10-Q

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 June 30, 2019

☐ 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.)

6701 Koll Center Parkway, Suite 120, Pleasanton, CA 94566

(Address of principal executive offices) (Zip Code)

(925) 223-6700

(Registrant’s telephone number, including area code)

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  ☒

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)

The number of issued and outstanding shares of the registrant’s Common Stock, $0.001 par value, as of July 31, 2019 was 34,069,328.

NATUS MEDICAL INCORPORATED

TABLE OF CONTENTS

		Page No.
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 (unaudited)	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2019 and 2018 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		33

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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)

	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	52,009		$	56,373
Accounts receivable, net of allowance for doubtful accounts of $8,579 in 2019 and $6,960 in 2018	106,934			127,041
Inventories	78,275			79,736
Prepaid expenses and other current assets	28,022			22,625
Total current assets	265,240			285,775
Property and equipment, net	26,547			22,913
Operating lease right-of-use assets	17,217			—
Intangible assets, net	126,985			139,453
Goodwill	147,740			147,644
Deferred income tax	19,187			22,639
Other assets	25,084			19,716
Total assets	$	628,000		$	638,140
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,235		$	28,805
Current portion of long-term debt	35,000			35,000
Accrued liabilities	51,605			52,568
Deferred revenue	19,861			17,073
Current portion of operating lease liabilities	5,960			—
Total current liabilities	137,661			133,446
Long-term liabilities:
Other liabilities	21,237			19,845
Operating lease liabilities	14,326			—
Long-term debt, net	44,570			69,474
Deferred income tax	8,649			16,931
Total liabilities	226,443			239,696
Stockholders’ equity:
Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding 34,040,230 in 2019 and 33,804,379 in 2018	338,735			334,215
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2019 and 2018	—			—
Retained earnings	77,780			102,261
Accumulated other comprehensive loss	(14,958		)	(38,032		)
Total stockholders’ equity	401,557			398,444
Total liabilities and stockholders’ equity	$	628,000		$	638,140

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   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Revenue	$	125,539		$	130,653		$	240,296		$	259,261
Cost of revenue	52,164			52,897			98,534			108,266
Intangibles amortization	1,746			2,717			3,502			4,305
Gross profit	71,629			75,039			138,260			146,690
Operating expenses:
Marketing and selling	32,236			33,401			65,966			69,273
Research and development	12,769			15,616			25,827			31,059
General and administrative	12,691			23,721			28,995			41,169
Intangibles amortization	3,763			4,151			7,549			8,957
Restructuring	2,668			1,938			40,040			2,750
Total operating expenses	64,127			78,827			168,377			153,208
Income (loss) from operations	7,502			(3,788		)	(30,117		)	(6,518		)
Other expense, net	(1,200		)	(2,398		)	(3,312		)	(4,218		)
Income (loss) before provision for (benefit from) income tax	6,302			(6,186		)	(33,429		)	(10,736		)
Provision for (benefit from) income tax	2,114			(3,609		)	(7,616		)	(5,009		)
Net income (loss)	4,188			$	(2,577	)	$	(25,813	)	$	(5,727	)
Net income (loss) per share:
Basic	$	0.12		$	(0.08	)	$	(0.77	)	$	(0.17	)
Diluted	$	0.12		$	(0.08	)	$	(0.77	)	$	(0.17	)
Weighted average shares used in the calculation of net income (loss) per share:
Basic	33,639			32,859			33,630			32,809
Diluted	33,690			32,859			33,630			32,809

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   June 30,					Six Months Ended   June 30,
	2019		2018			2019			2018
Net income (loss)	$	4,188	$	(2,577	)	$	(25,813	)	$	(5,727	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	1,436		(13,253		)	(439		)	(9,636		)
Reclassification of stranded tax effects upon adoption of ASU 2018-02	—		—			(1,332		)	—
Reclassification of deferred foreign currency related adjustments related to the sale of Medix (See Footnote 17 - Sale of Certain Subsidiary Assets)	24,845		—			24,845			—
Other comprehensive income (loss), net of tax	26,281		(13,253		)	23,074			(9,636		)
Comprehensive income (loss)	30,469		(15,830		)	(2,739		)	(15,363		)

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 Loss			Stockholders’ Equity
	Shares		Amount
Balances, December 31, 2018	33,804,379		$	334,215		$	102,261		$	(38,032	)	$	398,444
Reclassification of stranded tax effects for ASU 2018-02	—		—			1,332			(1,332		)	—
Vesting of restricted stock units	42,130		—			—			—			—
Net issuance of restricted stock awards	139,718		—			—			—			—
Stock-based compensation expense	—		2,432			—			—			2,432
Taxes paid related to net share settlement of equity awards	(47,767	)	(1,567		)	—			—			(1,567		)
Exercise of stock options	16,617		268			—			—			268
Other comprehensive loss	—		—			—			(1,875		)	(1,875		)
Net loss	—		—			(30,001		)	—			(30,001		)
Balances, March 31, 2019	33,955,077		$	335,348		$	73,592		$	(41,239	)	$	367,701
Vesting of restricted stock units	—		—			—			—			—
Net issuance of restricted stock awards	5,762		—			—			—			—
Employee stock purchase plan	31,879		725			—			—			725
Stock-based compensation expense	—		1,987			—			—			1,987
Repurchase of company stock	—		—			—			—			—
Taxes paid related to net share settlement of equity awards	(274	)	(7		)	—			—			(7		)
Exercise of stock options	47,786		682			—			—			682
Other comprehensive income	—		—			—			26,281			26,281
Net income	—		—			4,188			—			4,188
Balances, June 30, 2019	34,040,230		$	338,735		$	77,780		$	(14,958	)	$	401,557

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 Loss			Stockholders’ Equity
	Shares		Amount
Balances, December 31, 2017	33,134,101		$	316,577		$	129,115		$	(23,595	)	$	422,097
Cumulative-effect adjustment for ASU 2016-16	—		—			(3,919		)	—			(3,919		)
Vesting of restricted stock units	100		—			—			—			—
Net issuance of restricted stock awards	239,649		—			—			—			—
Stock-based compensation expense	—		2,361			—			—			2,361
Repurchase of company stock	(147,893	)	(4,736		)	—			—			(4,736		)
Taxes paid related to net share settlement of equity awards	(600	)	(19		)	—			—			(19		)
Exercise of stock options	46,173		577			—			—			577
Other comprehensive income	—		—			—			3,617			3,617
Net loss	—		—			(3,148		)	—			(3,148		)
Balances, March 31, 2018	33,271,530		$	314,760		$	122,048		$	(19,978	)	$	416,830
Vesting of restricted stock units	166		—			—			—			—
Net issuance of restricted stock awards	21,599		—			—			—			—
Employee stock purchase plan	30,971		870			—			—			870
Stock-based compensation expense	—		3,219			—			—			3,219
Repurchase of company stock	(25,652	)	(893		)	—			—			(893		)
Taxes paid related to net share settlement of equity awards	(8,627	)	(306		)	—			—			(306		)
Exercise of stock options	300,350		3,645			—			—			3,645
Other comprehensive income	—		—			—			(13,253		)	(13,253		)
Net loss	—		—			(2,577		)	—			(2,577		)
Balances, June 30, 2018	33,590,337		$	321,295		$	119,471		$	(33,231	)	$	407,535

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)

	Six Months Ended   June 30,
	2019			2018
Operating activities:
Net loss	$	(25,813	)	$	(5,727	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for losses on accounts receivable	960			4,089
Depreciation and amortization	15,427			16,694
Loss on disposal of property and equipment	482			160
Warranty reserve	1,677			975
Share-based compensation	4,462			5,632
Impairment charge for sale of entity	24,571			—
Changes in operating assets and liabilities:
Accounts receivable	19,170			2,064
Inventories	(2,475		)	(2,483		)
Prepaid expenses and other assets	(11,060		)	(15,141		)
Accounts payable	(3,517		)	(364		)
Accrued liabilities	(2,620		)	3,414
Deferred revenue	2,739			1,687
Deferred income tax	44			326
Net cash provided by operating activities	24,047			11,326
Investing activities:
Acquisition of businesses, net of cash acquired	—			151
Purchase of property and equipment	(2,919		)	(3,387		)
Purchase of intangible assets	(13		)	(298		)
Net cash used in investing activities	(2,932		)	(3,534		)
Financing activities:
Proceeds from stock option exercises and Employee Stock Purchase Program purchases	1,674			5,092
Repurchase of common stock	—			(5,630		)
Taxes paid related to net share settlement of equity awards	(1,573		)	(326		)
Principal payments of financing lease liability	(265		)	—
Payment of contingent consideration related to a business combination	—			(147		)
Payments on borrowings	(25,000		)	(35,000		)
Net cash used in financing activities	(25,164		)	(36,011		)
Exchange rate changes effect on cash and cash equivalents	(315		)	(5,823		)
Net decrease in cash and cash equivalents	(4,364		)	(34,042		)
Cash and cash equivalents, beginning of period	56,373			88,950
Cash and cash equivalents, end of period	$	52,009		$	54,908
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,071		$	2,966
Cash paid for income taxes	$	5,328		$	7,234
Non-cash investing activities:
Property and equipment included in accounts payable	$	35		$	93
Inventory transferred to property and equipment	$	589		$	293

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

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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1 - Basis of Presentation and Significant Accounting Policies

The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“Natus,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. The Company has made certain reclassifications to the prior period to conform to current period presentation. The consolidated balance sheet as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Recent Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires lease assets and lease liabilities arising from operating leases to be presented in the statement of financial position. Qualitative along with specific quantitative disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which affects narrow aspects of the guidance issued in the amendments in Update 2016-02. In July 2018, the FASB also issued ASU 2018-11, Targeted Improvements. The amendments in ASU 2018-11 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU 2016-02 and have the same effective and transition requirements as ASU 2016-02.

The new standard provides a number of optional practical expedients in transition. The Company elected the 'package of practical expedients,' which permits an entity to not reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. The Company has not elected the use-of-hindsight practical expedient or the practical expedient pertaining to land easements; the latter of which is not applicable to the Company. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. The Company will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

The new standard became effective for the Company on January 1, 2019. The Company adopted the new standard using the modified retrospective transition method with the effective date as the date of initial application. Upon adoption, the Company recognized additional new lease assets of approximately $19.5 million and additional lease liabilities of approximately $22.3 million as of January 1, 2019. The standard did not materially affect consolidated net earnings. By electing the effective date as the date of initial application, financial performance has not been adjusted and the disclosures required under the new standard have not been provided for periods prior to January 1, 2019. See Significant Accounting Policies and Note 14 for additional discussion and disclosure.

The adoption of the new standard did not impact the Company's liquidity or debt-covenant compliance under its current agreements.

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In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective for the Company's annual and any interim goodwill impairment tests performed on or after January 1, 2020. The Company elected to early adopt. The adoption of ASU 2017-04 did not have an impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This update permits a company to reclassify its disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings (termed “stranded tax effects”). Only the stranded tax effects resulting from the 2017 Act are eligible for reclassification. The ASU is effective for the Company on January 1, 2019. Upon adoption, the Company reclassified its stranded tax effects resulting from the 2017 Act of $1.3 million, resulting in a decrease to AOCI and an increase to retained earnings as of January 1, 2019.

Recent Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326). This update requires financial assets measured at amortized cost, such as trade receivables and contract assets, to be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. In May 2019, the FASB issued ASU 2019-05 which provides targeted transition relief guidance intended to increase comparability of financial statement information. The guidance for both of these is effective beginning January 1, 2020. The Company is evaluating the impact, if any, that these pronouncements will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 813), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This update amends Topic 820 to add, remove, and clarify disclosure requirements related to fair value measurement disclosure. For calendar year-end entities, the update will be effective for annual periods beginning January 1, 2020, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. As the standard relates only to disclosures, the Company does not expect the adoption to have a material impact on the consolidated financial statements and is still evaluating if it will early adopt.

Significant Accounting Policies

Leases

The Company determines if an arrangement is a lease at inception of the lease. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit borrowing rate, generally the Company uses an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the lease commencement date. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to exclude or terminate the lease when it is reasonably certain that they will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

Operating leases are included in operating lease ROU assets, accrued liabilities, and operating lease liabilities in the Company's consolidated balance sheet. Finance leases are included in property and equipment, accrued liabilities, and other liabilities in the consolidated balance sheet.

-10-

The Company has lease agreements with lease and non-lease components, which are generally accounted for based on the type of asset. For real estate and telecom leases, the Company accounts for these components separately. For equipment leases, such as office equipment and vehicles, the Company accounts for the lease and non-lease components as a single lease component.

Assets and Liabilities Held for Sale

The Company considers assets and liabilities to be held for sale when all of the following criteria are met:

• Management approves and commits to a formal plan to sell the asset or disposal group;

• The assets or disposal group is available for immediate sale in its present condition;

• An active program to locate a buyer and other actions required to complete the sale have been initiated;

• The sale of the asset or disposal group is expected to be completed within one year;

• The asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to the current fair value; and

• It is unlikely that significant changes will be made to the plan.

Assets held for sale are not depreciated. Upon designation of the asset or disposal group as held for sale, the Company records the asset or disposal group at the lower of its carrying value or its estimated fair value, less estimated costs of sale. The Company considers deferrals accumulated in other comprehensive income, including cumulative currency translation adjustments, in the total carrying value of the disposal group in accordance with GAAP. Any loss resulting from this measurement is recognized on the Company's income statement as a restructuring operating expense in the period in which the held for sale criteria are met and gains, if any are not recognized until the date of sale. The Company assesses the fair value of assets held for sale less any costs to sell each reporting period it remains classified as held for sale and reports any reduction in fair value as an adjustment to the carrying value of the assets held for sale.

2 - Revenue

Unbilled accounts receivable (“AR”) for the periods presented primarily represent the difference between revenue recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented primarily relates to extended service contracts, installation, and training, for which the service fees are billed in advance. The associated deferred revenue is generally recognized ratably over the extended service period or when installation and training are complete.

The following table summarizes the changes in the unbilled AR and deferred revenue balances for the six months ended June 30, 2019 (in thousands):

Unbilled AR, December 31, 2018	$	3,012
Additions	420
Transferred to Trade Receivable	(667		)
Unbilled AR, June 30, 2019	$	2,765

Deferred Revenue, December 31, 2018	$	21,410
Additions	14,242
Revenue Recognized	(11,502		)
Deferred Revenue, June 30, 2019	$	24,150

At June 30, 2019, the short-term portion of deferred revenue of $19.9 million and the long-term portion of $4.3 million were included in deferred revenue and other long-term liabilities respectively, in the consolidated balance sheet. As of June 30, 2019, the Company expects to recognize revenue associated with deferred revenue of

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approximately $12.8 million in 2019, $8.3 million in 2020, $1.5 million in 2021, $0.9 million in 2022, and $0.7 million thereafter.

3 - Earnings Per Share

The components of basic and diluted EPS are as follows (in thousands, except per share amounts):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2019		2018			2019			2018
Net income (loss)	$	4,188	$	(2,577	)	$	(25,813	)	$	(5,727	)
Weighted average common shares	33,639		32,859			33,630			32,809
Dilutive effect of stock based awards	51		—			—			—
Diluted Shares	33,690		32,859			33,630			32,809
Basic income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Diluted income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Shares excluded from calculation of diluted EPS	—		382			103			387

4 - Inventories

Inventories consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Raw materials and subassemblies	$	34,310		$	31,459
Work in process	2,603			2,424
Finished goods	62,650			63,932
Total inventories	99,563			97,815
Less: Non-current inventories	(21,288		)	(18,079		)
Inventories, current	$	78,275		$	79,736

As of June 30, 2019 and December 31, 2018, the Company has classified $21.3 million and $18.1 million, respectively, of inventories as other assets. This inventory consists primarily of service components used to repair products held by customers pursuant to warranty obligations and extended service contracts, including service components for products the Company no longer sells, inventory purchased for lifetime buys, and inventory that is turning over at a slow rate. The Company believes these inventories will be utilized for their intended purpose.

5 – Intangible Assets

The following table summarizes the components of gross and net intangible asset balances (in thousands):

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	June 30, 2019										December 31, 2018
	Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value
Intangible assets with definite lives:
Technology	$	110,516	$	(6,636	)	$	(53,225	)	$	50,655	$	111,198	$	(6,768	)	$	(50,046	)	$	54,384
Customer related	99,050		(50		)	(44,523		)	54,477		99,440		(1,961		)	(38,574		)	58,905
Trade names	47,047		(3,831		)	(22,714		)	20,502		47,217		(4,397		)	(19,250		)	23,570
Internally developed software	16,282		—			(15,179		)	1,103		16,264		—			(14,164		)	2,100
Patents	2,953		(132		)	(2,801		)	20		2,718		(133		)	(2,524		)	61
Service Agreements	1,190		—			(962		)	228		1,190		—			(757		)	433
Definite-lived intangible assets	$	277,038	$	(10,649	)	$	(139,404	)	$	126,985	$	278,027	$	(13,259	)	$	(125,315	)	$	139,453

Finite-lived intangible assets are amortized over their weighted average lives, which are 14 years for technology, 10 years for customer related intangibles, 7 years for trade names, 6 years for internally developed software, 12 years for patents, 2 years for service agreements and 11 years weighted average in total.

Internally developed software consists of $14.1 million relating to costs incurred for development of internal use computer software and $2.2 million for development of software to be sold.

Amortization expense related to intangible assets with definite lives was as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Technology	$	1,729	$	2,558	$	3,467	$	4,378
Customer related	2,167		2,302		4,350		5,183
Trade names	1,491		1,456		2,989		3,082
Internally developed software	506		528		1,010		1,058
Patents	20		22		40		43
Service Agreements	$	103	$	486	205		486
Total amortization	$	6,016	$	7,352	$	12,061	$	14,230

The amortization expense amounts shown above include internally developed software not held for sale of $0.5 million and $1.0 million for the three and six months ended June 30, 2019, respectively which is recorded within the Company's income statement as a general and administrative operating expense.

Expected amortization expense related to amortizable intangible assets is as follows (in thousands):

Six months ending December 31, 2019	$	11,333
2020	21,805
2021	20,918
2022	17,473
2023	16,500
2024	14,592
Thereafter	24,364
Total expected amortization expense	$	126,985

6 – Goodwill

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The carrying amount of goodwill and the changes in the balance are as follows (in thousands):

December 31, 2018	$	147,644
Foreign currency translation	96
June 30, 2019	$	147,740

7 - Property and Equipment, net

Property and equipment, net consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Land	$	1,720		$	1,828
Buildings	6,778			7,036
Leasehold improvements	7,616			4,649
Finance lease right-of-use assets	2,955			—
Equipment and furniture	23,725			23,487
Computer software and hardware	12,635			12,803
Demonstration and loaned equipment	12,201			12,843
	67,630			62,646
Accumulated depreciation	(41,083		)	(39,733		)
Total	$	26,547		$	22,913

Depreciation expense of property and equipment was approximately $1.8 million and $3.3 million for the three and six months ended June 30, 2019 and approximately $1.4 million and $2.4 million for the three and six months ended June 30, 2018.

8 - Reserve for Product Warranties

The Company provides a warranty for products that is generally one year in length, but in some cases regulations may require us to provide repair or remediation beyond the typical warranty period. If any of the products contain defects, the Company may incur additional repair and remediation costs. Service for domestic customers is provided by Company-owned service centers that perform all service, repair, and calibration services. Service for international customers is provided by a combination of Company-owned facilities, vendors on a contract basis, and distributors.

A warranty reserve is included in accrued liabilities for the expected future costs of servicing products. Additions to the reserve are based on management’s best estimate of probable liability. The Company considers a combination of factors including material and labor costs, regulatory requirements, and other judgments in determining the amount of the reserve. The reserve is reduced as servicing is performed to honor existing warranty and regulatory obligations.

As of June 30, 2019, the Company has accrued $8.1 million for product related warranties, which includes $2.9 million of estimated costs to bring certain products into regulatory compliance. The Company's estimate of these costs is primarily based upon the number of units outstanding that may require repair and costs associated with shipping.

The details of activity in the warranty reserve are as follows (in thousands):

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	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Balance, beginning of period	$	8,225		$	9,068		$	9,391		$	10,995
Additions charged to expense	1,639			2,100			2,248			2,335
Utilizations	(1,473		)	(255		)	(2,983		)	(1,057		)
Changes in estimate related to product remediation activities	(315		)	—			(571		)	(1,360		)
Divestiture adjustments	—			—			(9		)	—
Balance, end of period	$	8,076		$	10,913		$	8,076		$	10,913

The Company's estimates of future product warranty costs may vary from actual product warranty costs, and any variance from estimates could impact our cost of sales, operating profits and results of operations.

9 - Share-Based Compensation

As of June 30, 2019, the Company has two active share-based compensation plans, the 2018 Equity Incentive Plan and the 2011 Employee Stock Purchase Plan.

In January 2019, the Company granted market stock unit (“MSU”) awards to certain employees. These MSUs fully vest on December 31, 2021 and have separate market performance goals than the performance stock unit (“PSU”) awards the Company grants. Each MSU represents the right to one share of common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Natus' stock price over the vesting period. The maximum number of MSUs which will be eligible to vest are 200% of the MSUs initially granted. A Monte Carlo simulation model was used to estimate the fair value of the MSUs as of their grant date. This model simulates the stock price movements of the Company using certain assumptions, including the stock price of the company.

The terms of all other awards granted during the six months ended June 30, 2019 and the methods for determining grant-date fair value of the awards are consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Details of share-based compensation expense are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Cost of revenue	$	89	$	71	$	156	$	139
Marketing and selling	209		199		439		396
Research and development	258		272		503		549
General and administrative	1,431		2,728		3,321		4,548
Total	$	1,987	$	3,270	$	4,419	$	5,632

As of June 30, 2019, unrecognized compensation expense related to the unvested portion of stock options and other stock awards was approximately $13.5 million, which is expected to be recognized over a weighted average period of 2.5 years.

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10 - Other Income (Expense), net

Other income (expense), net consists of (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Interest income	$	127		$	(5	)	$	147		$	5
Interest expense	(1,468		)	(1,641		)	(2,995		)	(3,601		)
Foreign currency gain (loss)	134			(838		)	(463		)	(234		)
Other expense	7			86			(1		)	(388		)
Total other expense, net	$	(1,200	)	$	(2,398	)	$	(3,312	)	$	(4,218	)

11 - Income Taxes

The Company's tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective quarter. During each interim period, the Company updates the estimated annual effective tax rate which is subject to significant volatility due to several factors, including the Company's ability to accurately predict the income (loss) before provision for income taxes in multiple jurisdictions, the effects of acquisitions, the integration of those acquisitions, and changes in tax law. In circumstances where the Company is unable to predict income (loss) in multiple jurisdictions, the actual year to date effective tax rate may be the best estimate of the annual effective tax rate for purposes of determining the interim provision for income tax.

The Company recorded an expense from income tax of $2.1 million and a benefit from income tax of $7.6 million for the three and six months ended June 30, 2019, respectively. The effective tax rate was 33.5% and 22.8% for the three and six months ended June 30, 2019, respectively. Of the $7.6 million benefit from income tax recorded for the six months ended June 30, 2019, $8.2 million relates to the tax accounting effects of the sale of Medix.

The Company recorded a benefit for income tax of $3.6 million and $5.0 million for the three and six months ended June 30, 2018, respectively. The effective tax rate was 58.3% and 46.7% for the three and six months ended June 30, 2018, respectively.

The decrease in the effective tax rate for the three and six months ended June 30, 2019 compared with the three and six months ended June 30, 2018 is primarily attributable to the tax accounting effects of the sale of Medix. The Company's effective tax rate for the three and six months ended June 30, 2019 differed from the federal statutory rate of 21% primarily due to the tax accounting effects of the sale of Medix. Other significant factors that impact the effective tax rate are Federal and California research and development credits, non-deductible executive compensation expenses, and inclusions related to global intangible low-taxed income.

The Company recorded $0.2 million of net tax expense related to unrecognized tax benefits for the three and six months ended June 30, 2019, primarily due to the increase in uncertain tax positions related to the prior year. Within the next twelve months, it is possible that the uncertain tax benefit may change with a range of approximately zero to $3.8 million. The Company's tax returns remain open to examination as follows: U.S Federal, 2015 through 2018, U.S. states, 2014 through 2018, and significant foreign jurisdictions, generally 2014 through 2018.

12 - Debt and Credit Arrangements

The Company has a Credit Agreement with JP Morgan Chase Bank ("JP Morgan"), Citibank, NA (“Citibank”), and Wells Fargo Bank, National Association (“Wells Fargo”). The Credit Agreement provides for an aggregate $225.0 million of secured revolving credit facility. The Credit Agreement contains covenants, including covenants relating to maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and limitations on guaranties, investments, issuance of debt, lease

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obligations and capital expenditures, and is secured by virtually all of the Company's assets. The Credit Agreement provides for events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and the occurrence of the event has a material adverse effect. The Company has no other significant credit facilities.

In addition to the customary restrictive covenants listed above, the Credit Agreement also contains financial covenants that require the Company to maintain a certain leverage ratio and fixed charge coverage ratio, each as defined in the Credit Agreement:

• Leverage Ratio, as defined, to be no higher than 2.75 to 1.00.

• Interest Coverage Ratio, as defined, to be at least 1.75 to 1.00 at all times.

At June 30, 2019, the Company was in compliance with the Leverage Ratio and the Interest Coverage Ratio covenants as defined in the Credit Agreement.

At June 30, 2019, the Company had $80.0 million outstanding under the Credit Agreement.

Pursuant to the terms of the Credit Agreement, the outstanding principal balance will bear interest at either (a) a fluctuating rate per annum equal to the Applicable Rate, as defined in the Credit Agreement, depending on our leverage ratio plus the higher of (i) the federal funds rate plus one-half of one percent per annum; (ii) the prime rate in effect on such a day; and (iii) the LIBOR rate plus one percent, or (b) a fluctuating rate per annum of LIBOR Rate plus the Applicable Rate, which ranges between 1.75% to 2.75%. The effective interest rate during the six months ended June 30, 2019 was 4.74%. The Credit Agreement matures on September 23, 2021, at which time all principal amounts outstanding under the Credit Agreement will be due and payable. As of June 30, 2019, we have classified $35.0 million of the $80.0 million outstanding as short-term on our balance sheet due to our intent to repay this portion over the next twelve months.

Long-term debt consists of (in thousands):

	June 30, 2019			December 31, 2018
Revolving credit facility	$	80,000		$	105,000
Debt issuance costs	(430		)	(526		)
Less: current portion of long-term debt	35,000			35,000
Total long-term debt	$	44,570		$	69,474

Maturities of long-term debt as of June 30, 2019 are as follows (in thousands):

	June 30, 2019		December 31, 2018
2019	$	—	$	—
2020	—		—
2021	80,000		105,000
Thereafter	—		—
Total	$	80,000	$	105,000

As of June 30, 2019, the carrying value of total debt approximated fair market value.

13 - Financial Instruments and Derivatives

The Company uses interest rate swap derivative instruments to reduce earnings volatility and manage cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected LIBOR-indexed floating-rate borrowings. The Company held the following interest rate swaps as of June 30, 2019 (in thousands):

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Hedged Item	Current Notional Amount		Designation Date	Effective Date	Termination Date	Fixed Interest Rate	Floating Rate	Estimated Fair Value
1-month USD LIBOR Loan	$	25,000	May 31, 2018	June 1, 2018	September 23, 2021	2.611%	1-month USD LIBOR	$	384
Total interest rate derivatives designated as cash flow hedge	$	25,000						$	384

The Company designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and records the change in the fair value of a derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax. Once the hedged item affects earnings, the effective portion of any gain or loss will be reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time.

As of June 30, 2019, the Company estimates that approximately $136.0 thousand of losses associated with the cash flow hedge, net of tax, could be reclassified from AOCI into earnings within the next twelve months.

14 - Leases

The Company has operating and finance leases for offices, warehouses, and certain equipment. The leases have remaining lease terms of one to eight years, some of which include options to extend the leases for up to ten years. The Company's leases do not have any residual value guarantees or any restrictions or covenants imposed by leases.

Components of lease cost were as follows (in thousands):

	Three Months Ended   June 30,			Six Months Ended   June 30,
	2019			2019
Operating lease cost	$	1,659		$	3,424
Finance lease cost:
Amortization of right-of-use assets (principal payments)	100			265
Interest on lease liabilities	14			36
Short-term lease cost	13			51
Variable lease cost	356			1,240
Sublease income	(56		)	(89		)
Total lease cost	$	2,086		$	4,927

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,265	$	6,757
Operating cash flows from finance leases	29		66
Financing cash flows from finance leases	100		265
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	601		1,721
Finance leases	17		105

Supplemental balance sheet information related to leases was as follows (in thousands):

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	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	17,217
Current portion of operating lease liabilities	$	5,960
Operating lease liabilities	14,326
Total operating lease liabilities	$	20,286
Finance Leases
Property and equipment, gross	$	2,955
Accumulated amortization	1,637
Property and equipment, net	$	1,318
Accrued liabilities	$	483
Other liabilities	888
Total finance lease liabilities	$	1,371
Weighted Average Remaining Lease Term
Operating leases	4.1 years
Finance leases	3.2 years
Weighted Average Discount Rate
Operating leases	5.3		%
Finance leases	5.1		%

As of June 30, 2019, future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet, for the following five fiscal years and thereafter, were as follows (in thousands):

Year ending December 31,	Operating Leases			Finance Leases
2019	$	6,849		$	529
2020	5,727			429
2021	4,337			340
2022	2,714			144
2023	2,049			24
Thereafter	1,283			2
Total lease payments	22,959			1,468
Less imputed interest	(2,673		)	(97		)
Total	$	20,286		$	1,371

As the Company elected to apply the provisions of Topic 842 on a prospective basis, the following comparative period disclosure is being presented in accordance with Topic 840. The future minimum commitments under the Company’s leases as of December 31, 2018 were as follows (in thousands):

Year ending December 31,	Operating Leases
2019	$	8,092
2020	6,951
2021	5,290
2022	3,423
2023	2,426
Thereafter	1,365
Total minimum lease payments	$	27,547

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15 - Segment, Customer and Geographic Information

The Company operates in one reportable segment in which the Company provides medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

End-user customer base includes hospitals, clinics, laboratories, physicians, audiologists, and governmental agencies. Most of the Company's international sales are to distributors who resell products to end users or sub-distributors.

Revenue and long-lived asset information are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Consolidated Revenue:
United States	$	73,531	$	75,467	$	139,598	$	144,154
International	52,008		55,186		100,698		115,107
Totals	$	125,539	$	130,653	$	240,296	$	259,261

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Revenue by End Market:
Neurology Products
Devices and Systems	$	54,617	$	50,275	$	100,366	$	96,234
Supplies	16,910		16,535		32,751		33,707
Services	71		3,565		871		6,303
Total Neurology Revenue	71,598		70,375		133,988		136,244
Newborn Care Products
Devices and Systems	12,615		15,471		27,260		34,450
Supplies	8,933		9,625		18,979		19,147
Services	5,015		5,477		9,860		10,880
Total Newborn Care Revenue	26,563		30,573		56,099		64,477
Audiology Products
Devices and Systems	26,178		29,119		47,703		52,968
Supplies	1,200		586		2,506		5,572
Total Audiology Revenue	27,378		29,705		50,209		58,540
Total Revenue	$	125,539	$	130,653	$	240,296	$	259,261

	June 30, 2019		December 31, 2018
Property and equipment, net:
United States	$	13,128	$	10,019
Ireland	5,868		5,083
Canada	4,384		4,504
Denmark	1,950		1,371
Argentina	—		999
Other countries	1,217		937
Totals	$	26,547	$	22,913

During the three and six months ended June 30, 2019 and 2018, no single customer or country outside the United States contributed more than 10% of the Company's consolidated revenue.

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16 - Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

On April 1, 2019, as part of the sale of the Company's Argentinian subsidiary, Medix, Natus provided a loan to Medix for $2.2 million. This asset was measured at fair value less costs to sell as of June 30, 2019 and is classified as Level 3 asset. The loan is classified within other assets on our condensed consolidated balance sheet. Subsequent changes in the fair value of the loan receivable are recorded within the Company's income statement as an operating expense.

	December 31, 2018		Additions		Receipts		Adjustments		June 30, 2019
Other assets:
Loan receivable	$	—	$	2,200	$	—	$	—	$	2,200
Total	$	—	$	2,200	$	—	$	—	$	2,200

The derivative financial instruments described in Note 13 are measured at fair value on a recurring basis and are presented on the consolidated balance sheets at fair value. The Company estimates the fair value of the interest rate swaps by calculating the present value of the expected future cash flows of each swap. The calculation incorporated the contractual terms of the derivatives, observable market interest rates which are considered to be Level 2 inputs, and credit risk adjustments, if any, to reflect the counterpart's as well as the Company's nonperformance risk. As of June 30, 2019, there have been no events of default under the interest rate swap agreement. The table below presents the fair value of the derivative financial instruments as well as the classification on the consolidated balance sheet (in thousands):

	December 31, 2018		Additions		Payments		Adjustments		June 30, 2019
Liabilities:
Interest rate swap	$	77	$	—	$	—	$	307	$	384
Total	$	77	$	—	$	—	$	307	$	384

The following financial instruments are not measured at fair value on the Company’s consolidated balance sheet as of June 30, 2019 and December 31, 2018 but require disclosure of their fair values: cash and cash equivalents, accounts receivable, and accounts payable. The carrying value of these financial instruments approximates fair values because of their relatively short maturity.

17 - Sale of Certain Subsidiary

As part of the One Natus restructuring initiative, the Company divested its wholly owned subsidiary, Medix SA, on April 2, 2019 via a stock sale. In exchange for the stock, the Company received $2,500 in cash and provided Medix with a $2.2 million limited-recourse loan. The loan is secured by a specific asset of Medix and repayment is conditional upon the sale of the asset.

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The held for sale criteria under GAAP was met in the first quarter of 2019. As such, the Company completed an asset impairment analysis which resulted in the full impairment of all assets held for sale. The Company recognized an impairment loss of $24.6 million which included an accrual for the anticipated realization of deferred foreign currency related translation adjustments in accumulated other comprehensive income of $24.8 million, net of tax, and an adjustment of $4.6 million for assets with a book value in excess of their fair market value. As of June 30, 2019, the sale is final and the deferred foreign currency related translation adjustments previously in accumulated other comprehensive income have been released from the balance sheet along with the held for sale accrual.

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

Overview

The following Management Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) supplements the MD&A in the Annual Report on Form 10-K for the year ended December 31, 2018 of Natus Medical Incorporated. MD&A should be read in conjunction with our condensed consolidated financial statements and accompanying footnotes, the risk factors referred to in Part II, Item 1A of this report, our Annual Report filed on Form 10-K for the year ended December 31, 2018 and the cautionary information regarding forward-looking statements at the end of this section.

Our Business

Natus is a leading provider of medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

We have completed a number of acquisitions since 2003, consisting of either the purchase of a company, substantially all of the assets of a company, or individual products or product lines.

End Markets

Our products address the below end markets:

• Neuro - Includes products and services that provide diagnostic, therapeutic and surgical solutions in neurodiagnostics, neurocritical care and neurosurgery. Neuro's comprehensive neurodiagnostic solutions include electroencephalography and long-term monitoring, Intensive Care Unit monitoring, electromyography, sleep analysis or polysomnography, and intra-operative monitoring.

• Newborn Care - Includes products and services for newborn care including hearing screening, brain injury, ROP vision screening, jaundice management, and various disposable newborn care supplies, as well as products for diagnostic hearing assessment for children through adult populations, and products to diagnose and assist in treating balance and mobility disorders.

• Audiology - Includes products for hearing, diagnostics and hearing aid fitting, including computer-based audiological, otoneurologic and vestibular instrumentation and sound rooms for hearing and balance care professionals. Audiology has a complete product and brand portfolio known for its sophisticated design technology in the hearing and balance assessment markets. Global brands include Aurical®, ICS®, and Madsen®.

Segment and Geographic Information

We operate in one reportable segment, which we have presented as the aggregation of our Neuro, Newborn Care, and Audiology end markets. Within this reportable segment we are organized on the basis of the healthcare products and services we provide which are used for the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

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Our end-user customer base includes hospitals, clinics, laboratories, physicians, nurses, audiologists, and governmental agencies. Most of our international sales are to distributors, who in turn resell our products to end users or sub-distributors.

Information regarding our sales and long-lived assets in the U.S. and in countries outside the U.S. is contained in Note 15 – Segment, Customer and Geographic Information of our condensed consolidated financial statements included in this report and is incorporated in this section by reference.

Revenue by Product Category

We generate our revenue from sales of Devices and Systems, which are generally non-recurring, and from related Supplies and Services, which are generally recurring. The products that are attributable to these categories are described in our Annual Report on Form 10-K for the year ended December 31, 2018. Revenue from Devices and Systems, Supplies, and Services, as a percent of total revenue for the three and six months ended June 30, 2019 and 2018, is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Devices and Systems	74	%	73	%	73	%	70	%
Supplies	22	%	20	%	23	%	23	%
Services	4	%	7	%	4	%	7	%
Total	100	%	100	%	100	%	100	%

2019 Second Quarter Overview

Our business and operating results are driven in part by worldwide economic conditions. Our sales are significantly dependent on both capital spending by hospitals in the United States and healthcare spending by ministries of health outside the United States.

Our consolidated revenue decreased $5.1 million in the second quarter ended June 30, 2019 to $125.5 million compared to $130.7 million in the second quarter of the previous year. The decline in revenue was driven primarily by the exit of the GND and Neurocom businesses, our Medix business in Argentina and Audiology products pending product registrations.

Net income was $4.2 million or $0.12 per diluted share in the three months ended June 30, 2019, compared with net loss of $2.6 million or $(0.08) per share in the same period in 2018. The increase in net income was driven by lower operating expenses as a result of restructuring, exit from the GND business, the sale of Medix, and charges in the prior year for bad debt expense, contested proxy solicitation and remediation activities that did not recur in the current year.

Application of Critical Accounting Policies

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. In so doing, we must often make estimates and use assumptions that can be subjective, and, consequently, our actual results could differ from those estimates. For any given individual estimate or assumption we make, there may also be other estimates or assumptions that are reasonable.

We believe that the following critical accounting policies require the use of significant estimates, assumptions, and judgments:

• Revenue recognition

• Income taxes

• Inventory valuation

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The use of different estimates, assumptions, or judgments could have a material effect on the reported amounts of assets, liabilities, revenue, expenses, and related disclosures as of the date of the financial statements and during the reporting period. These critical accounting policies are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2018, under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

The following table sets forth selected consolidated statement of operations data as a percentage of total revenue for the periods indicated:

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	41.6	%	40.5	%	41.0	%	41.8	%
Intangibles amortization	1.4	%	2.1	%	1.5	%	1.6	%
Gross profit	57.0	%	57.4	%	57.5	%	56.6	%
Operating expenses:
Marketing and selling	25.7	%	25.6	%	27.5	%	26.7	%
Research and development	10.2	%	12.0	%	10.7	%	12.0	%
General and administrative	10.1	%	18.2	%	12.1	%	15.9	%
Intangibles amortization	3.0	%	3.2	%	3.1	%	3.6	%
Restructuring	2.1	%	1.5	%	16.7	%	1.1	%
Total operating expenses	51.1	%	60.5	%	70.1	%	59.3	%
Income (loss) from operations	5.9	%	(3.1	)%	(12.6	)%	(2.7	)%
Other expense, net	(1.0	)%	(1.8	)%	(1.4	)%	(1.6	)%
Income (loss) before provision for (benefit from) income tax	4.9	%	(4.9	)%	(14.0	)%	(4.3	)%
Provision for (benefit from) income tax	1.7	%	(2.8	)%	(3.2	)%	(1.9	)%
Net income (loss)	3.2	%	(2.1	)%	(10.8	)%	(2.4	)%

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Revenues

The following table shows revenue by products during the three and six months ended June 30, 2019 and June 30, 2018 (in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2019		2018		Change		2019		2018		Change
Neuro Products
Devices and Systems	$	54,617	$	50,275	9	%	$	100,366	$	96,234	4	%
Supplies	16,910		16,535		2	%	32,751		33,707		(3	)%
Services	71		3,565		(98	)%	871		6,303		(86	)%
Total Neurology Revenue	71,598		70,375		2	%	133,988		136,244		(2	)%
Newborn Care Products
Devices and Systems	12,615		15,471		(18	)%	27,260		34,450		(21	)%
Supplies	8,933		9,625		(7	)%	18,979		19,147		(1	)%
Services	5,015		5,477		(8	)%	9,860		10,880		(9	)%
Total Newborn Care Revenue	26,563		30,573		(13	)%	56,099		64,477		(13	)%
Audiology Products
Devices and Systems	26,178		29,119		(10	)%	47,703		52,968		(10	)%
Supplies	1,200		586		105	%	2,506		5,572		(55	)%
Total Audiology Revenue	27,378		29,705		(8	)%	50,209		58,540		(14	)%
Total Revenue	$	125,539	$	130,653	(4	)%	$	240,296	$	259,261	(7	)%

For the three months ended June 30, 2019, Neuro revenue increased by 2% compared to the same quarter last year. Revenue from sales of Neuro Devices and Systems increased by 9% driven by strong demand in early 2019 for electroencephalography (“EEG”) products in our domestic market, as well as electromyography (“EMG”) products in our international markets. Revenue from Supplies increased by 2% due to higher sales of neurodiagnostic products in our domestic market. Revenue from Services decreased by 98% due to the exit of GND, our ambulatory EEG services business, as of January 31, 2019.

For the three months ended June 30, 2019, Newborn Care revenue decreased by 13% compared to the same quarter last year. The decrease was due to the impact of end of life products, a decline in balance and mobility revenue driven by the exit from our Neurocom business, the sale of the Medix business as of March 31, 2019, and reduced billings for Peloton.

For the three months ended June 30, 2019, Audiology revenue decreased by 8% compared to the same period last year. The decrease in revenue was mainly due to products on hold pending international product registrations and end of sale products.

For the six months ended June 30, 2019, Neuro revenue decreased by 2% compared to the same quarter last year due mainly to the exit from the GND business as of January 31, 2019. Revenue from sales of Neuro Devices and Systems increased by 4% driven by strong demand for EEG systems in our domestic market, partly offset by a decline in neurosurgery revenue in our domestic market. Revenue from Supplies decreased by 3% due to lower sales of neurodiagnostic products in our international markets. Revenue from Services decreased by 86% due to the exit of GND, our ambulatory EEG services business, as of January 31, 2019.

For the six months ended June 30, 2019, Newborn Care revenue decreased by 13% compared to the same quarter last year. The decrease was due to the impact of end of life products, a decline in balance and mobility revenue driven by the exit from our Neurocom business, lower business in Argentina due to the sale of Medix, and reduced billings for Peloton.

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For the six months ended June 30, 2019, Audiology revenue decreased by 14% compared to the same period last year. The decrease in revenue was due to products on hold pending international product registrations and end of sale products.

Revenue from domestic sales decreased to $73.5 million for the three months ended June 30, 2019 compared to $75.5 million in the three months ended June 30, 2018. The decrease in domestic revenue was driven by the exit of GND and Neurocom businesses, lower neurosurgery product revenue and a decline in Peloton billings, partly offset by growth in EEG devices.

Revenue from international sales decreased to $52.0 million for the three months ended June 30, 2019 compared to $55.2 million for the three months ended June 30, 2018. Decreases are due to audiology products on hold pending international product registrations and end of sales for certain Newborn Care and Audiology products, partly offset by growth for neurodiagnostics and neurocritical care products in our international markets.

Cost of Revenue and Gross Profit

Cost of revenue and gross profit consists of (in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue	$	125,539		$	130,653		$	240,296		$	259,261
Cost of revenue	52,164			52,897			98,534			108,266
Intangibles amortization	1,746			2,717			3,502			4,305
Gross profit	71,629			75,039			138,260			146,690
Gross profit percentage	57.0		%	57.4		%	57.5		%	56.6		%

For the three and six months ended June 30, 2019, gross profit as a percentage of revenue decreased 0.4% and increased 0.9%, respectively, compared to the same period in the prior year. The decrease for the three-month period was due to lower margins for Audiology products, partly offset by increased margins for Newborn Care products. The increase for the six-month period was primarily driven by increased margins on neurodiagnostics, due in part to the exit from the GND business in January 2019, which was partly offset by lower margins for Newborn Care and Audiology products.

Operating Costs

Operating costs consist of (in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Marketing and selling	$	32,236		$	33,401		$	65,966		$	69,273
Percentage of revenue	25.7		%	25.6		%	27.5		%	26.7		%
Research and development	$	12,769		$	15,616		$	25,827		$	31,059
Percentage of revenue	10.2		%	12.0		%	10.7		%	12.0		%
General and administrative	$	12,691		$	23,721		$	28,995		$	41,169
Percentage of revenue	10.1		%	18.2		%	12.1		%	15.9		%
Intangibles amortization	$	3,763		$	4,151		$	7,549		$	8,957
Percentage of revenue	3.0		%	3.2		%	3.1		%	3.6		%
Restructuring	$	2,668		$	1,938		$	40,040		$	2,750
Percentage of revenue	2.1		%	1.5		%	16.7		%	1.1		%

Marketing and Selling

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Marketing and selling expenses decreased for the three and six months ended June 30, 2019. The reduction was primarily driven by exiting the GND business and lower expenses due to One Natus.

Research and Development

Research and development expenses decreased during the three and six months ended June 30, 2019 compared to the same period in 2018. The decrease is due mainly to lower recall and remediation costs in the current periods and lower employee expenses due to One Natus.

General and Administrative

General and administrative expense during the three and six months ended June 30, 2019 decreased when compared to the same period in the prior year. This decrease was due to a reduction in employee expenses related to our exit from the GND business and One Natus organization changes, lower bad debt expense related to our GND and Peloton businesses, and contested proxy solicitation expenses from 2018 which did not recur in 2019.

Intangibles Amortization

Intangibles amortization decreased during the three and six months ended June 30, 2019 as compared to the same period in 2018. This decrease was due to a reduction of intangible assets for impairments recognized during the fourth quarter of 2018 for GND, Neurocom, and Bio-Logic core technology.

Restructuring

Restructuring expenses increased during the three and six months ended June 30, 2019 compared to the same period in 2018. The increase in the three-month period was driven by restructuring expenses incurred related to the exiting of the GND business and our One Natus restructuring project. These additional expenses also contributed to the six-month period increase, but the main driver was an impairment recorded related to the sale of Medix which included the recognition of deferred foreign currency related adjustments in accumulated other comprehensive income of $24.8 million, net of tax, and an adjustment of $4.6 million for assets with a book value in excess of their fair market value.

Other Expense, net

Other expense, net consists of investment income, interest expense, net currency exchange gains and losses, and other miscellaneous income and expense. For the three months ended June 30, 2019 we reported $1.2 million of other expense compared to $2.4 million of other expense for the same period in 2018. For the six months ended June 30, 2019 we reported $3.3 million of other expense compared to $4.2 million of other expense for the same period in 2018. These decreases in expense were attributable to foreign currency fluctuations.

Provision for (benefit from) Income Tax

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective quarter. During each interim period, we update the estimated annual effective tax rate which is subject to significant volatility due to several factors, including our ability to accurately predict the income (loss) before provision for income taxes in multiple jurisdictions, the effects of acquisitions, the integration of those acquisitions, and changes in tax law. In circumstances where we are unable to predict income (loss) in multiple jurisdictions, the actual year to date effective tax rate may be the best estimate of the annual effective tax rate for purposes of determining the interim provision for income tax.

We recorded an expense from income tax of $2.1 million and a benefit from income tax of $7.6 million for the three and six months ended June 30, 2019, respectively. The effective tax rate was 33.5% and 22.8% for the three and six months ended June 30, 2019, respectively. Of the $7.6 million benefit from income tax recorded for the six months ended June 30, 2019, $8.2 million relates to the tax accounting effects of the sale of Medix.

We recorded a benefit for income tax of $3.6 million and $5.0 million for the three and six months ended June 30, 2018, respectively. The effective tax rate was 58.3% and 46.7% for the three and six months ended June 30, 2018, respectively.

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The decrease in the effective tax rate for the three and six months ended June 30, 2019 compared with the three and six months ended June 30, 2018 is primarily attributable to the tax accounting effects of the sale of Medix. The effective tax rate for the three and six months ended June 30, 2019 differed from the federal statutory rate of 21% primarily due to the tax accounting effects of the sale of Medix. Other significant factors that impact the effective tax rate are Federal and California research and development credits, non-deductible executive compensation expenses, and inclusions related to global intangible low-taxed income.

We recorded $0.2 million of net tax expense related to unrecognized tax benefits for the three and six months ended June 30, 2019, primarily due to the increase in uncertain tax positions related to the prior year. Within the next twelve months, it is possible that the uncertain tax benefit may change with a range of approximately zero to $3.8 million. Our tax returns remain open to examination as follows: U.S Federal, 2015 through 2018, U.S. states, 2014 through 2018, and significant foreign jurisdictions, generally 2014 through 2018.

Liquidity and Capital Resources

Liquidity and capital resources consist of (in thousands):

	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	52,009	$	56,373
Working capital	127,579		152,329

	Six Months Ended   June 30,
	2019			2018
Net cash provided by operating activities	$	24,047		$	11,326
Net cash used in investing activities	(2,932		)	(3,534		)
Net cash used in financing activities	(25,164		)	(36,011		)

We believe that our current cash and cash equivalents and any cash generated from operations will be sufficient to meet our ongoing operating requirements for the foreseeable future.

As of June 30, 2019, we had cash and cash equivalents outside the U.S. in certain of our international subsidiaries of $40.3 million primarily in Canada and Ireland. We intend to permanently reinvest the cash held by our international subsidiaries except for Excel-Tech and Natus Ireland, which we intend to repatriate. If, however, a portion of these funds were needed for and distributed to our operations in the United States, we would be subject to additional U.S. income taxes and foreign withholding taxes depending on facts and circumstances at the time of distribution. The amount of taxes due would depend on the amount and manner of repatriation, as well as the country from which the funds were repatriated.

The Company has a Credit Agreement with JP Morgan, Citibank, and Wells Fargo. The Credit Agreement provides for an aggregate $225.0 million of secured revolving credit facility. The Credit Agreement contains covenants, including covenants relating to maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and limitations on guaranties, investments, issuance of debt, lease obligations and capital expenditures, and is secured by virtually all of the Company's assets. The Credit Agreement provides for events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and the occurrence of the event has a material adverse effect. The Credit Agreement matures on September 23, 2021, at which time all principal amounts outstanding under the Credit Agreement will be due and payable. The Company has no other significant credit facilities. As of June 30, 2019, we had $80.0 million outstanding under the Credit Facility.

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During the six months ended June 30, 2019 cash provided by operating activities of $24.0 million was the result of $25.8 million of net loss, non-cash adjustments to net loss of $47.6 million, and net cash inflows of $2.3 million from changes in operating assets and liabilities. The change in non-cash adjustment to net loss was driven by an impairment recorded related to the sale of Medix of $24.6 million and depreciation and amortization of $15.4 million. Cash used in investing activities during the period was $2.9 million to acquire other property and equipment. Cash used in financing activities during the six months ended June 30, 2019 was $25.2 million and consisted of repayment of borrowing of $25.0 million, $1.6 million for taxes paid related to net share settlement of equity awards, $0.3 million for principal payments of financing lease liability, offset by stock option exercises of $1.7 million.

During the six months ended June 30, 2018 cash provided by operating activities of $11.3 million was the result of $5.7 million of net loss, non-cash adjustments to net loss of $27.6 million, and net cash outflows of $10.5 million from changes in operating assets and liabilities. The change in non-cash adjustment to net loss was driven by increased depreciation and amortization due to the Neurosurgery assets acquisition, share based compensation, and accounts receivable reserves. Cash used in investing activities during the period was $3.5 million, driven by cash used to acquire other property and equipment. Cash used in financing activities during the six months ended June 30, 2018 was $36.0 million and consisted of repayment of borrowing of $35.0 million, $5.6 million for repurchases of common stock under our share program, $0.3 million for taxes paid related to net share settlement of equity awards, and $0.1 million for a contingent consideration payment partially offset by stock option exercises of $5.1 million.

Our future liquidity and capital requirements will depend on numerous factors, including the:

• Extent to which we make acquisitions;

• Amount and timing of revenue;

• Extent to which our existing and new products gain market acceptance;

• Cost and timing of product development efforts and the success of these development efforts;

• Cost and timing of marketing and selling activities; and

• Availability of borrowings under line of credit arrangements and the availability of other means of financing.

Commitments and Contingencies

In the normal course of business, we enter into obligations and commitments that require future contractual payments. The commitments result primarily from firm, non-cancellable purchase orders placed with contract vendors that manufacture some of the components used in our medical devices and related disposable supply products, as well as commitments for leased office space, and bank debt. The following table summarizes our contractual obligations and commercial commitments as of June 30, 2019 (in thousands):

			Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Unconditional purchase obligations	$	64,997	$	60,702	$	4,295	$	—	$	—
Bank debt	80,000		—		80,000		—		—
Interest payments	7,299		4,413		2,127		759
Repatriation tax	9,113		797		1,751		3,830		2,735
Total	$	161,409	$	65,912	$	88,173	$	4,589	$	2,735

Purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding. Included in the purchase obligations category above are obligations related to purchase orders for inventory

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purchases under our standard terms and conditions and under negotiated agreements with vendors. We expect to receive consideration (products or services) for these purchase obligations. The purchase obligation amounts do not represent all anticipated purchases in the future but represent only those items for which we are contractually obligated. The table above does not include obligations under employment agreements for services rendered in the ordinary course of business.

The Company's Credit Agreement with JP Morgan, Citibank, and Wells Fargo matures in 2021. We have recorded this obligation in the payments due in one to three years category in the table above based on the maturity date of the Agreement. As of June 30, 2019, we have classified $35.0 million out of the $80.0 million outstanding as short-term on our balance sheet due to our intent to repay this portion over the next twelve months.

The interest payments noted above are an estimate of expected interest payments but could vary materially based on the timing of future loan draws and payments. See Note 12 to the unaudited Condensed Consolidated Financial Statements for additional discussion on our debt and credit arrangements.

We are not able to reasonably estimate the timing of any potential payments for uncertain tax positions under ASC 740, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109. As a result, the preceding table excludes any potential future payments related to our ASC 740 liability for uncertain tax positions. See Note 17 in our Annual Report filed on Form 10-K for the year ended December 31, 2018 for further discussion on income taxes and repatriation tax.

Recent Accounting Pronouncements

See Note 1 to our Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements that affect us.

Cautionary Information Regarding Forward Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about Natus Medical Incorporated. These statements include, among other things, statements concerning our expectations, beliefs, plans, intentions, future operations, financial condition and prospects, and business strategies. The words “may,” “will,” “continue,” “estimate,” “project,” “intend,” “believe,” “expect,” “anticipate,” and other similar expressions generally identify forward-looking statements. Forward-looking statements in this Item 2 include, without limitation, statements regarding our ability to capitalize on improving market conditions, the sufficiency of our current cash, cash equivalents and short-term investment balances, any cash generated from operations to meet our ongoing operating and capital requirements for the foreseeable future, outcomes of new product development, improved operations performance and profitability as the result of restructuring activities, and our intent to acquire additional technologies, products or businesses.

Forward-looking statements are not guarantees of future performance and are subject to substantial risks and uncertainties that could cause the actual results predicted in the forward-looking statements as well as our future financial condition and results of operations to differ materially from our historical results or currently anticipated results. Investors should carefully review the information contained under the caption “Risk Factors” referred to in Part II, Item 1A of this report for a description of risks and uncertainties. All forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update forward-looking statements.

ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate risk on our LIBOR-indexed floating-rate debt. We have entered into an interest rate swap agreement to effectively covert a portion of our floating-rate debt to a fixed-rate. The principal objective of the swap contract is to reduce the variability of future earnings and cash flows associated with our floating-rate debt. Please refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk

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included in our Annual Report on Form 10-K for the ended December 31, 2018 for a more complete discussion on the market risks we encounter.

ITEM 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the rules of the Securities and Exchange Commission, “disclosure controls and procedures” are controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud due to inherent limitations of internal controls. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management, with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our management, including our chief executive officer and chief financial officer, has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the second quarter of 2019, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonable likely to materially affect, the Company's internal control over financial reporting.

PART II.    OTHER INFORMATION

ITEM 1.    Legal Proceedings

We currently are, and may from time to time become, a party to various other legal proceedings or claims that arise in the ordinary course of business. Our management reviews these matters if and when they arise and believes that the resolution of any such matters currently known will not have a material effect on our results of operations or financial position.

ITEM 1A.    Risk Factors

A description of the risks associated with our business, financial condition and results of operations is set forth in Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. There have been no material changes in our risks from such description.

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

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ITEM 5.    Other Information

None

ITEM 6.    Exhibits

(a) Exhibits

		Incorporated By Reference
Exhibit No.	Exhibit	Filing	Exhibit No.	File Date	Filed Herewith
3.1	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Natus Medical Incorporated, as filed with the Delaware Secretary of State of June 5, 2019	8-K	3.1	6/5/2019
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.				X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NATUS MEDICAL INCORPORATED
Dated:	August 7, 2019	By:	/s/ Jonathan A. Kennedy
			Jonathan A. Kennedy President and Chief Executive Officer (Principal Executive Officer)
Dated:	August 7, 2019	By:	/s/ B. Drew Davies
			B. Drew Davies Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jonathan A. Kennedy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Natus Medical Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2019
		/s/ Jonathan A. Kennedy
		Jonathan A. Kennedy
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, B. Drew Davies, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Natus Medical Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2019
		/s/ B. Drew Davies
		B. Drew Davies
		Executive Vice President
		and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Natus Medical Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan A. Kennedy, President and Chief Executive Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jonathan A. Kennedy
Print Name: Jonathan A. Kennedy
Title: President and Chief Executive Officer
Date:	August 7, 2019

In connection with the Quarterly Report of Natus Medical Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, B. Drew Davies, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ B. Drew Davies
Print Name: B. Drew Davies
Title: Executive Vice President and Chief Financial Officer
Date:	August 7, 2019

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Cover page.
Entity Address, Address Line One	6701 Koll Center Parkway, Suite 120
Entity File Number	000-33001
Entity Incorporation, State or Country Code	DE
Document Transition Report	false
Document Quarterly Report	true
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	NTUS
Security Exchange Name	NASDAQ
Entity Small Business	false
Entity Registrant Name	NATUS MEDICAL INC
Entity Central Index Key	0000878526
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		34,069,328
Entity Emerging Growth Company	false
Entity Tax Identification Number	77-0154833
Entity Address, City or Town	Pleasanton
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94566
City Area Code	925
Local Phone Number	223-6700
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 52,009	$ 56,373
Accounts receivable, net of allowance for doubtful accounts of $8,579 in 2019 and $6,960 in 2018	106,934	127,041
Inventories	78,275	79,736
Prepaid expenses and other current assets	28,022	22,625
Total current assets	265,240	285,775
Property and equipment, net	26,547	22,913
Operating lease right-of-use assets	17,217	0
Intangible assets, net	126,985	139,453
Goodwill	147,740	147,644
Deferred income tax	19,187	22,639
Other assets	25,084	19,716
Total assets	628,000	638,140
Current liabilities:
Accounts payable	25,235	28,805
Current portion of long-term debt	35,000	35,000
Accrued liabilities	51,605	52,568
Deferred revenue	19,861	17,073
Current portion of operating lease liabilities	5,960	0
Total current liabilities	137,661	133,446
Long-term liabilities:
Other liabilities	21,237	19,845
Operating lease liabilities	14,326	0
Long-term debt, net	44,570	69,474
Deferred income tax	8,649	16,931
Total liabilities	226,443	239,696
Stockholders’ equity:
Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding 34,040,230 in 2019 and 33,804,379 in 2018	338,735	334,215
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2019 and 2018	0	0
Retained earnings	77,780	102,261
Accumulated other comprehensive loss	(14,958)	(38,032)
Total stockholders’ equity	401,557	398,444
Total liabilities and stockholders’ equity	$ 628,000	$ 638,140

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 8,579	$ 6,960
Common Stock, par value (dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized (in shares)	120,000,000	120,000,000
Common Stock, shares issued (in shares)	34,040,230	33,804,379
Common Stock, shares outstanding (in shares)	34,040,230	33,804,379
Preferred Stock, par value (dollars per share)	$ 0.001	$ 0.001
Preferred Stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred Stock, shares issued (in shares)	0	0
Preferred Stock, shares outstanding (in shares)	0	0

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Revenue	$ 125,539	$ 130,653	$ 240,296	$ 259,261
Cost of revenue	52,164	52,897	98,534	108,266
Intangibles amortization	1,746	2,717	3,502	4,305
Gross profit	71,629	75,039	138,260	146,690
Operating expenses:
Marketing and selling	32,236	33,401	65,966	69,273
Research and development	12,769	15,616	25,827	31,059
General and administrative	12,691	23,721	28,995	41,169
Intangibles amortization	3,763	4,151	7,549	8,957
Restructuring	2,668	1,938	40,040	2,750
Total operating expenses	64,127	78,827	168,377	153,208
Income (loss) from operations	7,502	(3,788)	(30,117)	(6,518)
Other expense, net	(1,200)	(2,398)	(3,312)	(4,218)
Income (loss) before provision for (benefit from) income tax	6,302	(6,186)	(33,429)	(10,736)
Provision for (benefit from) income tax	2,114	(3,609)	(7,616)	(5,009)
Net income (loss)	$ 4,188	$ (2,577)	$ (25,813)	$ (5,727)
Loss per share:
Basic (dollars per share)	$ 0.12	$ (0.08)	$ (0.77)	$ (0.17)
Diluted (dollars per share)	$ 0.12	$ (0.08)	$ (0.77)	$ (0.17)
Weighted average shares used in the calculation of loss per share:
Basic (in shares)	33,639	32,859	33,630	32,809
Diluted (in shares)	33,690	32,859	33,630	32,809

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 4,188	$ (2,577)	$ (25,813)	$ (5,727)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	1,436	(13,253)	(439)	(9,636)
Reclassification of stranded tax effects upon adoption of ASU 2018-02	0	0	(1,332)	0
Reclassification of deferred foreign currency related adjustments related to the sale of Medix (See Footnote 17 - Sale of Certain Subsidiary Assets)	24,845	0	24,845	0
Other comprehensive income (loss), net of tax	26,281	(13,253)	23,074	(9,636)
Comprehensive income (loss)	$ 30,469	$ (15,830)	$ (2,739)	$ (15,363)

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities:
Net loss	$ (25,813)	$ (5,727)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for losses on accounts receivable	960	4,089
Depreciation and amortization	15,427	16,694
Loss on disposal of property and equipment	482	160
Warranty reserve	1,677	975
Share-based compensation	4,462	5,632
Impairment charge for sale of entity	24,571	0
Changes in operating assets and liabilities:
Accounts receivable	19,170	2,064
Inventories	(2,475)	(2,483)
Prepaid expenses and other assets	(11,060)	(15,141)
Accounts payable	(3,517)	(364)
Accrued liabilities	(2,620)	3,414
Deferred revenue	2,739	1,687
Deferred income tax	44	326
Net cash provided by operating activities	24,047	11,326
Investing activities:
Acquisition of businesses, net of cash acquired	0	151
Purchase of property and equipment	(2,919)	(3,387)
Purchase of intangible assets	(13)	(298)
Net cash used in investing activities	(2,932)	(3,534)
Financing activities:
Proceeds from stock option exercises and Employee Stock Purchase Program purchases	1,674	5,092
Repurchase of common stock	0	(5,630)
Taxes paid related to net share settlement of equity awards	(1,573)	(326)
Principal payments of financing lease liability	(265)	0
Payment of contingent consideration related to a business combination	0	(147)
Payments on borrowings	(25,000)	(35,000)
Net cash used in financing activities	(25,164)	(36,011)
Exchange rate changes effect on cash and cash equivalents	(315)	(5,823)
Net decrease in cash and cash equivalents	(4,364)	(34,042)
Cash and cash equivalents, beginning of period	56,373	88,950
Cash and cash equivalents, end of period	52,009	54,908
Supplemental disclosure of cash flow information:
Cash paid for interest	3,071	2,966
Cash paid for income taxes	5,328	7,234
Non-cash investing activities:
Property and equipment included in accounts payable	35	93
Inventory transferred to property and equipment	$ 589	$ 293

XML

Condensed Consolidated Statement of Stockholders' Equity (unaudited) Condensed Consolidated Statement of Stockholders' Equity (unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]
Beginning of period (shares) at Dec. 31, 2017		33,134,101
Beginning of period at Dec. 31, 2017	$ 422,097	$ 316,577	$ 129,115	$ (23,595)
Vesting Of Restricted Stock Units Shares		100
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		239,649
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	2,361	$ 2,361
Stock Repurchased During Period, Shares		(147,893)
Stock Repurchased During Period, Value	(4,736)	$ (4,736)
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation		(600)
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation	(19)	$ (19)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		46,173
Stock Issued During Period, Value, Stock Options Exercised	577	$ 577
Other Comprehensive Income (Loss), Net of Tax	3,617			3,617
Net loss	(3,148)		(3,148)
End of period (shares) at Mar. 31, 2018		33,271,530
End of period at Mar. 31, 2018	416,830	$ 314,760	122,048	(19,978)
Beginning of period (shares) at Dec. 31, 2017		33,134,101
Beginning of period at Dec. 31, 2017	422,097	$ 316,577	129,115	(23,595)
Other Comprehensive Income (Loss), Net of Tax	(9,636)
Net loss	(5,727)
End of period (shares) at Jun. 30, 2018		33,590,337
End of period at Jun. 30, 2018	407,535	$ 321,295	119,471	(33,231)
Beginning of period (shares) at Mar. 31, 2018		33,271,530
Beginning of period at Mar. 31, 2018	416,830	$ 314,760	122,048	(19,978)
Vesting Of Restricted Stock Units Shares		166
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		21,599
Stock Issued During Period, Shares, Employee Stock Purchase Plans		30,971
Stock Issued During Period, Value, Employee Stock Purchase Plan	870	$ 870
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	3,219	$ 3,219
Stock Repurchased During Period, Shares		(25,652)
Stock Repurchased During Period, Value	(893)	$ (893)
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation		(8,627)
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation	(306)	$ (306)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		300,350
Stock Issued During Period, Value, Stock Options Exercised	3,645	$ 3,645
Other Comprehensive Income (Loss), Net of Tax	(13,253)			(13,253)
Net loss	(2,577)		(2,577)
End of period (shares) at Jun. 30, 2018		33,590,337
End of period at Jun. 30, 2018	407,535	$ 321,295	119,471	(33,231)
Beginning of period (shares) at Dec. 31, 2018		33,804,379
Beginning of period at Dec. 31, 2018	398,444	$ 334,215	102,261	(38,032)
Vesting Of Restricted Stock Units Shares		42,130
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		139,718
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	2,432	$ 2,432
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation		(47,767)
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation	(1,567)	$ (1,567)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		16,617
Stock Issued During Period, Value, Stock Options Exercised	268	$ 268
Other Comprehensive Income (Loss), Net of Tax	(1,875)			(1,875)
Net loss	(30,001)		(30,001)
End of period (shares) at Mar. 31, 2019		33,955,077
End of period at Mar. 31, 2019	367,701	$ 335,348	73,592	(41,239)
Beginning of period (shares) at Dec. 31, 2018		33,804,379
Beginning of period at Dec. 31, 2018	398,444	$ 334,215	102,261	(38,032)
Other Comprehensive Income (Loss), Net of Tax	23,074
Net loss	(25,813)
End of period (shares) at Jun. 30, 2019		34,040,230
End of period at Jun. 30, 2019	401,557	$ 338,735	77,780	(14,958)
Beginning of period (shares) at Mar. 31, 2019		33,955,077
Beginning of period at Mar. 31, 2019	367,701	$ 335,348	73,592	(41,239)
Vesting Of Restricted Stock Units Shares		0
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		5,762
Stock Issued During Period, Shares, Employee Stock Purchase Plans		31,879
Stock Issued During Period, Value, Employee Stock Purchase Plan	725	$ 725
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	1,987	$ 1,987
Stock Repurchased During Period, Shares		0
Stock Repurchased During Period, Value	0	$ 0
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation		(274)
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation	(7)	$ (7)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		47,786
Stock Issued During Period, Value, Stock Options Exercised	682	$ 682
Other Comprehensive Income (Loss), Net of Tax	26,281			26,281
Net loss	4,188		4,188
End of period (shares) at Jun. 30, 2019		34,040,230
End of period at Jun. 30, 2019	$ 401,557	$ 338,735	$ 77,780	$ (14,958)

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation and Significant Accounting Policies

The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“Natus,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. The Company has made certain reclassifications to the prior period to conform to current period presentation. The consolidated balance sheet as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Recent Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires lease assets and lease liabilities arising from operating leases to be presented in the statement of financial position. Qualitative along with specific quantitative disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which affects narrow aspects of the guidance issued in the amendments in Update 2016-02. In July 2018, the FASB also issued ASU 2018-11, Targeted Improvements. The amendments in ASU 2018-11 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU 2016-02 and have the same effective and transition requirements as ASU 2016-02.

The new standard provides a number of optional practical expedients in transition. The Company elected the 'package of practical expedients,' which permits an entity to not reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. The Company has not elected the use-of-hindsight practical expedient or the practical expedient pertaining to land easements; the latter of which is not applicable to the Company. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. The Company will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

The new standard became effective for the Company on January 1, 2019. The Company adopted the new standard using the modified retrospective transition method with the effective date as the date of initial application. Upon adoption, the Company recognized additional new lease assets of approximately $19.5 million and additional lease liabilities of approximately $22.3 million as of January 1, 2019. The standard did not materially affect consolidated net earnings. By electing the effective date as the date of initial application, financial performance has not been adjusted and the disclosures required under the new standard have not been provided for periods prior to January 1, 2019. See Significant Accounting Policies and Note 14 for additional discussion and disclosure.

The adoption of the new standard did not impact the Company's liquidity or debt-covenant compliance under its current agreements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective for the Company's annual and any interim goodwill impairment tests performed on or after January 1, 2020. The Company elected to early adopt. The adoption of ASU 2017-04 did not have an impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This update permits a company to reclassify its disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings (termed “stranded tax effects”). Only the stranded tax effects resulting from the 2017 Act are eligible for reclassification. The ASU is effective for the Company on January 1, 2019. Upon adoption, the Company reclassified its stranded tax effects resulting from the 2017 Act of $1.3 million, resulting in a decrease to AOCI and an increase to retained earnings as of January 1, 2019.

Recent Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326). This update requires financial assets measured at amortized cost, such as trade receivables and contract assets, to be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. In May 2019, the FASB issued ASU 2019-05 which provides targeted transition relief guidance intended to increase comparability of financial statement information. The guidance for both of these is effective beginning January 1, 2020. The Company is evaluating the impact, if any, that these pronouncements will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 813), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This update amends Topic 820 to add, remove, and clarify disclosure requirements related to fair value measurement disclosure. For calendar year-end entities, the update will be effective for annual periods beginning January 1, 2020, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. As the standard relates only to disclosures, the Company does not expect the adoption to have a material impact on the consolidated financial statements and is still evaluating if it will early adopt.

Significant Accounting Policies

Leases

The Company determines if an arrangement is a lease at inception of the lease. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit borrowing rate, generally the Company uses an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the lease commencement date. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to exclude or terminate the lease when it is reasonably certain that they will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

Operating leases are included in operating lease ROU assets, accrued liabilities, and operating lease liabilities in the Company's consolidated balance sheet. Finance leases are included in property and equipment, accrued liabilities, and other liabilities in the consolidated balance sheet.

The Company has lease agreements with lease and non-lease components, which are generally accounted for based on the type of asset. For real estate and telecom leases, the Company accounts for these components separately. For equipment leases, such as office equipment and vehicles, the Company accounts for the lease and non-lease components as a single lease component.

Assets and Liabilities Held for Sale

The Company considers assets and liabilities to be held for sale when all of the following criteria are met:

• Management approves and commits to a formal plan to sell the asset or disposal group;

• The assets or disposal group is available for immediate sale in its present condition;

• An active program to locate a buyer and other actions required to complete the sale have been initiated;

• The sale of the asset or disposal group is expected to be completed within one year;

• The asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to the current fair value; and

• It is unlikely that significant changes will be made to the plan.

Assets held for sale are not depreciated. Upon designation of the asset or disposal group as held for sale, the Company records the asset or disposal group at the lower of its carrying value or its estimated fair value, less estimated costs of sale. The Company considers deferrals accumulated in other comprehensive income, including cumulative currency translation adjustments, in the total carrying value of the disposal group in accordance with GAAP. Any loss resulting from this measurement is recognized on the Company's income statement as a restructuring operating expense in the period in which the held for sale criteria are met and gains, if any are not recognized until the date of sale. The Company assesses the fair value of assets held for sale less any costs to sell each reporting period it remains classified as held for sale and reports any reduction in fair value as an adjustment to the carrying value of the assets held for sale.

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Revenue (Notes)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Unbilled accounts receivable (“AR”) for the periods presented primarily represent the difference between revenue recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented primarily relates to extended service contracts, installation, and training, for which the service fees are billed in advance. The associated deferred revenue is generally recognized ratably over the extended service period or when installation and training are complete.

The following table summarizes the changes in the unbilled AR and deferred revenue balances for the six months ended June 30, 2019 (in thousands):

Unbilled AR, December 31, 2018	$	3,012
Additions	420
Transferred to Trade Receivable	(667		)
Unbilled AR, June 30, 2019	$	2,765

Deferred Revenue, December 31, 2018	$	21,410
Additions	14,242
Revenue Recognized	(11,502		)
Deferred Revenue, June 30, 2019	$	24,150

At June 30, 2019, the short-term portion of deferred revenue of $19.9 million and the long-term portion of $4.3 million were included in deferred revenue and other long-term liabilities respectively, in the consolidated balance sheet. As of June 30, 2019, the Company expects to recognize revenue associated with deferred revenue of

approximately $12.8 million in 2019, $8.3 million in 2020, $1.5 million in 2021, $0.9 million in 2022, and $0.7 million thereafter.

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The components of basic and diluted EPS are as follows (in thousands, except per share amounts):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2019		2018			2019			2018
Net income (loss)	$	4,188	$	(2,577	)	$	(25,813	)	$	(5,727	)
Weighted average common shares	33,639		32,859			33,630			32,809
Dilutive effect of stock based awards	51		—			—			—
Diluted Shares	33,690		32,859			33,630			32,809
Basic income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Diluted income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Shares excluded from calculation of diluted EPS	—		382			103			387

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Raw materials and subassemblies	$	34,310		$	31,459
Work in process	2,603			2,424
Finished goods	62,650			63,932
Total inventories	99,563			97,815
Less: Non-current inventories	(21,288		)	(18,079		)
Inventories, current	$	78,275		$	79,736

As of June 30, 2019 and December 31, 2018, the Company has classified $21.3 million and $18.1 million, respectively, of inventories as other assets. This inventory consists primarily of service components used to repair products held by customers pursuant to warranty obligations and extended service contracts, including service components for products the Company no longer sells, inventory purchased for lifetime buys, and inventory that is turning over at a slow rate. The Company believes these inventories will be utilized for their intended purpose.

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Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

The following table summarizes the components of gross and net intangible asset balances (in thousands):

	June 30, 2019										December 31, 2018
	Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value
Intangible assets with definite lives:
Technology	$	110,516	$	(6,636	)	$	(53,225	)	$	50,655	$	111,198	$	(6,768	)	$	(50,046	)	$	54,384
Customer related	99,050		(50		)	(44,523		)	54,477		99,440		(1,961		)	(38,574		)	58,905
Trade names	47,047		(3,831		)	(22,714		)	20,502		47,217		(4,397		)	(19,250		)	23,570
Internally developed software	16,282		—			(15,179		)	1,103		16,264		—			(14,164		)	2,100
Patents	2,953		(132		)	(2,801		)	20		2,718		(133		)	(2,524		)	61
Service Agreements	1,190		—			(962		)	228		1,190		—			(757		)	433
Definite-lived intangible assets	$	277,038	$	(10,649	)	$	(139,404	)	$	126,985	$	278,027	$	(13,259	)	$	(125,315	)	$	139,453

Finite-lived intangible assets are amortized over their weighted average lives, which are 14 years for technology, 10 years for customer related intangibles, 7 years for trade names, 6 years for internally developed software, 12 years for patents, 2 years for service agreements and 11 years weighted average in total.

Internally developed software consists of $14.1 million relating to costs incurred for development of internal use computer software and $2.2 million for development of software to be sold.

Amortization expense related to intangible assets with definite lives was as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Technology	$	1,729	$	2,558	$	3,467	$	4,378
Customer related	2,167		2,302		4,350		5,183
Trade names	1,491		1,456		2,989		3,082
Internally developed software	506		528		1,010		1,058
Patents	20		22		40		43
Service Agreements	$	103	$	486	205		486
Total amortization	$	6,016	$	7,352	$	12,061	$	14,230

The amortization expense amounts shown above include internally developed software not held for sale of $0.5 million and $1.0 million for the three and six months ended June 30, 2019, respectively which is recorded within the Company's income statement as a general and administrative operating expense.

Expected amortization expense related to amortizable intangible assets is as follows (in thousands):

Six months ending December 31, 2019	$	11,333
2020	21,805
2021	20,918
2022	17,473
2023	16,500
2024	14,592
Thereafter	24,364
Total expected amortization expense	$	126,985

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Goodwill

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The carrying amount of goodwill and the changes in the balance are as follows (in thousands):

December 31, 2018	$	147,644
Foreign currency translation	96
June 30, 2019	$	147,740

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Property and Equipment, net

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Land	$	1,720		$	1,828
Buildings	6,778			7,036
Leasehold improvements	7,616			4,649
Finance lease right-of-use assets	2,955			—
Equipment and furniture	23,725			23,487
Computer software and hardware	12,635			12,803
Demonstration and loaned equipment	12,201			12,843
	67,630			62,646
Accumulated depreciation	(41,083		)	(39,733		)
Total	$	26,547		$	22,913

Depreciation expense of property and equipment was approximately $1.8 million and $3.3 million for the three and six months ended June 30, 2019 and approximately $1.4 million and $2.4 million for the three and six months ended June 30, 2018.

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Reserve for Product Warranties

6 Months Ended

Jun. 30, 2019

Product Warranties Disclosures [Abstract]

Reserve for Product Warranties

Reserve for Product Warranties

The Company provides a warranty for products that is generally one year in length, but in some cases regulations may require us to provide repair or remediation beyond the typical warranty period. If any of the products contain defects, the Company may incur additional repair and remediation costs. Service for domestic customers is provided by Company-owned service centers that perform all service, repair, and calibration services. Service for international customers is provided by a combination of Company-owned facilities, vendors on a contract basis, and distributors.

A warranty reserve is included in accrued liabilities for the expected future costs of servicing products. Additions to the reserve are based on management’s best estimate of probable liability. The Company considers a combination of factors including material and labor costs, regulatory requirements, and other judgments in determining the amount of the reserve. The reserve is reduced as servicing is performed to honor existing warranty and regulatory obligations.

As of June 30, 2019, the Company has accrued $8.1 million for product related warranties, which includes $2.9 million of estimated costs to bring certain products into regulatory compliance. The Company's estimate of these costs is primarily based upon the number of units outstanding that may require repair and costs associated with shipping.

The details of activity in the warranty reserve are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Balance, beginning of period	$	8,225		$	9,068		$	9,391		$	10,995
Additions charged to expense	1,639			2,100			2,248			2,335
Utilizations	(1,473		)	(255		)	(2,983		)	(1,057		)
Changes in estimate related to product remediation activities	(315		)	—			(571		)	(1,360		)
Divestiture adjustments	—			—			(9		)	—
Balance, end of period	$	8,076		$	10,913		$	8,076		$	10,913

The Company's estimates of future product warranty costs may vary from actual product warranty costs, and any variance from estimates could impact our cost of sales, operating profits and results of operations.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

As of June 30, 2019, the Company has two active share-based compensation plans, the 2018 Equity Incentive Plan and the 2011 Employee Stock Purchase Plan.

In January 2019, the Company granted market stock unit (“MSU”) awards to certain employees. These MSUs fully vest on December 31, 2021 and have separate market performance goals than the performance stock unit (“PSU”) awards the Company grants. Each MSU represents the right to one share of common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Natus' stock price over the vesting period. The maximum number of MSUs which will be eligible to vest are 200% of the MSUs initially granted. A Monte Carlo simulation model was used to estimate the fair value of the MSUs as of their grant date. This model simulates the stock price movements of the Company using certain assumptions, including the stock price of the company.

The terms of all other awards granted during the six months ended June 30, 2019 and the methods for determining grant-date fair value of the awards are consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Details of share-based compensation expense are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Cost of revenue	$	89	$	71	$	156	$	139
Marketing and selling	209		199		439		396
Research and development	258		272		503		549
General and administrative	1,431		2,728		3,321		4,548
Total	$	1,987	$	3,270	$	4,419	$	5,632

As of June 30, 2019, unrecognized compensation expense related to the unvested portion of stock options and other stock awards was approximately $13.5 million, which is expected to be recognized over a weighted average period of 2.5 years.

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Other Income (Expense), net

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other Income (Expense), net

Other Income (Expense), net

Other income (expense), net consists of (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Interest income	$	127		$	(5	)	$	147		$	5
Interest expense	(1,468		)	(1,641		)	(2,995		)	(3,601		)
Foreign currency gain (loss)	134			(838		)	(463		)	(234		)
Other expense	7			86			(1		)	(388		)
Total other expense, net	$	(1,200	)	$	(2,398	)	$	(3,312	)	$	(4,218	)

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective quarter. During each interim period, the Company updates the estimated annual effective tax rate which is subject to significant volatility due to several factors, including the Company's ability to accurately predict the income (loss) before provision for income taxes in multiple jurisdictions, the effects of acquisitions, the integration of those acquisitions, and changes in tax law. In circumstances where the Company is unable to predict income (loss) in multiple jurisdictions, the actual year to date effective tax rate may be the best estimate of the annual effective tax rate for purposes of determining the interim provision for income tax.

The Company recorded an expense from income tax of $2.1 million and a benefit from income tax of $7.6 million for the three and six months ended June 30, 2019, respectively. The effective tax rate was 33.5% and 22.8% for the three and six months ended June 30, 2019, respectively. Of the $7.6 million benefit from income tax recorded for the six months ended June 30, 2019, $8.2 million relates to the tax accounting effects of the sale of Medix.

The Company recorded a benefit for income tax of $3.6 million and $5.0 million for the three and six months ended June 30, 2018, respectively. The effective tax rate was 58.3% and 46.7% for the three and six months ended June 30, 2018, respectively.

The decrease in the effective tax rate for the three and six months ended June 30, 2019 compared with the three and six months ended June 30, 2018 is primarily attributable to the tax accounting effects of the sale of Medix. The Company's effective tax rate for the three and six months ended June 30, 2019 differed from the federal statutory rate of 21% primarily due to the tax accounting effects of the sale of Medix. Other significant factors that impact the effective tax rate are Federal and California research and development credits, non-deductible executive compensation expenses, and inclusions related to global intangible low-taxed income.

The Company recorded $0.2 million of net tax expense related to unrecognized tax benefits for the three and six months ended June 30, 2019, primarily due to the increase in uncertain tax positions related to the prior year. Within the next twelve months, it is possible that the uncertain tax benefit may change with a range of approximately zero to $3.8 million. The Company's tax returns remain open to examination as follows: U.S Federal, 2015 through 2018, U.S. states, 2014 through 2018, and significant foreign jurisdictions, generally 2014 through 2018.

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Debt and Credit Arrangements

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt and Credit Arrangements

Debt and Credit Arrangements

The Company has a Credit Agreement with JP Morgan Chase Bank ("JP Morgan"), Citibank, NA (“Citibank”), and Wells Fargo Bank, National Association (“Wells Fargo”). The Credit Agreement provides for an aggregate $225.0 million of secured revolving credit facility. The Credit Agreement contains covenants, including covenants relating to maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and limitations on guaranties, investments, issuance of debt, lease

obligations and capital expenditures, and is secured by virtually all of the Company's assets. The Credit Agreement provides for events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and the occurrence of the event has a material adverse effect. The Company has no other significant credit facilities.

In addition to the customary restrictive covenants listed above, the Credit Agreement also contains financial covenants that require the Company to maintain a certain leverage ratio and fixed charge coverage ratio, each as defined in the Credit Agreement:

• Leverage Ratio, as defined, to be no higher than 2.75 to 1.00.

• Interest Coverage Ratio, as defined, to be at least 1.75 to 1.00 at all times.

At June 30, 2019, the Company was in compliance with the Leverage Ratio and the Interest Coverage Ratio covenants as defined in the Credit Agreement.

At June 30, 2019, the Company had $80.0 million outstanding under the Credit Agreement.

Pursuant to the terms of the Credit Agreement, the outstanding principal balance will bear interest at either (a) a fluctuating rate per annum equal to the Applicable Rate, as defined in the Credit Agreement, depending on our leverage ratio plus the higher of (i) the federal funds rate plus one-half of one percent per annum; (ii) the prime rate in effect on such a day; and (iii) the LIBOR rate plus one percent, or (b) a fluctuating rate per annum of LIBOR Rate plus the Applicable Rate, which ranges between 1.75% to 2.75%. The effective interest rate during the six months ended June 30, 2019 was 4.74%. The Credit Agreement matures on September 23, 2021, at which time all principal amounts outstanding under the Credit Agreement will be due and payable. As of June 30, 2019, we have classified $35.0 million of the $80.0 million outstanding as short-term on our balance sheet due to our intent to repay this portion over the next twelve months.

Long-term debt consists of (in thousands):

	June 30, 2019			December 31, 2018
Revolving credit facility	$	80,000		$	105,000
Debt issuance costs	(430		)	(526		)
Less: current portion of long-term debt	35,000			35,000
Total long-term debt	$	44,570		$	69,474

Maturities of long-term debt as of June 30, 2019 are as follows (in thousands):

	June 30, 2019		December 31, 2018
2019	$	—	$	—
2020	—		—
2021	80,000		105,000
Thereafter	—		—
Total	$	80,000	$	105,000

As of June 30, 2019, the carrying value of total debt approximated fair market value.

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Financial Instruments and Derivatives

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments and Derivatives

Financial Instruments and Derivatives

The Company uses interest rate swap derivative instruments to reduce earnings volatility and manage cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of the Company's expected LIBOR-indexed floating-rate borrowings. The Company held the following interest rate swaps as of June 30, 2019 (in thousands):

Hedged Item	Current Notional Amount		Designation Date	Effective Date	Termination Date	Fixed Interest Rate	Floating Rate	Estimated Fair Value
1-month USD LIBOR Loan	$	25,000	May 31, 2018	June 1, 2018	September 23, 2021	2.611%	1-month USD LIBOR	$	384
Total interest rate derivatives designated as cash flow hedge	$	25,000						$	384

The Company designated these derivative instruments as cash flow hedges. The Company assesses the effectiveness of these derivative instruments and records the change in the fair value of a derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax. Once the hedged item affects earnings, the effective portion of any gain or loss will be reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time.

As of June 30, 2019, the Company estimates that approximately $136.0 thousand of losses associated with the cash flow hedge, net of tax, could be reclassified from AOCI into earnings within the next twelve months.

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Leases (Notes)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

The Company has operating and finance leases for offices, warehouses, and certain equipment. The leases have remaining lease terms of one to eight years, some of which include options to extend the leases for up to ten years. The Company's leases do not have any residual value guarantees or any restrictions or covenants imposed by leases.

Components of lease cost were as follows (in thousands):

	Three Months Ended   June 30,			Six Months Ended   June 30,
	2019			2019
Operating lease cost	$	1,659		$	3,424
Finance lease cost:
Amortization of right-of-use assets (principal payments)	100			265
Interest on lease liabilities	14			36
Short-term lease cost	13			51
Variable lease cost	356			1,240
Sublease income	(56		)	(89		)
Total lease cost	$	2,086		$	4,927

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,265	$	6,757
Operating cash flows from finance leases	29		66
Financing cash flows from finance leases	100		265
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	601		1,721
Finance leases	17		105

Supplemental balance sheet information related to leases was as follows (in thousands):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	17,217
Current portion of operating lease liabilities	$	5,960
Operating lease liabilities	14,326
Total operating lease liabilities	$	20,286
Finance Leases
Property and equipment, gross	$	2,955
Accumulated amortization	1,637
Property and equipment, net	$	1,318
Accrued liabilities	$	483
Other liabilities	888
Total finance lease liabilities	$	1,371
Weighted Average Remaining Lease Term
Operating leases	4.1 years
Finance leases	3.2 years
Weighted Average Discount Rate
Operating leases	5.3		%
Finance leases	5.1		%

As of June 30, 2019, future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet, for the following five fiscal years and thereafter, were as follows (in thousands):

Year ending December 31,	Operating Leases			Finance Leases
2019	$	6,849		$	529
2020	5,727			429
2021	4,337			340
2022	2,714			144
2023	2,049			24
Thereafter	1,283			2
Total lease payments	22,959			1,468
Less imputed interest	(2,673		)	(97		)
Total	$	20,286		$	1,371

As the Company elected to apply the provisions of Topic 842 on a prospective basis, the following comparative period disclosure is being presented in accordance with Topic 840. The future minimum commitments under the Company’s leases as of December 31, 2018 were as follows (in thousands):

Year ending December 31,	Operating Leases
2019	$	8,092
2020	6,951
2021	5,290
2022	3,423
2023	2,426
Thereafter	1,365
Total minimum lease payments	$	27,547

Leases

Leases

The Company has operating and finance leases for offices, warehouses, and certain equipment. The leases have remaining lease terms of one to eight years, some of which include options to extend the leases for up to ten years. The Company's leases do not have any residual value guarantees or any restrictions or covenants imposed by leases.

Components of lease cost were as follows (in thousands):

	Three Months Ended   June 30,			Six Months Ended   June 30,
	2019			2019
Operating lease cost	$	1,659		$	3,424
Finance lease cost:
Amortization of right-of-use assets (principal payments)	100			265
Interest on lease liabilities	14			36
Short-term lease cost	13			51
Variable lease cost	356			1,240
Sublease income	(56		)	(89		)
Total lease cost	$	2,086		$	4,927

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,265	$	6,757
Operating cash flows from finance leases	29		66
Financing cash flows from finance leases	100		265
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	601		1,721
Finance leases	17		105

Supplemental balance sheet information related to leases was as follows (in thousands):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	17,217
Current portion of operating lease liabilities	$	5,960
Operating lease liabilities	14,326
Total operating lease liabilities	$	20,286
Finance Leases
Property and equipment, gross	$	2,955
Accumulated amortization	1,637
Property and equipment, net	$	1,318
Accrued liabilities	$	483
Other liabilities	888
Total finance lease liabilities	$	1,371
Weighted Average Remaining Lease Term
Operating leases	4.1 years
Finance leases	3.2 years
Weighted Average Discount Rate
Operating leases	5.3		%
Finance leases	5.1		%

As of June 30, 2019, future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet, for the following five fiscal years and thereafter, were as follows (in thousands):

Year ending December 31,	Operating Leases			Finance Leases
2019	$	6,849		$	529
2020	5,727			429
2021	4,337			340
2022	2,714			144
2023	2,049			24
Thereafter	1,283			2
Total lease payments	22,959			1,468
Less imputed interest	(2,673		)	(97		)
Total	$	20,286		$	1,371

As the Company elected to apply the provisions of Topic 842 on a prospective basis, the following comparative period disclosure is being presented in accordance with Topic 840. The future minimum commitments under the Company’s leases as of December 31, 2018 were as follows (in thousands):

Year ending December 31,	Operating Leases
2019	$	8,092
2020	6,951
2021	5,290
2022	3,423
2023	2,426
Thereafter	1,365
Total minimum lease payments	$	27,547

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Segment, Customer and Geographic Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment, Customer and Geographic Information

Segment, Customer and Geographic Information

The Company operates in one reportable segment in which the Company provides medical device solutions focused on the diagnosis and treatment of central nervous and sensory system disorders for patients of all ages.

End-user customer base includes hospitals, clinics, laboratories, physicians, audiologists, and governmental agencies. Most of the Company's international sales are to distributors who resell products to end users or sub-distributors.

Revenue and long-lived asset information are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Consolidated Revenue:
United States	$	73,531	$	75,467	$	139,598	$	144,154
International	52,008		55,186		100,698		115,107
Totals	$	125,539	$	130,653	$	240,296	$	259,261

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Revenue by End Market:
Neurology Products
Devices and Systems	$	54,617	$	50,275	$	100,366	$	96,234
Supplies	16,910		16,535		32,751		33,707
Services	71		3,565		871		6,303
Total Neurology Revenue	71,598		70,375		133,988		136,244
Newborn Care Products
Devices and Systems	12,615		15,471		27,260		34,450
Supplies	8,933		9,625		18,979		19,147
Services	5,015		5,477		9,860		10,880
Total Newborn Care Revenue	26,563		30,573		56,099		64,477
Audiology Products
Devices and Systems	26,178		29,119		47,703		52,968
Supplies	1,200		586		2,506		5,572
Total Audiology Revenue	27,378		29,705		50,209		58,540
Total Revenue	$	125,539	$	130,653	$	240,296	$	259,261

	June 30, 2019		December 31, 2018
Property and equipment, net:
United States	$	13,128	$	10,019
Ireland	5,868		5,083
Canada	4,384		4,504
Denmark	1,950		1,371
Argentina	—		999
Other countries	1,217		937
Totals	$	26,547	$	22,913

During the three and six months ended June 30, 2019 and 2018, no single customer or country outside the United States contributed more than 10% of the Company's consolidated revenue.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

On April 1, 2019, as part of the sale of the Company's Argentinian subsidiary, Medix, Natus provided a loan to Medix for $2.2 million. This asset was measured at fair value less costs to sell as of June 30, 2019 and is classified as Level 3 asset. The loan is classified within other assets on our condensed consolidated balance sheet. Subsequent changes in the fair value of the loan receivable are recorded within the Company's income statement as an operating expense.

	December 31, 2018		Additions		Receipts		Adjustments		June 30, 2019
Other assets:
Loan receivable	$	—	$	2,200	$	—	$	—	$	2,200
Total	$	—	$	2,200	$	—	$	—	$	2,200

The derivative financial instruments described in Note 13 are measured at fair value on a recurring basis and are presented on the consolidated balance sheets at fair value. The Company estimates the fair value of the interest rate swaps by calculating the present value of the expected future cash flows of each swap. The calculation incorporated the contractual terms of the derivatives, observable market interest rates which are considered to be Level 2 inputs, and credit risk adjustments, if any, to reflect the counterpart's as well as the Company's nonperformance risk. As of June 30, 2019, there have been no events of default under the interest rate swap agreement. The table below presents the fair value of the derivative financial instruments as well as the classification on the consolidated balance sheet (in thousands):

	December 31, 2018		Additions		Payments		Adjustments		June 30, 2019
Liabilities:
Interest rate swap	$	77	$	—	$	—	$	307	$	384
Total	$	77	$	—	$	—	$	307	$	384

The following financial instruments are not measured at fair value on the Company’s consolidated balance sheet as of June 30, 2019 and December 31, 2018 but require disclosure of their fair values: cash and cash equivalents, accounts receivable, and accounts payable. The carrying value of these financial instruments approximates fair values because of their relatively short maturity.

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Sale of Certain Subsidiary Assets Sale of Certain Subsidiary Assets

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Sale of Certain Subsidiary Assets

Sale of Certain Subsidiary

As part of the One Natus restructuring initiative, the Company divested its wholly owned subsidiary, Medix SA, on April 2, 2019 via a stock sale. In exchange for the stock, the Company received $2,500 in cash and provided Medix with a $2.2 million limited-recourse loan. The loan is secured by a specific asset of Medix and repayment is conditional upon the sale of the asset.

The held for sale criteria under GAAP was met in the first quarter of 2019. As such, the Company completed an asset impairment analysis which resulted in the full impairment of all assets held for sale. The Company recognized an impairment loss of $24.6 million which included an accrual for the anticipated realization of deferred foreign currency related translation adjustments in accumulated other comprehensive income of $24.8 million, net of tax, and an adjustment of $4.6 million for assets with a book value in excess of their fair market value. As of June 30, 2019, the sale is final and the deferred foreign currency related translation adjustments previously in accumulated other comprehensive income have been released from the balance sheet along with the held for sale accrual.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The accompanying interim condensed consolidated financial statements of Natus Medical Incorporated (“Natus,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Except where noted below within Note 1, the accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Interim financial reports are prepared in accordance with the rules and regulations of the Securities and Exchange Commission; accordingly, the reports do not include all of the information and notes required by GAAP for annual financial statements. The interim financial information is unaudited, and reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods presented. The Company has made certain reclassifications to the prior period to conform to current period presentation. The consolidated balance sheet as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Recent Accounting Pronouncements

Recent Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires lease assets and lease liabilities arising from operating leases to be presented in the statement of financial position. Qualitative along with specific quantitative disclosures are required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which affects narrow aspects of the guidance issued in the amendments in Update 2016-02. In July 2018, the FASB also issued ASU 2018-11, Targeted Improvements. The amendments in ASU 2018-11 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU 2016-02 and have the same effective and transition requirements as ASU 2016-02.

The new standard provides a number of optional practical expedients in transition. The Company elected the 'package of practical expedients,' which permits an entity to not reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. The Company has not elected the use-of-hindsight practical expedient or the practical expedient pertaining to land easements; the latter of which is not applicable to the Company. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. The Company will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

The new standard became effective for the Company on January 1, 2019. The Company adopted the new standard using the modified retrospective transition method with the effective date as the date of initial application. Upon adoption, the Company recognized additional new lease assets of approximately $19.5 million and additional lease liabilities of approximately $22.3 million as of January 1, 2019. The standard did not materially affect consolidated net earnings. By electing the effective date as the date of initial application, financial performance has not been adjusted and the disclosures required under the new standard have not been provided for periods prior to January 1, 2019. See Significant Accounting Policies and Note 14 for additional discussion and disclosure.

The adoption of the new standard did not impact the Company's liquidity or debt-covenant compliance under its current agreements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective for the Company's annual and any interim goodwill impairment tests performed on or after January 1, 2020. The Company elected to early adopt. The adoption of ASU 2017-04 did not have an impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). This update permits a company to reclassify its disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) on items within accumulated other comprehensive income (“AOCI”) to retained earnings (termed “stranded tax effects”). Only the stranded tax effects resulting from the 2017 Act are eligible for reclassification. The ASU is effective for the Company on January 1, 2019. Upon adoption, the Company reclassified its stranded tax effects resulting from the 2017 Act of $1.3 million, resulting in a decrease to AOCI and an increase to retained earnings as of January 1, 2019.

Recent Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326). This update requires financial assets measured at amortized cost, such as trade receivables and contract assets, to be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. In May 2019, the FASB issued ASU 2019-05 which provides targeted transition relief guidance intended to increase comparability of financial statement information. The guidance for both of these is effective beginning January 1, 2020. The Company is evaluating the impact, if any, that these pronouncements will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 813), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This update amends Topic 820 to add, remove, and clarify disclosure requirements related to fair value measurement disclosure. For calendar year-end entities, the update will be effective for annual periods beginning January 1, 2020, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. As the standard relates only to disclosures, the Company does not expect the adoption to have a material impact on the consolidated financial statements and is still evaluating if it will early adopt.

Leases

The Company determines if an arrangement is a lease at inception of the lease. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit borrowing rate, generally the Company uses an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the lease commencement date. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to exclude or terminate the lease when it is reasonably certain that they will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

Operating leases are included in operating lease ROU assets, accrued liabilities, and operating lease liabilities in the Company's consolidated balance sheet. Finance leases are included in property and equipment, accrued liabilities, and other liabilities in the consolidated balance sheet.

The Company has lease agreements with lease and non-lease components, which are generally accounted for based on the type of asset. For real estate and telecom leases, the Company accounts for these components separately. For equipment leases, such as office equipment and vehicles, the Company accounts for the lease and non-lease components as a single lease component.

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Revenue (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of contract assets and liabilities

The following table summarizes the changes in the unbilled AR and deferred revenue balances for the six months ended June 30, 2019 (in thousands):

Unbilled AR, December 31, 2018	$	3,012
Additions	420
Transferred to Trade Receivable	(667		)
Unbilled AR, June 30, 2019	$	2,765

Deferred Revenue, December 31, 2018	$	21,410
Additions	14,242
Revenue Recognized	(11,502		)
Deferred Revenue, June 30, 2019	$	24,150

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

The components of basic and diluted EPS are as follows (in thousands, except per share amounts):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2019		2018			2019			2018
Net income (loss)	$	4,188	$	(2,577	)	$	(25,813	)	$	(5,727	)
Weighted average common shares	33,639		32,859			33,630			32,809
Dilutive effect of stock based awards	51		—			—			—
Diluted Shares	33,690		32,859			33,630			32,809
Basic income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Diluted income (loss) per share	$	0.12	$	(0.08	)	$	(0.77	)	$	(0.17	)
Shares excluded from calculation of diluted EPS	—		382			103			387

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Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Raw materials and subassemblies	$	34,310		$	31,459
Work in process	2,603			2,424
Finished goods	62,650			63,932
Total inventories	99,563			97,815
Less: Non-current inventories	(21,288		)	(18,079		)
Inventories, current	$	78,275		$	79,736

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Amortization expense related to intangible assets with definite lives

The following table summarizes the components of gross and net intangible asset balances (in thousands):

	June 30, 2019										December 31, 2018
	Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Book Value
Intangible assets with definite lives:
Technology	$	110,516	$	(6,636	)	$	(53,225	)	$	50,655	$	111,198	$	(6,768	)	$	(50,046	)	$	54,384
Customer related	99,050		(50		)	(44,523		)	54,477		99,440		(1,961		)	(38,574		)	58,905
Trade names	47,047		(3,831		)	(22,714		)	20,502		47,217		(4,397		)	(19,250		)	23,570
Internally developed software	16,282		—			(15,179		)	1,103		16,264		—			(14,164		)	2,100
Patents	2,953		(132		)	(2,801		)	20		2,718		(133		)	(2,524		)	61
Service Agreements	1,190		—			(962		)	228		1,190		—			(757		)	433
Definite-lived intangible assets	$	277,038	$	(10,649	)	$	(139,404	)	$	126,985	$	278,027	$	(13,259	)	$	(125,315	)	$	139,453

Amortization expense

Amortization expense related to intangible assets with definite lives was as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Technology	$	1,729	$	2,558	$	3,467	$	4,378
Customer related	2,167		2,302		4,350		5,183
Trade names	1,491		1,456		2,989		3,082
Internally developed software	506		528		1,010		1,058
Patents	20		22		40		43
Service Agreements	$	103	$	486	205		486
Total amortization	$	6,016	$	7,352	$	12,061	$	14,230

Expected amortization expense related to amortizable intangible assets

Expected amortization expense related to amortizable intangible assets is as follows (in thousands):

Six months ending December 31, 2019	$	11,333
2020	21,805
2021	20,918
2022	17,473
2023	16,500
2024	14,592
Thereafter	24,364
Total expected amortization expense	$	126,985

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Goodwill (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Carrying amount of Goodwill

The carrying amount of goodwill and the changes in the balance are as follows (in thousands):

December 31, 2018	$	147,644
Foreign currency translation	96
June 30, 2019	$	147,740

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Property and Equipment, net (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment net

Property and equipment, net consist of the following (in thousands):

	June 30, 2019			December 31, 2018
Land	$	1,720		$	1,828
Buildings	6,778			7,036
Leasehold improvements	7,616			4,649
Finance lease right-of-use assets	2,955			—
Equipment and furniture	23,725			23,487
Computer software and hardware	12,635			12,803
Demonstration and loaned equipment	12,201			12,843
	67,630			62,646
Accumulated depreciation	(41,083		)	(39,733		)
Total	$	26,547		$	22,913

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Reserve for Product Warranties (Tables)

6 Months Ended

Jun. 30, 2019

Product Warranties Disclosures [Abstract]

Reserve for Product Warranties

The details of activity in the warranty reserve are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Balance, beginning of period	$	8,225		$	9,068		$	9,391		$	10,995
Additions charged to expense	1,639			2,100			2,248			2,335
Utilizations	(1,473		)	(255		)	(2,983		)	(1,057		)
Changes in estimate related to product remediation activities	(315		)	—			(571		)	(1,360		)
Divestiture adjustments	—			—			(9		)	—
Balance, end of period	$	8,076		$	10,913		$	8,076		$	10,913

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Expense

Details of share-based compensation expense are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Cost of revenue	$	89	$	71	$	156	$	139
Marketing and selling	209		199		439		396
Research and development	258		272		503		549
General and administrative	1,431		2,728		3,321		4,548
Total	$	1,987	$	3,270	$	4,419	$	5,632

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Other Income (Expense), net (Tables)

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other Income (Expense), net

Other income (expense), net consists of (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Interest income	$	127		$	(5	)	$	147		$	5
Interest expense	(1,468		)	(1,641		)	(2,995		)	(3,601		)
Foreign currency gain (loss)	134			(838		)	(463		)	(234		)
Other expense	7			86			(1		)	(388		)
Total other expense, net	$	(1,200	)	$	(2,398	)	$	(3,312	)	$	(4,218	)

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Debt and Credit Arrangements (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-term debt

Long-term debt consists of (in thousands):

	June 30, 2019			December 31, 2018
Revolving credit facility	$	80,000		$	105,000
Debt issuance costs	(430		)	(526		)
Less: current portion of long-term debt	35,000			35,000
Total long-term debt	$	44,570		$	69,474

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Financial Instruments and Derivatives (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of interest rate swaps

The Company held the following interest rate swaps as of June 30, 2019 (in thousands):

Hedged Item	Current Notional Amount		Designation Date	Effective Date	Termination Date	Fixed Interest Rate	Floating Rate	Estimated Fair Value
1-month USD LIBOR Loan	$	25,000	May 31, 2018	June 1, 2018	September 23, 2021	2.611%	1-month USD LIBOR	$	384
Total interest rate derivatives designated as cash flow hedge	$	25,000						$	384

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Lease, Cost [Table Text Block]

Components of lease cost were as follows (in thousands):

	Three Months Ended   June 30,			Six Months Ended   June 30,
	2019			2019
Operating lease cost	$	1,659		$	3,424
Finance lease cost:
Amortization of right-of-use assets (principal payments)	100			265
Interest on lease liabilities	14			36
Short-term lease cost	13			51
Variable lease cost	356			1,240
Sublease income	(56		)	(89		)
Total lease cost	$	2,086		$	4,927

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,265	$	6,757
Operating cash flows from finance leases	29		66
Financing cash flows from finance leases	100		265
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	601		1,721
Finance leases	17		105

Assets and Liabilities, Lessee [Table Text Block]

Supplemental balance sheet information related to leases was as follows (in thousands):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	17,217
Current portion of operating lease liabilities	$	5,960
Operating lease liabilities	14,326
Total operating lease liabilities	$	20,286
Finance Leases
Property and equipment, gross	$	2,955
Accumulated amortization	1,637
Property and equipment, net	$	1,318
Accrued liabilities	$	483
Other liabilities	888
Total finance lease liabilities	$	1,371
Weighted Average Remaining Lease Term
Operating leases	4.1 years
Finance leases	3.2 years
Weighted Average Discount Rate
Operating leases	5.3		%
Finance leases	5.1		%

Finance Lease, Liability, Maturity [Table Text Block]

As of June 30, 2019, future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet, for the following five fiscal years and thereafter, were as follows (in thousands):

Year ending December 31,	Operating Leases			Finance Leases
2019	$	6,849		$	529
2020	5,727			429
2021	4,337			340
2022	2,714			144
2023	2,049			24
Thereafter	1,283			2
Total lease payments	22,959			1,468
Less imputed interest	(2,673		)	(97		)
Total	$	20,286		$	1,371

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

As of June 30, 2019, future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet, for the following five fiscal years and thereafter, were as follows (in thousands):

Year ending December 31,	Operating Leases			Finance Leases
2019	$	6,849		$	529
2020	5,727			429
2021	4,337			340
2022	2,714			144
2023	2,049			24
Thereafter	1,283			2
Total lease payments	22,959			1,468
Less imputed interest	(2,673		)	(97		)
Total	$	20,286		$	1,371

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

The future minimum commitments under the Company’s leases as of December 31, 2018 were as follows (in thousands):

Year ending December 31,	Operating Leases
2019	$	8,092
2020	6,951
2021	5,290
2022	3,423
2023	2,426
Thereafter	1,365
Total minimum lease payments	$	27,547

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Segment, Customer and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Revenue and Long-lived Asset Information by Geographic Region

Revenue and long-lived asset information are as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Consolidated Revenue:
United States	$	73,531	$	75,467	$	139,598	$	144,154
International	52,008		55,186		100,698		115,107
Totals	$	125,539	$	130,653	$	240,296	$	259,261

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2019		2018		2019		2018
Revenue by End Market:
Neurology Products
Devices and Systems	$	54,617	$	50,275	$	100,366	$	96,234
Supplies	16,910		16,535		32,751		33,707
Services	71		3,565		871		6,303
Total Neurology Revenue	71,598		70,375		133,988		136,244
Newborn Care Products
Devices and Systems	12,615		15,471		27,260		34,450
Supplies	8,933		9,625		18,979		19,147
Services	5,015		5,477		9,860		10,880
Total Newborn Care Revenue	26,563		30,573		56,099		64,477
Audiology Products
Devices and Systems	26,178		29,119		47,703		52,968
Supplies	1,200		586		2,506		5,572
Total Audiology Revenue	27,378		29,705		50,209		58,540
Total Revenue	$	125,539	$	130,653	$	240,296	$	259,261

	June 30, 2019		December 31, 2018
Property and equipment, net:
United States	$	13,128	$	10,019
Ireland	5,868		5,083
Canada	4,384		4,504
Denmark	1,950		1,371
Argentina	—		999
Other countries	1,217		937
Totals	$	26,547	$	22,913

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair value of the derivative financial instrument

The table below presents the fair value of the derivative financial instruments as well as the classification on the consolidated balance sheet (in thousands):

	December 31, 2018		Additions		Payments		Adjustments		June 30, 2019
Liabilities:
Interest rate swap	$	77	$	—	$	—	$	307	$	384
Total	$	77	$	—	$	—	$	307	$	384

	December 31, 2018		Additions		Receipts		Adjustments		June 30, 2019
Other assets:
Loan receivable	$	—	$	2,200	$	—	$	—	$	2,200
Total	$	—	$	2,200	$	—	$	—	$	2,200

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Basis of Presentation (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Lease, Right-of-Use Asset	$ 17,217		$ 0
Operating Lease, Liability	$ 20,286
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Lease, Right-of-Use Asset		$ 19,500
Operating Lease, Liability		22,300
ASU 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment		0
Retained Earnings [Member] | ASU 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment		$ 1,332

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Revenue - Narrative (Details) $ in Millions	Jun. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Short-term contract liability	$ 19.9
Long-term contract liability	$ 4.3
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction for remaining performance obligation	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 12.8
Expected timing of satisfaction for remaining performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 8.3
Expected timing of satisfaction for remaining performance obligation	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 1.5
Expected timing of satisfaction for remaining performance obligation	3 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 0.9
Expected timing of satisfaction for remaining performance obligation	4 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 0.7
Expected timing of satisfaction for remaining performance obligation

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Revenue - Unbilled AR and Deferred Revenue (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Movement in Deferred Revenue [Roll Forward]
Deferred Revenue, December 31, 2018	$ 21,410
Additions	14,242
Revenue Recognized	(11,502)
Deferred Revenue, March 31, 2019	24,150
Unbilled AR
Movement in Unbilled AR [Roll Forward]
Unbilled AR, December 31, 2018	3,012
Additions	420
Transferred to Trade Receivable	(667)
Unbilled AR, March 31, 2019	$ 2,765

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net loss	$ 4,188	$ (30,001)	$ (2,577)	$ (3,148)	$ (25,813)	$ (5,727)
Weighted average common shares (in shares)	33,639		32,859		33,630	32,809
Dilutive effect of stock based awards (in shares)	51		0		0	0
Diluted Shares (in shares)	33,690		32,859		33,630	32,809
Basic earnings per share (dollars per share)	$ 0.12		$ (0.08)		$ (0.77)	$ (0.17)
Diluted earnings per share (dollars per share)	$ 0.12		$ (0.08)		$ (0.77)	$ (0.17)
Diluted earnings per share (in shares)	0		382		103	387

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Summary of Inventories
Raw materials and subassemblies	$ 34,310	$ 31,459
Work in process	2,603	2,424
Finished goods	62,650	63,932
Total inventories	99,563	97,815
Less: Non-current inventories	(21,288)	(18,079)
Inventories, current	$ 78,275	$ 79,736

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Intangible Assets - Components of Gross and Net Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 277,038	$ 278,027
Accumulated Impairment	(10,649)	(13,259)
Accumulated Amortization	(139,404)	(125,315)
Net Book Value	126,985	139,453
Technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	110,516	111,198
Accumulated Impairment	(6,636)	(6,768)
Accumulated Amortization	(53,225)	(50,046)
Net Book Value	50,655	54,384
Customer related
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	99,050	99,440
Accumulated Impairment	(50)	(1,961)
Accumulated Amortization	(44,523)	(38,574)
Net Book Value	54,477	58,905
Trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	47,047	47,217
Accumulated Impairment	(3,831)	(4,397)
Accumulated Amortization	(22,714)	(19,250)
Net Book Value	20,502	23,570
Internally developed software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	16,282	16,264
Accumulated Impairment	0	0
Accumulated Amortization	(15,179)	(14,164)
Net Book Value	1,103	2,100
Patents
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,953	2,718
Accumulated Impairment	(132)	(133)
Accumulated Amortization	(2,801)	(2,524)
Net Book Value	20	61
Service Agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,190	1,190
Accumulated Impairment	0	0
Accumulated Amortization	(962)	(757)
Net Book Value	$ 228	$ 433

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Intangible Assets - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	$ 6,016,000	$ 7,352,000	$ 12,061,000	$ 14,230,000
Useful life (in years)			11 years
Technology
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	1,729,000	2,558,000	$ 3,467,000	4,378,000
Useful life (in years)			14 years
Customer related
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	2,167,000	2,302,000	$ 4,350,000	5,183,000
Useful life (in years)			10 years
Trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	1,491,000	1,456,000	$ 2,989,000	3,082,000
Useful life (in years)			7 years
Internally developed software
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	506,000	528,000	$ 1,010,000	1,058,000
Useful life (in years)			6 years
Costs incurred for development of internal use computer software	14,100,000		$ 14,100,000
Costs incurred for development of software to be sold	2,200,000		2,200,000
Patents
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	20,000	22,000	$ 40,000	43,000
Useful life (in years)			12 years
Service Agreements
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	103,000	$ 486,000	$ 205,000	$ 486,000
Useful life (in years)			2 years
General and administrative | Internally developed software
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization	$ 500,000		$ 1,000,000.0

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Intangible Assets - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Finite-Lived Intangible Assets [Line Items]
Total amortization	$ 6,016	$ 7,352	$ 12,061	$ 14,230
Technology
Finite-Lived Intangible Assets [Line Items]
Total amortization	1,729	2,558	3,467	4,378
Customer related
Finite-Lived Intangible Assets [Line Items]
Total amortization	2,167	2,302	4,350	5,183
Trade names
Finite-Lived Intangible Assets [Line Items]
Total amortization	1,491	1,456	2,989	3,082
Internally developed software
Finite-Lived Intangible Assets [Line Items]
Total amortization	506	528	1,010	1,058
Patents
Finite-Lived Intangible Assets [Line Items]
Total amortization	20	22	40	43
Service Agreements
Finite-Lived Intangible Assets [Line Items]
Total amortization	$ 103	$ 486	$ 205	$ 486

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Intangible Assets - Schedule of Expected Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Expected annual amortization expense related to amortizable intangible assets
Six months ending December 31, 2019	$ 11,333
2019	21,805
2020	20,918
2021	17,473
2022	16,500
2023	14,592
Thereafter	24,364
Net Book Value	$ 126,985	$ 139,453

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Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Carrying amount of goodwill
December 31, 2018	$ 147,644
Foreign currency translation	96
June 30, 2019	$ 147,740

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Property and Equipment, net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 67,630		$ 67,630		$ 62,646
Finance Lease, Right-of-Use Asset	2,955		2,955		0
Accumulated depreciation	(41,083)		(41,083)		(39,733)
Total	26,547		26,547		22,913
Depreciation	1,800	$ 1,400	3,300	$ 2,400
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,720		1,720		1,828
Buildings
Property, Plant and Equipment [Line Items]
Property and equipment, gross	6,778		6,778		7,036
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	7,616		7,616		4,649
Equipment and furniture
Property, Plant and Equipment [Line Items]
Property and equipment, gross	23,725		23,725		23,487
Computer software and hardware
Property, Plant and Equipment [Line Items]
Property and equipment, gross	12,635		12,635		12,803
Demonstration and loaned equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 12,201		$ 12,201		$ 12,843

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Reserve for Product Warranties - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Product Warranties Disclosures [Abstract]
Product warranty period (in years)	1 year
Product Liability Contingency [Line Items]
Accrual of estimated costs	$ 8,076	$ 8,225	$ 9,391	$ 10,913	$ 9,068	$ 10,995
Certain products
Product Liability Contingency [Line Items]
Accrual of estimated costs	$ 2,900

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Reserve for Product Warranties - Schedule of Warranty Reserve (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reserve for Product Warranties
Balance, beginning of period	$ 8,225	$ 9,068	$ 9,391	$ 10,995
Additions charged to expense	1,639	2,100	2,248	2,335
Utilizations	(1,473)	(255)	(2,983)	(1,057)
Changes in estimate related to product remediation activities	(315)	0	(571)	(1,360)
Standard and Extended Product Warranty Accrual, Decrease for Divestiture	0	0	(9)	0
Balance, end of period	$ 8,076	$ 10,913	$ 8,076	$ 10,913

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Share-Based Compensation - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($) plan
Share-based Payment Arrangement [Abstract]
Number of active share based compensation plans | plan	2
Unrecognized compensation expense related to unvested portion of stock options | $	$ 13.5
Weighted average period of recognition of unrecognized compensation expense	2 years 6 months

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Share-Based Compensation - Schedule of Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1,987	$ 3,270	$ 4,419	$ 5,632
Cost of revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	89	71	156	139
Marketing and selling
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	209	199	439	396
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	258	272	503	549
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1,431	$ 2,728	$ 3,321	$ 4,548

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Other Income (Expense), net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other expense, net
Interest income	$ 127	$ (5)	$ 147	$ 5
Interest expense	(1,468)	(1,641)	(2,995)	(3,601)
Foreign currency gain (loss)	134	(838)	(463)	(234)
Other expense	7	86	(1)	(388)
Total other expense, net	$ (1,200)	$ (2,398)	$ (3,312)	$ (4,218)

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Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Provision for income tax benefit	$ 2,114,000	$ (3,609,000)	$ (7,616,000)	$ (5,009,000)
Effective income tax rate	33.50%	58.30%	22.80%	46.70%
tax benefit related to unrecognized tax benefits due to the lapse of applicable statute of limitations			$ 200,000
Minimum
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Possible of uncertain tax benefit within the next twelve months	$ 0		0
Maximum
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Possible of uncertain tax benefit within the next twelve months	$ 3,800,000		3,800,000
Medix Medical Devices, SRL [Member]
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Tax related to divestiture			$ 8,200,000

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Debt and Credit Arrangements - Narrative (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
Revolving credit facility	$ 80,000,000	$ 80,000,000	$ 105,000,000
Revolving credit facility | Line of Credit
Line of Credit Facility [Line Items]
Revolving credit facility	80,000,000.0
Credit Agreement | Citibank, National Association
Line of Credit Facility [Line Items]
Aggregate secured revolving credit facility	$ 225,000,000.0
All-in rate	4.74%
Credit Agreement | Citibank, National Association | Federal Funds Rate
Line of Credit Facility [Line Items]
Interest rate	0.50%
Credit Agreement | Citibank, National Association | LIBOR rate
Line of Credit Facility [Line Items]
Interest rate	1.00%
Credit Agreement | Citibank, National Association | Maximum
Line of Credit Facility [Line Items]
Leverage Ratio	2.75
Credit Agreement | Citibank, National Association | Maximum | LIBOR rate
Line of Credit Facility [Line Items]
Interest rate	275.00%
Credit Agreement | Citibank, National Association | Minimum
Line of Credit Facility [Line Items]
Interest Coverage Ratio	1.75
Credit Agreement | Citibank, National Association | Minimum | LIBOR rate
Line of Credit Facility [Line Items]
Interest rate	175.00%

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Debt and Credit Arrangements - Schedule of Long-term debt (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
2019	$ 0		$ 0
2020	0		0
2021	80,000		105,000
Thereafter	0		0
Revolving credit facility	80,000	$ 80,000	105,000
Debt issuance costs		(430)	(526)
Less: current portion of long-term debt		35,000	35,000
Total long-term debt	44,570	$ 44,570	$ 69,474
Revolving credit facility | Line of Credit
Debt Instrument [Line Items]
Revolving credit facility	$ 80,000

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Financial Instruments and Derivatives (Details)	Jun. 30, 2019 USD ($)
Derivative [Line Items]
Losses associated with cash flow hedge expected to be reclassified within the next 12 months	$ 136,000.0
Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Swap
Derivative [Line Items]
Current Notional Amount	$ 25,000,000
Fixed Interest Rate	2.611%
Estimated Fair Value	$ 384,000

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Leases - Narrative (Details)	Jun. 30, 2019
Operating Leased Assets [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	4 years 1 month 6 days
Lessee, Operating Lease, Renewal Term	10 years
Minimum
Operating Leased Assets [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	1 year
Maximum
Operating Leased Assets [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	8 years

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Operating Lease, Cost	$ 1,659	$ 3,424
Finance Lease, Right-of-Use Asset, Amortization	100	265
Finance Lease, Interest Expense	14	36
Short-term Lease, Cost	13	51
Variable Lease, Cost	356	1,240
Sublease Income	(56)	(89)
Lease, Cost	$ 2,086	$ 4,927

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Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Leases [Abstract]
Operating Lease, Payments	$ 3,265	$ 6,757
Finance Lease, Interest Payment on Liability	29	66
Finance Lease, Principal Payments	100	265	$ 0
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	601	1,721
Right-of-Use Asset Obtained in Exchange for Finance Lease Liability	$ 17	$ 105

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Leases - Supplemental Balance Sheet (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Operating lease right-of-use assets	$ 17,217,000	$ 0
Current portion of operating lease liabilities	5,960,000	0
Operating lease liabilities	14,326,000	$ 0
Operating Lease, Liability	20,286,000
Finance Lease, Right-Of-Use Asset, Gross	2,955,000
Finance Lease, Right-Of-Use Asset, Accumulated Depreciation	1,637,000
Finance Lease, Right-of-Use Asset	1,318,000
Finance Lease, Liability, Current	483,000
Finance Lease, Liability, Noncurrent	888,000
Finance Lease, Liability	$ 1,371,000
Operating Lease, Weighted Average Remaining Lease Term	4 years 1 month 6 days
Finance Lease, Weighted Average Remaining Lease Term	3 years 2 months 12 days
Operating Lease, Weighted Average Discount Rate, Percent	5.30%
Finance Lease, Weighted Average Discount Rate, Percent	5.10%

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Leases - Lease Maturities (Details)	Jun. 30, 2019 USD ($)
Operating Leases
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year	$ 6,849,000
Lessee, Operating Lease, Liability, Payments, Due Year Two	5,727,000
Lessee, Operating Lease, Liability, Payments, Due Year Three	4,337,000
Lessee, Operating Lease, Liability, Payments, Due Year Four	2,714,000
Lessee, Operating Lease, Liability, Payments, Due Year Five	2,049,000
Lessee, Operating Lease, Liability, Payments, Due after Year Five	1,283,000
Lessee, Operating Lease, Liability, Payments, Due	22,959,000
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	(2,673,000)
Operating Lease, Liability	20,286,000
Finance Leases
Finance Lease, Liability, Payments, Remainder of Fiscal Year	529,000
Finance Lease, Liability, Payments, Due Year Two	429,000
Finance Lease, Liability, Payments, Due Year Three	340,000
Finance Lease, Liability, Payments, Due Year Four	144,000
Finance Lease, Liability, Payments, Due Year Five	24,000
Finance Lease, Liability, Payments, Due after Year Five	2,000
Finance Lease, Liability, Payment, Due	1,468,000
Finance Lease, Liability, Undiscounted Excess Amount	(97,000)
Finance Lease, Liability	$ 1,371,000

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Leases - Future Minimum Payments (Details)	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 8,092,000
Operating Leases, Future Minimum Payments, Due in Two Years	6,951,000
Operating Leases, Future Minimum Payments, Due in Three Years	5,290,000
Operating Leases, Future Minimum Payments, Due in Four Years	3,423,000
Operating Leases, Future Minimum Payments, Due in Five Years	2,426,000
Operating Leases, Future Minimum Payments, Due Thereafter	1,365,000
Operating Leases, Future Minimum Payments Due	$ 27,547,000

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Segment, Customer and Geographic Information - Narrative (Details)	6 Months Ended
	Jun. 30, 2019 segment
Segment Reporting [Abstract]
Number of reportable segments (segments)	1

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Segment, Customer and Geographic Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Consolidated Revenue:
Revenue	$ 125,539	$ 130,653	$ 240,296	$ 259,261
Revenue by End Market:
Total Revenue	125,539	130,653	240,296	259,261
Property and equipment, net:
Property and equipment, net	26,547		26,547		$ 22,913
Neurology Products
Revenue by End Market:
Total Revenue	71,598	70,375	133,988	136,244
Neurology Products | Devices and Systems
Revenue by End Market:
Total Revenue	54,617	50,275	100,366	96,234
Neurology Products | Supplies
Revenue by End Market:
Total Revenue	16,910	16,535	32,751	33,707
Neurology Products | Services
Revenue by End Market:
Total Revenue	71	3,565	871	6,303
Newborn Care Products
Revenue by End Market:
Total Revenue	26,563	30,573	56,099	64,477
Newborn Care Products | Devices and Systems
Revenue by End Market:
Total Revenue	12,615	15,471	27,260	34,450
Newborn Care Products | Supplies
Revenue by End Market:
Total Revenue	8,933	9,625	18,979	19,147
Newborn Care Products | Services
Revenue by End Market:
Total Revenue	5,015	5,477	9,860	10,880
Audiology Products
Revenue by End Market:
Total Revenue	27,378	29,705	50,209	58,540
Audiology Products | Devices and Systems
Revenue by End Market:
Total Revenue	26,178	29,119	47,703	52,968
Audiology Products | Supplies
Revenue by End Market:
Total Revenue	1,200	586	2,506	5,572
United States
Consolidated Revenue:
Revenue	73,531	75,467	139,598	144,154
Property and equipment, net:
Property and equipment, net	13,128		13,128		10,019
International
Consolidated Revenue:
Revenue	52,008	$ 55,186	100,698	$ 115,107
Property and equipment, net:
Property and equipment, net	1,217		1,217		937
Canada
Property and equipment, net:
Property and equipment, net	4,384		4,384		4,504
Denmark
Property and equipment, net:
Property and equipment, net	1,950		1,950		1,371
Long-Lived Assets	5,868		5,868		5,083
Argentina
Property and equipment, net:
Property and equipment, net	$ 0		$ 0		$ 999

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Fair Value Measurements - Related Party Loan Receivable (Details) - Medix Medical Devices, SRL [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Apr. 01, 2019
Long Lived Assets Held-for-sale [Line Items]
Loan receivable		$ 2,200
Level III
Long Lived Assets Held-for-sale [Line Items]
Loan receivable	$ 0	$ 2,200
Loans and Leases Receivable, Related Parties [Roll Forward]
December 31, 2018	0
Additions	2,200
Receipts	0
Adjustments	0
June 30, 2019	$ 2,200

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Fair Value Measurements - Schedule of Derivative Financial Instruments at Fair Value (Details) - Level II - Recurring $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Derivative Liability [Roll Forward]
December 31, 2018	$ 77
Additions	0
Payments	0
Adjustments	307
June 30, 2019	$ 384

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Sale of Certain Subsidiary Assets (Details) - USD ($)	Apr. 02, 2019	Jun. 30, 2019	Apr. 01, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Accumulated Other Comprehensive Income (Loss), Net of Tax		$ (14,958,000)		$ (38,032,000)
Medix Medical Devices, SRL [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Amounts of Transaction	$ 2,500
Loan receivable			$ 2,200,000
Gain (Loss) on Sale of Assets and Asset Impairment Charges	24,600,000
Accumulated Other Comprehensive Income (Loss), Net of Tax			$ 24,800,000
Assets, Fair Value Adjustment	$ 4,600,000

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Label	Element	Value
Accounting Standards Update 2016-16 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (3,919,000)
Accounting Standards Update 2016-16 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(3,919,000)
Accounting Standards Update 2018-02 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (1,332,000)