Exhibit 99.1
Natus Medical Announces Record 2007
Third Quarter Financial Results
-- Company Reports Record Third Quarter Revenue and Earnings
-- Gross Profit Improves to 65%
SAN CARLOS, Calif.--(BUSINESS WIRE)--Nov. 1, 2007--Natus Medical
Incorporated (Nasdaq:BABY) today announced financial results for the
three and nine months ended September 30, 2007.
For the third quarter ended September 30, 2007, Natus reported
revenue of $28.8 million, representing a 32% increase from $21.8
million in the comparable quarter of the previous year. The Company
reported net income of $3.2 million, or $0.14 per diluted share, for
the third quarter of 2007, compared with net income of $1.9 million,
or $0.09 per diluted share, for the third quarter of 2006. The
earnings per share for the three months ended September 30, 2007
reflects a 53% increase over the amount reported in the 2006 period.
For the nine months ended September 30, 2007, the Company reported
net income of $7.0 million, or $0.31 per diluted share, compared to a
loss of $1.4 million, or $(0.08) per share, for the comparable period
in 2006. The results for the 2006 period include a charge for
in-process research and development associated with the acquisition of
Bio-logic Systems Corp. in January 2006. Excluding this charge,
non-GAAP earnings for the nine months ended September 30, 2006 were
$4.5 million, or $0.24 per diluted share. The results for the first
nine months of 2007 reflect increases in net income and earnings per
share of 57% and 30%, respectively, compared to the non-GAAP results
in 2006.
Jim Hawkins, President and Chief Executive Officer of the Company,
said, "I am pleased with our record results for the third quarter. The
quarter was led by continued strong growth in our hearing screening
business, both domestic and international, as well as our newborn care
products, which where driven by our acquisition of Olympic Medical
last year. I am also proud of our gross profit improvement to 65% for
the quarter. This is a long standing goal of Natus and I am pleased to
have achieved this result earlier than planned."
"As we previously discussed, in transitioning production of the
Olympic Cool-Cap from clinical units to commercial units, we updated
some of the components used in the device. Because the Cool-Cap is a
FDA Class III medical device, these component updates require FDA
pre-market approval. Consequently, in June we put a hold on shipments
of Cool-Cap units. We believe we are in the final stages of working
with the FDA on these changes, and we are hopeful that we will resume
shipments of the Cool-Cap in the fourth quarter," Hawkins added.
In a separate matter, the Company also disclosed that on October
15, 2007 it received a warning letter from the FDA related to the
Company's Olympic Medical manufacturing facility in Seattle,
Washington. The letter focused on process deficiencies that were
identified during an FDA inspection in April. "We take this matter
seriously and are working to address the findings identified by the
FDA. We currently expect to resolve the FDA's issues in the fourth
quarter," said Hawkins.
On October 10, 2007, Natus announced it had entered into a
definitive agreement to acquire Excel-Tech Ltd. ("XLTEK"). XLTEK
develops and markets computer-based electro diagnostic systems and
disposable supplies used by medical practitioners to aid in the
detection, diagnosis, and monitoring of neurologic and sleep
disorders. The transaction is now expected to close by the end of
November. Natus believes the acquisition will be immediately accretive
to earnings, excluding associated one-time charges.
During 2006 the Company completed the acquisitions of Bio-logic
Systems, Deltamed, and Olympic Medical, in January, September, and
October, respectively. The acquisitions of Deltamed and Olympic
contributed to the reported revenue growth in the three and nine
months ended September 30, 2007.
As of September 30, 2007 the Company had cash and cash equivalents
of $22.4 million, stockholders' equity of $112 million, working
capital of $45 million, and no long-term debt.
Financial Guidance
Natus increased its previously announced revenue guidance for the
fourth quarter of 2007. For the fourth quarter of 2007, the Company
now expects revenue to range from $33.3 million to $33.8 million. The
Company had previously said revenue would range from $32.9 million to
$33.4 million. The Company reiterated its earnings per share guidance,
which it expects to range from $0.19 to $0.21. This compares to
revenue of $28.8 million and earnings per share of $0.02 reported in
the fourth quarter of 2006.
For the full year 2007, the Company now expects revenue to range
from $117.5 million to $118.5 million. The Company had previously said
revenue would range from $118.3 million to $119.3 million. The Company
reiterated its earnings per share guidance, which it expects to range
from $0.49 to $0.52 per share.
The Company's revised fourth quarter revenue guidance assumes no
revenue from the Cool-Cap.
The Company expects that it will utilize tax net operating loss
carryforwards to significantly reduce its taxable income in 2007, such
that it will pay taxes at a rate of approximately 12% to 15% for the
year.
The Company's annual 2007 guidance is on a GAAP basis, including
the impact of expensing employee equity-based compensation, which the
Company expects to be approximately $2.3 million for the full year
2007. The Company's fourth quarter guidance does not include the
impact of any restructuring related charges or one-time acquisition
costs. All earnings per share amounts are on a diluted basis.
Natus expects to provide 2008 annual revenue and earnings guidance
in December after the acquisition of XLTEK is completed.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results calculated in
accordance with GAAP, this release contains non-GAAP financial
measures that exclude the effects of costs associated with the January
5, 2006 acquisition of Bio-logic Systems Corp. The Company believes
that the presentation of results excluding this acquisition-related
charge provides meaningful supplemental information to both management
and investors that is indicative of the Company's core operating
results. 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 measures facilitate 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 these non-GAAP financial measures in assessing the
Company's performance and when planning, forecasting, and analyzing
future periods. The 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 today
(8:00 a.m. Pacific Time). Individuals interested in listening to the
conference call may do so by dialing (866) 578-5747 for domestic
callers, or (617) 213-8054 for international callers, and entering
reservation code 37593392. 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 80585392.
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, and newborn care. 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, 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, but are
not limited to, statements regarding future revenue and expenses;
anticipated revenue, profitability, and cash tax rates for the fourth
quarter and full year 2007; and the timing for resumption of shipment
of Cool-Cap units. 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, challenges incurred in integrating acquired companies,
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, 2006, 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
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue $ 28,830 $ 21,806 $ 84,140 $ 61,156
Cost of revenue 10,129 8,299 30,454 22,809
--------- -------- --------- --------
Gross profit 18,701 13,507 53,686 38,347
--------- -------- --------- --------
Operating expenses:
Marketing and selling 6,752 4,809 20,147 14,965
Research and development 3,879 2,438 12,076 7,387
General and administrative 3,662 2,994 11,359 7,928
Acquired IPR&D - - - 5,900
--------- -------- --------- --------
Total operating expenses 14,293 10,241 43,582 36,180
--------- -------- --------- --------
Income from operations 4,408 3,266 10,104 2,167
--------- -------- --------- --------
Other income/(expense):
Interest income 182 247 552 491
Interest expense - (160) - (498)
Other income, net 31 59 136 23
--------- -------- --------- --------
Total other
income/(expense) 213 146 688 16
--------- -------- --------- --------
Income before provision for
income tax 4,621 3,412 10,792 2,183
Provision for income tax 1,465 1,543 3,791 3,622
--------- -------- --------- --------
Net income (loss) $ 3,156 $ 1,869 $ 7,001 $ (1,439)
========= ======== ========= ========
Earnings (loss) per share:
Basic $ 0.15 $ 0.09 $ 0.32 $ (0.08)
Diluted $ 0.14 $ 0.09 $ 0.31 $ (0.08)
Weighted-average shares used
to compute
Basic earnings per share 21,646 19,749 21,568 18,541
Diluted earnings per share 22,965 20,860 22,798 18,541
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June June June June
2007 2006 2007 2006
--------- -------- ------- --------
GAAP based results:
Net Income (loss) $ 3,156 $ 1,869 $ 7,001 $(1,439)
Non-GAAP adjustments:
Acquired in-process
research and development
(see note) - - - 5,900 (a)
--------- -------- ------- -------
Non-GAAP net income $ 3,156 $ 1,869 $ 7,001 $ 4,461
========= ======== ======= =======
Earnings per share:
Basic $ 0.15 $ 0.09 $ 0.32 $ 0.24
Diluted $ 0.14 $ 0.09 $ 0.31 $ 0.24
Weighted-average shares
used to compute
Basic earnings per share 21,646 19,749 21,568 18,541
Diluted earnings per
share 22,965 20,860 22,798 18,949
(a) Charges for acquired in-process research and development expense
of $5,900 related to the acquisition of Bio-logic Systems Corp. on
January 5, 2006. Management believes that excluding this charges
facilitates comparisons of Natus' core operating results across
multiple reporting periods. Since the IPR&D charge is not expected to
be tax deductible, reversal of this charge has no impact on the tax
provision.
CONTACT: Natus Medical Incorporated
Steven J. Murphy, Chief Financial Officer, 650-802-0400
InvestorRelations@Natus.com