NTUS - Earnings call transcript Q3 2019

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Operator

Good afternoon, everyone, and thank you for joining us today to review our results for the Third Quarter of 2019.

On the call today from Natus is Jonathan Kennedy, Natus' President and Chief Executive Officer; and Drew Davies, Natus' Executive Vice President and Chief Financial Officer. Jonathan will begin today with a business overview of the third quarter 2019. Then, Drew will discuss the third quarter financial performance and provide guidance for the fourth quarter and full-year 2019.

Finally, we will open the call for your questions. will Securities statements Litigation call of the Today's Private the Reform instructions] include within forward-looking meaning [Operator Act. These expectations statements about and our future include results. management's beliefs

these Our statements. materially may actual from results differ forward-looking

Natus relevant risks today's Kennedy, the filed Mr. call to see and Medical. with For a SEC. release Officer and description and pertaining Chief would business, press annual to and periodic Jonathan turn I over President uncertainties Executive our the to please our reports of Kennedy? like of now

Jonathan Kennedy

Thank and the afternoon, Revenue Today, results line $XXX.X per everyone. for quarter in our XXXX. were earnings million with the you, of share previous good operator, Both we was and non-GAAP the reported third for $X.XX. was quarter expectations.

continued the our Our results improvement third demonstrate business. in quarter

a grew the divestitures, increase second for $XX.X neuro's operations. in flow, achieving flow drove contributions positive end-market in for quarter growth, After neuro a adjusting with performance to including neuro cash X% quarter million neurosurgery. our all in cash major from row submarkets the making in from significant revenue Our

balance care fitting were hearing submarkets. and and growth markets vision newborn Our showed down year-over-year hearing in phototherapy, and but screening

was product in ship by primarily to address order certain The voluntary trend design negative driven changes. holds

be We of achieved organic and year. X% divestitures expect revenue after these next to early implemented products. discontinued growth changes by Overall, we adjusting for

nervous sensory execute continued and operation to efforts plan central in of the strategic significant we our quarter, the During markets system efficiency. and improvements our in systems achieved focusing

million. reduced generation the we $XX long-term outstanding our debt flow cash addition by the during to In quarter,

further in discuss we ability nine months our a cash look flow. before, Only announced One and has minutes. we just forward flow working few discussed more cash capital tremendous our we've will in to detail a generate As ago, business initiative. Drew cash, Natus and improvements in to capital-light

have product us more our this quality better for us of a results efficient and made effort company. The positioned growth, increase

to evidence progress and this cash added quarter, the and flow margins are that. of we During our

further our In supply year-to-date addition chain and to achievements, progress continue operations. to integrating our make we

at to We quarters our continue we Natus ahead. stakeholders result in that payoffs execute many expect to in the changes and sustainable years to

our service in recently to I'd now announced caring Pediatrix. the largest of States, Pediatrix to business describe hearing and XX% MEDNAX the patients. screening briefly Medical the United transition advanced network and pediatric of neonatal neonatologists, Peloton providers practice Group like for nearly are hospitalists of

in have The accelerate to We’re excited partnered to of outstanding Pediatrix scale Natus much very needed an newborn combined innovation and us screening. such hearing organization. will allow with

focus on hearing The patient transition newborn aspects the allow will of screening. and on will Pediatrix Natus while to care delivering solutions service technology focus

the at year and of so beginning fourth efforts Natus in future where strength financial not a to a provide XXXX We have the do during expect quarter's our effect completed results. that this the material the compelling be could expect more to call. We our we XXXX transition to We set we'll have competencies. detailed update areas focus we year-end conference however transition, out on redefine during and

Since the completed January, businesses. Medix our and of we've divestitures NeuroCom GND,

XXXX the around us efficiencies allow full-year initiative. million immediate of We core a direct approximately Peloton benefit all completed ages. patients to as for strategic communicated of through January system exits build the of that These a our transition, these we of $X now expected in have our accomplishments central refocused With One systems broad for and competencies initiatives. will the sensory and nervous on strokes the gained we Natus the result

our our XX%. We annual ability annual to on non-GAAP ongoing expense. margin to non-GAAP a of equity remain in achieved margins to We continued and benefits include midterm goal confident operating reminder, our benefits XX% have XXXX. these deliver additional to compensation expect beyond And near as

can margin improvement margin mid-teens continued toward during you fourth the as from the guidance, quarter operating As and operating year. our expansion continued expect we we see finish the

In of the At We look far to a to and thus we summary, expand on opportunities our XXXX ahead hold pleased grow the leadership and lie for and as positions that Natus. will the continuing each we business our that focus profitability same continue flow. cash increase with with in business. performance several very in of we time, are the to margins goal leading expanding end-markets of

into the Drew? to Now Drew and Davies, turn Chief financial deeper Executive call Financial President our over Vice a our dive I'll results. for Officer

Drew Davies

will I on Today, results basis. Jonathan. basis you, and our discussing GAAP a financial be Thank a non-GAAP

results that the exclude ongoing tax statements, a believe our restructurings measures, non-GAAP certain charges We thorough other GAAP non-GAAP amortization related presentation analysis and financial effects. provide expense, our with their financial Our these more along of performance. of and

of financial a basis You reconciliation versus results on in our can release. find a today's earnings GAAP non-GAAP

same our XX% our neuro of during neuro the of compared million $XX.X third XXXX million market the previously from last The year. of primarily total XX% a decline the million, driven for quarter to quarter and revenue products divestitures total the was primarily of revenue was stated, end-of-sale X.X% Jonathan other XXXX offset in $XX.X by reported growth or revenue quarter same As $XXX.X or last end quarter. third market period -- during was Revenue by announced, year. we decrease from revenue

the X.X% EEG, all total care during $XX.X quarter our revenue end-market or revenue and from increase or year. quarter neuro million sleep of compared The revenue products XX% the Revenue XX% of products our of is decreased to study our last of EMG, within million to PSG, newborn total neurosurgery. including in during neuro, XXXX same third to $XX major XX% attributable

compared of and during XXXX to business of last was offset The or hearing same was revenue year. our and Revenue revenue primarily balance newborn the and from or million of of the divestiture quarter driven care $XX.X total million XX% end-market third decline RetCam. by by end-of-sale phototherapy in products growth the $XX.X in XX% Medix, during quarter our total

total hearing In in devices from lower was revenue balance international which in third quarter domestic XXXX, from XX% services to in the and quarter approximately due pending approximately XXXX the products to the third to the from systems than XXXX XX% contributed end-of-sale revenue total last revenue and and year. quarter previous year XX% total, XXXX XX% the was was in revenue quarter products of same The from sales Revenue XX% third compared supplies in the design and of period. the third of on split hold Revenue the XX% of sales and compared modifications. was in period.

increased sales basis last strength points in gross increased XX.X% year. of gross third the margin in XX.X% Neuro quarter On compared in was products. and in in to to This XXXX third lower the GAAP to quarter third XXXX. of driven quarter a our the same XX XX% of non-GAAP by increase XX.X% basis, margin to operations overhead compared period of our XXXX the

million Third quarter non-GAAP quarter expense decreased the year. compared $X.X to operating by last same

decrease expense by removing the initiatives, cost was primarily driven businesses. the from operating in reduction operating divested The including expenses impact of

expense XX% quarter. Interest by decreased as revenues the the quarter compared Non-GAAP lower for was was fluctuations. driven Our other $X.X result exchange last quarter during a to XX.X% same third to in million the of rate non-GAAP expense the year quarter. operating $X.X margin for million

million. and XXXX full-year the expense interest to quarter during $X.X $XXX,XXX be to approximately expect approximately fourth be We

diluted same rate per non-GAAP effective million be was On $X.X Our XXXX between GAAP third quarter share We was to net anticipate of tax quarter XX% million quarter income non-GAAP XX%. XX.X%. the $X.XX or basis, rate a overall third loss year. net tax our $X.X and to a last XXXX compared

net recorded depreciation per decreased based amortization share million $X.X the the million third third of same Non-GAAP and quarter. compared expense. Non-GAAP was year. Share we $X.X diluted In was last $X.XX. income quarter, the to compensation million $X.X quarter during earnings

sheet some repaid by flow. Now from $XXX,XXX. the the $XX outstanding let's third interest XXXX, million at annualized of balance look the which of and highlights reduces cash during approximately of We debt statement of quarter the

we ended operations quarter million. As the debt from $XX.X million. $X.X with a net was Cash result, flow of

collections. sales days in versus six decreased same days year period outstanding improved days prior to During quarter, by the the XX.X driven primarily our the

the outstanding shares to year. in shares compared declined Our compared last total period to Non-GAAP same net quarter. inventory shares the by to million diluted XX.X previous million XX.X increased million $X.X

guidance. to Turning

and We for basis. the revenues million. GND, the expect This million quarter of reflects year to exit a our $X.X which $XXX combined in guidance on fourth the Medix $XXX contributed revenues of businesses, to QX last be million and between XXXX NeuroCom

million Peloton of expect to be to expected the GAAP to to XXXX the share. full range $X.X million $X.XX fourth net $X.XX income continue for quarter. per of fourth to the business for operate We is in quarter or $XX.X the

of $XX.X range $X.XX be Non-GAAP million net is $X.XX share. to expected income or per to in the to million $XX.X

non-GAAP to revenue narrowing XXXX, of range per million $XXX a of with of revised full-year $XXX the full-year range diluted to to earnings $X.XX. a $X.XX to For share was guidance million

expect also full-year to of other of and and intangibles $XX of million exclude diluted non-GAAP of Expected $X.XX. to loss charges. share million amortization GAAP We restructuring $X.XX per $XX million earnings $XX

With the up open that, questions. call I will now for

Operator

James. Thank you. [Operator instructions] from comes Bedford question from Jayson first Raymond And our

line is open. Your

Jayson Bedford

aspects question business seems afternoon. growing taking guess and well. the to with And all which I the start quite I good around progress. appreciate wanted for the congrats be Thanks Hi, on that to I Neuro, growing. disclosure of

of the idea an quickly first business how been of growing? like It as year. us the portion give it's can half you is least chance driver EEG to the the Any in the at seems

Jonathan Kennedy

up we've to over quarter-over-quarter. biggest really a taken years And in Jayson, EEG, of win say us. the piece a outside was big as year line the U.S. low it believe, share that's -- Yes, the the couple for the I and product and is for obviously last business. U.S. us continues double-digits we the been for want of for really solid market the be to double-digit taken,

Jayson Bedford

a me can maybe is that you percent or either And of Jonathan, just business, just total as how Neuro? remind big

Jonathan Kennedy

about million it's Yes, EEG, for just a for quarter us. $XX business

Jayson Bedford

ship question Okay, And then, holds. I the had okay. I a guess, on

you of in all I third quarter? carrying. in about under products $X.X that the think that ship hold at had XQ were you you million Did recognize

Jonathan Kennedy

to much net don't we're we're basis, grow, On the And still be improvement up book my here us you hold them we backlog not No. will, of And shipping prepared couple if as had in our continues coming wouldn't to if and it's -- opportunities. I would as over said ship area backlog, I grow. it call a next a of although remarks. it for quarters, so an to continues

a But definitely for last that's something it's headwind up going quarter. the And also, revenue to

it's headwind for of a bit QX, as into us well.

Jayson Bedford

of detail this been have holds? exhausted thought would going entered For by there. about million, $X just I that Are maybe a something And is reason, little new I Jonathan, year some that's now. thought what's ship the we new? And there on and

Jonathan Kennedy

Yes, there are new ship holds.

As otherwise traps to game have in couple prepared of quarters, sometimes, my remarks, really things I we at the wouldn't our been Natus that trapped. quality last said up that tried step and

a been just we the lot more so what disciplined And goes about door. out

third ship needed it that on It quarter to was the terms felt in them mostly And we products, some and meeting in in marginal so business in expectation revenue, quality here, for we're screening, the in hearing not like Newborn the hearing beginnings amount last a our balance the quarter, we -- but of beginning was and material we and hearing we found very put the do. -- hearing of so -- the hold. screen something

Jayson Bedford

can you sorry, ahead. Maybe -- Okay. go

Jonathan Kennedy

No, I no. done. was

Jayson Bedford

products? update an Can XX I the next new product new flow? on kind give outline of of terms Can know of the us maybe there's just in works. months a the to XX in you you few timing

Jonathan Kennedy

our late a expect That's year. we in year for to release we’ve a the so product $X toward new camera us. NicView here Yes, million X

have that By device those ROP time cameras system, have got And RetCam probably in comes We numbers, a we a mean, a on -- release. then hundreds this number out And on a new I a time next extend life product number our of that of then year backlog. and our of backlog. we've that then of the this of terms line software well. screening other the new about add for out next product there as and have things of And are top extensions that, some EEG products revision we on features. year comes software new

Jayson Bedford

Any me, And mentioned model back partnerships, hear development, lastly didn't terms Otoscan. just business in jump Okay. there cetera? for you et I'll I queue. of in update then

Jonathan Kennedy

It keeping reviews. camera No was what -- The on that place. than of in other we've unfortunately good with continues this announced. the hold already it an with that lens product update issue quarter get the on well as lens that the to ship tip is

-- product a for hold ship a on for it quality put we've So issue.

pretty QX. with We hearing And expect resume it material end to until off won't we've manufacturers the is along. still as But probably well as the for year towards that of it the announced, some shipments demand but the to established continues partnerships get and of we've here, some aid chug major high.

Jayson Bedford

All you. Thank right.

Operator

Brian Thank you. question comes [Operator Weinstein next instructions] from William from And our Blair.

line Your is open.

Brian Weinstein

guys. Hey,

couple me. Just for a

to one. Just on piggyback the last

revenue else of, to million on the there? the new is Just care the and these newborn related full-year, at ship there for reduction guidance that's I was -- end, $X think, right? holds balance, is that the there something Or high and hearing in

Jonathan Kennedy

that of started Yes, beginning year. have Brian, going into for the just of think we be, more and the the just still narrowing as the as headwind at range us. continue we we're just to visibility That's a to that within tighten quarter. year, that's We evidently the we also, with to clarity it. we're But the range well where progressed we

Brian Weinstein

just And longer-term couple the the Natus million from a nature. having achieved But talked then now. in Okay. are efficiencies One that about $X been benefit you with

you said expect XXXX. benefits additional beyond You

Can give as to could willing us those comment about about hear and some that potentially benefits? when we'll of additional that like what look additional you're you detail any to

Jonathan Kennedy

think, of run we anticipated I rate the sometime million Well, a that the a for that year. is achieved in cumulative Obviously, year. we middle $X the that that amount was had

starting And the $X that's and point annualization that into so of beginning the year. that year. just from at going to probably of And $X from million goes versus the next million beyond the

this We haven't of give guidance year. prepared to the end beyond really

about I'm to put suffice we've long-term to that But the We'll do there. hesitant achieving too or that XX% to say, So get goal good XX% -- out. out goal felt far in January. it really we midterm

somewhat about in And XXXX. we a good we that that to midterm. able to and run guidance. rate of achieve according felt Sorry, have goal being be for And will in layer QX pretty that

Brian Weinstein

So just heard to you. make sure I

expense the in are $X million potentially trying an say? XXXX guys Is what in off that standpoint. So where benefit incremental you from were of you to QX

Jonathan Kennedy

I full-year. No, the meant for

to million One XXXX, really full we that cumulative put $X expect a for plan that, be we together XXXX. and million the $XX would I benefits for Natus for But would be tabulated million So the for haven't guidance cumulative I'll having to said $X you, for caution XXXX.

that out the same that more come in in come it's we'll XXXX So than that if with or or less guidance. out quarter, than would the

Brian Weinstein

Got are thinking far mean this end-markets it. kind kind in you of for they're that do long-term these think a all And next you terms And end-markets the what that then, at I your where do was markets. see in you of of these point. as of that getting of growth? over you gainer several years share to able I now? I growth like where most assume are as correct? Is

Jonathan Kennedy

with would agree that. I

are range good historics, like that Natus. did But quarter, this the actually products upgraded look on for a which in X% I there's historically longer-term I markets end-market. it's low at you model, I we cybersecurity. rates growth have that products pretty that would based themselves, connected think if the new a Brian, and that's demand the think in better products, are for products, single-digit think

terms share extent that, for what of Natus a will our And on driving think cybersecurity, and taker end-markets say will products is I think the In later solutions more I cybersecure do. technology. and hospitals provides things needed more be time, would the to fact, And one I EEG software demand of this we the to right of now in of be that over versions devices.

Brian Weinstein

Okay. last then one me. And for

debt. the down paid have guys You

some flow. showing You cash are guys decent

seems on So capabilities and you have before was it M&A this. had table. even clearly -- you like But back the

You have financial capability to do it.

a structural position or from organizational in better a an You're standpoint.

where you Can far and and are there? appetite processing you different something for talk as about through Thanks. ideas kind doing just guys opportunities as the of

Jonathan Kennedy

questions. the for Brian, Thanks, sure. Yes,

a hard where patients. do sensory Natus why. really add? year disorders in put defined strategic system markets together have I a So really prepared we're to we to what nervous value was remarks, going compelling the system output and we and that And the operate all to the that do said central tried Like plan this is in and of my define for

the efforts we that'll area And so be in. that our focus

that, that you nervous so Neuro got within And the squarely they're central in system.

sensory periphery You also got are newborn that systems hearing, and the protecting or care same brain. system with some but aspects balance the really the brain of are that systems, in in NICU, and nervous newborn's are aspects newborn care. is about some preserving In a and there sensory

fits data system. our interested would to also be that in and nervous us move markets, connect chain central I patients that in us nervous central of to availability sort in us hearing expect so and enable enable data, of or in those interested us of thing. terms brain to squarely And clean markets devices -- that devices and from to expect in data, and sort data, of businesses that that those up system But research analysis be the

Brian Weinstein

right. All Thanks guys. Great.

Jonathan Kennedy

you, Brian. Thank Sure.

Operator

you. Jonathan And closing turn phone remarks. now showing back further for to from to I'd am the like I Thank questions no any lines. Kennedy conference over our

Jonathan Kennedy

Okay. a joining for call. us, Thank have concludes for Thank you nice program That and you, the today's day. operator.

Operator

This gentlemen, thank and you Ladies concludes conference. the in does for participating today’s program.

may disconnect. all Everyone a You have wonderful day.

Natus Medical (NTUS) 26 Oct 192019 Q3 Earnings call transcript