Natus Medical Announces 2009 Third Quarter Financial Results and Increases Fourth Quarter and Full Year 2009 Guidance

http://www.businesswire.com/news/home/20091102005424/en

- Provides 2010 Guidance
SAN CARLOS, Calif.--(Business Wire)--
Natus Medical Incorporated (Nasdaq:BABY) today announced financial results for
the three and nine months ended September 30, 2009.

For the third quarter ended September 30, 2009, Natus reported revenue of $44.3
million, compared to $41.7 million reported in the comparable quarter of the
previous year. Net income was $3.7 million, or $0.13 per diluted share, for the
third quarter of 2009, compared with net income of $4.8 million, or $0.17 per
diluted share, for the third quarter of 2008.

For the nine months ended September 30, 2009, the Company reported net income of
$6.8 million, or $0.24 per diluted share, compared to net income of $11.2
million, or $0.43 per diluted share, for the comparable period in 2008.

The results for the third quarter of 2009 included $460,000 of direct
acquisition costs associated with the Company`s acquisitions of Hawaii Medical
and Alpine Biomed in July and September 2009, respectively. Excluding these
direct costs, which were reported as a component of general and administrative
expense, non-GAAP earnings were $4.0 million, or $0.14 per diluted share.

"We are pleased with our third quarter results as they exceeded our
expectations," said Jim Hawkins, President and Chief Executive Officer of the
Company. "Demand for our products, which stabilized in our second quarter,
improved among all our product lines throughout the third quarter, which is
extremely satisfying since we believe hospitals continue to limit spending on
capital equipment. I am also happy to report that we again generated cash during
the quarter, adding more than $6 million through operations."

"We believe the acquisitions of Hawaii Medical and Alpine Biomed signify that
our business model is on track. This, coupled with improved business conditions
in our markets, gives us the opportunity to return to the growth rates we
achieved in the years leading up to the 2008 recession, through a combination of
organic growth, cost reduction, and accretive acquisitions," added Hawkins.

"We are currently working through the integration of Alpine Biomed and expect
the contribution of Alpine to be accretive to our 2010 results," stated Hawkins.

As of September 30, 2009 the Company had cash, cash equivalents, and short-term
investments of $29.6 million, stockholders' equity of approximately $238
million, and working capital of approximately $76 million.

Financial Guidance

Natus increased its financial guidance for the full year and fourth quarter
2009. For the full year 2009 the Company now expects revenue to range from $164
million to $165 million and earnings per share to range from $0.39 to $0.40. The
Company had previously said it expected that revenue would range from $149
million to $151 million and earnings per share would range from $0.35 to $0.37.

For the fourth quarter of 2009, the Company now expects revenue to range from
$49 million to $50 million and earnings per share to range from $0.15 to $0.16.
The Company had previously said it expected that revenue would range from $40.3
million to $41.3 million and earnings per share would range from $0.14 to $0.15.
This compares to revenue of $43.4 million and earnings of per share of $0.22
reported in the fourth quarter of 2008.

Natus also provided financial guidance for the full year 2010. The Company said
it expects revenue to be approximately $196 million and earnings per share to
range from $0.49 to $0.51.

The Company`s fourth quarter 2009 and full year 2010 guidance is on a GAAP
basis, including the impact of expensing employee equity based compensation.
However, the Company`s guidance does not include the impact of any future
acquisition-related charges associated with the Hawaii Medical or Alpine Biomed
acquisitions, other acquisition or restructuring related charges that may be
incurred, and the impact any future potential acquisitions might have on the
Company`s results of operations. All earnings per share amounts are on a diluted
basis.

Use of Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with GAAP,
this release contains non-GAAP financial measures that exclude direct costs
associated with the company`s acquisitions of Hawaii Medical and Alpine Biomed.
The Company believes that the presentation of results excluding the
acquisition-related charges provides meaningful supplemental information to both
management and investors that is indicative of the Company's core operating
results. Therefore, the Company believes these non-GAAP financial measures
facilitate comparison of operating results across reporting periods. A
reconciliation between the Company's results of operations on a GAAP and
non-GAAP basis for the periods reported is included as part of the condensed
consolidated statements of operations at the end of the Company's financial
results release.

The Company believes that both management and investors benefit from referring
to these non-GAAP financial measures in assessing the Company's performance and
when planning, forecasting, and analyzing future periods. These non-GAAP
financial measures also facilitate management's internal comparisons to the
Company's historical performance. The non-GAAP financial measures disclosed by
the Company should not be considered a substitute for or superior to financial
measures calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those financial
statements should be carefully evaluated.

Conference Call

Natus has scheduled an investment-community conference call to discuss this
announcement beginning at 10:00 a.m. Eastern Time today (7:00 a.m. Pacific
Time). Individuals interested in listening to the conference call may do so by
dialing (866) 700-7441 for domestic callers, or (617) 213-8839 for international
callers, and entering reservation code 13698654. 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 65677711.

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
anticipated revenue and profitability for the fourth quarter and full year 2009
and full year 2010, the potential to achieve historic growth rates through a
combination of organic growth, cost reduction, and accretive acquisitions, and
the accretive impact of the Alpine Biomed acquisition. These statements relate
to current estimates and assumptions of our management as of the date of this
press release, and 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, the impact of adverse global economic conditions on our target
markets, 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, 2008, 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.

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

Three Months Ended Nine Months Ended
September September September September
2009 2008 2009 2008

Revenue $ 44,251 $ 41,714 $ 114,871 $ 118,435
Cost of revenue 17,450 15,835 44,869 45,215
Gross profit 26,801 25,879 70,002 73,220
Operating expenses:
Marketing and selling 11,767 9,965 32,005 29,020
Research and development 4,175 4,066 11,839 11,961
General and administrative 5,688 4,913 16,462 15,209
Total operating expenses 21,630 18,944 60,306 56,190
Income from operations 5,171 6,935 9,696 17,030
Other income/(expense):
Interest income 40 435 218 802
Interest expense (18 ) (28 ) (131 ) (813 )
Other income, net 49 160 497 965
Total other income/(expense) 71 567 584 954
Income before provision for income tax 5,242 7,502 10,280 17,984

Provision for income tax 1,573 2,710 3,488 6,798

Net income $ 3,669 $ 4,792 $ 6,792 $ 11,186
Earnings per share:
Basic $ 0.13 $ 0.17 $ 0.25 $ 0.46
Diluted $ 0.13 $ 0.17 $ 0.24 $ 0.43

Weighted-average shares used to compute
Basic earnings per share 27,669 27,445 27,640 24,497
Diluted earnings per share 28,668 28,756 28,343 25,775

NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)

Three Months Ended Nine Months Ended
September September September September
2009 2008 2009 2008

GAAP based results:

Income before provision for income tax $ 5,242 $ 7,502 $ 10,280 $ 17,984

Non-GAAP adjustments:

Direct costs of acquisitions 460 - 460 - (a)

Non-GAAP income before provision for income tax 5,702 7,502 10,740 17,984

Provision for income tax, as adjusted 1,711 2,710 3,644 6,798

Non-GAAP net income $ 3,991 $ 4,792 $ 7,096 $ 11,186

Earnings per share:
Basic $ 0.14 $ 0.17 $ 0.26 $ 0.46
Diluted $ 0.14 $ 0.17 $ 0.25 $ 0.43

Weighted-average shares used to compute
Basic earnings per share 27,669 27,445 27,640 24,497
Diluted earnings per share 28,668 28,756 28,343 25,775

(a) Direct costs of the acquisitions of Hawaii Medical and Alpine Biomed that are expensed pursuant to the requirements of SFAS 141R.

Natus Medical Incorporated
Steven J. Murphy, 650-802-0400
Chief Financial Officer
InvestorRelations@Natus.com

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