Exhibit 99.1
Natus Medical Reports Record Third Quarter Revenue and Earnings
-- Non-GAAP Pretax Income Up 136% Over Prior Year
-- Company Increases 2006 Revenue and Earnings Guidance
SAN CARLOS, Calif.--(BUSINESS WIRE)--Nov. 1, 2006--Natus Medical
Incorporated (Nasdaq:BABY) today reported financial results for the
three and nine months ended September 30, 2006.
Natus reported record revenue of $21.8 million for the quarter
ended September 30, 2006, an increase of 107% compared to $10.6
million reported in the same period in 2005. The increase was
primarily attributable to the acquisition of Bio-logic Systems Corp.
in January of 2006. Gross margin was 61.9% for the three months ended
September 30, 2006, compared with 65.4% for the third quarter of 2005.
The Company reported net income of $1.9 million or $0.09 per
diluted share in the third quarter of 2006, compared to net income of
$1.5 million or $0.08 per diluted share in the same period in 2005.
For the 2006 period, the Company's effective tax rate for book
purposes was 45% compared to 7% in the 2005 period.
For the nine months ended September 30, 2006, the Company reported
a net loss of $1.4 million or ($0.08) per diluted share. Results for
the nine months include a $5.9 million charge for in-process research
and development associated with the acquisition of Bio-logic.
Additionally, the Company's effective tax rate for book purposes was
45% in the 2006 period compared to 10% in 2005.
For the three and nine months ended September 30, 2006,
respectively, the Company reported income before tax of $3.4 million
and $2.2 million. Non-GAAP income before tax increased 136% to $3.8
million for the quarter ended September 30, 2006, from $1.6 million
reported in the same period in 2005. For the nine months ended
September 30, 2006, non-GAAP income before tax increased 124% to $9.2
million, compared to $4.1 million reported in 2005.
The non-GAAP results for 2006 exclude the effect of employee
equity-based compensation expense, an in-process research and
development charge associated with the acquisition of Bio-logic, and
other Bio-logic acquisition related costs.
The acquisition of Deltamed on September 12, 2006 did not add
significantly to revenue or results of operations for the three months
ended September 30, 2006.
"I am very pleased to report our excellent third quarter results,
with our revenue growing by 107% and our non-GAAP income before tax
increasing by 136%," stated Jim Hawkins, President and Chief Executive
Officer of Natus.
"We are excited about our recently announced acquisitions of
Olympic Medical and Deltamed. They strengthen our position as a
leading medical device company in both the neonatal and EEG markets.
With the integration of Olympic Medical products into our sales
channels in 2007, we believe we will achieve significant revenue
growth in those products," added Hawkins. "Additionally, with the
synergies we expect to achieve from these acquisitions, we believe
that in 2007 we will continue to see earnings growth at levels
exceeding that of our revenue growth."
Financial Guidance
Natus increased its financial guidance for the fourth quarter and
full year 2006. The Company now expects to report revenue of $27.5
million to $28.5 million in the fourth quarter of 2006, and $88.7
million to $89.7 million for the full year 2006. The Company had
previously said that it expected to report revenue of $21.4 million to
$21.7 million for the quarter and $81.5 million to $83.0 million for
the full year.
The Company also expects to report non-GAAP income per diluted
share of $0.11 to $0.13 in the fourth quarter 2006, and $0.33 to $0.35
for the full year. The Company had previously said that it expected to
report non-GAAP earnings per share of $0.11 to $0.12 for the quarter
and $0.31 to $0.34 for the full year.
The Company's 2006 fourth-quarter and annual guidance excludes the
impact of an in-process research and development charge of $5.9
million associated with the acquisition of Bio-logic recorded in the
first quarter 2006, and an in-process research and development charge
associated with the acquisition of Olympic Medical that the Company
expects to record in the fourth quarter of 2006.
The Company's guidance includes the impact of expensing employee
equity-based compensation.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results calculated in
accordance with GAAP, this release contains a non-GAAP financial
measure that excludes the effects of employee equity-based
compensation expense as a result of the Company's adoption of SFAS
123R on January 1, 2006 and costs associated with the January 5, 2006
acquisition of Bio-logic Systems Corp. The Company believes that the
presentation of results excluding equity-based compensation expense
and the acquisition-related charges provides meaningful supplemental
information to both management and investors that is indicative of the
Company's core operating results. The Company is using the modified
prospective method in its adoption of SFAS 123R and as such, will not
restate prior year results for the impact of employee stock option
expensing. The Company also believes the in-process research and
development charge is not indicative of resources devoted to ongoing
research and development efforts. Therefore, the Company believes the
non-GAAP financial measure facilitates comparison of operating results
across reporting periods. A reconciliation between the Company's
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 the Company's financial results release.
The Company believes that both management and investors benefit
from referring to this non-GAAP financial measure in assessing the
Company's performance and when planning, forecasting, and analyzing
future periods. The non-GAAP financial measure also facilitates
management's internal comparisons to the Company's historical
performance. The non-GAAP financial measure 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 investor conference call to discuss this
announcement beginning at 11:00 a.m. Eastern Time today (8:00 a.m.
Pacific Time). Individuals interested in listening to the conference
call may do so by dialing (866) 700-6067 for domestic callers, or
(617) 213-8834 for international callers, and entering reservation
code 83873550. A telephone replay will be available for 48 hours
following the conclusion of the call by dialing (888) 286-8010 for
domestic callers, or (617) 801-6888 for international callers, and
entering reservation code 18741771.
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 such as hearing impairment, neurological dysfunction,
epilepsy, sleep disorders, newborn jaundice and newborn metabolic
testing.
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, but are
not limited to, statements regarding revenue growth associated with
the acquisition of Olympic Medial, revenue and earnings growth in
2007, and anticipated revenue and profitability for the fourth-quarter
and full-year 2006. These statements relate to 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, 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, and risks associated with bringing new products to
market and integrating acquired businesses. 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, 2005, 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 BALANCE SHEETS
(in thousands, except share amounts)
Sep 30, Dec 31,
2006 2005
ASSETS
Current assets:
Cash and equivalents $ 37,155 $ 40,046
Short-term investments - 12,163
Accounts receivable, net of allowance for
doubtful accounts of $506 in 2006 and $173 in
2005 16,107 8,460
Inventories 8,912 3,482
Deferred income tax 562 -
Prepaid expenses and other current assets 1,402 1,041
Total current assets 64,138 65,192
Property and equipment, net 7,510 2,116
Goodwill 22,372 3,836
Intangible assets 30,131 6,174
Deferred income tax 410 -
Other assets 871 78
Total assets $125,432 $ 77,396
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,228 $ 1,817
Current portion of long term debt 7,125 -
Accrued liabilities 11,985 5,441
Deferred revenue 1,810 439
Total current liabilities 26,148 7,697
Long term liabilities
Note payable - -
Deferred income tax - 734
Total liabilities 26,148 8,431
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value, 120,000,000
shares authorized; shares issued and
outstanding: 21,274,917 in 2006 and 18,444,753
in 2005 131,720 99,634
Accumulated deficit (32,189) (30,750)
Accumulated other comprehensive income (247) 81
Total stockholders' equity 99,284 68,965
Total liabilities and stockholders' equity $125,432 $ 77,396
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
Sep Sep Sep Sep
2006 2005 2006 2005
--------- -------- -------- --------
Revenue $21,806 $10,551 $61,156 $30,422
Cost of revenue 8,299 3,645 22,809 11,435
--------- -------- -------- --------
Gross profit 13,507 6,906 38,347 18,987
--------- -------- -------- --------
Operating expenses:
Marketing and selling 4,809 2,916 14,965 8,355
Research and development 2,438 1,162 7,387 3,233
General and administrative 2,994 1,521 7,928 4,071
Acquired IPR&D - - 5,900 -
--------- -------- -------- --------
Total operating expenses 10,241 5,599 36,180 15,659
--------- -------- -------- --------
Income from operations 3,266 1,307 2,167 3,328
--------- -------- -------- --------
Other income/(expense):
Interest income 247 314 491 750
Interest expense (160) - (498) -
Other income, net 59 5 23 37
--------- -------- -------- --------
Total other income/(expense) 146 319 16 787
--------- -------- -------- --------
Income before provision for
income tax 3,412 1,626 2,183 4,115
Provision for income tax 1,543 111 3,622 426
--------- -------- -------- --------
Net income (loss) $ 1,869 $ 1,515 $(1,439) $ 3,689
========= ======== ======== ========
Earnings (loss) per share:
Basic $ 0.09 $ 0.09 $ (0.08) $ 0.21
Diluted $ 0.09 $ 0.08 $ (0.08) $ 0.20
Weighted-average shares used to
compute
Basic earnings per share 19,749 17,292 18,949 17,224
Diluted earnings per share 20,860 18,877 18,949 18,574
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands)
Three Months Ended Nine Months Ended
Sep Sep Sep Sep
2006 2005 2006 2005
---------- ------- --------- -------
GAAP income before provision
for income tax $3,412 $1,626 $2,183 $4,115
non-GAAP adjustments:
Acquired in-process research
and development (see note) (a) - - 5,900 -
Other transaction related
costs associated with the
acquisiton of Bio-logic.
(see note) (b) - - 168 -
Equity-based compensation
expense under SFAS 123R
(see note) (c) 419 966
---------- ------- --------- -------
Non-GAAP income before
provision for income tax $3,831 $1,626 $9,217 $4,115
========== ======= ========= =======
Non-GAAP Adjustments
(a) A charge for acquired in-process research and development expense
related to the acquisition of Bio-logic Systems Corp. on January 5,
2006. Management believes that excluding this charge facilitates
comparisons of Natus' core operating results across multiple
reporting periods.
(b) Other costs associated with the acquisition of Bio-logic that are
not properly capitalized as part of the acquisition cost and were
expensed.
(c) Non-cash equity-based compensation expense related to the
Company's adoption of SFAS No. 123R on January 1, 2006. Management
believes that it is useful to investors to understand the impact of
expenses associated with the adoption of SFAS 123R on reported
results of operations. Net income for the three and nine months ended
September 30, 2005 did not include equity-based compensation expense
under SFAS 123.
CONTACT: Natus Medical Incorporated
Steven J. Murphy, Chief Financial Officer, 650-802-0400
InvestorRelations@Natus.com