Natus Medical Q3 Revenue Slips 3.9 Percent

Maybe it was an off quarter.

Natus Medical Inc.’s third-quarter revenue slipped 3.9 percent to $90.9 million, according to the company’s latest financial report. GAAP gross profit margin was 63.9 percent vs. 61.7 percent reported for the third quarter 2015. GAAP net income was $13.2 million, or $0.40 per diluted share, compared with GAAP net income of $10.9 million, or $0.33 per diluted share in the third quarter 2015, representing a 21 percent increase in GAAP earnings per diluted share.
 
Non-GAAP earnings per diluted share was $0.39 for the third quarter 2016, compared to $0.39 in the third quarter 2015. Non-GAAP net income was $12.8 million for the third quarter ended Sept. 30, compared to the prior year’s non-GAAP net income of $12.9 million. Non-GAAP Gross profit margin was 64.6 percent vs. 62.5 percent reported for Q3 2015. 
 
For the nine months ended Sept. 30, the company reported revenue of $274.2 million, a decrease of 0.6 percent compared to $275.9 million reported for the same period in 2015. GAAP gross profit margin was 61.9 percent vs. 61.4 percent reported for the same period in 2015. GAAP net income was $32.2 million, or $0.97 per diluted share, compared with GAAP net income of $29.4 million, or $0.89 per diluted share in the same period in 2015, staying constant in GAAP earnings per diluted share.
 
Non-GAAP earnings per diluted share increased 7 percent to $1.11 for the first nine months in 2016, compared to $1.04 in the same period in 2015. The company reported non-GAAP net income of $36.7 million for the nine months ended Sept. 30, compared to the prior year’s non-GAAP net income of $34.4 million.
 
Combined cash and investments increased by $10.2 million to $106.5 million during the quarter. The company repurchased $1.5 million of its stock during the third quarter of 2016. Cash flow from operations for the third quarter was $35.5 million and includes $13.1 million of net cash increase from Venezuela prepayments, resulting in an adjusted cash flow from operations of $22.4 million. 
 
“I am pleased with our non-GAAP earnings of $0.39 and our non-GAAP gross margin of 64.6 percent considering our reduced revenue.  As previously reported, our revenue shortfall was the result of certain voluntary product ship holds and softness in our international markets,” said Jim Hawkins, president and CEO. “We now expect our recently announced acquisition of Otometrics to close on Jan. 1. With Otometrics next year, we look forward to achieving $500 million in revenue, an important milestone for Natus. We expect Otometrics to be accretive to our 2017 earnings with a non-GAAP contribution operating margin goal for the year of 10 percent and a 2018 goal of 20 percent.”
 
For the fourth quarter 2016, Natus expects revenue of $107 million to $109 million, GAAP earnings per share of $0.46 to $0.49 and non-GAAP earnings per share guidance of $0.52 to $0.55.
 
The company adjusted its full year 2016 revenue guidance and now expects revenue of $381.2 million to $383.2 million. Full-year 2016 guidance for GAAP earnings per share is $1.43 to $1.46.  Non-GAAP earnings per share guidance is being updated to $1.63 to $1.66.

Fourth-quarter and full year revenue and earnings guidance includes approximately $7 million in shipments and service under its supply agreement with Venezuela.
 
Natus provides healthcare products and services used for the screening, detection, treatment, monitoring and tracking of common medical ailments in neurological dysfunction, epilepsy, sleep disorders, newborn care, hearing impairment and balance and mobility disorders. The company is based in Pleasanton, Calif.