Natus Medical Incorporated

Natus reported fourth-quarter 2021 revenue of $128.7 million, up 8.4% from the prior-year quarter, and full-year 2021 revenue of $473 million, up 14% year over year. GAAP Q4 net income was $1.7 million, or $0.05 per diluted share, versus $5.2 million a year ago; non-GAAP EPS was $0.47. Q4 non-GAAP gross margin was 59.3% versus 58.1% last year, while GAAP gross margin was 56.7% versus 55.3%. For the full year, non-GAAP gross margin was 60% and GAAP gross margin was 57.8%; non-GAAP operating margin was 12% versus 4.5% in 2020, and full-year non-GAAP EPS was $1.20. Natus ended the quarter with $75.6 million in cash and generated $12.8 million of operating cash flow in Q4 and $64 million for the full year. For 2022, management guided revenue to $491 million-$499 million, GAAP EPS to $0.90-$1.03, and non-GAAP EPS to $1.36-$1.49, assuming $16 million of extraordinary semiconductor/component costs and $6 million of cost reductions from commercial realignment and other savings.

Tom Sullivan framed the quarter and the strategic review as a reset from a “position of strength,” emphasizing Natus’ leadership in neurodiagnostics, pediatric retinal imaging, and infant hearing screening. He argued the legacy portfolio and organizational structure had become too broad and complex, and said the company is now prioritizing higher-growth, higher-value areas with more commercial focus and a matrix structure to foster entrepreneurial growth. His tone was upbeat but measured, acknowledging supply-chain problems and saying Natus will keep investing where appropriate if it supports long-term shareholder value.

Drew Davies focused on the financial details: Q4 revenue of $128.7 million, backlog of $26 million, non-GAAP gross margin of 59.3%, and non-GAAP operating margin up 3.6% versus last year. He highlighted full-year non-GAAP gross margin of 60%, full-year non-GAAP operating margin of 12%, cash of $75.6 million, and operating cash flow of $64 million. On 2022 guidance, he cited revenue of $491 million-$499 million, GAAP EPS of $0.90-$1.03, non-GAAP EPS of $1.36-$1.49, $16 million of incremental extraordinary supply costs, $6 million of savings from realignment, and expected interest expense of about $1.2 million, with a non-GAAP tax rate of 21%-24%.

Analysts pressed management on what is most critical to reach upper mid-single-digit growth, and management said it will require all levers working together: international expansion, consumables growth, faster product development, and selective M&A. They also asked about leverage and acquisition criteria; management said Natus has $75 million in cash and no debt, but will only pursue assets that are strategically aligned, technology-driven, and likely to generate attractive long-term ROIC. On the new business buckets, management said the market growth rates are roughly 3% to 5% for brain and neural pathways and about 3% to 4% for sensory, and said it expects to present plans for the “other” businesses within the next three months.