ntus-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-33001

NATUS MEDICAL INCORPORATED

(Exact name of registrant as specified in its charter)


Delaware						77-0154833
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3150 Pleasant View Road, Middleton, WI 53562

(Address of principal executive offices) (Zip Code)

(608) 829-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	NTUS	The Nasdaq Stock Market LLC
		(The Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” or an “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of issued and outstanding shares of the registrant’s Common Stock, $0.001 par value, as of April 29, 2022 was 34,585,114.

Table of Contents

NATUS MEDICAL INCORPORATED

TABLE OF CONTENTS


		Page No.
PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)	3

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	28

PART II.	OTHER INFORMATION	29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

Signatures		32

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	84,285	$	75,595

Accounts receivable, net of allowance for doubtful accounts of $4,977 in 2022 and $5,271 in 2021	103,714		111,760
Inventories	72,238		67,745
Prepaid expenses and other current assets	26,531		22,191

Total current assets	286,768		277,291
Property and equipment, net	21,391		21,783
Operating lease right-of-use assets	8,027		9,288
Intangible assets, net	59,815		65,513
Goodwill	148,304		148,657
Deferred income tax	23,548		23,161
Other assets	20,230		18,595
Total assets	$	568,083	$	564,288
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,342	$	36,405

Accrued liabilities	47,185		48,135
Deferred revenue	26,846		25,097
Current portion of operating lease liabilities	4,482		4,964

Total current liabilities	112,855		114,601
Other liabilities	17,128		17,237
Operating lease liabilities	5,755		6,567

Deferred income tax	1,451		1,133
Total liabilities	137,189		139,538
Stockholders’ equity:
Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding 34,576,100 in 2022 and 34,225,682 in 2021	359,319		353,737
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2022 and 2021	—		—
Retained earnings	86,389		84,486
Accumulated other comprehensive loss	(14,814)		(13,473)
Total stockholders’ equity	430,894		424,750
Total liabilities and stockholders’ equity	$	568,083	$	564,288

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2022		2021
Revenue	$	119,793	$	114,927
Cost of revenue	52,781		46,688
Intangibles amortization	1,600		1,751
Gross profit	65,412		66,488
Operating expenses:
Marketing and selling	29,551		28,971
Research and development	13,224		14,040
General and administrative	12,807		14,855
Intangibles amortization	3,598		3,897
Restructuring	2,051		205
Total operating expenses	61,231		61,968
Income from operations	4,181		4,520
Other expense, net	(807)		(1,656)
Income before provision for income tax	3,374		2,864
Provision for income taxes	1,471		468
Net income	$	1,903	$	2,396
Net income per share:
Basic	$	0.06	$	0.07
Diluted	$	0.06	$	0.07
Weighted average shares used in the calculation of net income per share:
Basic	34,119		33,611
Diluted	34,276		33,782

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2022		2021
Net income	$	1,903	$	2,396
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(1,341)		(6,494)
Interest rate swap designated as a cash flow hedge	—		68



Other comprehensive income (loss), net of tax	(1,341)		(6,426)
Comprehensive income (loss)	$	562	$	(4,030)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except per share amounts)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount
Balances, December 31, 2021	34,225,682	$	353,737	$	84,486	$	(13,473)	$	424,750

Vesting of restricted stock units	33,794	—		—		—		—
Net issuance of restricted stock awards	164,760	—		—		—		—

Stock-based compensation expense	—	2,619		—		—		2,619

Taxes paid related to net share settlement of equity awards	(51,482)	(1,228)		—		—		(1,228)
Exercise of stock options	203,346	4,191		—		—		4,191
Other comprehensive loss	—	—		—		(1,341)		(1,341)
Net income	—	—		1,903		—		1,903
Balances, March 31, 2022	34,576,100	$	359,319	$	86,389	$	(14,814)	$	430,894

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount
Balances, December 31, 2020	33,911,703	$	342,828	$	71,309	$	(3,043)	$	411,094

Vesting of restricted stock units	19,650	—		—		—		—
Net issuance of restricted stock awards	222,899	—		—		—		—

Stock-based compensation expense	—	3,018		—		—		3,018

Taxes paid related to net share settlement of equity awards	(57,357)	(1,150)		—		—		(1,150)

Other comprehensive loss	—	—		—		(6,426)		(6,426)
Net loss	—	—		2,396		—		2,396
Balances, March 31, 2021	34,096,895	$	344,696	$	73,705	$	(9,469)	$	408,932

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2022		2021
Operating activities:
Net income	$	1,903	$	2,396
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on accounts receivable	87		101

Depreciation and amortization	6,673		7,257
Loss on disposal of property and equipment	30		8
Warranty reserve	1,363		341
Share-based compensation	2,619		3,114
Loss on commencement of sales-type leases	—		6
Loss on equity method investment	192		136
Changes in operating assets and liabilities:
Accounts receivable	8,803		4,962
Inventories	(6,132)		4,139
Prepaid expenses and other assets	(4,752)		(4,028)
Accounts payable	(1,957)		1,303
Accrued liabilities	(1,762)		1,172
Deferred revenue	1,949		2,732
Deferred income tax	(119)		1,064

Net cash provided by operating activities	8,897		24,703
Investing activities:

Purchase of property and equipment	(1,062)		(731)


Purchase of equity method investments	(572)		—

Net cash used in investing activities	(1,634)		(731)
Financing activities:
Proceeds from stock option exercises and Employee Stock Purchase Program purchases	4,191		—


Taxes paid related to net share settlement of equity awards	(1,228)		(1,150)
Principal payments of financing lease liability	(447)		(125)

SEC Form 10-Q filed by Natus Medical Incorporated