4,975 | |
| Restructuring and acquisition charges | 2,185 | | | 2,243 | | | 469 | | | 2,601 | |
| Non-GAAP Operating profit | 22,281 | | | 20,337 | | | 69,768 | | | 71,332 | |
| Non-GAAP Operating margin | 20.7 | % | | 20.3 | % | | 18.3 | % | | 19.0 | % |
1 Restructuring costs primarily consist of facility abandonment charges related to our Munich, Germany and Austin, Texas facilities, and severance costs associated with the ceasing operations in Munich, Germany.
2 Amount represents a reduction in our anticipated earn-out payment for the GND acquisition.
| NATUS MEDICAL INCORPORATED AND SUBSIDIARIES |
| RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED) |
| (in thousands, except per share amounts) |
| |
| | Quarter Ended | | Year to Date |
| | December 31,
2016 | | December 31,
2015 | | December 31,
2016 | | December 31,
2015 |
| GAAP Provision for income tax expense | 4,704 | | | 1,643 | | | 12,309 | | | 14,485 | |
| Effect of accumulated change of pretax income | 1,023 | | | 2,622 | | | 3,286 | | | 4,976 | |
| Effect of change in annual expected tax rate | (1,231 | ) | | (1,781 | ) | | (51 | ) | | (1,634 | ) |
| Tax audit reserve | 7 | | | — | | | (543 | ) | | — | |
| Effect on acquisition cost | 1,093 | | | 1,103 | | | 1,093 | | | 1,178 | |
| Non-GAAP Income tax expense, as adjusted | 5,596 | | | 3,587 | | | 16,094 | | | 19,005 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | Quarter Ended | | Year to Date | | | | |
| | March 31,
2017 | | December 31,
2017 | | | | |
| GAAP EPS Guidance | $0.21 - $0.23 | | $1.49 - $1.54 | | | | |
| Amortization of Intangibles 3 | 0.09 | | | 0.30 | | | | | |
| Direct cost of acquisitions | 0.06 | | | 0.11 | | | | | |
| Tax effect | (0.04 | ) | | (0.10 | ) | | | | |
| Non-GAAP EPS Guidance | $0.32 - $0.34 | | $1.80 - $1.85 | | | | |
3 Excludes amortization of intangibles acquired in the Otometrics purchase as these amounts have not yet been determined.
Natus Medical Incorporated
Jonathan A. Kennedy
Executive Vice President and Chief Financial Officer
(925) 223-6700
InvestorRelations@Natus.com
