NTUS - Earnings call transcript Q4 2021

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Operator

Good morning, everyone, and thank you for joining us today to review our Results for the Fourth Quarter of 2021.

On the call today from Natus is Thomas J. Sullivan, Natus' President and Chief Executive Officer, and Drew Davies, Natus' Executive Vice President and Chief Financial Officer.

During the call, Mr. Sullivan will provide a brief overview of the fourth quarter 2021 and discuss the strategic direction of Natus. fourth performance the XXXX discuss will quarter and financial guidance. Drew within will Act. of include call the forward-looking Reform Today's Litigation statements meaning Securities the Private statements future about and management's These our include beliefs results. expectations

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

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

a You of Sullivan? Executive would call versus and Sullivan, on non-GAAP release. a like President in results over to GAAP financial I Medical. yesterday's Mr. turn of the Natus earnings Mr. now can basis find to Officer reconciliation Chief

Thomas Sullivan

you, find Drew for Chief the On am presentation, Officer, call. www.investor.natus.com. you to will the your to deck investment Thank Relations and our of on is listen of an to comments. today's Drew joined Natus' well will the review for discussion Investors strategic investor Financial go-forward clinical as by today's of business website Good and and model. page Carmen. call Natus' A of results, Executive time of I quarter our morning, fourth presentation investing the agenda the as throughout President focus page our today's XXXX Thank financial everyone. copy Vice available and on you presentation Natus X refer Davies. I

will Following review quarter full-year introduction, my Drew XXXX financial results. the and brief fourth

will back week Natus an me privilege and review the comments this discuss for turn strategic it and consider Q&A. financial provide a taking are Medical. as the the will to completion result. lead honor will I for with company. full-year ninth I this, Following XXXX my a we Today then to marks actions Drew and our and our guidance closing of it

by two been their and for the every them and past day. company. the bring to with I've to the opportunity thank talent, with for throughout have also industry passion I the around products months, I to had would Natus breadth impressed whose Natus that Natus' teammates been I've touched experience patients and depth are world. lives engage Over they efforts the of the our like impressed leading products

fortunate XXXX. a the strength. We building be such fourth are to from great quarter the reported for of of Yesterday, position results we

challenges and Our at a high by COVID continuing chain for of EPS constraints. revenue the finish end from quarter year bolstered of despite the supply our to and strong were end the guidance,

and remains products expected focus in refer At XXXX that the over over for Natus in Davies, are continue in X Drew? to on challenges our like Our fourth turn you time, $X.X million to are would will describe extraordinary the CFO, Unfortunately, call presentation. later. ensuring these as available quarter. we page to the this of resulted Drew clinicians, into which to costs I

Drew Davies

Tom. you, Thank

by the XXXX, fourth increase service businesses million, reported X.X% of neuro fourth during each Revenues an and we our grew quarter revenue the contracts. of hardware For the of $XXX.X from in quarter led XXXX. quarter,

imbalance. attributable unforecasted of by total end gross and during XXXX. our XX% with same drove XXXX The million $XX.X for improvements on quarter operations quarter increased XXXX phototherapy XXXX overhead. during costs or million total devices. driven the quarter fitting quarter compared higher the from the year. from million year. margin Non-GAAP quarter year gross last margin of and compared compared total of On XX% the $XX.X XXXX. to devices XXXX XX.X% XXXX million seventh services supplies non-GAAP in devices time same XX.X% our or XXXX XX.X% to XX% decline XXXX quarter, the gross quarter during million hearing year. to Revenue increases same Revenue XX% revenue business for increased Hearing Revenue the market X.X% XXXX. compared Revenue XX.X% X.X% repeat quarter of total of to the XX% the related fourth year. expenses device, compared in was international or by imbalance the X.X% the of of the lower compared increase total the by to for revenue of quarter sales full of fourth basis, or XXXX during gross the increase $X.X during increased XX% million year. period grew required improved newborn revenue period. $XX.X last last approximately to The to revenues XX% and total the market million revenues XXXX improved quarter offset XX.X% to period. $XX.X market XX% from manufacturing to increased compared in revenues margin total full-year consecutive XX.X% the XX% was XXXX to same from margin million compared from XX% last international in compared margin of million same total fourth to Revenue did last to XX.X% a last the revenue from same from were the in in hearing in driven semiconductors revenue and to fourth revenue fourth that savings year leverage securing Fourth offset $X.X in revenue gross GAAP a to from million year screening in incentive GAAP year. The $XX of neuro and for not during of overhead. end by increased for systems last gross grew the to on of year. the the year. fourth $XX.X margin in of growth to fourth increase domestic XXXX of end in this last year-on-year quarter to the or quarter $XX.X in care was compared total of the and of from increased compared higher sales. lower full non-GAAP pay to freight XX.X% same in the was revenue XX% compared of service. positive XXXX for contributed in extraordinary and to fourth to our by $XX.X operating Revenue period fourth increase of increased from and was revenue of our supply off our revenue assessment neuro of backlog to XXXX of revenue In XX% $XXX quarter XX% Our and XX% compared XX% the total was during quarter in was hearing in XX% million. in from of XXXX or in device quarter by devices quarter expense the The quarter from Revenue associated respectively increase the and

quarter year drove the to operating increased Non-GAAP increase an expenses for revenues in XX% margin the improvements operating compared increased million non-GAAP in by year. the X.X% compared in the improvement. to full last on the operating increase same for year X.X% to last of gross year gross Our higher Non-GAAP XXXX $XXX margins and margin. million margin compared XXXX. Again, to and $XXX full to revenues

Interest exchange was quarter driven $X.X the the and million Our during million fourth full fluctuations. year. other million expense expense rate $X.X was $X.X for for quarter, by the

We approximately expect XXXX the for be expense million. of year to full interest $X.X

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

For during at And GAAP flow. the cash. was million million $XX.X let's net now was income was quarter $XX.X recorded $X.XX quarter. year or look sheet Cash a balance highlights the ended take of the cash and from in million $X.X and operations $XX.X million non-GAAP compensation with and statement net share the XXXX, the some income share. of was quarter. $XX.X $X.X from We diluted flow full during In fourth million depreciation million amortization per quarter, $X.XX Share-based or we per expense. of fourth the

operations of the XXXX, $XX was million. from For year full flow cash

year outstanding Non-GAAP it direction Our Tom strategic versus prior back now days increased days will discuss year. the increased turn XX.X compared to million period I to sales the X million of to to XX in in XX.X same shares days. shares same shares the last to the Natus. outstanding period

Thomas Sullivan

our thank Drew. imaging, categories, strategic that pediatric strength. from including an page and the industry our you of Natus' being refinements I resulting highlighting Natus begin is to you, partnership. Thank financials and investor hearing I your a diagnostics, of several And screening. position in X On infant by deck, are for like stewardship would the retinal transition. during accomplished appreciate review leader of neuro

drainage instrument hearing pressure and intracranial fitting, and competitive. and also offerings our Additionally, monitoring assessment balance highly hearing are

are commercial Our service, in a platforms development, quality, over by and to marketing, through operations, including XXX-person-strong robust customers administration. sales and regulatory field technology and research our XXX brought complemented organization, teammates

our operate. states an we possess of teammates which disease Our customers in and understanding excellent

limitations There complex that and Natus and by portfolio. some believe are, page and built broad in is hindered however, to a growth that a Turning profitability. company history Natus' has historical resulted acquisition, has XX. product I

call our consolidation three reduce many lack While to than The mix led our years customer of infrastructure did point, past in other duplication resulting strategic these some have acquisitions synergies of technologies. the industry-leading disparate of positions, cost. products a in these

improvement. attention entrepreneurial margin the resulting focus However, on diminished centralization and

changes competitive as hearing alignment Additionally, on enable to believe somewhat the newborn care internal and that in XX. approach and can a We approach us that page neuro, technology. diluted create refinement our has described a as on imbalance resulted care-driven to in value shareholder advantages legacy commercial of sales on product well our key as site lines emphasis focus

a international the mid-single so, digits. Specifically, our consumables, growth increase accelerate to product innovation product sales potential or growth and medical we greater margin must leader. vital, strategically do focus our products internal segments, And device and differentiated that we have those long-term to that and aspire inorganic commercial be upper aligned of offer Natus Natus pursue on are growth technology-driven pursue penetration drive in and large in are where improved can development, strategically higher-value increase countries, dynamics

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believe home. to pride Natus professional an them and our the build Our place that take teammates great Natus culture, ideal for in their is we neighborhood

component strategic plan our Natus second our The is vision. of

and making broadly, eight succinctly Natus ultimately uniquely patient and sense and advancing to and diagnose with pathways the goal page Described education of new more service and sums standard nervous trusted of and very affecting delivers neural care of is quality on the systems, and signals. life. tagline screen, treat us. it innovative disorders Our outcomes brain, improving body's solutions, products, XX Natus, the the of sensory up

space, compete a see our body can balance, central peripheral – sense neural the right, the and brain, or you which focus sense this more both and eight business product the define of interoception On faster of page sensory believe in the Natus' freedom to that XX, we the upon and itself. touch, expanding systems, logo, the nervous detail. and markets. showcasing smell, nervous nervous specific in our proprioception, clinical growing, a new gives we the and hearing, We This in areas to potentially for builds pathways, may taste, technology-driven a On systems us strengths, while vision, body vision capabilities or vision describe new Natus model this in efforts into areas.

information clinicians. hardware, Let body's body, me detail. physiological you to of the acquire will for then clinical first and focus and of this software provide translate Natus in and overview provide response, algorithms, and that advanced an describe and business data actionable capture will with each the more offer model, we the consumables area signals, stimulus into monitor

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sleep offer specialists, pressure revenue, of and intracranial technologies and a apnea, leg XX, assessing specialists, and uniquely software muscle focus. epilepsy, maintain neuro product drainage. to of efforts area to our and knowledgeable tumors, diagnostics support ENT brain in epileptologists, neurosurgeons largest syndrome, focus sleep describe brain team XX% positioned function in injuries, their sleep presence and is to sales in neurointensivists industry-leading largest neurologists, Natus' Our a address global our stroke, with page solutions Natus seizures, and of neural of head our narcolepsy, range offering grow position. representing and solutions, insomnia for scale, XXXX restless supplies strong we service most area and and the pathways On devices, nerve disorders,

are and syndrome, settings, technicians and Our tunnel and neurologists practice address offered private in comprehensive hospital disorders, to to peripheral both muscle solutions neuropathy. carpal

positions While clinical smallest leading XX% these high customer area of focus the of have and at industry revenue, exceptional loyalty. brands

solutions sensory offices system Natus eye Today, is retail solutions, fitting, focus and and as with on in assessment, portrayed acute XX. screening in hearing, of products area balance, and imaging hearing third Our nervous page the offers software found audiologist care, settings.

recognition audiologists, and we portfolio Representing of disorders. the ENTs differentiated brand neurologists offer engage innovative of sensory are range neonatologists, care. Our solutions XX% of strong that a customer loyalty. ophthalmologists, changing have paradigm and We revenue, across

highly our solutions and assets not nonetheless regarded product fourth and final Natus focus are Our linked is page traditional of other represents on lines. that, area XX while to Natus directly vision, new

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currently value in path these XX% product other best of shareholder creation the assessing of represent are Natus' solutions to Collectively, all lines. revenue. We

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adjacencies. in acquisitions areas Our capital stable of pursue afford cash clinical strong sheet and flows the synergistic and focus debt-free to balance us

increase new increase pace in product We manage drive we as growth to margins. intend growing growth penetration, international thoughtfully faster our consumables, we development. have the accelerate for prioritize overall improve of as We growth segments, increased to product opportunities costs and

page alignment, and XXXX Drew that Now, the at background, annual With supply the involving will the we'll to chain this refer a for to we this challenges guidance, XX time. turning as continue to well to XXXX. full-year Drew? of it availability our guidance to strategic you we CFO, semiconductor as guidance provide Davies, as face, chips, I transition especially of turn result as back our to

Drew Davies

areas of clinical transition In growth support Thank on of and pathways Tom. systems. innovation infrastructure organization on The in its the neural will realign nervous XXXX, its area first company the quarter resources focus focus entrepreneurial brain, clinical to a cost matrix Natus while you, non-commercial commercial reviewing will eight sensory structure. and of the in months, each coming in

these the result point, annual excludes As is impact of only acquisitions providing a or company at changes, the of this guidance which divestitures.

and associated includes For $X and $XXX $X.XX be per million our $XX year to to guidance XXXX expected other $X.XX their be other is is the and due semiconductors components company's extraordinary between earnings to of availability an million. revenue assumed million and share acquiring reductions and per earnings outside savings. million with constrained of supply full non-GAAP be to $XXX chain and costs XXXX, share normal expected commercial associated with of $X.XX. incremental expected between $X.XX realignment GAAP, cents between of cost are and the

further profitability. Additional unforeseen constraints our impact could

component future. back could some extraordinary these time, the we will And Tom to the constraints impact impact in for with revenue. positively a comments. that, profitability supply not and costs profitability more anticipate chain At this it semiconductor near conditions additional to normal While do term, to negatively turn I in impact return

Thomas Sullivan

the included chain regarding our guidance. impact echo costs Thank you, comments I of XXXX Drew. supply in incremental negative Drew's

improve these despite to will will further technologies short-term While committed we remain return cost will our we of and COGS be reasonable the to mitigate that clinicians will and acquisition that impact. available products hopeful costs ensure these more to Natus levels, attempt supply remain for

our these we the we expenses. to we seeing of Excluding new gross that begin briefly a our believe to a We'll prospects on of XX%, complementing COVID-impacted pathways in believe these up it in areas us. are the compared sensory previous in believe will and clinical basis categorizations. way this reporting in pursue. XX% operating will are these growth led for continue be forward revenue XXXX. manner areas costs, underlying Returning we up improving We Both growth progress as each technology segments the go are making page XX, pleased the margins, a systems revenue reflects we areas. brain neural Compared Natus of are better to improvement focus dynamics XXXX, to with the X%. focus up we in and there

year. the believe that area I invest journey technology-driven core on believe where other We pursuit time, XX% on will lines, first respond the higher segment products summary, page away of improve long-term margins areas step this can and data good you Natus Our are Natus the continue in strategic leader growth our from the in enabled stated in Natus be the refinement. We've Drew and the that was implementation to in our as updating wealth the growth the categories. each for begun slower XX, intend to thoughtfully of questions. in down to as happy new make the We manage newborn growth solutions our by to well the progress care movement We look and as clear forward In as key we overall is a is on difference. product focus. worldwide opportunities At of our costs of to prospects as drive ecosystem. our several of I Carmen? areas earlier we our Natus

Operator

Instructions]. [Operator Bedford from Raymond Jayson James. Question with

Jayson Bedford

comprehensive the deck after to throwing season, long a lot you're morning, slide but have a us the at detail earnings appreciate admit, this certainly all here. I and

to critical Natus is growth identified higher which for And longer you sales these is upper line one things to single-digit growth? you was the of just, of I I think And factors deals. talked I penetration, and just Tom, question about, international upper most maybe single-digit consumable first term. one my pursuing guess reach So, start, top guess

Drew Davies

to medical the us all opportunities where as a largest to countries have to in of the number growth, areas concurrently, market definitely our done that that look we of has portfolio strong lot to in have as for we business is with growth. outside our digits care the the mid-single want device be We But particularly opportunities not And the drive And there is that we of consumable Jason. it the Jason. focus, world. are States. of US, grow right United that can in greater around are They adoption believe drive Upper believe also standard that we we believe, a the clinical technologies standard of share care.

great areas also speed really So are growing those new internal but same are to looking of we see with we at can development continue in inorganic best being And in consistent portfolio. innovation. time, us lines the the as we our executional opportunities fit want to family. aspects or really the the sensitive as that product where process growth, and keep faster we vision, them that to product strategically We're the of of give technologies Natus are to make to oriented class. looking part our that synergies accelerate acquiring At then technologies our business strategic

So, right levers the all It's there's manage no those lever. of concurrently. of a trying one those that's to single question

Jayson Bedford

upper definitional, that mid-single, more And just X% to X%? is

Thomas Sullivan

think I a that's good Yeah, range.

Jayson Bedford

some just the you what's Tom, M&A bucket, look on and the of for M&A criteria guess, the leverage some taking at? I appetite on

Thomas Sullivan

at done faster And a with debt Jason. assets. that Natus with here lot have into $XX of million we or are sheet don't focused and growing move acquire available no areas are that either all, technology market We're assets just adjacencies we Natus. to the in an markets, increase great we really we're our where the a highly in to strength traditional balance job on. But have want today opportunity first for for assets, Well, have firepower where currently a cash of that looking than is driven, Drew's attractive, that

in. bring shareholders. secondly, sure criteria for is to them, it's then, to but ROIC is it's acquisition that already that look that, going first, there if think right, in, to that existing we're any for strategic term markets going we is the with use make attractive play we're synergies also We our in we long a strategically particularly And

Jayson Bedford

back just In of to to of new terms neural and brain, growth maybe of rate end just here, buckets? getting as idea each you market specifically give of the of kind us sensory, the buckets those revenue can an

Thomas Sullivan

pin the one that little range, opposed growth market. a the they mid-single bit hearing than being different rate. as to there see less similar look variety But the to a overall in marketplace is aid seen the that. down hearing at instrument rate to that very as It's of little of sort areas. growth what lower different digit, while specific itself the clinical market, market we pathways market represent as grows for neural the the The is markets capital brain faster in we to because growing, a roughly, X% is X% we sensory market The infrastructure that play role a out

probably be X% estimate. range So, it X% would in too is our main to the

the digits digits. that we But both opportunities or single mid-single that So, side US and believe the in of lower US do share lower the outside of from there the upper perspective. they're in growth a all the market for are us

Jayson Bedford

brain, share, it's would what realize today be and in your neural approximate difficult, sensory? on just And share but I

Thomas Sullivan

level that's detail It's specialties go put that not get because there, into really not it out prepared to to Jason, of the sub and easy today. we're something for to starts to us

Jayson Bedford

of for as long products new just are I'm decisions how you identified homes or path the in other an How far segment curious you're make guess these kind find to the area the will looking where I at. as we. other to segments? you along it take

Thomas Sullivan

in Neometrics in our necessarily lines vision. leaders market particular, there's category. Jason, NicView the their other and space. terrific directly with They're the consistent not Natus assets In are

including are these us systems. distract eight all them. best to we're strategic evaluating on we options shareholders. highly brain, So, the at they clinical of growth them generate paths assets looking what for sensory our to and pathways value organically want don't that for us from nervous We're the make key attractive are the neural maintaining But that focus areas on sure for

a And what a is, the how to of fit take initial that more Even have of to nice photo three revenue. Natus There's remaining at the line, able going therapy the our let's a our Natus for revenue portfolio. the our to them, fully next X% approach our plans assess months, them step variety in overall it assess Natus process highly So, line. we're up them do be things will other of through a of product of back, is each describe not successful part each they is My X% overall to we'll that as investors. make expectation and them. make overall we'll of very

Jayson Bedford

maybe cost in can the me. structure? like that? you've spending it need with to along guess Is I lastly listing with and technology the step I here. you that importance a accelerated goes information new you're technology seems Or achieve lot a certainly of think the the about for portfolio. this of period of disclosed perceived clinical up But there the current

Thomas Sullivan

fit restructured say back would excellent cost the we an Jason, thing a and sales step did to is this, and that I question. the yielded saving. organization that's we And first

I've already as has our So, million, $X.X guidance. Drew included in and described, it

It's have properly, and to drive we really answer sure that we've starting don't that they growth. to As accelerate now. from engineering organic the our of teams is these that resourced make that want been perspective, to which We that collaboration matrix talent an organizations and building have only the we that been and long-term we're now two they teams, competencies are that, the here yet. nine implement innovation weeks know the part

be we can and as we Now, going to of we're cost investments interests the we attempt sensitive are that. obviously if to But in long-term go to as through best our it's open as the believe shareholders. do making we appropriate

distinct in on begin own we'll But announcements yet. not of And our So, to it. we we same want organization. in next and the evaluating answer make don't an have process that the the months. the journey to a update We're it have three today

Jayson Bedford

XXX people it's what if strong restructuring, was force before today, sales the on it the Just restructuring?

Thomas Sullivan

any XXX. get over that, than Jason. We sorry. specific I'm was It more don't

Operator

to I And any remarks. the final call Sullivan for you. will Thank back turn Mr.

Thomas Sullivan

would to Carmen. every day Thank you, call. teammates their to enabling quality today's life. outcomes for improve I like our investor everyone, patient and joining in In for again Thank of thank clinicians Natus efforts closing, you,

investment also return. Thank and shareholder a a appreciate company day. in our And We investors' forward you. great Natus to have us generate growing as to look

Operator

may concludes you. for today's Thank disconnect. this now participating conference and Thank you And you call.

Natus Medical (NTUS) 25 Feb 222021 Q4 Earnings call transcript