Exhibit

“Our 2018 third quarter results are highlighted by 6.5% year over year revenue growth and 12.1% growth in non-GAAP operating income driven both by the acquisition of our Neuro Surgery business last year and modest organic growth in Neuro,” said Jonathan Kennedy, President and Chief Executive Officer of Natus. “We also continued to make progress on the regulatory front, successfully completing an FDA audit and our first MDSAP audit in our Seattle facility during the quarter.”

The Company's non-GAAP earnings per share guidance excludes charges for amortization expense associated with intangible assets from prior acquisitions, certain other expenses, and related tax effects, which the Company expects to be approximately $7.5 million and $52.0 million for the fourth quarter 2018 and full year, respectively, and which the Company expects will reduce GAAP earnings per share by approximately $0.22 and $1.54 for the respective periods.

The Company presents in this release its non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin and non-GAAP operating margin results which exclude amortization expense associated with certain acquisition-related intangibles, restructuring charges, certain discrete items, direct costs of acquisitions, and the related tax effects. A reconciliation between non-GAAP and GAAP financial measures is included in this press release.

Specifically, the Company excludes the following charges, gains, and their related tax effects in the calculation of non-GAAP net income, non-GAAP earnings per share and non-GAAP operating expense: 1) Non-cash amortization expense associated with certain acquisition-related intangibles. The charges reflect an estimate of the cost of acquired intangible assets over their estimated useful lives. 2) Restructuring and other non-recurring charges. The Company has over time completed multiple acquisitions of other companies and businesses. Following an acquisition the Company will, as it determines appropriate, initiate restructuring events to eliminate redundant costs. Restructuring expenses, which are excluded in the non-GAAP items, are exclusively related to permanent reductions in our workforce and redundant facility closures. Other non-recurring costs are associated with the transition of the executive management team. These costs can include stock compensation from accelerated vesting of stock, severance payouts and related payroll expenses. 3) Certain discrete items. These items represent significant infrequent charges or gains that management believes should be viewed outside of normal operating results, and each significant discrete transaction is evaluated to determine whether it should be excluded from non-GAAP reporting. These items are specifically identified when they occur. 4) Direct costs of acquisitions. These are direct acquisition-related costs that occur when the Company makes an acquisition, such as professional fees, due diligence costs, and earn-out adjustments.

The Company applies GAAP methodologies in computing its non-GAAP tax provision by determining the annual expected effective tax rate after taking into account items excluded for non-GAAP financial reporting purposes. The Company’s non-GAAP tax expense and its non-GAAP effective tax rate are generally higher than its GAAP tax expense and GAAP effective tax rate because the income subject to taxes would be higher due to the effect of the expenses excluded from non-GAAP financial reporting. The nature of each quarterly discrete transaction will be evaluated to determine whether it should be excluded from non-GAAP reporting.

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

Natus has scheduled an investment-community conference call to discuss this announcement beginning at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today, October 24, 2018. Individuals interested in listening to the conference call may do so by dialing 1-844-634-1441 for domestic callers, or 1-508-637-5658 for international callers, and entering reservation code 6688356. A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-855-859-2056 for domestic callers, or 1-404-537-3406 for international callers, and entering reservation code 6688356. The conference call also will be available real-time via the Internet at http://investor.natus.com, and a recording of the call will be available on the Company’s Web site for 90 days following the completion of the call.

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, particularly statements regarding the expectations, beliefs, plans, intentions and strategies of Natus. These forward-looking statements include statements regarding the anticipated revenue and GAAP and non-GAAP earnings per share for the fourth quarter and full year 2018 and the impact of amortization expense associated with acquisition-related intangible assets, certain other expenses, and related tax effects. These statements relate to current estimates and assumptions of our management as of the date of this press release and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are only predictions and the actual events or results may differ materially. Natus cannot provide any assurance that its future results or the results implied by the forward-looking statements will meet expectations. Our future results could differ materially due to a number of factors, including the effects of competition, our ability to successfully integrate and achieve our profitability goals from recent acquisitions, the demand for our products and services, the impact of adverse global economic conditions and changing governmental regulations, including foreign exchange rate changes, on our target markets, our ability to expand our sales in international markets, our ability to maintain current sales levels in a mature domestic market, our ability to control costs, risks associated with bringing new



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

	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Revenue	$	130,638		$	122,643		$	389,900		$	369,531
Cost of revenue	51,583			47,112			159,849			158,615
Intangibles amortization	1,930			1,290			6,235			3,789
Gross profit	77,125			74,241			223,816			207,127
Gross profit margin	59.0		%	60.5		%	57.4		%	56.1		%
Operating expenses:
Marketing and selling	33,200			32,537			102,474			95,106
Research and development	15,127			11,632			46,186			38,098
General and administrative	15,799			17,329			56,967			57,501
Intangibles amortization	4,477			3,882			13,434			11,841
Restructuring	11,432			321			14,182			914
Total operating expenses	80,035			65,701			233,243			203,460
Income (loss) from operations	(2,910		)	8,540			(9,427		)	3,667
Interest expense	(1,644		)	(1,025		)	(5,240		)	(3,287		)
Other income	918			1,175			296			2,019
Income (loss) before tax	(3,636		)	8,690			(14,371		)	2,399
Provision for income tax expense (benefit)	1,940			17,203			(3,069		)	15,597
Net loss	$	(5,576	)	$	(8,513	)	$	(11,302	)	$	(13,198	)
Loss per share:
Basic	$	(0.17	)	$	(0.26	)	$	(0.34	)	$	(0.41	)
Diluted	$	(0.17	)	$	(0.26	)	$	(0.34	)	$	(0.41	)
Weighted-average shares:
Basic	33,321			32,593			32,982			32,536
Diluted	33,321			32,593			32,982			32,536



NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)

	September 30,		June 30,		December 31,
	2018		2018		2017
ASSETS

Current assets:
Cash and investments	$	54,440	$	54,908	$	88,950
Accounts receivable	121,113		122,971		126,809
Inventories	80,586		76,630		71,529
Other current assets	30,843		32,224		18,340
Total current assets	286,982		286,733		305,628

Property and equipment	21,564		21,645		22,071
Goodwill and intangible assets	318,618		326,109		345,580
Deferred income tax	10,135		10,296		10,709
Other assets	16,746		18,855		25,931
Total assets	$	654,045	$	663,638	$	709,919

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	20,595	$	24,053	$	25,242
Accrued liabilities	52,015		54,874		51,738
Deferred revenue	16,816		16,892		15,157
Total current liabilities	89,426		95,819		92,137

Long-term liabilities:
Long-term debt	114,426		119,379		154,283
Deferred income tax	18,896		18,936		19,407
Other long-term liabilities	21,338		21,970		21,995
Total liabilities	244,086		256,104		287,822
Total stockholders’ equity	409,959		407,534		422,097
Total liabilities and stockholders’ equity	$	654,045	$	663,638	$	709,919



NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

	Three Months Ended
	September 30, 2018			September 30, 2017
Operating activities:
Net loss	$	(5,576	)	$	(8,513	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for losses on accounts receivable	1,782			1,632
Depreciation and amortization	8,958			7,040
Loss on disposal of property and equipment	250			20
Warranty reserve	(902		)	(401		)
Share-based compensation	9,814			2,248
Changes in operating assets and liabilities:
Accounts receivable	891			(4,762		)
Inventories	(2,700		)	699
Prepaid expenses and other assets	743			719
Accounts payable	(3,435		)	(8,734		)
Accrued liabilities	(2,446		)	1,967
Deferred revenue	58			998
Deferred income tax	191			11,021
Net cash provided by operating activities	7,628			3,934
Investing activities:
Acquisition of businesses, net of cash acquired	—			4,844
Purchases of property and equipment	(1,740		)	(1,285		)
Purchase of intangible assets	(339		)	—
Net cash provided by (used in) investing activities	(2,079		)	3,559
Financing activities:
Proceeds from stock option exercises and Employee Stock Purchase Program purchases	5,423			174
Taxes paid related to net share settlement of equity awards	(4,847		)	(549		)
Deferred debt issuance costs	—			(316		)
Contingent consideration earn-out	—			(446		)
Proceeds from borrowings	—			50,000
Payments on borrowings	(5,000		)	(5,000		)
Net cash provided by (used in) financing activities	(4,424		)	43,863
Exchange rate changes effect on cash and cash equivalents	(1,593		)	746
Net Increase (decrease) in cash and cash equivalents	(468		)	52,102
Cash and cash equivalents, beginning of period	54,908			80,303
Cash and cash equivalents, end of period	$	54,440		$	132,405



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

	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
GAAP based results:
Income before provision for income tax	$	(3,636	)	$	8,690		$	(14,371	)	$	2,399

Non-GAAP adjustments:
Intangibles amortization - (COGS)	1,930			1,290			6,235			3,789
Recall accrual and remediation efforts (COGS)	(1,198		)	(714		)	1,375			3,945
Restructuring and other non-recurring costs (COGS)	846			—			873			1,684
Direct costs of acquisitions (COGS)	402			76			3,882			4,446
Intangibles amortization - (OPEX)	4,483			3,882			13,439			11,841
Direct costs of acquisitions (M&S)	14			(302		)	423			(338		)
Recall accrual and remediation efforts (R&D)	1,288			1,469			4,875			6,571
Direct costs of acquisitions (R&D)	50			24			235			24
Restructuring and other non-recurring costs (OPEX)	12,904			321			18,108			5,401
Direct costs of acquisitions (G&A)	502			1,457			3,682			2,370
Restructuring and other non-recurring costs (OI)	—			—			366			—
Direct costs of acquisitions (OI)	—			—			—			48
Extraordinary annual meeting expenses	15			—			2,230			—
Extraordinary patent litigation	—			306			996			1,642
Non-GAAP income before provision for income tax	17,600			16,499			42,348			43,822

Income tax expense, as adjusted	$	4,227		$	3,380		$	9,357		$	9,672

Non-GAAP net income	$	13,373		$	13,119		$	32,991		$	34,150
Non-GAAP earnings per share:
Basic	$	0.40		$	0.40		$	1.00		$	1.05
Diluted	$	0.40		$	0.40		$	0.99		$	1.03

Weighted-average shares used to compute
Basic non-GAAP earnings per share	33,321			32,593			32,982			32,536
Diluted non-GAAP earnings per share	33,551			33,100			33,388			33,086



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

	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
GAAP Gross Profit	77,125		74,241		223,816		207,127
Amortization of intangibles	1,930		1,290		6,235		3,789
Direct cost of acquisitions	402		76		3,882		4,446
Recall accrual and remediation efforts	(1,198	)	(714	)	1,375		3,945
Restructuring and other non-recurring costs	846		—		873		1,684
Non-GAAP Gross Profit	79,105		74,893		236,181		220,991
Non-GAAP Gross Margin	60.6	%	61.1	%	60.6	%	59.8	%

GAAP Operating Profit	(2,910	)	8,540		(9,427	)	3,667
Amortization of intangibles	6,413		5,172		19,674		15,630
Recall accrual and remediation efforts	90		755		6,250		10,516
Extraordinary patent litigation	—		306		996		1,642
Restructuring and other non-recurring costs	13,750		321		18,981		7,085
Direct cost of acquisitions	968		1,255		8,222		6,502
Extraordinary annual meeting expenses	15		—		2,230		—
Non-GAAP Operating Profit	18,326		16,349		46,926		45,042
Non-GAAP Operating Margin	14.0	%	13.3	%	12.0	%	12.2	%

GAAP Provision for income tax expense (benefit)	1,940		17,203		(3,069	)	15,597
Effect of accumulated change of pretax income	(15,493	)	(1,942	)	(4,701	)	5,099
Effect of change in annual expected tax rate	15,704		(1,126	)	14,120		(473	)
Repatriation tax adjustment	—		—		101		—
Stock-based compensation adjustment	791		—		1,621		—
Valuation Allowance for GAAP purposes	1,285		(10,755	)	1,285		(10,755	)
Effect on acquisition cost	—		—		—		204
Non-GAAP Income tax expense	4,227		3,380		9,357		9,672

	Quarter Ended		Year Ended
	December 31, 2018		December 31, 2018
GAAP EPS Guidance	$0.26 - $0.29		($0.07) - ($0.04)
Amortization of Intangibles	0.20		0.79
Restructuring and other non-recurring costs	0.03		0.67
Litigation	—		0.03
Recall Accrual and Remediation Efforts	0.03		0.22
Direct cost of acquisitions	0.02		0.26
Tax effect	(0.06)		(0.43)
Non-GAAP EPS Guidance	$0.48 - $0.51		$1.47 - $1.50



NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GROSS MARGIN BY BUSINESS UNIT (unaudited)
(in thousands)

	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Neuro:
Revenue	$	69,790		$	59,368		$	206,162		$	174,955
Cost of revenue	25,275			21,222			79,628			65,011
Intangibles amortization	1,042			470			3,507			1,369
Gross profit	43,473			37,676			123,027			108,575
Gross profit margin	62.3		%	63.5		%	59.7		%	62.1		%

Newborn care:
Revenue	$	31,210		$	33,666		$	91,188		$	108,408
Cost of revenue	13,044			12,848			38,223			52,248
Intangibles amortization	119			126			358			338
Gross profit	18,047			20,692			52,607			55,822
Gross profit margin	57.8		%	61.5		%	57.7		%	51.5		%

Otometrics:
Revenue	$	29,638		$	29,609		$	92,550		$	86,168
Cost of revenue	13,264			13,042			41,998			41,356
Intangibles amortization	769			694			2,370			2,082
Gross profit	15,605			15,873			48,182			42,730
Gross profit margin	52.7		%	53.6		%	52.1		%	49.6		%

Consolidated:
Revenue	$	130,638		$	122,643		$	389,900		$	369,531
Cost of revenue	51,583			47,112			159,849			158,615
Intangibles amortization	1,930			1,290			6,235			3,789
Gross profit	77,125			74,241			223,816			207,127
Gross profit margin	59.0		%	60.5		%	57.4		%	56.1		%



NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP GROSS MARGIN BY BUSINESS UNIT (unaudited)
(in thousands)

	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Neuro:
GAAP Gross Profit	43,473		37,676		123,027		108,575
Amortization of intangibles	1,042		469		3,507		1,364
Acquisition charges	402		—		3,832		—
Recall accrual and remediation efforts	—		—		—		1,781
Non-GAAP Gross Profit	44,917		38,145		130,366		111,720
Non-GAAP Gross Margin	64.4	%	64.3	%	63.2	%	63.9	%

Newborn care:
GAAP Gross Profit	18,047		20,692		52,607		55,822
Amortization of intangibles	119		128		358		345
Recall accrual and remediation efforts	(1,198	)	(714	)	1,375		2,164
Restructuring and other non-recurring costs	846				848		1,684
Non-GAAP Gross Profit	17,814		20,106		55,188		60,015
Non-GAAP Gross Margin	57.1	%	59.7	%	60.5	%	55.4	%

Otometrics:
GAAP Gross Profit	15,605		15,873		48,182		42,730
Amortization of intangibles	769		693		2,370		2,080
Acquisition charges	—		76		50		4,446
Restructuring and other non-recurring costs	—		—		25		—
Non-GAAP Gross Profit	16,374		16,642		50,627		49,256
Non-GAAP Gross Margin	55.2	%	56.2	%	54.7	%	57.2	%

Consolidated:
GAAP Gross Profit	77,125		74,241		223,816		207,127
Amortization of intangibles	1,930		1,290		6,235		3,789
Acquisition charges	402		76		3,882		4,446
Recall accrual and remediation efforts	(1,198	)	(714	)	1,375		3,945
Restructuring and other non-recurring costs	846		—		873		1,684
Non-GAAP Gross Profit	79,105		74,893		236,181		220,991
Non-GAAP Gross Margin	60.6	%	61.1	%	60.6	%	59.8	%



NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
GEOGRAPHIC REVENUE (unaudited)
(in thousands)

	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Consolidated Revenue:
United States	77,980		68,697		222,135		200,506
International	52,658		53,946		167,765		169,025
Totals	130,638		122,643		389,900		369,531

United States	60	%	56	%	57	%	54	%
International	40	%	44	%	43	%	46	%
Totals	100	%	100	%	100	%	100	%


•	Reports third quarter GAAP loss per share of $0.17 and non-GAAP earnings per share of $0.40