BioTelemetry, Inc. (NASDAQ:BEAT), the leading remote medical
technology company focused on the delivery of health information to
improve quality of life and reduce cost of care, today reported
results for the quarter ended June 30, 2020.
Company Highlights
- Recognized quarterly total revenue of $99.1 million
- Total revenue declined 11.4% year-over-year due to the impact
of COVID-19 across most of our businesses
- Reported quarterly GAAP net income of $2.3 million, or 2.3% of
total revenue
- Realized quarterly adjusted EBITDA of $25.6 million, or 25.8%
of total revenue
- Acquired Remote Patient Monitoring (“RPM”) assets from a
subsidiary of Centene Corporation
- Entered into Sales Agent Agreement with Boston Scientific
- Assumed responsibility to service Roche’s remote INR patient
base
President and CEO Commentary
Joseph H. Capper, President and Chief Executive
Officer of BioTelemetry, Inc., commented:
“Due to the unwavering commitment of the entire
BioTelemetry team, we continued to successfully navigate the
current external challenges. As such, our business recovered
faster than anticipated during the quarter, finishing strong with
total revenue of $99.1 million and adjusted EBITDA of $25.6
million. Cardiac monitoring volumes bounced off their April
lows, quickly returning to more normalized levels by quarter
end. Given the encouraging trends coming out of the quarter,
we believe we will soon be back to delivering year-over-year
revenue and earnings growth.
“As I shared previously, in early April we
streamlined our cost structure to manage through the
downturn. As the business improved, we were able to call back
all furloughed employees and are now operating at pre-pandemic
headcount levels. We have pivoted back into an offensive
posture as evidenced by the advancement of several business
initiatives. The acquisition of Centene’s RPM assets is a key
step toward increasing our commercial activity in the rapidly
growing population health management market. The Boston
Scientific and Roche agreements are designed to extend the
capabilities of our market-leading cardiac monitoring
franchise.
“We are more confident than ever that the post
COVID-19 healthcare environment will demand a host of telehealth
and remote monitoring solutions. As one of the largest,
fastest growing and most profitable connected health companies, we
are perfectly positioned to capitalize on this opportunity.”
Second Quarter Financial Results
Total revenue for the second quarter 2020 was
$99.1 million compared to $111.8 million for the second quarter
2019, a decrease of $12.7 million, or 11.4%.
Gross profit for the second quarter 2020 was
$61.5 million, or 62.1% of total revenue, compared to $70.2
million, or 62.8% of total revenue, for the second quarter
2019.
On a GAAP basis, net income for the second
quarter 2020 was $2.3 million, or $0.06 per diluted share, compared
to net income of $8.3 million, or $0.23 per diluted share, for the
second quarter 2019. The decline in net income was primarily
due to the impact of COVID-19 on total revenue, partially offset by
decreases in operating costs as we scaled back our operations due
to the reduced demand.
On an adjusted basis1, net income for the second
quarter 2020 was $12.9 million, or $0.35 per diluted share.
This compares to adjusted net income of $19.4 million, or $0.53 per
diluted share, for the second quarter 2019. The decline in
non-GAAP adjusted net income was consistent with the change in GAAP
net income. The details regarding adjusted net income are
included in the reconciliation tables included in this release.
1 The Company believes that providing non-GAAP
financial measures offers a meaningful representation of our
performance, as we exclude expenses that are not necessary to
support our ongoing business. We also make adjustments to
facilitate year over year comparisons. Please refer to our
“Reconciliation of GAAP to Non-GAAP Financial Measures” in this
release for additional information.
Conference Call
BioTelemetry, Inc. will host an earnings
conference call on Thursday, July 30, 2020, at 5:00 PM Eastern
Time. The call will be webcast on the investor information
page of our website, www.gobio.com/investors/events. The call
will be archived on our website for at least two weeks.
About BioTelemetry
BioTelemetry, Inc. is the leading remote medical
technology company focused on the delivery of health information to
improve quality of life and reduce cost of care. We provide
remote cardiac monitoring, centralized core laboratory services for
clinical trials, remote blood glucose monitoring and original
equipment manufacturing that serves both healthcare and clinical
research customers. More information can be found at
www.gobio.com.
Cautionary Statement Regarding Forward-Looking
Statements
This document includes certain forward-looking
statements within the meaning of the “Safe Harbor” provisions of
the Private Securities Litigation Reform Act of 1995 regarding,
among other things, our growth prospects, the prospects for our
products and our confidence in our future. These statements
may be identified by words such as “expect,” “anticipate,”
“estimate,” “intend,” “plan,” “believe,” “promises” and other words
and terms of similar meaning. Examples of forward-looking
statements include statements we make regarding the successful
execution of our operating plan, including the success of the Sales
Agent Agreement with Boston Scientific, our ability to increase
demand for our products and services, to grow our market share and
to recover from the impacts of the COVID-19 pandemic, our
expectations regarding revenue trends in our segments, and our
expectations regarding the growth and success related to the
acquisition of Centene’s RPM assets and Roche’s remote INR patient
base. Such forward-looking statements are based on current
expectations and involve inherent risks and uncertainties,
including important factors that could delay, divert or change any
of these expectations, and could cause actual outcomes and results
to differ materially from current expectations. These factors
include, among other things: our ability to identify acquisition
candidates, acquire them on attractive terms and integrate their
operations into our business; our ability to educate physicians and
continue to obtain prescriptions for our products and services;
changes to insurance coverage and reimbursement levels by Medicare
and commercial payors for our products and services; our ability to
attract and retain talented executive management and sales
personnel; the commercialization of new competitive products;
acceptance of our new products and services, such as our mobile
cardiac telemetry patch; the impact of the COVID-19 pandemic; the
impact of the October 2019 information technology incident; our
ability to obtain and maintain required regulatory approvals for
our products, services and manufacturing facilities; changes in
governmental regulations and legislation; adverse regulatory
actions; our ability to obtain and maintain adequate protection of
our intellectual property; interruptions or delays in the
telecommunications systems and/or information technology systems
that we use; our ability to successfully resolve outstanding legal
proceedings; and the other factors that are described in
“Part I; Item 1A. Risk Factors” of our
Annual Report on Form 10-K for the year ended December 31, 2019, as
well as the factors that are described in “Part II; Item
1A. Risk Factors” of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2020.
We undertake no obligation to publicly update
any forward-looking statement, whether as a result of new
information, future events, or otherwise, except as may be required
by law.
Contact: |
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BioTelemetry, Inc. |
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Heather C. Getz |
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Executive Vice President, Chief Financial and Administrative
Officer |
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800-908-7103 |
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investorrelations@gobio.com |
BioTelemetry,
Inc.Consolidated Statements of
Operations(unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
(in thousands, except
per share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
$ |
89,407 |
|
|
$ |
111,803 |
|
|
$ |
202,438 |
|
|
$ |
215,782 |
|
Other revenue |
9,702 |
|
|
— |
|
|
9,702 |
|
|
— |
|
Total
revenue |
99,109 |
|
|
111,803 |
|
|
212,140 |
|
|
215,782 |
|
Cost of
revenue |
37,582 |
|
|
41,563 |
|
|
80,105 |
|
|
80,764 |
|
Gross
profit |
61,527 |
|
|
70,240 |
|
|
132,035 |
|
|
135,018 |
|
Gross profit % |
62.1 |
% |
|
62.8 |
% |
|
62.2 |
% |
|
62.6 |
% |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
General and administrative |
31,099 |
|
|
30,587 |
|
|
62,980 |
|
|
58,194 |
|
Sales and marketing |
10,521 |
|
|
12,795 |
|
|
23,967 |
|
|
25,235 |
|
Credit loss expense |
6,166 |
|
|
5,379 |
|
|
12,186 |
|
|
10,527 |
|
Research and development |
2,699 |
|
|
3,532 |
|
|
6,267 |
|
|
6,865 |
|
Other charges |
5,003 |
|
|
2,234 |
|
|
7,087 |
|
|
5,304 |
|
Total operating
expenses |
55,488 |
|
|
54,527 |
|
|
112,487 |
|
|
106,125 |
|
|
|
|
|
|
|
|
|
Income from operations |
6,039 |
|
|
15,713 |
|
|
19,548 |
|
|
28,893 |
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
Interest expense |
(1,702 |
) |
|
(2,538 |
) |
|
(3,809 |
) |
|
(5,020 |
) |
Loss on equity method investments |
— |
|
|
(154 |
) |
|
— |
|
|
(186 |
) |
Other non-operating income/(expense), net |
(1,400 |
) |
|
86 |
|
|
(469 |
) |
|
(968 |
) |
Total other expense,
net |
(3,102 |
) |
|
(2,606 |
) |
|
(4,278 |
) |
|
(6,174 |
) |
|
|
|
|
|
|
|
|
Income before income
taxes |
2,937 |
|
|
13,107 |
|
|
15,270 |
|
|
22,719 |
|
Provision for income
taxes |
(656 |
) |
|
(4,807 |
) |
|
(5,880 |
) |
|
(2,734 |
) |
Net
income |
$ |
2,281 |
|
|
$ |
8,300 |
|
|
$ |
9,390 |
|
|
$ |
19,985 |
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
0.25 |
|
|
$ |
0.27 |
|
|
$ |
0.59 |
|
Diluted |
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.26 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
34,290 |
|
|
33,825 |
|
|
34,238 |
|
|
33,806 |
|
Diluted |
36,609 |
|
|
36,318 |
|
|
36,669 |
|
|
36,444 |
|
BioTelemetry,
Inc.Condensed Consolidated Balance
Sheets
|
June 30, 2020 |
|
December 31, 2019 |
(in
thousands) |
|
ASSETS |
(unaudited) |
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
84,003 |
|
|
$ |
68,614 |
|
Healthcare accounts receivable, net |
65,525 |
|
|
71,851 |
|
Other accounts receivable, net |
15,088 |
|
|
15,625 |
|
Inventory |
6,929 |
|
|
5,738 |
|
Prepaid expenses and other current assets |
4,371 |
|
|
6,505 |
|
Total current
assets |
175,916 |
|
|
168,333 |
|
|
|
|
|
Property and equipment,
net |
60,275 |
|
|
56,380 |
|
Intangible assets, net |
128,324 |
|
|
129,596 |
|
Goodwill |
301,333 |
|
|
301,321 |
|
Deferred tax assets |
7,156 |
|
|
12,626 |
|
Other assets |
36,653 |
|
|
17,464 |
|
Total
assets |
$ |
709,657 |
|
|
$ |
685,720 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
21,491 |
|
|
24,198 |
|
Accrued liabilities |
48,006 |
|
|
27,318 |
|
Current portion of finance lease obligations |
255 |
|
|
394 |
|
Current portion of long-term debt |
— |
|
|
3,844 |
|
Total current
liabilities |
69,752 |
|
|
55,754 |
|
|
|
|
|
Long-term portion of finance
lease obligations |
224 |
|
|
289 |
|
Long-term debt |
157,655 |
|
|
190,823 |
|
Other long-term
liabilities |
98,198 |
|
|
71,937 |
|
Total
liabilities |
325,829 |
|
|
318,803 |
|
|
|
|
|
Total stockholders’
equity |
383,828 |
|
|
366,917 |
|
|
|
|
|
Total liabilities and
stockholders’ equity |
$ |
709,657 |
|
|
$ |
685,720 |
|
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresQuarterly Non-GAAP Adjusted Net Income and
Non-GAAP Adjusted Net Income Per Share
|
|
Three Months Ended |
(Unaudited) |
|
June 30, 2020 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share* |
GAAP |
|
$ |
6,039 |
|
|
$ |
2,937 |
|
|
$ |
2,281 |
|
|
$ |
0.06 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (a) |
|
5,003 |
|
|
5,003 |
|
|
5,003 |
|
|
0.14 |
|
Acquisition amortization (b) |
|
3,680 |
|
|
3,680 |
|
|
3,680 |
|
|
0.10 |
|
Other expense adjustments (c) |
|
— |
|
|
1,697 |
|
|
1,697 |
|
|
0.05 |
|
Income tax effect of adjustments (d) |
|
— |
|
|
— |
|
|
(3,002 |
) |
|
(0.08 |
) |
Impact of NOL utilization (e) |
|
— |
|
|
— |
|
|
3,199 |
|
|
0.09 |
|
Non-GAAP
Adjusted |
|
$ |
14,722 |
|
|
$ |
13,317 |
|
|
$ |
12,858 |
|
|
$ |
0.35 |
|
* Total does not add due to
rounding |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
(Unaudited) |
|
June 30, 2019 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share |
GAAP |
|
$ |
15,713 |
|
|
$ |
13,107 |
|
|
$ |
8,300 |
|
|
$ |
0.23 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (a) |
|
2,234 |
|
|
2,234 |
|
|
2,234 |
|
|
0.06 |
|
Acquisition amortization (b) |
|
3,812 |
|
|
3,812 |
|
|
3,812 |
|
|
0.10 |
|
Other expense adjustments (c) |
|
— |
|
|
932 |
|
|
932 |
|
|
0.03 |
|
Income tax effect of adjustments (d) |
|
— |
|
|
— |
|
|
(1,442 |
) |
|
(0.04 |
) |
Impact of NOL utilization (e) |
|
— |
|
|
— |
|
|
5,580 |
|
|
0.15 |
|
Non-GAAP
Adjusted |
|
$ |
21,759 |
|
|
$ |
20,085 |
|
|
$ |
19,416 |
|
|
$ |
0.53 |
|
|
a. |
|
In the second quarter 2020, other charges of $5.0 million were
primarily due to a $2.1 million unfavorable change in the fair
value of acquisition-related contingent consideration, $1.8 million
of integration and other non-recurring charges, $0.8 million for
patent and other litigation and $0.3 million of costs related to
our October 2019 information technology incident. In the
second quarter 2019, other charges of $2.2 million were primarily
due to $2.6 million for patent and other litigation and $1.4
million for integration and restructuring activities related to our
acquisitions, partially offset by a $1.8 million reduction in the
fair value of acquisition-related contingent consideration. |
|
|
|
|
|
b. |
|
In the second quarter 2020 and 2019, we recognized $3.7 million and
$3.8 million of expense, respectively, related to the amortization
of acquisition-related intangible assets. We have excluded
this amortization of acquisition-related intangible assets from
non-GAAP adjusted net income due to the non-operational nature of
the expense. This amortization was recorded as a component of
general and administrative expense. |
|
|
|
|
|
c. |
|
In the second quarter 2020, we had an unrealized foreign exchange
loss of $1.3 million and incurred $0.4 million of interest expense
related to a portion of the Geneva Healthcare deferred purchase
consideration. In the second quarter 2019, we had an
unrealized foreign exchange loss of $1.5 million and interest
expense of $0.1 million related to a portion of the Geneva
Healthcare deferred purchase consideration, partially offset by a
$0.7 million gain associated with the termination of a former
LifeWatch foreign pension plan. |
|
|
|
|
|
d. |
|
Represents the tax effect of the non-GAAP adjustments at the
Company’s annual effective tax rate. |
|
|
|
|
|
e. |
|
After giving effect to taxes at the estimated annual effective tax
rate on the adjustments, the utilization of net operating loss
carryforwards and exclusion of discrete items had a positive $3.2
million and a positive $5.6 million impact on the second quarter
2020 and 2019, respectively. |
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresYear-to-Date Non-GAAP Adjusted Net Income
and Non-GAAP Adjusted Net Income Per Share
|
|
Six Months Ended |
(Unaudited) |
|
June 30, 2020 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share |
GAAP |
|
$ |
19,548 |
|
|
$ |
15,270 |
|
|
$ |
9,390 |
|
|
$ |
0.26 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (f) |
|
7,087 |
|
|
7,087 |
|
|
7,087 |
|
|
0.19 |
|
Acquisition amortization (g) |
|
7,408 |
|
|
7,408 |
|
|
7,408 |
|
|
0.20 |
|
Other expense adjustments (h) |
|
— |
|
|
1,165 |
|
|
1,165 |
|
|
0.03 |
|
Income tax effect of adjustments (i) |
|
— |
|
|
— |
|
|
(5,204 |
) |
|
(0.14 |
) |
Impact of NOL utilization (j) |
|
— |
|
|
— |
|
|
9,397 |
|
|
0.26 |
|
Non-GAAP
Adjusted |
|
$ |
34,043 |
|
|
$ |
30,930 |
|
|
$ |
29,243 |
|
|
$ |
0.80 |
|
|
|
Six Months Ended |
(Unaudited) |
|
June 30, 2019 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share |
GAAP |
|
$ |
28,893 |
|
|
$ |
22,719 |
|
|
$ |
19,985 |
|
|
$ |
0.55 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (f) |
|
5,304 |
|
|
5,304 |
|
|
5,304 |
|
|
0.15 |
|
Acquisition amortization (g) |
|
7,074 |
|
|
7,074 |
|
|
7,074 |
|
|
0.19 |
|
Other expense adjustments (h) |
|
— |
|
|
932 |
|
|
932 |
|
|
0.03 |
|
Income tax effect of adjustments (i) |
|
— |
|
|
— |
|
|
(2,751 |
) |
|
(0.08 |
) |
Impact of NOL utilization (j) |
|
— |
|
|
— |
|
|
4,081 |
|
|
0.11 |
|
Non-GAAP
Adjusted |
|
$ |
41,271 |
|
|
$ |
36,029 |
|
|
$ |
34,625 |
|
|
$ |
0.95 |
|
|
f. |
|
For the six months ended June 30, 2020, other charges of $7.1
million were primarily due to $2.7 million for patent and other
litigation, a $1.9 million unfavorable change in the fair value of
acquisition-related contingent consideration, $1.3 million of
acquisition and integration costs and $1.2 million of other
non-recurring charges. For the six months ended June 30,
2019, other charges of $5.3 million were primarily due to $3.7
million for patent and other litigation and $3.0 million for
integration and restructuring activities related to our
acquisitions, partially offset by a $1.8 million reduction in the
fair value of acquisition-related contingent consideration. |
|
|
|
|
|
g. |
|
For the six months ended June 30, 2020 and 2019, we recognized
$7.4 million and $7.1 million of expense, respectively, related to
the amortization of acquisition-related intangible assets. We
have excluded this amortization of acquisition-related intangible
assets from non-GAAP adjusted net income due to the non-operational
nature of the expense. This amortization was recorded as a
component of general and administrative expense. |
|
|
|
|
|
h. |
|
For the six months ended June 30, 2020, we incurred $0.8
million of interest expense related to a portion of the Geneva
Healthcare deferred purchase consideration and had an unrealized
foreign exchange loss of $0.4 million. For the six months
ended June 30, 2019, we had an unrealized foreign exchange
loss of $1.5 million and interest expense of $0.1 million related
to a portion of the Geneva Healthcare deferred purchase
consideration, partially offset by a $0.7 million gain associated
with the termination of a former LifeWatch foreign pension
plan. |
|
|
|
|
|
i. |
|
Represents the tax effect of the non-GAAP adjustments at the
Company’s annual effective tax rate. |
|
|
|
|
|
j. |
|
After giving effect to taxes at the estimated annual effective tax
rate on the adjustments, the utilization of net operating loss
carryforwards and exclusion of discrete items had a positive $9.4
million and a positive $4.1 million positive impact for the six
months ended June 30, 2020 and 2019, respectively. |
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresQuarterly and Year-to-Date Non-GAAP
Adjusted EBITDA and EBITDA Margin
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income - GAAP |
|
$ |
2,281 |
|
|
$ |
8,300 |
|
|
$ |
9,390 |
|
|
$ |
19,985 |
|
Provision for/(benefit from) income taxes |
|
656 |
|
|
4,807 |
|
|
5,880 |
|
|
2,734 |
|
Total other expense, net |
|
3,102 |
|
|
2,606 |
|
|
4,278 |
|
|
6,174 |
|
Other charges |
|
5,003 |
|
|
2,234 |
|
|
7,087 |
|
|
5,304 |
|
Depreciation and amortization expense |
|
10,879 |
|
|
10,192 |
|
|
21,364 |
|
|
20,213 |
|
Stock compensation expense |
|
3,678 |
|
|
3,477 |
|
|
7,060 |
|
|
6,026 |
|
Non-GAAP Adjusted
EBITDA |
|
$ |
25,599 |
|
|
$ |
31,616 |
|
|
$ |
55,059 |
|
|
$ |
60,436 |
|
GAAP Net income as a
percentage of total revenue |
|
2.3 |
% |
|
7.4 |
% |
|
4.4 |
% |
|
9.3 |
% |
Non-GAAP Adjusted EBITDA
margin |
|
25.8 |
% |
|
28.3 |
% |
|
26.0 |
% |
|
28.0 |
% |
Quarterly and Year-to-Date Non-GAAP Free
Cash Flow
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Cash provided by operating activities |
|
$ |
56,842 |
|
|
$ |
18,586 |
|
|
$ |
69,545 |
|
|
$ |
36,130 |
|
Capital expenditures |
|
(10,126 |
) |
|
(10,758 |
) |
|
(17,110 |
) |
|
(16,092 |
) |
Non-GAAP Free Cash
Flow |
|
$ |
46,716 |
|
|
$ |
7,828 |
|
|
$ |
52,435 |
|
|
$ |
20,038 |
|
Use of Non-GAAP Financial Measures
In addition to the results prepared in
accordance with generally accepted accounting principles
in the United States (“GAAP”), this press
release also includes certain financial measures which have been
adjusted and are not in accordance with generally accepted
accounting principles (“Non-GAAP financial
measures”). These Non-GAAP financial measures
include adjusted income from operations, adjusted income before
income taxes, adjusted net income, adjusted net income per diluted
share, adjusted EBITDA and free cash flow. In accordance with
Regulation G of the Securities and Exchange Commission, we have
provided a reconciliation of these Non-GAAP financial measures with
the most directly comparable financial measure calculated in
accordance with GAAP.
These Non-GAAP financial measures are not
intended to replace GAAP financial measures. They are
presented as supplemental measures of our performance in an effort
to provide our stakeholders better visibility into our ongoing
operating results and to allow for comparability to prior periods
as well as to other companies’ results. Management uses these
Non-GAAP financial measures to assess the financial health of our
ongoing operating performance. Management encourages our
stakeholders to consider all of our financial measures and to not
rely on any single financial measure to evaluate our
performance.
Adjusted net income for the second quarter 2020
excludes other charges of $5.0 million, $3.7 million of
amortization expense related to our acquisition-related intangible
assets, $1.3 million of unrealized foreign currency loss, $0.4
million of interest expense related to a portion of the Geneva
Healthcare deferred purchase consideration, the tax effect of these
adjustments, as well as the impact from the utilization of our net
operating loss carryforwards. Adjusted net income for the
second quarter 2019 excludes other charges of $2.2 million, $3.8
million of amortization expense related to acquired intangibles,
$1.5 million of unrealized foreign currency loss, $0.1 million of
interest expense related to a portion of the Geneva Healthcare
contingent consideration, a $0.7 million gain associated with the
termination of a former LifeWatch foreign pension plan, the tax
effect of these adjustments, as well as the impact from the
utilization of net operating loss carryforwards. By excluding
expenses that are considered unnecessary to support the ongoing
business, are nonrecurring in nature or which limit year over year
comparability, we believe these Non-GAAP financial measures offer a
meaningful representation of our ongoing operating
performance. Included in these excluded items are transaction
related expenses, primarily legal and professional fees,
integration related expenses, primarily severance, patent and other
litigation, amortization of acquired intangibles, costs related to
the October 2019 information technology incident net of insurance
proceeds, costs related to restructuring programs aimed at
streamlining operations and reducing future expense, as well as
other one-time items. These excluded charges are not part of
the ongoing operations, and therefore, not reflective of our core
operations. We view patent litigation as an extreme measure
not typically required in our industry to protect a company’s
intellectual property and which has not been common practice for
us. We commenced patent litigation proceedings after we
uncovered specific evidence of four distinct cases of
misappropriation and infringement. We can choose to resolve
the outstanding matters and terminate the expense at any
time. We also included the income tax effect of these
adjustments.
In addition to adjusted income from operations,
adjusted income before income taxes, adjusted net income, adjusted
net income per diluted share and free cash flow, we also present
adjusted EBITDA. This Non-GAAP financial measure excludes
income taxes, total other expense, net, other charges, depreciation
and amortization and stock compensation expense. EBITDA is a
widely accepted financial measure which we believe our stakeholders
use to compare our ongoing financial performance to that of other
companies. Adjusting our EBITDA for other charges and other
one-time items is a meaningful financial measure as we believe it
is an indication of our ongoing operations. In addition, we
also add back stock-based compensation expense because it is
non-cash in nature. Other companies may calculate adjusted
EBITDA in a different manner.
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