[May 21, 2018] |
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Voce Capital Files Definitive Natus Proxy
Voce Capital Management LLC ("Voce"), a long-term owner of Natus Medical
Incorporated (Nasdaq: BABY) ("Natus," or the "Company") and the owner of
approximately 2.2% of its shares outstanding, today announced it has
filed its definitive proxy materials seeking the election of three
highly-qualified, independent candidates, Mark Gilreath, Lisa Wipperman
Heine and Joshua H. Levine (the "Nominees"), to the Board of Directors
at the Company's 2018 Annual Meeting.
Voce also provided the following update:
On April 23, 2018 Voce issued a lengthy, detailed letter to Natus
stockholders (the letter can be accessed here)
which outlined our concerns about Natus' performance and corporate
governance and publicly disclosed Voce's submission to the Company of
three Director nominations. In the interim month, not only has Natus
failed to respond in any substantive way to the specific analysis in the
letter, but the actions by the Board, Chairman and CEO since that time
have amplified Voce's concerns and solidified our resolve to seek
meaningful changes at the Company. These include the following:
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Further business uncertainty. Natus' 1Q18
earnings results illustrated again that management does not have a
firm handle on its business, as both of its traditional units
struggled. Of even greater concern, the Company's forward quarterly
guidance now projects negative organic growth. Despite Natus'
flagging business trends, CEO James Hawkins has reiterated his
commitment to the only thing he seems to be able to accomplish
consistently: more acquisitions.
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Concerns about CEO Hawkins. On the same
1Q18 earnings call, CEO Hawkins appeared confuzzled. At one point, he
incorrectly recited the Company's financial guidance and had to be
corrected by CFO Jonathan Kennedy after one of the sell-side analysts
attending the call noticed the gaffe. Later, CEO Hawkins was unable to
remember the name of the Company's Embrace product, referring to it as
"Encore" until he was corrected by a different analyst on the call.
These lapses follow his emotional outburst at a recent investment
conference, which was reported by The Wall Street Journal. CEO
Hawkins has, we've learned, also failed to show up at several recent
meetings with stockholdrs.
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Gratuitous compensation practices continue.
Natus recently amended its 10-K and finally revealed how it
compensated executives after its awful 2017 performance. Despite
trumpeting the fact that it didn't pay cash bonuses to management
(management missed the specific financial performance metrics required
to earn the bonuses), CEO Hawkins nonetheless
received 10% more in total compensation in 2017 than 2015, Natus' last
"good" year. His 2017 base salary was increased by nearly 10%
(again), and the Board changed the rules to accelerate full and
immediate vesting at age 65 (CEO Hawkins turns 63 this year).
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Insider selling accelerating. Just five
days after his bizarre performance on the 1Q18 earnings call, CEO
Hawkins sold more than 100,000 shares of Natus stock. Soon
thereafter, several of CEO Hawkins' direct reports took his cue and
also dumped Natus stock. Long-time Directors Kenneth Ludlum and
William Moore have both sold shares in 2018, with Director Moore
punting stock within the past few days and both of them selling
after the Board's approval of a share repurchase plan in February. If
Natus' stock is a compelling buying opportunity for corporate cash
then why are its Directors selling stock at the same time?
Collectively, these insider sales send a terrible signal to
stockholders and further illustrate the deep misalignment between
Natus' leadership and stockholders. Voce, on the other hand, has
continued to acquire Natus shares in the open market.
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Chairman Robert Gunst continues to wield
inappropriate power. As recounted in our April 23 letter, Voce
attempted for several weeks to engage with Chairman Gunst, who joined
Natus less than one month after CEO Hawkins (2004). Chairman Gunst
initially refused to meet with Voce, explicitly disavowing any
responsibility as Chairman to interact with stockholders; consistently
allowed CEO Hawkins to interfere in the communications; and, when
Chairman Gunst finally relented and agreed to meet with us (on the
same day The Wall Street Journal reported we had nominated
Directors) he refused to let the other two Directors who accompanied
him speak, imposing a "listen-only" gag order.
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As the Company has acknowledged in its Proxy Statement, Natus
terminated settlement negotiations with Voce because Chairman Gunst
refused to even consider any outcome which would have resulted in a
change to his status as Chairman - including one proposal we
made which would have allowed him to save face by remaining on the
Board while relinquishing the Chairmanship. Chairman
Gunst's inability to grasp or perform his duties as Independent
Chairman, and his iron-fisted grip on the Board as evidenced by his
seemingly complete and self-serving control of its decision-making, is
why Voce is proposing to remove Chairman Gunst from the Board.
Voce urges fellow stockholders to vote on the BLUE proxy card FOR its
Removal Proposal.
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Natus' Board remains entrenched and insular.
Despite Voce nominating four different independent Director candidates
within the past two months, the Board's Nominating and Governance
Committee never offered to interview any of them. Instead, Natus
is asking stockholders to reelect a Director who in 14 years on the
Board has never purchased a single share of Natus stock in the open
market; as well as a new, 71-year-old retiree who Natus acknowledges
was hand-picked by CEO Hawkins. Stockholders deserve more
independence and alignment of interest than the tired slate the Board
is offering.
In contrast, Voce has nominated three independent, highly-qualified
Nominees - Mark Gilreath, Lisa Wipperman Heine and Joshua H. Levine -
who bring substantial, relevant medical device experience and fill
crucial skill-gaps in sales, marketing, product development, strategy
and clinical and regulatory affairs, all of which are areas where Natus
has shown significant deficiency. Given their prior Board tenures and
service as named executive officers in public companies, the Nominees
possess significant corporate governance expertise, another glaring and
immediate need at Natus. Two of the Nominees are already Natus
stockholders.
THE 2018 ANNUAL MEETING IS SCHEDULED TO BE HELD ON (News - Alert) JUNE 22, 2018. VOCE
URGES ITS FELLOW STOCKHOLDERS TO VOTE ON THE BLUE
PROXY CARD FOR ITS HIGHLY-QUALIFIED, INDEPENDENT NOMINEES AND FOR ITS
PROPOSAL TO REMOVE CHAIRMAN ROBERT GUNST FROM THE BOARD.
About Voce Capital Management LLC
Voce Capital Management LLC is a fundamental value-oriented,
research-driven investment adviser founded in 2011 by J. Daniel Plants.
The San Francisco-based firm is 100% employee-owned.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180521005568/en/
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