EX-99.1 2 a5263170ex991.txt EXHIBIT 99.1 Exhibit 99.1 Natus Medical Reports Record Third Quarter Revenue and Earnings -- Non-GAAP Pretax Income Up 136% Over Prior Year -- Company Increases 2006 Revenue and Earnings Guidance SAN CARLOS, Calif.--(BUSINESS WIRE)--Nov. 1, 2006--Natus Medical Incorporated (Nasdaq:BABY) today reported financial results for the three and nine months ended September 30, 2006. Natus reported record revenue of $21.8 million for the quarter ended September 30, 2006, an increase of 107% compared to $10.6 million reported in the same period in 2005. The increase was primarily attributable to the acquisition of Bio-logic Systems Corp. in January of 2006. Gross margin was 61.9% for the three months ended September 30, 2006, compared with 65.4% for the third quarter of 2005. The Company reported net income of $1.9 million or $0.09 per diluted share in the third quarter of 2006, compared to net income of $1.5 million or $0.08 per diluted share in the same period in 2005. For the 2006 period, the Company's effective tax rate for book purposes was 45% compared to 7% in the 2005 period. For the nine months ended September 30, 2006, the Company reported a net loss of $1.4 million or ($0.08) per diluted share. Results for the nine months include a $5.9 million charge for in-process research and development associated with the acquisition of Bio-logic. Additionally, the Company's effective tax rate for book purposes was 45% in the 2006 period compared to 10% in 2005. For the three and nine months ended September 30, 2006, respectively, the Company reported income before tax of $3.4 million and $2.2 million. Non-GAAP income before tax increased 136% to $3.8 million for the quarter ended September 30, 2006, from $1.6 million reported in the same period in 2005. For the nine months ended September 30, 2006, non-GAAP income before tax increased 124% to $9.2 million, compared to $4.1 million reported in 2005. The non-GAAP results for 2006 exclude the effect of employee equity-based compensation expense, an in-process research and development charge associated with the acquisition of Bio-logic, and other Bio-logic acquisition related costs. The acquisition of Deltamed on September 12, 2006 did not add significantly to revenue or results of operations for the three months ended September 30, 2006. "I am very pleased to report our excellent third quarter results, with our revenue growing by 107% and our non-GAAP income before tax increasing by 136%," stated Jim Hawkins, President and Chief Executive Officer of Natus. "We are excited about our recently announced acquisitions of Olympic Medical and Deltamed. They strengthen our position as a leading medical device company in both the neonatal and EEG markets. With the integration of Olympic Medical products into our sales channels in 2007, we believe we will achieve significant revenue growth in those products," added Hawkins. "Additionally, with the synergies we expect to achieve from these acquisitions, we believe that in 2007 we will continue to see earnings growth at levels exceeding that of our revenue growth." Financial Guidance Natus increased its financial guidance for the fourth quarter and full year 2006. The Company now expects to report revenue of $27.5 million to $28.5 million in the fourth quarter of 2006, and $88.7 million to $89.7 million for the full year 2006. The Company had previously said that it expected to report revenue of $21.4 million to $21.7 million for the quarter and $81.5 million to $83.0 million for the full year. The Company also expects to report non-GAAP income per diluted share of $0.11 to $0.13 in the fourth quarter 2006, and $0.33 to $0.35 for the full year. The Company had previously said that it expected to report non-GAAP earnings per share of $0.11 to $0.12 for the quarter and $0.31 to $0.34 for the full year. The Company's 2006 fourth-quarter and annual guidance excludes the impact of an in-process research and development charge of $5.9 million associated with the acquisition of Bio-logic recorded in the first quarter 2006, and an in-process research and development charge associated with the acquisition of Olympic Medical that the Company expects to record in the fourth quarter of 2006. The Company's guidance includes the impact of expensing employee equity-based compensation. Use of Non-GAAP Financial Measures In addition to disclosing financial results calculated in accordance with GAAP, this release contains a non-GAAP financial measure that excludes the effects of employee equity-based compensation expense as a result of the Company's adoption of SFAS 123R on January 1, 2006 and costs associated with the January 5, 2006 acquisition of Bio-logic Systems Corp. The Company believes that the presentation of results excluding equity-based compensation expense and the acquisition-related charges provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results. The Company is using the modified prospective method in its adoption of SFAS 123R and as such, will not restate prior year results for the impact of employee stock option expensing. 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 measure facilitates 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 this non-GAAP financial measure in assessing the Company's performance and when planning, forecasting, and analyzing future periods. The non-GAAP financial measure also facilitates management's internal comparisons to the Company's historical performance. The non-GAAP financial measure 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 investor 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) 700-6067 for domestic callers, or (617) 213-8834 for international callers, and entering reservation code 83873550. 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 18741771. 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, newborn jaundice and newborn metabolic testing. 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 revenue growth associated with the acquisition of Olympic Medial, revenue and earnings growth in 2007, and anticipated revenue and profitability for the fourth-quarter and full-year 2006. 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, 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, 2005, 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 BALANCE SHEETS (in thousands, except share amounts) Sep 30, Dec 31, 2006 2005 ASSETS Current assets: Cash and equivalents $ 37,155 $ 40,046 Short-term investments - 12,163 Accounts receivable, net of allowance for doubtful accounts of $506 in 2006 and $173 in 2005 16,107 8,460 Inventories 8,912 3,482 Deferred income tax 562 - Prepaid expenses and other current assets 1,402 1,041 Total current assets 64,138 65,192 Property and equipment, net 7,510 2,116 Goodwill 22,372 3,836 Intangible assets 30,131 6,174 Deferred income tax 410 - Other assets 871 78 Total assets $125,432 $ 77,396 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,228 $ 1,817 Current portion of long term debt 7,125 - Accrued liabilities 11,985 5,441 Deferred revenue 1,810 439 Total current liabilities 26,148 7,697 Long term liabilities Note payable - - Deferred income tax - 734 Total liabilities 26,148 8,431 Commitments and contingencies Stockholders' equity: Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding: 21,274,917 in 2006 and 18,444,753 in 2005 131,720 99,634 Accumulated deficit (32,189) (30,750) Accumulated other comprehensive income (247) 81 Total stockholders' equity 99,284 68,965 Total liabilities and stockholders' equity $125,432 $ 77,396 NATUS MEDICAL INCORPORATED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended Nine Months Ended Sep Sep Sep Sep 2006 2005 2006 2005 --------- -------- -------- -------- Revenue $21,806 $10,551 $61,156 $30,422 Cost of revenue 8,299 3,645 22,809 11,435 --------- -------- -------- -------- Gross profit 13,507 6,906 38,347 18,987 --------- -------- -------- -------- Operating expenses: Marketing and selling 4,809 2,916 14,965 8,355 Research and development 2,438 1,162 7,387 3,233 General and administrative 2,994 1,521 7,928 4,071 Acquired IPR&D - - 5,900 - --------- -------- -------- -------- Total operating expenses 10,241 5,599 36,180 15,659 --------- -------- -------- -------- Income from operations 3,266 1,307 2,167 3,328 --------- -------- -------- -------- Other income/(expense): Interest income 247 314 491 750 Interest expense (160) - (498) - Other income, net 59 5 23 37 --------- -------- -------- -------- Total other income/(expense) 146 319 16 787 --------- -------- -------- -------- Income before provision for income tax 3,412 1,626 2,183 4,115 Provision for income tax 1,543 111 3,622 426 --------- -------- -------- -------- Net income (loss) $ 1,869 $ 1,515 $(1,439) $ 3,689 ========= ======== ======== ======== Earnings (loss) per share: Basic $ 0.09 $ 0.09 $ (0.08) $ 0.21 Diluted $ 0.09 $ 0.08 $ (0.08) $ 0.20 Weighted-average shares used to compute Basic earnings per share 19,749 17,292 18,949 17,224 Diluted earnings per share 20,860 18,877 18,949 18,574 NATUS MEDICAL INCORPORATED AND SUBSIDIARIES RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED) (in thousands) Three Months Ended Nine Months Ended Sep Sep Sep Sep 2006 2005 2006 2005 ---------- ------- --------- ------- GAAP income before provision for income tax $3,412 $1,626 $2,183 $4,115 non-GAAP adjustments: Acquired in-process research and development (see note) (a) - - 5,900 - Other transaction related costs associated with the acquisiton of Bio-logic. (see note) (b) - - 168 - Equity-based compensation expense under SFAS 123R (see note) (c) 419 966 ---------- ------- --------- ------- Non-GAAP income before provision for income tax $3,831 $1,626 $9,217 $4,115 ========== ======= ========= ======= Non-GAAP Adjustments (a) A charge for acquired in-process research and development expense related to the acquisition of Bio-logic Systems Corp. on January 5, 2006. Management believes that excluding this charge facilitates comparisons of Natus' core operating results across multiple reporting periods. (b) Other costs associated with the acquisition of Bio-logic that are not properly capitalized as part of the acquisition cost and were expensed. (c) Non-cash equity-based compensation expense related to the Company's adoption of SFAS No. 123R on January 1, 2006. Management believes that it is useful to investors to understand the impact of expenses associated with the adoption of SFAS 123R on reported results of operations. Net income for the three and nine months ended September 30, 2005 did not include equity-based compensation expense under SFAS 123. CONTACT: Natus Medical Incorporated Steven J. Murphy, Chief Financial Officer, 650-802-0400 InvestorRelations@Natus.com