Natus Medical Announces Record 2008 Second Quarter Financial Results

-- 62% Increase in Net Income Leads to Record Second Quarter
Results

-- 2008 Guidance Increased
SAN CARLOS, Calif.--(Business Wire)--
Natus Medical Incorporated (Nasdaq:BABY) today announced financial
results for the three and six months ended June 30, 2008.

For the second quarter ended June 30, 2008, revenue increased 41%
to $39.9 million, compared to $28.3 million reported in the comparable
quarter of the previous year. Net income increased 62% to $3.8
million, or $0.15 per diluted share, for the second quarter of 2008,
compared with net income of $2.3 million, or $0.10 per share, for the
second quarter of 2007.

For the six months ended June 30, 2008, the Company reported net
income of $6.4 million, or $0.26 per diluted share, compared to net
income of $3.8 million, or $0.17 per diluted share, for the comparable
period in 2007. The results for the first six months of 2008 reflect
increases in net income and earnings per share of 66% and 56%,
respectively.

Jim Hawkins, President and Chief Executive Officer of the Company,
said, "We had an excellent second quarter with outstanding results in
all of our product areas. We are also very encouraged that our strong
results were achieved in both the United States and in our
international markets.

"We acquired Sonamed in May 2008 and have very quickly completed
the integration of their operations into Natus. Sonamed, a
manufacturer of hearing screening products, has a disposable supply
model with high gross profits that is an ideal fit for Natus," added
Hawkins.

"In July 2008, we acquired the neurology business of Schwarzer
GmbH, located in Munich, Germany. Schwarzer Neurology develops and
markets EEG systems and disposable supplies used by medical
practitioners to aid in the detection, diagnosis, and monitoring of
neurologic disorders. With this acquisition, we now lead the market
for diagnostic neurology systems in the German-speaking regions of
Europe. We expect the results of both Sonamed and Schwarzer Neurology
will be accretive to our earnings in 2008.

"Also in the second quarter we strengthened our balance sheet by
completing two public offerings of our common stock, raising almost
$100 million in new equity. As we exited the second quarter we had
approximately $77 million in cash with minimal debt. This compares to
cash of approximately $13 million and $36 million in debt as of the
beginning of the quarter. I am pleased that we are able to maintain
our annual earnings guidance for 2008 with only minimal adjustment,
even with the significant dilution from these equity offerings. Our
current strong cash position supports our strategy of identifying
acquisitions and integrating businesses that will be accretive to our
earnings," added Hawkins.

"I remain optimistic for our prospects in 2008 as we look to
achieve our goal of 50% earnings growth. We continue to remain
confident in our strategy of combining internal growth and accretive
acquisitions to build a focused and highly profitable medical device
company," said Hawkins.

As of June 30, 2008 the Company had cash, cash equivalents, and
short-term investments of $76.7 million, revolving and term debt of
$3.7 million, stockholders' equity of approximately $223 million, and
working capital of approximately $105 million. The Company raised
approximately $99.5 million net of expenses in April and May 2008 in
two separate public offerings of 885,500 and 4,600,000 shares,
respectively, of its common stock.

2008 Guidance

Natus increased its revenue and earnings guidance for the full
year 2008. For the full year 2008, the Company now expects revenue to
range from $166 million to $169 million and earnings per share to
range from $0.68 to $0.71. The Company had previously said revenue
would range from $163 million to $164 million and earnings per share
would range from $0.68 to $0.70.

Natus also announced revenue and earnings guidance for the third
and fourth quarters of 2008.

For the third quarter of 2008, the Company expects revenue to
range from $42.2 million to $43.2 million and earnings per share to
range from $0.17 to $0.18. This compares to revenue of $28.8 million
and earnings per share of $0.14 reported in the third quarter of 2007.

For the fourth quarter of 2008, the Company expects revenue to
range from $47 million to $49 million and earnings per share to range
from $0.25 to $0.27. This compares to revenue of $34.2 million dollars
and earnings of per share of $0.12 reported in the fourth quarter of
2007. The Company reported non-GAAP earnings per share of $0.17 iin
the fourth quarter of 2007. The Non-GAAP results for the fourth
quarter of 2007 excluded acquisition related costs associated with the
Company's acquisition of Xltek on November 29, 2007.

In February 2008, the Company announced a restructuring of its
North American operating units. These restructuring activities will
result in increased costs during the first three quarters of 2008 with
a reduction in operating costs beginning in the fourth quarter of
2008. The Company expects that the restructuring will result in an
approximate $2.4 million annual cost reduction beginning in 2009.

The guidance is on a GAAP basis, including the impact of expensing
employee equity-based compensation, however it does not include the
impact of any one-time charges associated with the Schwarzer Neurology
acquisition or future restructuring charges exclusive of those
previously announced. All earnings per share amounts are on a diluted
basis.

Conference Call

Natus has scheduled an investment-community conference call to
discuss this announcement beginning at 11:00 a.m. Eastern Time today
(8:00 a.m. Pacific Time). Individuals interested in listening to the
conference call may do so by dialing (866) 770-7152 for domestic
callers, or (617) 213-8066 for international callers, and entering
reservation code 90484203. A telephone replay will be available for 48
hours following the conclusion of the call by dialing (888) 286-8010
for domestic callers, or (617) 801-6888 for international callers, and
entering reservation code 89306707.

The conference call also will be available real-time via the
Internet at http://investor.natus.com, and a recording of the call
will be available on the Company's Web site for 90 days following the
completion of the call.

About Natus Medical Incorporated

Natus is a leading provider of healthcare products used for the
screening, detection, treatment, monitoring and tracking of common
medical ailments such as hearing impairment, neurological dysfunction,
epilepsy, sleep disorders, and newborn care. Product offerings include
computerized neurodiagnostic systems for audiology, neurology,
polysomnography, and neonatology, as well as newborn care products
such as hearing screening systems, phototherapy devices for the
treatment of newborn jaundice, head-cooling products for the treatment
of brain injury in newborns, and software systems for managing and
tracking disorders and diseases for public health laboratories.

Additional information about Natus Medical can be found at
www.natus.com.

This press release contains forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995, particularly
statements regarding the expectations, beliefs, plans, intentions and
strategies of Natus. These forward-looking statements include, but are
not limited to, statements regarding future revenue and earnings
growth, and anticipated revenue and profitability for the third and
fourth quarters and full year 2008. These statements relate to future
events or Natus' future financial performance or results, and involve
known and unknown risks, uncertainties and other factors that may
cause actual results, levels of activity, performance, or achievements
to differ materially from those expressed or implied by the
forward-looking statements. Forward-looking statements are only
predictions and the actual events or results may differ materially.
Natus cannot provide any assurance that its future results or the
results implied by the forward-looking statements will meet
expectations. Our future results could differ materially due to a
number of factors, including the effects of competition, the demand
for our products and services, our ability to expand our sales in
international markets, our ability to maintain current sales levels in
a mature domestic market, our ability to control costs, and risks
associated with bringing new products to market and integrating
acquired businesses. Natus disclaims any obligation to update
information contained in any forward-looking statement.

More information about potential risk factors that could affect
the business and financial results of Natus is included in Natus'
annual report on Form 10-K for the year ended December 31, 2007, and
its quarterly reports on Form 10-Q, and in other reports filed from
time to time by Natus with the U.S. Securities and Exchange
Commission.

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Three Months Six Months Ended
Ended
June June June June
2008 2007 2008 2007
------- ------- ------- -------

Revenue $39,862 $28,260 $76,721 $55,313
Cost of revenue 15,374 10,151 29,379 20,326
------- ------- ------- -------
Gross profit 24,488 18,109 47,342 34,987
------- ------- ------- -------
Operating expenses:
Marketing and selling 9,180 6,900 19,056 13,395
Research and development 4,068 4,372 7,895 8,196
General and administrative 5,440 3,589 10,296 7,698
------- ------- ------- -------
Total operating expenses 18,688 14,861 37,247 29,289
------- ------- ------- -------
Income from operations 5,800 3,248 10,095 5,698
------- ------- ------- -------
Other income/(expense):
Interest income 229 184 367 370
Interest expense (241) - (786) -
Other income, net 398 50 805 105
------- ------- ------- -------
Total other income/(expense) 386 234 386 475
------- ------- ------- -------
Income before provision for income
tax 6,186 3,482 10,481 6,173

Provision for income tax 2,419 1,156 4,087 2,325
------- ------- ------- -------
Net income (loss) $ 3,767 $ 2,326 $ 6,394 $ 3,848
======= ======= ======= =======
Earnings (loss) per share:
Basic $ 0.16 $ 0.11 $ 0.28 $ 0.18
Diluted $ 0.15 $ 0.10 $ 0.26 $ 0.17

Weighted-average shares used to
compute
Basic earnings per share 24,248 21,584 23,000 21,525
Diluted earnings per share 25,514 22,830 24,253 22,783
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Natus Medical Incorporated
Steven J. Murphy, 650-802-0400
Chief Financial Officer
InvestorRelations@Natus.com

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