NTUS - Earnings call transcript Q2 2020

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Operator

Good afternoon, everyone, and thank you for joining us today to review our results for the Second Quarter of 2020.

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 the business overview of the second quarter 2020, then Drew will discuss the second quarter financial performance.

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

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

non-GAAP For description our results of presentation a our reports business, GAAP relevant with of risk and see the related filed basis. and along will press uncertainties these the exclude today’s and financial changes their release be SEC. of non-GAAP analysis Management and other performance. GAAP the restructurings our periodic a measures measures results annual financial please and Management’s and pertaining certain on statements tax to amortization presentation non-GAAP The believes financial that expenses, charges – effects. our provide ongoing of thorough with – more

GAAP now basis I Kennedy, You of earning Medical. release. to versus like President today’s Officer Natus can over Kennedy? the on Mr. non-GAAP and of find in to would reconciliation the our turn call financial Executive Jonathan Chief a results

Jonathan Kennedy

for afternoon, us Thank Good you, joining today. Michelle. everyone thank and you

discuss our the COVID-XX as environment business expect today, we During call current how to and our we impact near-term. as second our over well our pandemic financial business results XXXX quarter the will

started, thank partners customers during our their like we and efforts I’d the commitment employees, and quarter. Before for past get to

fundamentals our the every dynamics, our response, product of products services remain demand will our discuss providers day. as The our on just business will leaders While than our depend and market in care time we we financial lower remain Health current pandemic while patients during And products we of and at categories. for remain normal remains most provide the uncertain. too this business intact. guidance not visibility demand into

new product product invest number a expected the months. and to in within portfolio with continue several next We refreshed launches our of

and initiatives positions maintaining are management addition, believe with the are investments to over progress data and leadership these critical our cloud-based long-term. In we making

positive to pandemic, operations cash XXXX. to sheet remains than normal due full revenue year continue lower balance we for Our the despite expect the flow strong and from

our results As quarter quarter, efforts few mitigate spending our each commentary we reduced minutes, last additional more and was potential supply Drew XXXX. details discuss quarter are share quarter on Today, to our key continue discussed million. years Overall, and our of but prioritize to in will the the end prior for ensured in I’d the provide of on approximately XX.X% disruptions our first, that Revenue cost growth the revenue annual our products $X.XX. investments a by million in second In ahead. chain quickly and our we’ll reduce to was in And have financial versus inventory year. for elements the the ability to loss reported have the quarter expenses markets. for declined operating $XX services strategy investments profitable same like we some per non-GAAP $XX.X and

saw expected, we from COVID-XX impact As the quarter. second during significant

hearing Hearing centers. declined by Our the reduced activity retail due offices audiologist’s Balance in was in at to & and impacted many hospitals Neuro market revenue and spending decline

II X% from benefited the business the the during to last rates Our increasing at new second Newborn camera, NICVIEW Care with and release performed births revenue as our well of quarter we year product. quarter video expected continued streaming compared

end look markets. let’s the more some details around Now at

as well revenue well demand neurocritical in as supplies experienced year. care which our a capital This as purchases decline for market, reduction compared neurosurgery quarter industry-leading products, XX.X% and equally neurodiagnostic on includes last percentage to almost affected same the a Neuro Our basis. our as solutions

continued that into of quarter. end so has did supplies However, in pickup the far a we quarter see third the the at second

tuning quarter hearing centers. disorders, the XX.X% this year of and product and hearing same of ENTs fitting Our and and declined the from in who aids devices audiologists, by in used customers’ from include & those supplies family last for Revenue Hearing hearing Balance to guide balance due hospitals the diagnosis products our activity disorder. assist reduced

activity on Newborn increased Care brain some its eye streaming Major our and monitoring, market, this seen Natus’ have solutions, solutions. and is phototherapy hospitals remain screening market-leading product in services outlook. cautious this in near-term we product by hearing used we newborn family imaging categories include injury While worldwide. video family neonatal

the revenue versus quarter Care during the X% by last year. quarter improved same Newborn

beginning our as is show portfolio. We’re very its Care Newborn pleased with success to with these results business revamped

their to for Before employees, results customers during call over our want these commitment the of all thank challenging I I and turn and times. Drew, again partners to

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

Drew Davies

Thank you, Jonathan.

the XX%, market $XX.X NICVIEW the & stated, our quarter million total during total total in total $XX.X the Neuro retail XXXX X.X% XX% pandemic. to to XX% the backlog second from in was $XX.X XX.X% to Newborn the The last quarter market contributed XX% of total previous a our quarter from of in XX.X% during primarily of in $XX.X the million to total year. second during the in period. decrease sold revenue higher from decline second Newborn million the demand from the XX.X% the second decreased X.X% in to revenue million revenue of approximately second of On of decline in from revenue centers period from the in up device for both was from of year. due devices same Jonathan from same million of resulted the Balance of market to The X%, second up by same the was a in manufacturing, XX% services a result second last period Revenues revenue quarter capital revenue made during quarter, and sales. hardware revenue devices. to supplies. the of and costs screeners quarter Revenue compared COVID-XX in end in period from margin of The we total costs hearing XXXX XX% and quarter hearing margin or goods Care reported second growth last lower Pediatrix increase the last GAAP to freight the revenue of total, to Revenue systems $XX.X a quarter decrease, Care related approximately XX% XX% of to period X.X% non-GAAP or of of compared quarter $XX.X and the revenue the of Lower the to of as last compared lower Neuro in total to our As the overhead Balance million during was quarter the decline. during primarily significant or XX% or X.X%, than lower quarter year, to $XX.X attributable & in deploying a In or year. XX% spending Neuro revenues gross one-time compared for was year. domestic the XX% of second our XX% compared X% from COVID-XX related revenue audiologist’s same the domestic partly XX% and decline XXXX, XXXX the or total increased of offices XX.X% approximately X.X% in international compared The to Neuro of XXXX, XXXX. to XXXX. offset and in cost last XXXX, revenue gross the same balance quarter made compared was revenues XXXX, our XX.X% same of by second Revenue demand, up Revenue revenue was other of XX.X% of primarily sales of same impact of XXXX, decrease million, revenue end driven COVID-XX shipment the basis, revenue made to year. year. of compared and decreased Hearing quarter XXXX respectively absorption fluctuations supplies Hearing XX% end

included The operating was quarter offset Second expenses an in tradeshows, decrease quarter projects driven medical by the same employee regulation reductions by discretionary Seattle quarter. the expense Europe. increase R&D on device operating products for Only of – in R&D remain primarily to XX and in travel, the certain in spending compared – this expected expenses be non-GAAP are million expenses. R&D remediation remediation and and cost last two completed $X.X higher year. by decreased to

margin Our expense offset and quarter during income on Non-GAAP non-GAAP decrease primarily by quarter. was exchange was gross – a rate driven quarter, second to the Interest operating million for operating by the compared XX.X% revenues expenses. margin decreased the fluctuations. the in Neuro and decrease last other $XXX,XXX $X same by year

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

XX%. quarter, of and XX%. year. $X.XX share to tax $X.X non-GAAP Non-GAAP the we was XXXX million million last second second We the second XX% million $X.X or was depreciation our decreased compared share, million anticipate On GAAP compared $X.X year. $X.XX. last basis, same was same rate was recorded the quarter. the quarter million effective $X.XX Our of our net second loss net a or to quarter tax overall $X.X per between income to quarter rate be per income compensation amortization. net Non-GAAP quarter Stock-based and In loss $XX share during per non-GAAP

balance sheet statement of and at flow. look the Now, let’s cash highlights the from

in the quarter, in we remain the as year. We time, was quarter at million to positive $X.X for $XX expect decreased Our ended flow the million. used this in outstanding repaid the second with flow and cash debt quarter million. $XX Cash during operations cash

compared XX.X outstanding primarily million outstanding to sales decline period same decreased the driven the XX days in shares year. four increased prior revenues. same Our in the XX.X last shares in million Non-GAAP days, the versus days shares year by to period

indicated a guidance the of our release, With in of exists pandemic. in business this mind, press in significant will our not As at COVID-XX detailed as this provide uncertainty we the a company amount still earnings time. result

spending However, our quarter, reductions the we businesses tradeshows, least pickup we the will which discretionary – and our quarter, same but leading quarter in of and the revenue early supplies guidance and We impacted and QX last continue these excess and services services. we businesses that, in to revenues products improvements employee Neuro indicator have reductions Reductions this to of actions is travel, orders. remain In actions declined continuing up and quarters. and We believe do $XX of believe orders a quarter, by We third in below now the in annualized when pandemic. QX, quarter, The below demand outside & and weeks have the in look several Newborn again visibility the questions. quarter, in across which expect for will the improvement second levels. providing predictability to the of stabilizes be forward in Similar into second into the supplies In is compared benefit to for the improve it include of year. Care last historical took margins show remain fourth Balance the the of minimal annual to in demand. canceled spending, the to seen this second quarters. significantly. expenses, In we part expect open a two third Hearing coming will And but incremental the with reduce some million. we third quarterly

Operator

have James. of Raymond [Operator Instructions] question from a Jayson We Bedford

is open. line Your

Jayson Bedford

few. you seeing that start just a you of any it business certain between afternoon. have seen international Thanks and wondering, I’m US to devices? the taking or down Are kind the questions. have geographies? – just looked trends. you weakness lower guess, geographic Hi. pockets I for of Additionally, Good priced higher was seeing any I pretty of strength kind either similarly, I with difference priced the capital are but like in guess

Jonathan Kennedy

do it’s Jonathan. than number ones a that And at a difference the market is better US prior – just difficulty] there capital. There little quarter. little priced normal in volume and Europe and quarter we is a and nice bit that not the large was point definitely a as well Jayson, as versus definitely would China – of the faster higher - maybe this difficulty] I sort we of stronger [technical for are been out there shipped versus the normally than quarter, deals the smaller has recovering sold Yeah, [technical and what better still

numbers, kind us. our market in we Europe have improvement a for at if the better Asia So to major just over in look you US. of US but know you’d The still see weak, is that than remains

Jayson Bedford

cancellations outright or have And capital you on you do just get more that side, sense are the these seen the deferrals?

Jonathan Kennedy

that customers the and news and good about. hospitals think, frequently. quite deferral Care ask The it’s degree to talk remain somewhat still so in developing lesser from a question and Well, is Neuro Newborn I it they committed is interested their and space in a hearing, deferrals but we question capital and that to

Now, see we yet whether cancellations, today. you haven’t to that we know seen from but a certainly wide moves deferral what on that is scale, that

Jayson Bedford

Okay. early July, that pickup July? late side. in June, in was a I increase haven’t seen And on your commentary capital assume a that supply around or the you in June, specifically Can commensurate pickup

Jonathan Kennedy

There better than has than know QX. was the it capital, supplies there but the is capital been evidence more of on on is you most the

but more prevalent, in leading, the not it’s but much hopeful, in that spectrum, it say felt so – it’s confident we you is know it, I sort it’s not know a little you that would category, would of the capital, a feel the supplies on more So because remarking bit we I put that

Jayson Bedford

Okay, on the better the – just assumption cap than was make on capital May? the can June okay, side, that we

Jonathan Kennedy

Yes.

Jayson Bedford

Okay.

that in On was better. side, surprised, the Neuro there could business a bit a hold I little thought I

some product stabilization exactly you can the think, the pipeline in said maybe that but few few new about maybe is quarters, term the talk used, months, and just new I you next, side? for products I a forget you You Neuro driver referenced over the

Jonathan Kennedy

in you the really intent some weren’t opportunities been comment. just the have the we’ve the to They – No, we identify It wasn’t pipeline. that of of was Neuro. know

We have out year. of coming RetCam end the new device the a at

have new the that by hearing screener market a screener, of the We hearing international mostly comes out end year.

a Neuro out – We as our by have which Neuro software, well. to is a major end upgrade the year of product the

what And so I to. referred that’s

of Of Otoscan well kind during across All board, quite that course, the actually considered, another units this Otoscan our product of quarter. we the So sold quarter. things got mix we’ve did a XX

still is there So good interest there.

to really product but to development, of not wanted I product introductions well. So we as continue out, speed with full ahead point kind go just

Jayson Bedford

Okay, that’s helpful.

think and streaming Is Just of of of stabilization impact quantify on new there can was any way I an kind video side, clearly strength. the you Newborn the device? area that the NICVIEW

Drew Davies

it’s it under Hi, quarter. Jason million $X just for Yeah. Drew. Yeah, the did

being we number It had built were in get was really we it – well the So and it and and – time was during the product called was able over QX – we orders we the those backlog. to a the market of released did quarter. up into and it

Jayson Bedford

least at Drew, my end. apologize, I And on

on You out kind what number, was blanked value? of there the the dollar

Drew Davies

just $X it Yeah, was million. under

Jayson Bedford

okay. million, $X

in for is difficulty] capital Okay either you your difficult [technical M&A capital, of obviously cash? uses creative of tuck-in this and opportunities and Are use environment terms then or a seeing any of

Drew Davies

at. number slowly, been do. looking technology We’ve We and of there our M&A surely been we’ve but rebuilding are pipeline tuck-in

that that fits can be find things think, know to I earnings. looking So interested [technical the you in future those something accretive opportunities hopefully, at and the and difficulty] portfolio

Jayson Bedford

appreciate guidance, not growth? is business but when some show you us giving I revenue the way can to there then sense you’re any give as return can And Okay. to

Drew Davies

to Yeah, on revenue predict know you’re from. it’s growth, – guess period the I tough you comparing which depends

in. know but say levels the range not we than You thought as put still we it historical but QX, as that will high did be QX of kind we better

just that’s for tough think the mostly do this are able I point. about to at sales are we hardware margin all, for – dependent at to this we because Neuro. on It’s know,

Jayson Bedford

Okay.

are someone me else from guys. if I’ll that’s there any. it ask, let Okay,

Drew Davies

Thanks, Jason.

Jonathan Kennedy

Jason. you, Thank

Operator

Natus. over to There are the like turn no call further to questions. back I’d

Jonathan Kennedy

that so work to productive. make and keep Natus are best Today, you our doing Thank safe we Okay. people the much.

organization, a day. today’s the strength We have call our is have you operational. dynamic environment. financial this global our dedicated the of during we and patients and importantly, driven most our and business good us on by needs to joining are fully and Thank succeed customers a And support challenging for and commitment

Operator

Ladies today’s and gentlemen, this concludes call.

have disconnect. day. great may Everyone now a You

Natus Medical (NTUS) 2 Aug 202020 Q2 Earnings call transcript