Natus Medical (NTUS) 28 Feb 212020 Q4 Earnings call transcript

Good afternoon, everyone. And thank you for joining us today to review our results for the Fourth 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 a business overview of the fourth quarter 2020. Then Drew will discuss the fourth quarter financial performance.

the your open will we call questions. for Finally, include within Litigation the Instructions] Act. Today’s of statements will call Securities [Operator meaning forward-looking the Reform Private These future about statements and include our beliefs management’s 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 risks 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 today’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 Mr. Chief I the GAAP President Jonathan results versus earnings on Kennedy? now Kennedy, basis financial call like a our release. Natus in Medical. to Officer turn of today’s to would can non-GAAP find over Executive reconciliation and

Thank everyone. afternoon, you, Operator. Good

year the our company. quarter earnings our XXXX expectations and $XXX.X than $X.XX as million dynamic per exceeded challenges the as we of quarter produced in million quarter we our Both and for also EPS share today, for Revenue $X.XX. full our non-GAAP unforeseen the was year. will revenue fourth call expected. for we faster earnings non-GAAP for XXXX. of Today, significant The for year recovery the as for and quarter per discuss was environment. was environment the pace the the results business our XXXX well financial full current During and Revenue and business reported results, fourth $XXX.X share was was

the and However, our from in fourth revenues quarter, the business with to second recovery increasing year the XX.X% quarter recover third of into of continued that the XXXX. half began

company. to organizational decisions, on two major effects the strategic business, improvements we made period manage structure this pandemic over refreshed our more had in efficient and and and the to and in our changes operating demanding investing success which new of the enabled year the drive and a us continue will stronger future. allowed through generate the a $XX products, last us steps impact us These cost While cash million in over this years emerge helped

release commitment providing to to Our imaging pediatric our the and technology. in ocular standard-setting acquisition of new as and products and the Retcam remote evident system, focus its the patented mother-to-baby customers was improved of new fourth Babybe quarter communication was our with Envision,

Looking ahead hearing to new XXXX of expect software -- for solutions certain to cloud market, a telemedicine newborn to innovative enhancements. continue a bring and products screener, product capability including XXXX, products and we to variety new handheld

intact. last call, services in remain and increase business highlighted and As fundamentals our providers we of day our every normal levels. for and on and approaching to the services Healthcare patients products depend historically continue now are and demand our products our the

disruptions fourth But from results XXXX. over recovery we increasing results with continued to accelerated third Hearing in the quarter. and Revenue our Balance sales weigh strengthen, the pandemic by from QX negatively encouraged guidance, same sequentially. also products Neuro from are to Products & on for quarter improving the fourth revenue we increased saw in quarter equipment the our exceeded with the Our Revenue quarter COVID XXXX. of continue versus XXXX

the some is quarter markets. our pandemic improved the business commentary has least and Newborn third of expected the leader minutes, performed solutions. a neurodiagnostic first, on But like provide additional discuss I’d in Natus global our few equipment of by will over slightly Drew details. each Our more range, in affected financial within the quarter to and be end Care XXXX. to continued the In

products worldwide. Our used services majority are neurologists the and by hospitals of and

sales offering during manufacturer by most global about comprehensive line of by XX% a offered Overall, while EEG sleep XXXX, due versus the encouraged of EMG by versus solutions. levels equipment again returned EMG, declined the and that have and the year-over-year quarter disruptions. we believe the over sales quarter the equipment continue next XXXX any neurodiagnostic to neurodiagnostic of about the capital line and quarter rebound of activity to We we neurosurgery of and few back full quarter The XX% levels. level supplies declined our full sales business the sleep EEG, XXXX. driven equipment for and we fourth grow fourth pre-pandemic primarily during for begin to year-over-year was Overall, quarters pandemic-related today, mostly Neuro and saw of year EEG from equipment to products, during lower are decline will the

Hearing tuning used & from supplies audiologists, diagnose the and balance and Hearing Our products devices Balance of shipped digital only XXXX. of hearing was quarter, Otoscan diagnosis the & quarter the and electronic scanner. aids ENTs in-ear ear disorders. in Balance levels during hearing by include We XX for the of to fitting hospitals during disorders, the assist scanners Revenue returned and fourth industry’s to and quarter pre-pandemic to fourth comparable the

and hearing in Care to technology care imaging neonatal leading brain quarter very sales continued and solutions. categories favorable supplies, tied it by to the generally are by the new in include custom newborn directly opportunities the encouraged XXXX business product for to market video of revenue in hardware helping and hearing worldwide. We which industry’s Care by this product solutions, hospitals audiologists streaming and family deliver of screening the is eye monitoring, are adoption our Major become Newborn offset birth ‘XX. solutions. with injury performance Natus’ of rates expect were are increased ahead family services. in of sales of standard this services in used phototherapy and and Newborn the fourth the slightly summary, we progress the Overall, Declines XXXX. In was pleased

in focus on positions that our leading multiple new expand markets we business. and achieving hold and for of to flow. end continue At time, to our in to as same expand look technologies strategic to each plans products the will cash leadership margins and excellence growth, investing operational and grow our we continue We

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

you, Thank Jonathan.

compared a associated quarter revenue. points quarter $XX.X international Neuro. As Jonathan respectively, and X.X the Supplies by higher XX% last our consolidations. quarter total increased quarterly The in the record to decreased margin quarter compared also or decline total the of was total XXXX, sound margin total XXXX, the fourth to to period Revenue approximately business The from room the decreased compares employee certain was Revenue the revenue was revenue quarter of attributable same domestic total to or by approximately the of compared primarily total Hearing XXXX $X.X to $XX.X the reductions compared market XX%, the in of XX% in costs period $XXX.X and from mainly from year. revenue COVID-XX impact last year. during revenue decreased sales. total our compared decrease The and fourth site end during quarter during our with last scrap XXXX declined in during XXXX, million a sales expenses. and sequentially -- last GAAP of to million the the and consolidation and from and million for fourth trade operating X.X% the in of margin. end pandemic. reserves X.X% of market of compared cost quarter $XX.X X.X as and third gross attributable period same to the gross Balance Neuro phototherapy and of fourth XX% sequential XX.X% systems in Revenue during recovered to quarter to to stated, remains in On increased primarily XX% fourth or a in total quarter Care Hearing was increase revenue the percentage margin year-over-year to site same of that XX.X%, percentage was XX% or to million $XX.X XX% fourth revenue revenue adjusting revenue same & inventory compared in the XXXX, of XX% XX.X% mix lower total same revenue of the XX% the Revenue was in million XXXX compared the related down Balance X.X%, million was XXXX, XX% to by last end quarter gross of by the of our period. attributable expenses last increase fourth was from $X.X we gross The of expense travel, margin Neuro Neuro non-GAAP of XX.X% In was the revenue million of Newborn COVID-XX. year. year. fourth to the X.X% or was supplies market lower quarter which during XX.X%. of gross recovers year of and revenue last of reported to related same the revenue points to to revenue quarter of impacted GAAP in the from freight X.X% by quarter after or XXXX Neuro the mainly basis, NicView our quarter XXXX, Revenue quarter by in year. XXXX, to improved of XX.X% during X.X & compared from year. decline and or was business increase to from attributable services from non-GAAP sales, device quarter for XX% of driven the same contributed XX% year. Fourth quarter exit Year-over-year in by million XX% of XXXX period. the devices charges total, $XX.X $XX for fourth COVID-XX Revenue of the in million, from XX% operating fourth quarter business. XX% revenue mainly last shows, from X.X% was impacted discretionary increased

expenses. offset consolidation. for Other by operating the year and expense million by quarter. exchange last the Interest lower Our X.X% related driven gross the rate non-GAAP margin entity decrease quarter same quarter $X.X compared to decreased fluctuations was the on income operating $X.X million was margin was fourth to in during and by revenues

a On full non-GAAP -- anticipate be fourth We non-GAAP expect our effective of basis, fourth be tax XXXX non quarter XXXX quarter The the GAAP to $X.X We XX% last compared $X.X decreased XXXX approximately of income the expense per to the was or million. the compared same and for of compensation $X.X and year XX.X%. our be was interest approximately rate net and overall million $X.XX net share, during $X.X quarter last million to year. year. of first quarter rate to $X.X our XX%. XXXX net tax In between amortization. same was depreciation the quarter we fourth million million million income the during million $X $X.X earnings $X.XX. quarter. Non-GAAP quarter, recorded per share was fourth Stock-based income to Non-GAAP

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

million debt during the $XX.X Cash decreased and by we as million. was provided million flow $XX.X $XX fourth cash debt. in million the quarter with We of quarter. outstanding quarter repaid Our the operations $XX ended in

the versus days increased prior the of million shares days three million Our to year. decreased last the year shares XX.X in compared to XX.X Non-GAAP same outstanding same XX in shares outstanding period to period days. sales

cyclicality to some year-end sees sequential in our historically strength turning the guidance, and and the Now quarter in first first quarter. decline business

per the the weeks net last of quarter range the for We quarter million the $X.XX to the is the GAAP to the quarter. income a recover the million $X.XX revenues in of last year, in a experienced to expected expect quarter net diluted per XXXX our profit that, the be in $XXX million. we softness and million With first will to our expected mind, $X.XX we be and or share. share few to $XXX revenues XXXX of share. $X.X for of loss to continue similar first to of for of between of with diluted from $X.X quarter income expect this loss is the Non-GAAP to COVID-XX-related a share XXXX be which to $XXX,XXX a call per range from questions. or first open to in in per now pandemic a of million revenues in $X.X And first to of $X.XX range profit

Instructions] James. Raymond from Jayson [Operator Our first question Bedford is with

Your line is open.

guys offering. Hi, in seeing you XQ the guys. on Congrats that are recovery

you guidance, approximate Neuro breakdown the I of do between kind revenue each on to see one little in get Hearing? a segments? growth those So of Newborn, how it just What the want and segments, three regarding you

see We holding our Yeah. continuing business and where up Newborn Care been. it’s

the pretty to be -- quarter same last should well. year as recovering level is & And last Balance similar. it I Hearing think compared quarter to similar the to a for be and

and We first bit little recovery where in Neuro quarter softness was comparable are slower to a expect in would recover That’s saw as lower last we of that in U.S. revenue the the to seeing or the U.S. Neuro compared we kind year slower well.

terms is in you it know of given you. provide it you us kind to Thank can the guys is full for guidance haven’t there was full that but in year back on where think baseline just helpful. any year, guys full like of that XXXX, fair XXXX, year? us That’s And I regarding

but last definitely QX in economy than continued around than to world well. year, then Yeah. and will -- be was give QX improvement year kind expect quarter the little for the that than we the look is last situation specific that our the QX year. and We we would that at that We QX, better quarter be year, year think didn’t last COVID if lowest got of QX a gave believe potentially we better bit the quarter guidance with a each as and of better this guidance, we have the you which

the where That’s you of… recover of And that, to anticipate that or year business do pre-pandemic Okay. the end it’s better by was will any helpful. it kind or

Yeah.

that? around guidance …forward

we But of there’s year. full still didn’t rest quarter further giving lack in in year guidance. out I visibility first the the to recovering we would QX. the with really the feel give we from the the giving it see there, in Yeah. be comfortable saw Normally, nicely, mean guidance. prevented for that we volatility But of some honest, guidance us

in versus And now have seen of within the December, end in we have Jan has you the, guys -- trend that how the and recovery Okay. the of you been mean, terms guess, how February, are business -- month I like at that within I quarter? this

Yeah.

late in are quarter. the you think it’s I right

-- QX. quarter has backlog. to and fourth decent ended go with We the a We another have weeks got few here pretty strength continued through quarter the the

-- back-end So you But that us be confidence, capital more gives little business confidence normal pretty than a for QX. as know, our loaded. we can are

of are We finished that we and of kind where quarter with start entering the that. capital order in period strong come the to

what started first supplies I on to and the definitely maybe of smaller think So a to return months couple of continued that through the here, certainly capital has do looked level in business, normal recovery we back saw yet. ‘XX in especially still Neuro as hasn’t equipment left been the XXXX. as But in some we go have U.S., to where that the strong in strength

helpful. That’s Okay.

-- a that it from fourth third that deferred in orders from second pent-up not demand the from quarters? of were from backlog -- orders were or bulk -- guys from So new previous that that and the you like was not or quarter quarter, was the previously XQ,

I the cycles side, long. are think on sales hardware pretty the

continued probably second and So to some into to probably QX QX quarter the beyond. and was third that deferral safe from say pushed quarter, there it’s into that push

smaller turns the is real-time. purchase, for side think, supply I new That orders, on is On business us. type and more more that

answers hopefully question. that So your

more delay, think day-to-day we level. a but at real-time services think, I side on supplies, there’s on I hardware and a are the

you more can orders the large orders? we smaller ordering sized so is level capital of what patterns, seeing, mostly Just like, there are it sales, Okay. gauge activity or are normal of are kind And within we seeing.

a quarter. it’s so decent, and that’s to We backlog that we going capital time the -- the have pipeline finishing so any here of are deals normal usual the say have in range. drive to help Look, in as is I’d usually first in more little are that confidence larger the closer we today. a handful that at given

QX, I that real-time on too, state more think, see don’t pieces there as I pieces, smaller the and to continues We and into capital. smaller, going expensive cetera, pretty I how supplies, we hardware think It’s smaller the on will of normal less QX, pace. et supplies today. said, are normal

pipeline other And with device we us you XXXX? the guys products coming kind in where started of can give the update there’s if look you are on any to forward pipeline, Retcam an and should is that the that in

Sure.

it’s December start in a in that for and in next in the those to U.S. Retcam the here and of and the approved. Europe, at We launched months selling would have point, the get two sold we expect and where to months, three marketing we that the U.S. we in market in filed XXX(k) that few So Envision, in the

closer released handheld we have our that’s will replace not what will destined ALGO hearing For that international is Xi, Xi. ALGO screener our release which be our to yet now

We also soon in have device. our upgrade communication Babybe later we expect mother-child and NeuroWorks to a year, pretty coming much to possibly significant that’s release out then the software our

XXXX? expect helpful. what Regard That’s Retcam contribution in of revenue should we -- Thanks. kind from

a is business. million, $XX Retcam million typically $XX

upgrades, have driven it’s I million there, But comfortable cycle. $XX that I from it out from there. just we put that, we from historically, by should it product think and out from think with. tell roll be a annual about as we I go million, a I $XX can upgrade would grows there the forecast you, think don’t

for regarding comfortable guys helpful. on That’s the that Is touched quarter. forward in on you gross fourth of ‘XX? And guidance gross you margins margins feel weighed XQ what Okay. going guys there

Yeah.

a they to gross our are -- improve as we to will continue bit think go. margins I going

we savings doing. site consolidations continued the that some got have are from We

that on given XX% around to guidance margin. we gross EPS the is have high So based XXs

have just get EPS So kind below the guidance. XX% we over to is or of that just that XX% range to

trends, ‘XX geographic we shift geographies should or expect in within regarding And ‘XX, ‘XX? same sorry, roughly any kind as the of

historically it’s be international. that percentage points usually few It be a it will each XX I be the that XX but XX, will been it range. kind think That to same fluctuate quarter, similar. domestic, XX in will that largely XX-XX, of

market. to out the point I’d business margin the And Neuro capital continues generally you favors U.S. and That to gross that also strengthen.

it. Got it. Got

mix, regarding we of So regarding of for are -- a reporting geographic from what some the -- there I FX comfortable impact FX with? seen decent next lot have is companies kind of guide, know -- you FX also kind guys is guide that there for a XXXX, tailwind

do foreign guess, but lately seen say, don’t impact Europe I revenue in have I negative forecast softness have our we have in some a operating in expenses our just expenses our exchange, have revenue But we operating where impact We we seen, some and euros Danish generally some had and kroner, have or factories. in in there. that we we should

So but we accumulated impact Canada negative happen of do that against couple hit few have But the foreign We of was some a to a quarters last the that have an thousand quarter, that operating in from again. an we there. we natural wouldn’t a have usually exposure and and well, bit consolidating the pretty the the happen expect this We strengthen exchange some dollar if P&L this standpoint that as hedge We kroner. and were hundred doesn’t there little did entities but stable. dollars continue quarter. some have item in -- it’s euro had to can

you XQ. you sold units mentioned in XX guys guys XX -- Otoscan You talk… Can

Yeah.

-- little … about a hello? bit what more

Yeah.

XX was yeah. It units, X-X. Sorry.

units. XX

Yeah.

talk adoption the about you Otoscan? required Can what’s Thank correction. broader of for just for you

within we we would so out my this think, guess better office for the XX Well, experience, some adoption There hundred faster market latest last better are and XXX a several aid. the the hearing increase, here. seeing Broader patient fit are I probably, there, realizes sold XX quarter. quarter, think, I cycle or be really a as is a of time the benefits

see broader I more focus, you becomes adoption. that think, As will in

can look to guys you it compare And this year? was the up, -- quarter you in can is less, last XX of but mean, can I fourth I how

We that were -- believe I actually, market, didn’t have working a we the had year, in in fourth we on. were that quality last issue we quarter

the high of that kind been of think we out in in had QX it was about or I Q, have it a market we we were nine sold market. of didn’t -- just had for In this quarter, have was we but -- we three or over year -- quarters. So the along going But because XX -- XXs XX. XX, been we kind

kind of it quarter to in XX averaged came back So out market. the per that we when

over good a quarter we the is -- XXX got this for and now. have units over us So in well market

do that you of think of backlog think That’s was most -- very or do orders? was these you in helpful actually. of new XX of did XX some the And some XXXX, were XQ XX units them

get delaying I No. This from little that the digitally, were going COVID is base to in to momentum a selling of now. we hearing so sales some a gets to the a this shutdown orders But installed acceleration industry forward. being centers, having is -- less maybe in and think can -- that or back current we people bigger to bit to it there and and due we catch-up nice of are think about office traffic. we audiologist And I back continues see mean the the quarter do this as the step-up. standard purchases and was is XX

the And what in growth neurosurgery was XQ?

in year. XQ versus last Yeah. declined Neurosurgery

final one priorities you do plan any you cash? guys here, with allocation the doing guys What And XXXX? for capital question on think you have do

Yeah.

available is for our keep do the continues that cash interest via and line. expense to delevers our to down credit the revolving us I line, think, reduces primarily and revolving credit pay easiest thing to

that. here, coming that bit do some But throughout the strategic be that, are to maybe have that deploy still program exited an best we Second open would a how things to acquisitions that, start our things than we COVID anticipate do might share Babybe, larger making that as we quarters, will little we that like, we third, buyback reconsider program. have then And second.

I much very That’s guys. Appreciate you Thank have. all it.

You welcome. are

you. Thank

I am back call am showing further I to time. would show questions to no Kennedy. Mr. like this turn now the -- at I

strategic our for Okay. and executed I’d Thank you. joining their Thank throughout us team several the have continued every efforts partners concludes our good We to day. The throughout for best the of industry. initiatives and employees outstanding has for to of and customers customers you one and serve in day a on like today. the teams year. That all the thank Natus call. our successfully year. truly Have Thank program achievements today’s you, Operator.

Ladies and participation. for today’s concludes call. Thank this you your gentlemen, conference

and You day Have stay may great now disconnect. safe. a