Market Overview

Both Leading Proxy Advisory Firms Support Voce Capital's Case for Change at Natus Medical and Recommend Stockholders Vote on the BLUE Proxy Card


Glass Lewis Recommends Stockholders Vote FOR Election of Lisa
Wipperman Heine and Joshua H. Levine

Glass Lewis Highlights Natus' Sustained Underperformance and Grades
the Company's Compensation Practices an "F"

Glass Lewis Troubled by Board's Inaction Regarding Serious Pending
Allegations in Federal Court that CEO Hawkins Mislead Natus Stockholders

ISS Previously Recommended Stockholders Vote FOR Election of Voce

Voce Believes ISS and Glass Lewis' Findings Demonstrate a Holistic
Failure of Corporate Governance at Natus and Urges Stockholders to Hold
Chairman Gunst Accountable

Voce Urges Stockholders to Follow ISS' and Glass Lewis'
Recommendations to Vote on the BLUE Proxy Card

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 that
leading proxy advisory firm Glass, Lewis & Co. ("Glass Lewis") has
recommended that Natus stockholders vote FOR the election of both Voce
nominees, Lisa Wipperman Heine and Joshua H. Levine, to Natus' Board of
Directors (the "Board") on the BLUE
proxy card at the upcoming Annual Meeting of Stockholders on June 22,
2018. Previously, fellow leading proxy advisory firm Institutional
Shareholder Services ("ISS") also recommended that Natus stockholders
vote on the BLUE card FOR the
election of Ms. Wipperman Heine and Mr. Levine.

Voce also urges Natus stockholders to vote on the BLUE
proxy card FOR the removal of Chairman Robert Gunst and FOR the election
of Mark Gilreath to replace Gunst as a Director.

In its detailed report and findings, Glass Lewis affirmed Voce's
criticisms of the performance, strategy and corporate governance of
Natus – as well as the qualifications of Voce's nominees. Glass Lewis
concluded that stockholders should therefore vote on the BLUE
proxy card:1

  • "[W]e believe Voce has made a compelling argument that change to the
    composition of the Natus board is warranted at this time. We find that
    the Company significantly underperformed on a TSR basis relative to
    peers and market benchmarks in recent years and that the Company's
    operating performance has been largely unfavorable. While the
    incumbent board touts the Company's revenue growth and acquisitions,
    this strategy has not led to shareholder value creation in recent
    years and management has consistently failed to meet the financial
    targets it has communicated to shareholders."
  • "We find that the Company suffers from numerous corporate governance
    shortcomings, including an entrenched board with a lack of fresh
    perspective, ineffective board oversight of management and poor
    executive compensation practices. We believe shareholders would
    benefit from fresh perspective and additional independent oversight
    and find that the Dissident Nominees are well qualified to serve on
    the board, with significant and highly relevant experience in the
    medical device industry as well as prior public company board

With regard to Natus' corporate governance issues and Board composition,
Glass Lewis stated:

  • "[T]he Dissident has expressed valid concern with several aspects of
    the Company's governance structure and practices. The
    Company maintains a classified board, which limits the ability of
    shareholders to hold directors accountable
    , in our view. We
    agree that the incumbent board is stale and in
    need of refreshment
  • "Following the Dissident's involvement, the Company announced that the
    longest-serving director, William Moore, would not stand for
    reelection at the 2018 annual meeting and that the board had nominated
    a new director, Robert Weiss, for election at the 2018 annual meeting
    to fill the seat vacated by Mr. Weiss….[W]e are
    concerned that the incumbent board determined to act only after the
    Dissident's involvement and that it appears to be a reactionary
    measure to the Dissident's campaign
  • "Moreover, in the context of this proxy contest, we
    find it concerning that Mr. Weiss was recommended to the board by CEO
    Hawkins and that CEO Hawkins and Mr. Weiss reside in the same gated
    community in Pleasanton, CA. Given these connections, we question
    whether Mr. Weiss would provide a sufficient level of independent

Glass Lewis was also emphatic – as Voce has been throughout this
campaign – that the allegations pending against CEO Hawkins in a federal
securities fraud lawsuit for misleading Natus investors are serious and
require much more oversight by the Board than appears to have occurred:

  • "We are particularly troubled that the incumbent
    board does not appear to have taken any steps to investigate or address

    business in Venezuela. These allegations are the
    subject of ongoing shareholder litigation against the Company…CEO
    Hawkins is alleged to have misled shareholders by promoting the
    benefits of a $232.5 million supply contract with the Venezuelan
    Ministry of Health while failing to disclose that the counterparty had
    defaulted on the agreement by failing to make multiple required
    prepayments totaling $69 million by the end of 2015
  • "[W]e believe the details of Mr. Hawkins'
    conduct contained in a Federal District Court opinion filed February
    26, 2018 are highly concerning and warrant scrutiny from the board.
    Given the board's apparent failure to pursue this matter, we believe
    additional independent oversight on the board is warranted

Glass Lewis also criticized Natus' compensation practices, and stated:

  • "[W]e believe the Dissident has raised valid
    concerns with the structure of the Company's compensation plans
    We are particularly concerned that the Company relies on time-based
    vesting of equity awards for executive officers. We view
    performance-based vesting as more appropriate for linking executive
    compensation with performance…[W]e find that the Company has been
    deficient in linking executive pay to corporate performance, as
    indicated by the "F" grade received by the Company in Glass Lewis'
    pay-for-performance model

With regard to Natus' performance, Glass Lewis stated:

  • "Having considered the arguments presented by both sides as well as
    our assessment discussed above, we believe there is reasonable basis
    to conclude Natus has materially underperformed on a TSR basis,
    particularly in recent periods."
  • "We find that…Natus has suffered from poor financial performance in
    recent years and that the Company has failed to achieve numerous
    financial targets set by management. The Company has struggled to
    deliver meaningful organic growth and recent acquisitions do not
    appear to have generated anticipated scale benefits."

Finally, Glass Lewis noted the qualifications of Voce's nominees,

  • "Turning to the nominees, we find that the Dissident has put forward
    well-qualified nominees with relevant industry experience and
    appropriate credentials. Notably, Dissident Nominees Gilreath, Heine
    and Levine all have executive management experience in the medical
    device industry and public company board experience."

J. Daniel Plants, Founder and Chief Investment Officer of Voce Capital,
said, "We are gratified that both leading proxy advisory firms – ISS and
Glass Lewis – have, at the conclusion of their respective thorough
inquiries, supported our call for change at Natus by recommending that
stockholders vote for our nominees on the BLUE
proxy card. In its report, Glass Lewis articulates the depth of the
issues at Natus, including chronic underperformance, strategic missteps,
misaligned executive compensation and wholly inadequate Board oversight.

"Most notably, in our view the findings of ISS and Glass Lewis in
aggregate point to a holistic failure of corporate governance at Natus.
It is apparent to us that the issues here cannot be addressed with quick
fixes or cosmetic modification – but instead require real, meaningful
changes to the composition and structure of the Board especially its

"This is why we also strongly urge stockholders to support our Removal
Proposal to recall Chairman Gunst as a Director. Chairman Gunst lacks
any healthcare experience, has been retired from active employment for
almost two decades and hasn't sat on another public company board in
more than ten years. In his 14 years as Chairman, a culture of
entrenchment, insularity and misalignment with stockholders has taken
root at Natus. It is high time that Chairman Gunst is held accountable
for this."

Mr. Plants concluded: "We ask our fellow stockholders to join us in
seeking to restore credibility to Natus' Board by voting on the BLUE
proxy card today FOR Voce's highly-qualified and independent Nominees,
and FOR Voce's Removal Proposal to replace Chairman Gunst. We look
forward to seeing our fellow stockholders at the upcoming
Annual Meeting on June 22, 2018


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.

1 Permission to quote
Glass Lewis and ISS was neither sought nor obtained. Emphases added.

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