Q1 2021 Natus Medical Inc Earnings Call

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Good afternoon, everyone and thank you for joining us today to review our results for the first quarter of 2021 on the call today from Natus is.

Jonathan Kennedy Natus, President and Chief Executive Officer, Andrew Davies, Natus, Executive Vice President and Chief Financial Officer.

Jonathan will begin today with a business overview of the first quarter 2000, and 'twenty, one and then drew will discuss the first quarter financial performance. Finally drew will return the call to Jonathan for closing remarks.

Today's call will include forward looking statements within the meaning of the private Securities Litigation Reform Act. These statements include management's beliefs and expectations about our future results. Our actual results may differ materially from these forward looking statements.

Gretchen of relevant risks and uncertainties pertaining to our business. Please see today's press release and our periodic reports filed with the S. E C.

Yes.

Management's presentation.

Of the financial results will be on a GAAP and non-GAAP basis.

The non-GAAP results exclude amortization expenses.

Reconstruct and you and certain other charges and their related tax effects.

Management believes that the presentation of these non-GAAP measures along with our GAAP financial statements provide a more thorough analysis of our ongoing financial performance.

You can find a reconciliation of our financial results on a GAAP versus non-GAAP basis, and today's earnings release.

I would now like to turn the call over to Jonathan Kennedy, President and Chief Executive Officer, and he tests medical Mr. Kennedy.

Thank you Michelle.

Good afternoon, everyone. During our call today, we will discuss our first quarter 2021 financial results as well as our current business trends.

Today, we reported the results for the first quarter of 2020 one.

Revenue for the quarter was $114 9 million and non-GAAP earnings per share was <unk> 16 cents.

Revenue was higher than expected, while our earnings per share was in line with our expectation.

Our revenues and the first quarter of 2021 grew 5% compared to the first quarter of 2020, which was impacted by the pandemic late and that quarter.

Our neuro newborn care and hearing and balance and markets all experienced growth compared to the first quarter of 2020.

Our non-GAAP earnings per share grew 317% compared to the first quarter of 2020 on very similar revenues.

As a result, the operating expenses for events that we have delivered and the last two years.

We are optimistic and the pace of our revenue recovery in 2020, one compared to 2020.

Continue to believe our efforts to reduce our cost structure, and I and investment and new products will drive long term revenue growth and profitability.

We see strong customer interest and our newly released <unk> Kim and vision.

Seven nine newborn hearing screening and our oldest scan digital your screener ear scanner, which continues to build momentum and the market.

And in a few minutes drew will discuss more financial details, but first I'd like to provide some additional commentary on the quarter and each of our end markets.

Natus is the global leader and neuro diagnostic equipment solutions, our products and services are used by the majority of hospitals and neurologists worldwide. We have the most comprehensive line of neuro diagnostic equipment offered by any global manufacturer today operating at full line of EG EMG and PSG solutions.

Overall, our neuro business increased by 6% year over year during the first quarter with growth and recovery and all major product areas.

And that's another point of reference our Q1 neuro revenue was 11% higher and the first quarter of 2019.

Growth was led by our <unk> product line, where sales of our recently launched next generation Ultra pro as 100 neuromuscular diagnostic device contributed to a 26% year over year increase for EMG.

We also saw encouraging recovery and our sleep and neurosurgery product areas, which grew approximately 2% and 1% respectively from the first quarter and the prior year.

Overall, our neural hardware business grew just over 8% while sales of supplies decreased from the prior year by approximately 1% after adjusting for discontinued products.

Our hearing and balanced products include devices and supplies used by Audiologist hospitals, and N cheese to diagnose hearing disorders assist and the city and tuning and adhere and H and for the diagnosis of balance disorders.

Revenue from hearing and balance returned to pre pandemic levels levels during the quarter and grew slightly versus the first quarter 2020.

We shipped 67 oldest scan digital your standard during the first quarter.

Otis again, as the industry's only electronic and ear scanner. We now have about 700 edits Gan devices and the market OTA scan device installations generate annual recurring revenue of about 400 to $600. Each in addition to the initial device sale.

And there are more than 35000 potential hearing aid dispensers and hearing clinics and the market that we believe will eventually benefit from the use of OTA scan as it becomes the standard of care and helping audiologist deliberate cost on hearing solutions.

Natus is market, leading newborn care product family is used by hospitals worldwide.

A major product categories and this family include on newborn hearing screening solutions.

NATO I imaging and brain injury monitoring video streaming services and phototherapy solutions.

Overall newborn care revenue grew just grew 7% versus the first quarter of 2020.

Our revenue growth was driven by sales of our Nic due to video streaming solution and the release of our new Algo, seven IQ and screener during the quarter.

NICU allows parents families and friends to view their babies on NICU remotely via phone or computer and the August seven is our newest handheld and hearing screeners and using our industry, leading algorithms to detect hearing abnormalities FERC.

Growth was also driven by the full implementation of our here and screening programs with pediatrics.

And your order, which offset otherwise lower supplies and service revenue as birth rates have seen declines over the past few months.

In summary, we're very pleased with the recovery and growth during the quarter.

We continue to hold multiple leading positions and each of our end markets and look to extend our leadership and invest in new products and technologies that will drive growth and the years ahead.

Now, let me turn the call over to drew Davies, our executive Vice President and Chief Financial Officer for a deeper dive into our financial results.

Thank you Jonathan.

As Jonathan stated, we reported first quarter 2021 revenue of $114 $9 million or five 1% increase from the first quarter of 2020 revenue increased in each of our end markets neuro newborn and hearing and balance compared to the same quarter last year.

Keep in mind, we did see a slowdown at the end of the first quarter of 2020 related to the pandemic.

Total revenue in the first quarter of 2021 was also slightly higher than Q1 2019 revenue as a result of the improvements we've made.

Over the last two years and our cost structure, our non-GAAP EPS earnings per share increased to 100% or eight cents per share compared to Q1 of 2019.

Revenue from our neuro and market was $69 $1 million or 60% of total revenue during the first quarter of 2021 compared to $65 4 million or 60% of total revenue during the same quarter last year.

Revenue from our neuro and market increased five 7% compared to the same quarter last year led by our ultra pro DMG devices.

Revenue.

From our newborn care and market increased 7% to $25 $9 million or 23 percentage of total revenue during the first quarter of 2021 compared to $24 $2 million or 22% and total revenue during the same quarter last year. The increase was primarily attributable.

Two sales of our net view video streaming devices.

Revenue from our hearing and balance and end market was $19 $9 million or 17% of total revenue during the first quarter of 2021 compared to $19 $8 million or 18% of total revenue during the same quarter last year.

Hearing assessment and balance devices sales increased during the quarter and were offset by the exit of the Standalone business.

And total revenue from devices and systems contributed approximately 75% of revenue and the first quarter of 2021 compared to 72% in the 2020 period.

Revenue from supplies and services was 25% of total revenue and the first quarter of 2021 compared to 28%.

And the 2020 period.

Revenue from domestic sales was approximately 59% of total revenue and 41% from international and the first quarter of 2021 compared to 62% and 38% respectfully respectively for the same period last year.

On a non-GAAP basis, our gross margin increased 40 basis points and the first quarter of 2021 to 59, 6% compared to 59, 2% and the first quarter of 2021 the.

And the increasing gross margin.

It was mainly attributable to the leverage on the increase in revenues during the quarter.

And gross margin our GAAP gross margin increased 50 basis points to 57, 9% and the first quarter of 2021 compared to 57, 4% and the same period last year.

First quarter non-GAAP operating expenses decreased by $1 $6 million compared to the same quarter last year.

The decrease in operating expense was driven primarily by lower spending on R&D remediation projects.

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Our non-GAAP operating margin increased by four 4% and compared to the same quarter last year on higher revenues and lower operating expenses.

Other expense was $900000 for the first quarter driven by exchange rate fluctuations interest expense was $800000. During the quarter. We expect the interest expense during the second quarter of 2021 to be approximately $600000 and for the full year to be approximately.

<unk> $2 million.

Our first quarter non-GAAP effective tax rate was 25%, we anticipate our overall 2021 non-GAAP tax rate to be between 21 and 25%.

On a GAAP basis, our first quarter 2021 net income.

$2 $4 million from seven cents per diluted share compared to a net loss of <unk>.

$3 $6 million the same quarter last year.

Non-GAAP net income increased $4 $1 million to $5 $4 million compared to the same quarter last year and non-GAAP earnings per diluted share was <unk> 16 cents.

And the first quarter, we recorded $7 $3 million of depreciation and amortization expense.

Share based compensation was $3 million share and the first quarter.

Now, let's look at some highlights from the balance sheet and the statement of cash flow.

Our outstanding debt decreased and the first quarters, we repaid $20 million, we ended the quarter with $85 million and cash and $37 million and debt.

Cash flow provided by operations was $24 $7 million during the quarter.

Our day sales outstanding increased three days versus the same quarter.

Versus same period and in the prior year to 79 days.

Non-GAAP diluted shares outstanding decreased to 33 8 million shares compared to $33 9 million shares and the same period last year.

Now turning to guidance.

We continue to monitor the economic recovery of our markets around the world and expect revenues to improve year on year and the second quarter of 2021.

With this in mind, we expect our revenues for the second quarter of 2021 to be between $112 million and $116 million.

GAAP net income is expected to be and the range of $4 5 million to $6 $4 million for the second quarter of 2021 or 13 to 19 cents per diluted share.

Non-GAAP net income is expected to be and the range of $8 9 million to $10 $8 million or 26 to 32.

Per diluted share.

And with that I will now turn it back to Jonathan.

Thank you Joe.

And I'd like to thank all of our employees partners and customers for their outstanding efforts and partnerships throughout the quarter and thank you everyone for joining the call today have a good afternoon.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

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