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
third quarter ended September 30, 2011.
Third Quarter 2011 and Recent Highlights
- Achieved positive adjusted EBITDA year
to date
- Biotel contributed positive EBITDA and
is on track to exceed our expectations
- Improved GAAP and adjusted operating
loss as a percentage of revenue compared to prior year due to
efficiency and cost-saving initiatives
- Secured 13 new payor contracts during
the quarter
- Appointed existing Director Kirk Gorman
as Chairman of the Board; replaces Randy Thurman following
successful completion of transition plan
- Launching next-generation MCOTTM device
during fourth quarter 2011
- $43 million in cash and investments as
of September 30, 2011, with no outstanding debt
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of
CardioNet, commented: “During the third quarter, we advanced on our
strategic initiatives and positioned the Company for long-term
success. We added 13 new payor contracts and maintained a strong
presence in the physicians’ office by offering an entire suite of
cardiac monitoring tools. We spent significant time and money in
the quarter evaluating ongoing strategic opportunities. We expect a
limited market release of our next generation MCOTTM in the fourth
quarter, which will assist in reducing our overall cost structure.
To further reduce costs in response to a down market, we have
identified and will eliminate another $5 to $7 million of expenses.
Year-to-date, we have generated positive adjusted EBITDA and have
$43 million in cash and investments with no debt. This positions us
to capitalize on opportunities to drive future growth and
profitability.
“Despite the many examples of operational progress during the
third quarter, our financial results were impacted by a decline in
overall patient volume, coupled with continued pressure on
reimbursement. We believe our results are reflective of the overall
macro-economic environment, which includes declines in physician
office visits compared to the prior year and a drop-off in the U.S.
Consumer Confidence Index, which fell to its lowest level in over
two years. While the current environment has been challenging, we
believe the long-term prospects for MCOTTM are strong given the
growing awareness of the risks associated with atrial
fibrillation.”
Third Quarter Financial Results
Revenue for the third quarter 2011 was $26.6 million, a decrease
of 3.2% compared to $27.5 million in the third quarter 2010. The
decrease in revenue was primarily due to lower patient volume,
which we believe is as a result of an overall decline in physician
office visits compared to prior year. This decrease was partially
offset by the addition of Biotel revenue. For the three months
ended September 30, 2011, patient revenue was comprised of 39%
Medicare and 61% commercial, and patient volume was comprised of
51% Medicare and 49% commercial.
Gross profit for the third quarter 2011 decreased to $14.4
million, or 53.9% of revenue, compared to $15.5 million, or 56.6%
of revenue, in the third quarter 2010. The decline in gross profit
percentage was related to lower patient volume, costs related to
the launch of our next generation product, lower average MCOTTM
reimbursement and the addition of the lower margin Biotel
business.
On a GAAP basis, operating expenses for the third quarter 2011
were $21.5 million, a decrease of 6.8% compared to $23.1 million in
the third quarter 2010. Operating expenses on an adjusted basis
declined by 10.1% compared to the prior year quarter, excluding
$2.0 million in the third quarter 2011 and $1.4 million in the
third 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 third quarter 2011 was $7.1
million, or a loss of $0.29 per diluted share, compared to a net
loss of $7.5 million, or a loss of $0.31 per diluted share, for the
third quarter 2010. Excluding expenses related to restructuring and
other nonrecurring charges, adjusted net loss for the third quarter
2011 was $5.1 million, or a loss of $0.21 per diluted share. This
compares to an adjusted net loss of $6.1 million, or a loss of
$0.25 per diluted share, for the third quarter 2010, which also
excludes the impact of restructuring and other nonrecurring
charges.
Liquidity
As of September 30, 2011, the Company had total cash and
investments of $43.2 million compared to $45.5 million as of
December 31, 2010, a decrease of $2.3 million. This decrease is
primarily due to payments for certain one-time items of $3.4
million as well as an extended cash collection cycle. During 2011,
the Company experienced an increase in patient related receivables
which, on average, take longer to collect. In addition, the number
of carriers requesting additional information in order to
adjudicate our claims increased. These factors created a longer
collection cycle thereby negatively impacting DSO, which increased
to 93 days.
Conference Call
CardioNet, Inc. will host an earnings conference call on
Tuesday, November 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 65422402.
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,” “may,” “anticipate,”
“possible,” “estimate,” “potential,” “intend,” “plan,” “believe,”
“forecast,” “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, the effect of the Biotel 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,
relationships with our government and commercial payors 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,
adverse regulatory action and litigation success. 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)
September 30, September 30, 2011
2010 Revenue $ 26,602 $ 27,486 Cost of revenue
12,252 11,938 Gross profit 14,350 15,548 Gross profit %
53.9% 56.6% Operating expenses: General and administrative
expense 8,655 8,717 Sales and marketing expense 6,621 7,305 Bad
debt expense 3,263 4,934 Research and development expense 1,329
1,237 Integration, restructuring and other charges 1,619
859 Total operating expenses 21,487 23,052
Loss from operations (7,137) (7,504) Interest and
other income, net 34 34 Loss before income taxes (7,103)
(7,470) Provision for income taxes - - Net loss $
(7,103) $ (7,470)
Loss per Share:
Basic $ (0.29) $ (0.31) Diluted $ (0.29) $ (0.31) Weighted
Average Shares Outstanding: Basic 24,451 24,162 Diluted 24,451
24,162
Nine Months
Ended
Consolidated Statements of Operations
(unaudited) (In Thousands, Except Per Share Amounts)
September 30, September 30, 2011
2010 Revenue $ 92,238 $ 91,241 Cost of revenue
38,922 35,522 Gross profit 53,316 55,719 Gross
profit % 57.8 % 61.1 % Operating expenses: General and
administrative expense 27,315 26,942 Sales and marketing expense
22,081 22,178 Bad debt expense 8,555 14,058 Research and
development expense 4,372 3,710 Integration, restructuring and
other charges 2,757 3,932 Total
operating expenses 65,080 70,820 Loss from operations
(11,764 ) (15,101 ) Interest and other income, net
107 58 Loss before income taxes (11,657 ) (15,043 )
Provision for income taxes (4 ) - Net loss $
(11,661 ) $ (15,043 )
Loss per Share:
Basic $ (0.48 ) $ (0.63 ) Diluted $ (0.48 ) $ (0.63 )
Weighted Average Shares Outstanding: Basic 24,384 24,061 Diluted
24,384 24,061
Summary Financial
Data (In Thousands) September 30,
December 31, 2011 2010 (unaudited)
Cash and investments $ 43,224 $ 45,484 Accounts receivable,
net 24,766 24,978 Other receivables, net 2,529 3,041 Days sales
outstanding 93 78 Working capital 59,569 60,634 Total assets
146,655 156,692 Total debt - - Total shareholders’ equity 127,038
134,928
Three Months
Ended
September 30, September 30, 2011
2010 Stock compensation expense $ 917 $ 1,192
Nine Months
Ended
September 30, September 30, 2011
2010 Stock compensation expense $ 3,297 $ 3,058
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) September 30, September
30, 2011 2010 Operating loss – GAAP $ (7,137 ) $
(7,504 ) Nonrecurring charges (a) 1,982
1,357
Adjusted operating loss
$ (5,155 ) $ (6,147 )
Net loss – GAAP $ (7,103 ) $ (7,470 )
Nonrecurring charges (net of income taxes of $0 and $0,
respectively) (a) 1,982 1,357
Adjusted net loss $ (5,121 ) $
(6,113 )
Loss per diluted share – GAAP $ (0.29 ) $ (0.31 )
Nonrecurring charges per share (a) 0.08 0.06
Adjusted loss per diluted share $
(0.21 ) $ (0.25 )
(a)
In the third quarter of 2011, we incurred
$1.8 million of nonrecurring charges related to the integration of
Biotel’s operations and other strategic opportunities, as well as
$0.2 million for the forfeiture and acceleration of certain
options. In the third quarter of 2010, we incurred $0.8 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
September 30, September 30, 2011
2010 Cash used in operating activities $ (659 ) $
(6,501 ) Capital expenditures (1,138 ) (946 ) Free
cash flow (1,797 ) (7,447 )
Three Months
Ended
September 30, September 30, 2011
2010 Operating loss – GAAP $ (7,137 ) $ (7,504 )
Nonrecurring charges 1,982 1,357 Depreciation and amortization
expense 2,896 3,150 Adjusted EBITDA
(2,259 ) (2,997 ) 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.
Nine Months
Ended
(unaudited) September 30, September
30, 2011 2010
Operating loss – GAAP $ (11,764 ) $ (15,101 ) Nonrecurring
charges (a) 4,851 5,504
Adjusted operating loss
$ (6,913 ) $ (9,597 )
Net loss – GAAP $ (11,661 ) $ (15,043 )
Nonrecurring charges (net of income taxes of $0 and $0,
respectively) (a) 4,851 5,504
Adjusted net loss $ (6,810 ) $
(9,539 )
Loss per diluted share – GAAP $ (0.48 ) $ (0.63 )
Nonrecurring charges per share (a) 0.20 0.23
Adjusted loss per diluted share $
(0.28 ) $ (0.40 )
(a)
In the first nine months of 2011, we
incurred $4.1 million of nonrecurring charges related to the
integration of Biotel’s operations and other strategic
opportunities, as well as $0.8 million for the forfeiture and
acceleration of certain options. In the first nine months of 2010,
we incurred $3.5 million of severance and other exit costs related
to the restructuring of our sales and service organizations and
management changes, as well as $2.0 million of other charges
largely related to our class action and Biotel law suits.
Nine Months
Ended
September 30, September 30, 2011
2010 Cash provided by (used in) operating activities
$ 490 $ (3,829 ) Capital expenditures (2,814 ) (3,672
) Free cash flow (2,324 ) (7,501 )
Nine Months
Ended
September 30, September 30, 2011
2010 Operating loss – GAAP $ (11,764 ) $ (15,101 )
Nonrecurring charges 4,851 5,504 Depreciation and amortization
expense 9,269 9,532 Adjusted EBITDA
2,356 (65 )
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