CardioNet, Inc. (NASDAQ:BEAT), a leading wireless medical
technology company with a current focus on the diagnosis and
monitoring of cardiac arrhythmias, today reported results for the
second quarter ended June 30, 2011.
Second Quarter 2011 Highlights
- Generated positive EBITDA for the
second consecutive quarter
- Achieved positive cash flow for the
quarter
- Completed Biotel integration and
generated positive EBITDA contribution
- $45 million in cash and investments as
of June 30, 2011, with no outstanding debt
- Secured 15 new payor contracts during
the quarter
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of
CardioNet, commented: “Our second quarter results demonstrate
continued progress toward our goals of improving operational
efficiency and positioning the Company for long-term success. We
generated our second consecutive quarter of positive EBITDA, added
15 new payor contracts and completed the integration of Biotel.
While we had an increase in the aggregate number of patients
monitored in the quarter across MCOTTM, event and Holter services,
we saw a modest shift in our product mix from MCOTTM to event and
Holter monitoring. This shift was driven by our active efforts to
no longer service patients without appropriate insurance coverage
for MCOTTM as well as overall challenges in the healthcare
environment due to lower patient census and ongoing reimbursement
pressures. Our efforts have resulted in improved profitability
through higher event and Holter revenue and lower cost of
sales.
“The results of operations from our Biotel subsidiary have
exceeded our expectations to date and contributed to our initiative
to diversify. Furthermore, with $45 million in cash and no debt, we
are poised to make additional acquisitions that would complement
our platform and diversify our revenue base. We have substantially
accelerated our business development activity over the last quarter
and are currently evaluating several potential opportunities.
“We are committed to building value for our shareholders through
the implementation of our business strategy and organizational
goals for 2011. We continue to invest for volume growth with
additional sales and marketing resources, as well as by expanding
our commercial reimbursement for MCOTTM. We are excited to begin
commercialization of our next generation MCOTTM platform, C5,
during the second half of the year. C5 will reduce our overall cost
structure and provide additional ease-of-use features for our
patients. Our MCOT™ technology provides meaningful benefits for
physicians, patients and payors, and we remain dedicated to
expanding adoption and driving future growth and
profitability.”
Second Quarter Financial Results
Revenue for the second quarter 2011 was $31.6 million, a
decrease of 0.9% compared to $31.9 million in the second quarter
2010. The decrease in revenue was primarily due to lower average
MCOTTM reimbursement, as well as slightly lower MCOTTM volume which
the Company is addressing through increased investment in sales and
marketing. This decrease was partially offset by the inclusion of
Biotel revenue. For the three months ended June 30, 2011, patient
revenue was comprised of 37% Medicare and 63% commercial, and
patient volume was comprised of 51% Medicare and 49%
commercial.
Gross profit for the second quarter 2011 decreased to $18.6
million, or 58.9% of revenue, compared to $20.1 million, or 62.9%
of revenue, in the second quarter 2010. The decline in gross profit
is related to the lower average MCOTTM reimbursement, as well as
the addition of the lower margin Biotel business.
On a GAAP basis, operating expenses for the second quarter 2011
were $21.7 million, a decrease of 2.7% compared to $22.3 million in
the second quarter 2010. Operating expenses on an adjusted basis
declined by 3.4% compared to the prior year quarter, excluding $1.8
million in the second quarter 2011 and $1.7 million in the second
quarter 2010 related to restructuring and other nonrecurring
charges. The decrease in operating expenses was driven by a
reduction in bad debt expense, as well as the Company’s cost
reduction initiatives that were implemented in early 2010. These
reductions were partially offset by the addition of Biotel’s
operating expenditures in the quarter.
On a GAAP basis, net loss for the second quarter 2011 was $3.0
million, or a loss of $0.12 per diluted share, compared to a net
loss of $2.1 million, or a loss of $0.09 per diluted share, for the
second quarter 2010. Excluding expenses related to restructuring
and other nonrecurring charges, adjusted net loss for the second
quarter 2011 was $1.2 million, or a loss of $0.05 per diluted
share. This compares to an adjusted net loss of $0.4 million, or a
loss of $0.02 per diluted share, for the second quarter 2010, which
also excludes the impact of restructuring and other nonrecurring
charges.
Liquidity
As of June 30, 2011, the Company had total cash and investments
of $45.0 million compared to $45.5 million as of December 31, 2010,
a decrease of $0.5 million primarily due to the prepayment of
certain expenses that typically occurs in the first half of the
year. As anticipated, accounts receivable increased slightly, with
DSO increasing to 85 days. These increases were due to temporary
disruptions in the billing and collections area that resulted from
the Company’s proactive efforts to reorganize and restructure this
function to better support the business. The Company expects that
these proactive initiatives will contribute to a lower DSO by year
end.
Conference Call
CardioNet, Inc. will host an earnings conference call on Monday,
August 8, 2011, at 5:00 PM Eastern Time. The call will be
simultaneously webcast on the investor information page of our
website, www.cardionet.com. The call will be archived on our
website and will also be available for two weeks via phone at
888-286-8010, access code 16650278.
About CardioNet
CardioNet is a leading provider of ambulatory, continuous,
real-time outpatient management solutions for monitoring relevant
and timely clinical information regarding an individual’s health.
CardioNet’s initial efforts are focused on the diagnosis and
monitoring of cardiac arrhythmias, or heart rhythm disorders, with
a solution that it markets as Mobile Cardiac Outpatient TelemetryTM
(MCOTTM). More information can be found at
http://www.cardionet.com.
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 the Company’s 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. 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 them, and could cause actual outcomes and results to differ
materially from current expectations. These factors include, among
other things, our ability to complete the integration of Biotel and
its operations into our business, the effect of the acquisition on
our business operations and financial results, effectiveness of our
efforts to address operational initiatives, including cost savings
initiatives that affect our business, changes to insurance coverage
and reimbursement levels for our products, the success of our sales
and marketing initiatives, our ability to attract and retain
talented executive management and sales personnel, our ability to
identify acquisition candidates, acquire them on attractive terms
and integrate their operations into our business, the
commercialization of new products, market factors, internal
research and development initiatives, partnered research and
development initiatives, competitive product development, changes
in governmental regulations and legislation, the continued
consolidation of payors, acceptance of our new products and
services and patent protection and litigation. For further details
and a discussion of these and other risks and uncertainties, please
see our public filings with the Securities and Exchange Commission,
including our latest periodic reports on Form 10-K and 10-Q.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
Three Months
Ended
Consolidated Statements of Operations
(unaudited) (In Thousands, Except Per Share Amounts)
June 30, June 30, 2011 2010
Revenue $ 31,637 $ 31,939 Cost of revenue 13,018
11,835 Gross profit 18,619 20,104 Gross profit % 58.9% 62.9%
Operating expenses: General and administrative expense 8,985 8,548
Sales and marketing expense 7,395 6,876 Bad debt expense 2,902
4,484 Research and development expense 1,361 1,230 Integration,
restructuring and other charges 1,014 1,128 Total
operating expenses 21,657 22,266 Loss from operations
(3,038) (2,162) Interest and other income, net 36 20
Loss before income taxes (3,002) (2,142) Provision for
income taxes (4) - Net loss $ (3,006) $ (2,142)
Loss per Share:
Basic $ (0.12) $ (0.09) Diluted $ (0.12) $ (0.09) Weighted
Average Shares Outstanding: Basic 24,401 24,083 Diluted 24,401
24,083
Six Months
Ended
Consolidated Statements of Operations
(unaudited) (In Thousands, Except Per Share Amounts)
June 30, June 30, 2011 2010
Revenue $ 65,636 $ 63,755 Cost of revenue 26,670
23,584 Gross profit 38,966 40,171 Gross profit % 59.4% 63.0%
Operating expenses: General and administrative expense
18,660 18,225 Sales and marketing expense 15,460 14,873 Bad debt
expense 5,292 9,124 Research and development expense 3,043 2,473
Integration, restructuring and other charges 1,138
3,073 Total operating expenses 43,593 47,768 Loss
from operations (4,627) (7,597) Interest and other
income, net 73 24 Loss before income taxes (4,554) (7,573)
Provision for income taxes (4) - Net loss $ (4,558) $
(7,573)
Loss per Share:
Basic $ (0.19) $ (0.32) Diluted $ (0.19) $ (0.32) Weighted
Average Shares Outstanding: Basic 24,350 24,011 Diluted 24,350
24,011
Summary Financial Data
(In Thousands) June 30, December 31,
2011 2010 (unaudited) Cash and
investments $ 44,977 $ 45,484 Accounts receivable, net 26,276
24,978 Other receivables, net 2,845 3,041 Days sales outstanding 85
78 Working capital 63,730 60,634 Total assets 152,248 156,692 Total
debt - - Total shareholders’ equity 133,031 134,928
Three Months
Ended
June 30, June 30, 2011 2010
Stock compensation expense $ 1,231 $ 948
Six Months
Ended
June 30, June 30, 2011 2010
Stock compensation expense $ 2,380 $ 1,866
Reconciliation of Non-GAAP Financial
Measures(In Thousands, Except Per Share Amounts)
In accordance with Regulation G of the Securities and Exchange
Commission, the table set forth below reconciles certain financial
measures used in this press release that were not calculated in
accordance with generally accepted accounting principles, or GAAP,
with the most directly comparable financial measure calculated in
accordance with GAAP.
Three Months
Ended
(unaudited) June 30, 2011 June 30,
2010 Operating loss – GAAP $ (3,038) $ (2,162) Nonrecurring
charges (a) 1,816 1,726
Adjusted operating loss
$ (1,222) $ (436) Net loss –
GAAP $ (3,006) $ (2,142) Nonrecurring charges (net of income
taxes of $0 and $0, respectively) (a) 1,816 1,726
Adjusted net loss $ (1,190) $
(416)
Loss per diluted share – GAAP $ (0.12) $ (0.09) Nonrecurring
charges per share (a) 0.07 0.07
Adjusted loss per
diluted share $ (0.05) $ (0.02)
(a) In the second quarter of 2011, we incurred $1.5
million of nonrecurring charges largely related to the integration
of Biotel’s operations, as well as $0.3 million for the forfeiture
and acceleration of certain options. In the second quarter of 2010,
we incurred $1.1 million of severance and other exit costs related
to the restructuring of our sales and service organizations, as
well as $0.6 million of other nonrecurring charges.
Three Months
Ended
June 30, 2011 June 30, 2010 Cash
provided by operating activities $ 3,389 $ 5,624 Capital
expenditures (1,280) (1,248) Free cash flow
2,109 4,376
Three Months
Ended
June 30, 2011 June 30, 2010
Operating loss – GAAP $ (3,038) $ (2,162) Depreciation and
amortization expense 3,310 3,185 EBITDA 272
1,023
Reconciliation of Non-GAAP Financial
Measures(In Thousands, Except Per Share Amounts)
In accordance with Regulation G of the Securities and Exchange
Commission, the table set forth below reconciles certain financial
measures used in this press release that were not calculated in
accordance with generally accepted accounting principles, or GAAP,
with the most directly comparable financial measure calculated in
accordance with GAAP.
Six Months
Ended
(unaudited) June 30, 2011 June 30,
2010 Operating loss – GAAP $ (4,627) $ (7,597) Nonrecurring
charges (a) 2,869 4,147
Adjusted operating loss
$ (1,758) $ (3,450) Net loss –
GAAP $ (4,558) $ (7,573) Nonrecurring charges (net of income
taxes of $0 and $0, respectively) (a) 2,869 4,147
Adjusted net loss $ (1,689) $
(3,426)
Loss per diluted share – GAAP $ (0.19) $ (0.32) Nonrecurring
charges per share (a) 0.12 0.18
Adjusted loss per
diluted share $ (0.07) $ (0.14)
(a) In the first six months of 2011, we incurred $2.3
million of nonrecurring charges largely related to the integration
of Biotel’s operations, as well as $0.6 million for the forfeiture
and acceleration of certain options. In the first six months of
2010, we incurred $2.7 million of severance and other exit costs
related to the restructuring of our sales and service organizations
and management changes, as well as $1.4 million of other charges
largely related to our class action and Biotel law suits.
Six Months
Ended
June 30, 2011 June 30, 2010 Cash
provided by operating activities $ 1,149 $ 2,672 Capital
expenditures (1,676) (2,726) Free cash flow
(527) (54)
Six Months
Ended
June 30, 2011 June 30, 2010
Operating loss – GAAP $ (4,627) $ (7,597) Depreciation and
amortization expense 6,723 6,382 EBITDA 2,096
(1,215)
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