Natus Medical Inc. (NASDAQ:BABY) Q2 2018 Earnings Conference Call - Final Transcript

Jul 25, 2018 • 11:00 am ET


Natus Medical Inc. (NASDAQ:BABY) Q2 2018 Earnings Conference Call - Final Transcript


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Good morning, everyone, and thank you for joining us today to review our results for the Second Quarter of 2018. On the call today from Natus is Jonathan Kennedy, Natus' President and Chief Executive Officer; and Sharon Villaverde, Natus' Interim Chief Financial Officer.

Jonathan will begin today with a business overview of the second quarter and provide guidance for the third quarter and full-year 2018, then Sharon will discuss the second quarter financial performance. Finally, we will open the call for your questions. (Operator Instructions).

(Forward-Looking Cautionary Statements)

I would now like to turn the call over to Jonathan Kennedy, President and Chief Executive Officer of Natus Medical. Mr. Kennedy?

Jonathan Kennedy

Thank you, operator. Good morning, everyone. Today, we reported our financial results for the second quarter of 2018.

Revenue for the quarter was $130.7 million, near the high end of our guidance. Our non-GAAP earnings per share considerably exceeded guidance at $0.35 per share. Our improved margins and earnings, which Sharon will dive into a bit deeper, reflects strength in our neuro market, measurable progress in the integration of Otometrics into Natus and solid profitability from our Newborn Care business.

Now, I'd like to provide a little more color on revenue for the quarter. Overall, revenue grew by 7% versus Q2 last year, driven primarily by the addition of our neurosurgery business in Q4 of last year. Meaningful organic growth in Otometrics and neuro contributed to the increase as did favorable foreign exchange fluctuations. Excluding the effects of foreign exchange which primarily affects our Otometrics business and the year-over-year comparison for our recently acquired neurosurgery business, our organic revenue declined in the second quarter by about 2% versus the second quarter of 2017. But let's break it down by business unit.

Our Otometrics business grew organically by 4.3% versus Q2 of last year. This growth was driven by strength in our international markets, where pricing and market share have been improving. Revenue from Otometrics US market held back the growth rate and declined primarily from the non-repeat of a handful of significant corporate orders we fulfilled last year. Our neuro business grew organically 2.1% versus Q2 of last year. The growth in neuro was driven by global strength in orders, particularly in the US market. Our neuro business continues to be the market leader in neurodiagnostics solutions, and we believe we continue to gain market share.

Revenue from our Newborn Care business declined approximately 15% versus the same quarter last year. This decline was led by intentional end-of-life decisions for certain products that did not have the required scale to remain viable. While we have made most of these product liability decisions, you should expect to see marginal downward effects on Newborn Care revenue over the next several quarters. In the longer term, these decisions will allow us to focus and invest in our most critical and successful products, which we expect will in turn, increase our long-term profitability.

Next, I'd like to give you my perspective on the significant value-creation