Delaware | 77-0154833 | |
(State or other jurisdiction of Incorporation) | (I.R.S. Employer Identification No.) |
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition |
Item 9.01. | Financial Statements and Exhibits |
Exhibit No. | Description | |
99.1 | Press release dated October 25, 2017 describing the Company's results for its third quarter ended September 30, 2017 and other financial information. |
NATUS MEDICAL INCORPORATED (Registrant) | ||||||
Dated: October 25, 2017 | By: | /s/ Jonathan A. Kennedy | ||||
Executive Vice President and Chief Financial Officer |
• | Reports record third quarter 2017 revenue of $122.6 million |
• | Reports third quarter GAAP earnings (loss) per share of $(0.26) and non-GAAP of $0.40 |
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Quarter Ended | Year to Date | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Revenue | $ | 122,643 | $ | 90,906 | $ | 369,531 | $ | 274,193 | |||||||
Cost of revenue | 47,112 | 32,194 | 158,615 | 102,542 | |||||||||||
Intangibles amortization | 1,290 | 612 | 3,789 | 1,818 | |||||||||||
Gross profit | 74,241 | 58,100 | 207,127 | 169,833 | |||||||||||
Gross profit margin | 60.5 | % | 63.9 | % | 56.1 | % | 61.9 | % | |||||||
Operating expenses: | |||||||||||||||
Marketing and selling | 32,537 | 19,746 | 95,106 | 61,578 | |||||||||||
Research and development | 11,632 | 7,689 | 38,098 | 22,596 | |||||||||||
General and administrative | 17,329 | 12,821 | 57,501 | 37,225 | |||||||||||
Intangibles amortization | 3,882 | 2,409 | 11,841 | 6,741 | |||||||||||
Restructuring | 321 | 197 | 914 | 1,315 | |||||||||||
Total operating expenses | 65,701 | 42,862 | 203,460 | 129,455 | |||||||||||
Income from operations | 8,540 | 15,238 | 3,667 | 40,378 | |||||||||||
Interest expense | (1,025 | ) | (194 | ) | (3,287 | ) | (304 | ) | |||||||
Other income/(expense), net | 1,175 | (699 | ) | 2,019 | (108 | ) | |||||||||
Income before tax | 8,690 | 14,345 | 2,399 | 39,966 | |||||||||||
Provision for income tax expense | 17,203 | 1,032 | 15,597 | 7,605 | |||||||||||
Net (loss) income | $ | (8,513 | ) | $ | 13,313 | $ | (13,198 | ) | $ | 32,361 | |||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | (0.26 | ) | $ | 0.41 | $ | (0.41 | ) | $ | 1.00 | |||||
Diluted | $ | (0.26 | ) | $ | 0.40 | $ | (0.41 | ) | $ | 0.98 | |||||
Weighted-average shares: | |||||||||||||||
Basic | 32,593 | 32,388 | 32,536 | 32,476 | |||||||||||
Diluted | 32,593 | 32,981 | 32,536 | 33,077 |
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||||||
(in thousands) | |||||||||||
September 30, | June 30, | December 31, | |||||||||
2017 | 2017 | 2016 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and investments | $ | 132,405 | $ | 80,303 | $ | 247,570 | |||||
Accounts receivable, net | 116,666 | 114,063 | 86,638 | ||||||||
Inventories | 69,322 | 69,278 | 49,587 | ||||||||
Other current assets | 22,605 | 23,340 | 22,004 | ||||||||
Total current assets | 340,998 | 286,984 | 405,799 | ||||||||
Property and equipment, net | 20,677 | 20,853 | 17,333 | ||||||||
Goodwill and intangible assets | 321,454 | 320,824 | 190,277 | ||||||||
Deferred income tax | 2,204 | 14,714 | 14,915 | ||||||||
Other assets | 18,952 | 19,211 | 20,688 | ||||||||
Total assets | $ | 704,285 | $ | 662,586 | $ | 649,012 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 17,961 | $ | 26,762 | $ | 18,700 | |||||
Accrued liabilities | 48,281 | 44,662 | 37,895 | ||||||||
Deferred revenue | 14,691 | 14,813 | 23,346 | ||||||||
Total current liabilities | 80,933 | 86,237 | 79,941 | ||||||||
Long-term liabilities: | |||||||||||
Long-term debt, net | 154,235 | 109,498 | 140,000 | ||||||||
Deferred income tax | 34,835 | 31,037 | 3,684 | ||||||||
Other long-term liabilities | 9,263 | 9,323 | 8,013 | ||||||||
Total liabilities | 279,266 | 236,095 | 231,638 | ||||||||
Total stockholders’ equity | 425,019 | 426,491 | 417,374 | ||||||||
Total liabilities and stockholders’ equity | $ | 704,285 | $ | 662,586 | $ | 649,012 |
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||||
(in thousands) | |||||||
Quarter Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Operating activities: | |||||||
Net income (loss) | $ | (8,513 | ) | $ | 13,311 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Provision for losses on accounts receivable | 1,632 | 180 | |||||
Depreciation and amortization | 7,040 | 4,424 | |||||
Loss on disposal of property and equipment | 20 | 10 | |||||
Warranty reserve | (401 | ) | 961 | ||||
Share-based compensation | 2,248 | 1,954 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (4,762 | ) | 11,705 | ||||
Inventories | 699 | (6,705 | ) | ||||
Prepaid expenses and other assets | 719 | (11,468 | ) | ||||
Accounts payable | (8,734 | ) | (1,376 | ) | |||
Accrued liabilities | 2,467 | (2,464 | ) | ||||
Deferred revenue | 998 | 24,871 | |||||
Deferred income tax | 11,021 | 106 | |||||
Net cash provided by operating activities | 4,434 | 35,509 | |||||
Investing activities: | |||||||
Acquisition of businesses, net of cash acquired | 4,844 | (9,699 | ) | ||||
Purchases of property and equipment | (1,285 | ) | (73 | ) | |||
Purchase of intangible assets | — | 31 | |||||
Sale of short-term investments | — | (25,429 | ) | ||||
Net cash provided by (used in) investing activities | 3,559 | (35,170 | ) | ||||
Financing activities: | |||||||
Proceeds from stock option exercises and Employee Stock Purchase Program purchases | 174 | 343 | |||||
Repurchase of common stock | — | (1,503 | ) | ||||
Taxes paid related to net share settlement of equity awards | (549 | ) | (1,362 | ) | |||
Deferred debt issuance costs | (316 | ) | (533 | ) | |||
Proceeds from borrowings | 50,000 | — | |||||
Payments on borrowings | (5,000 | ) | (10,000 | ) | |||
Net cash provided by (used in) financing activities | 43,363 | (13,055 | ) | ||||
Exchange rate changes effect on cash and cash equivalents | 746 | (2,495 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 52,102 | (15,211 | ) | ||||
Cash and cash equivalents, beginning of period | 80,303 | 96,284 | |||||
Cash and cash equivalents, end of period | $ | 132,405 | $ | 81,073 |
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||||||||||
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited) | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Quarter Ended | Year to Date | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
GAAP based results: | |||||||||||||||
Income before provision for income tax | $ | 8,690 | $ | 14,345 | $ | 2,399 | $ | 39,966 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Intangibles Amortization - Cost of revenue | 1,290 | 612 | 3,789 | 1,818 | |||||||||||
Intangibles Amortization - Operating expense | 3,882 | 2,409 | 11,841 | 6,741 | |||||||||||
Recall Accrual and Remediation Efforts (COGS) | (714 | ) | — | 3,945 | 267 | ||||||||||
Recall Accrual and Remediation Efforts (R&D) | 1,469 | — | 6,571 | — | |||||||||||
Restructuring | 321 | 197 | 914 | 1,315 | |||||||||||
Litigation | 306 | — | 1,642 | — | |||||||||||
Direct costs of acquisitions (COGS) | 76 | — | 4,446 | — | |||||||||||
Direct costs of acquisitions (M&S) | (302 | ) | (2,827 | ) | (338 | ) | (3,410 | ) | |||||||
Direct costs of acquisitions (G&A) | 1,457 | 379 | 2,370 | 379 | |||||||||||
Direct costs of acquisitions (R&D) | 24 | — | 24 | — | |||||||||||
Direct costs of acquisitions (OI&E) | — | 37 | 48 | 111 | |||||||||||
Peloton Collection Reserve | — | — | 4,058 | — | |||||||||||
Discontinued product line charges (COGS) | — | — | 1,684 | — | |||||||||||
Discontinued product line charges (G&A) | — | — | 429 | — | |||||||||||
Non-GAAP income before provision for income tax | 16,499 | 15,152 | 43,822 | 47,187 | |||||||||||
Income tax expense, as adjusted | $ | 3,380 | $ | 2,370 | $ | 9,672 | $ | 10,499 | |||||||
Non-GAAP net income | $ | 13,119 | $ | 12,782 | $ | 34,150 | $ | 36,688 | |||||||
Non-GAAP earnings per share: | |||||||||||||||
Basic | $ | 0.40 | $ | 0.39 | $ | 1.05 | $ | 1.13 | |||||||
Diluted | $ | 0.40 | $ | 0.39 | $ | 1.03 | $ | 1.11 | |||||||
Weighted-average shares used to compute | |||||||||||||||
Basic non-GAAP earnings per share | 32,593 | 32,388 | 32,536 | 32,476 | |||||||||||
Diluted non-GAAP earnings per share | 33,100 | 32,981 | 33,086 | 33,077 |
NATUS MEDICAL INCORPORATED AND SUBSIDIARIES | |||||||||||
RECONCILIATION OF NON-GAAP ADJUSTMENTS (unaudited) | |||||||||||
(in thousands, except per share amounts) | |||||||||||
Quarter Ended | Year to Date | ||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
GAAP Gross Profit | 74,241 | 58,100 | 207,127 | 169,833 | |||||||
Amortization of intangibles | 1,290 | 612 | 3,789 | 1,818 | |||||||
Acquisition charges | 76 | — | 4,446 | — | |||||||
Recall accrual and remediation efforts | (714 | ) | — | 3,945 | 267 | ||||||
Discontinued product line charges | — | — | 1,684 | — | |||||||
Non-GAAP Gross Profit | 74,893 | 58,712 | 220,991 | 171,918 | |||||||
Non-GAAP Gross Margin | 61.1 | % | 64.6 | % | 59.8 | % | 62.7 | % | |||
GAAP Operating Profit | 8,540 | 15,238 | 3,667 | 40,378 | |||||||
Amortization of intangibles | 5,172 | 3,021 | 15,630 | 8,559 | |||||||
Recall accrual and remediation efforts | 755 | — | 10,516 | 267 | |||||||
Litigation | 306 | — | 1,642 | — | |||||||
Restructuring and acquisition charges | 1,576 | (2,251 | ) | 7,416 | (1,716 | ) | |||||
Peloton collection reserve | — | — | 4,058 | — | |||||||
Discontinued product line charges | — | — | 2,113 | — | |||||||
Non-GAAP Operating Profit | 16,349 | 16,008 | 45,042 | 47,488 | |||||||
Non-GAAP Operating Margin | 13.3 | % | 17.6 | % | 12.2 | % | 17.3 | % | |||
GAAP Provision for income tax expense (benefit) | 17,203 | 1,032 | 15,597 | 7,605 | |||||||
Effect of accumulated change of pretax income | (1,942 | ) | 771 | 5,099 | 2,413 | ||||||
Effect of change in annual expected tax rate | (1,126 | ) | 567 | (473 | ) | 1,031 | |||||
Tax audit reserve | — | — | — | (550 | ) | ||||||
Valuation Allowance for GAAP purposes | (10,755 | ) | — | (10,755 | ) | — | |||||
Effect on acquisition cost | — | 204 | — | ||||||||
Non-GAAP Income tax expense, as adjusted | 3,380 | 2,370 | 9,672 | 10,499 | |||||||
Quarter Ended | Year to Date | ||||||||||
December 31, 2017 | December 31, 2017 | ||||||||||
GAAP EPS Guidance | $0.53 - $0.57 | $0.14 - $0.18 | |||||||||
Amortization of Intangibles | 0.16 | 0.63 | |||||||||
Restructuring | — | 0.03 | |||||||||
Litigation | — | 0.05 | |||||||||
Recall Accrual and Remediation Efforts | 0.02 | 0.34 | |||||||||
Direct cost of acquisitions | 0.02 | 0.22 | |||||||||
Peloton collection reserve | — | 0.12 | |||||||||
Discontinued product line charges | — | 0.06 | |||||||||
Tax effect | (0.05) | 0.13 | |||||||||
Non-GAAP EPS Guidance | $0.68 - $0.72 | $1.72 - $1.76 |
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