Kennedy noted:"We have to look at the overall profitability of that business and when it makes sense to pursue a service model or pursue a hardware-and-supplies model, and that's going to be in the hospital by hospital case." Looking forward In hospitals where there aren't enough births, or reimbursement isn't high enough to produce a profit by offering outsourcing to the hospitals, Natus has the ability to switch back to just selling its hearing screener and make money from disposables.
Management has a plan to increase margins at Peloton by adding additional services that hospitals might want to outsource, explained Jonathan Kennedy, Natus Medical's CFO, EVP, and general manager of newborn care: The lower profitability was caused by continued costs to deal with the FDA warning letter at its facility in Seattle, which Natus Medical hopes to be resolved next year.Management blamed the lack of revenue growth from the legacy business on lower birth rates and lower reimbursement for hearing screening done by Peloton, its hearing-services business.Otometrics is on its way to achieving a 10% adjusted operating profit margin this year with a goal of expanding that to 20% next year. Management noted that it was the first time that Otometrics was profitable in the first quarter, so it's headed in the right direction under its new leadership.The new segment, which sells hearing-diagnostic, hearing-aid fitting, and balance-assessment products, was "slightly" profitable, so it didn't contribute much to the earnings line. The revenue growth came from Otometrics, which became part of Natus Medical in the beginning of January.What happened with Natus Medical this quarter?
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