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, 2012.
Second Quarter 2012 and Recent Highlights
- Signed definitive merger agreement to
acquire all outstanding shares of cardioCORE Lab, Inc., a leading
research services business
- Received IDTF designation and billing
number for San Francisco monitoring center
- Generated positive adjusted EBITDA of
$1.7 million in the second quarter 2012
- Experienced increased patient volume
year over year and sequentially
- Realized benefit from cost reductions
in the quarter; on track to realize $7.5 million of annualized cost
reductions
- $34.1 million in cash and investments
as of June 30, 2012
- Reached an agreement to settle
outstanding patent infringement litigation
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of
CardioNet, commented: “During the second quarter, we made
tremendous progress toward meeting our strategic goal of revenue
diversification while delivering solid earnings. On Monday, we
announced that we entered into a definitive merger agreement to
acquire cardioCORE Lab, Inc. (“Cardiocore”), a research services
business, for $23.5 million. This transaction enables us to extend
the use of our technology into an adjacent market and, with the
FDA’s increased focus on cardiac safety in drug development, we are
excited by the growth potential. In addition, as we continue to
face a challenging healthcare market where patient census is down
and reimbursement pressures remain, this acquisition provides
revenue diversification which is not dependent on third party
insurance reimbursement. We expect Cardiocore to be accretive to
our second half earnings and to be cash flow positive for 2012.
“Looking to earnings, we saw an improvement in our second
quarter operating results with increased overall patient volume and
positive adjusted EBITDA, as well as a decrease in our overall cost
structure stemming from the $7.5 million of annualized cost
reductions implemented at the end of 2011. Our revenue was impacted
by a shift in our product mix to event and Holter monitoring with
the full quarter impact of ECG Scanning. However, revenue included
the reimbursement benefit from monitoring patients out of our west
coast monitoring facility for which we recently received our IDTF
designation. With this approval in hand, we are now able to bill
all of the claims that were outstanding at quarter end. We expect
to receive the majority of the cash by the end of the third
quarter.
“This quarter’s progress clearly demonstrates our commitment to
our goals of growing and diversifying the business. With a strong
balance sheet, the technological superiority of our devices and the
strength of our core business infrastructure as the foundation for
success, we believe the Company is poised for growth.”
Second Quarter Financial Results
Revenue for the second quarter 2012 was $27.4 million, a
decrease of 13.2% compared to $31.6 million in the second quarter
2011. Despite an increase in overall patient volume, patient
services revenue declined $3.5 million primarily due to a shift in
product mix to event and Holter monitoring which carry a lower
reimbursement rate. Additionally, product revenue declined $0.7
million with lower volume due to unusually high sales in the first
half of 2011 following the acquisition of Biotel. For the three
months ended June 30, 2012, patient revenue was comprised of 43%
Medicare and 57% commercial, and MCOTTM patient volume was
comprised of 53% Medicare and 47% commercial.
Gross profit for the second quarter 2012 decreased to $16.7
million, or 60.9% of revenue, compared to $18.6 million, or 58.9%
of revenue, in the second quarter of 2011. Gross profit for the
second quarter 2012 on an adjusted basis was $17.0 million, or
62.0% of revenue, excluding $0.3 million related to restructuring
and other nonrecurring charges. The increase in adjusted gross
profit percentage was primarily related to the impact of cost
reductions implemented at the end of 2011 and lower
depreciation.
On a GAAP basis, operating expenses for the second quarter 2012
were $18.4 million, a decrease of 15.1% compared to $21.7 million
in the second quarter 2011. Operating expenses on an adjusted basis
were $17.4 million, a 12.3% decline compared to $19.8 million for
the prior year quarter, excluding $1.0 million in the second
quarter 2012 and $1.9 million in the second quarter 2011 related to
restructuring and other nonrecurring charges. The decrease in
operating expenses was driven by the implementation of cost
reductions at the end of 2011. These reductions were partially
offset by the addition of ECG Scanning’s operating expenditures in
the quarter.
On a GAAP basis, net loss for the second quarter 2012 was $1.2
million, or a loss of $0.05 per diluted share, compared to a net
loss of $3.0 million, or a loss of $0.12 per diluted share, for the
second quarter 2011. Excluding expenses related to restructuring
and other nonrecurring charges as well as a tax benefit related to
the acquisition of ECG Scanning, adjusted net loss for the second
quarter 2012 was $0.3 million, or a loss of $0.01 per diluted
share. This compares to an adjusted net loss of $1.2 million, or a
loss of $0.05 per diluted share, for the second quarter 2011, which
also excludes the impact of restructuring and other nonrecurring
charges.
Liquidity
As of June 30, 2012, the Company had total cash and investments
of $34.1 million compared to $46.5 million as of December 31, 2011,
a decrease of $12.4 million. The significant cash uses during the
first half of 2012 included $6.3 million related to the acquisition
of ECG Scanning, $2.7 million for capital expenditures and $1.3
million related to the settlement of the shareholder litigation. In
addition, the Company experienced a delay in collections of
approximately $7.0 million related to Medicare claims being held
while the Company awaited the receipt of its IDTF designation for
the west coast monitoring center. The Company’s DSO was 88 days at
quarter end, a 13 day increase compared to year end 2011. The delay
in Medicare collections had an approximate 20 day impact on DSO.
The Company subsequently received its Medicare designation and will
begin billing Medicare in mid-August.
Conference Call
CardioNet, Inc. will host an earnings conference call on
Wednesday, August 8, 2012, 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 95236125.
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 and the effect of the Cardiocore and ECG Scanning
acquisitions on our business operations and financial results, our
ability to effectively integrate the acquisitions into our
operations, the 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)
June 30,
2012
June 30,
2011
Revenue $ 27,450 $ 31,637 Cost of revenue 10,724
13,018 Gross profit 16,726 18,619 Gross profit % 60.9% 58.9%
Operating expenses: General and administrative expense 7,635
8,985 Sales and marketing expense 6,027 7,395 Bad debt expense
2,959 2,902 Research and development expense 1,040 1,361
Integration, restructuring and other charges 733
1,014 Total operating expenses 18,394 21,657
Loss from operations (1,668) (3,038) Interest
and other income, net 39 36 Loss before income taxes (1,629)
(3,002) Provision for income taxes 431 (4) Net loss $
(1,198) $ (3,006)
Loss per Share:
Basic $ (0.05) $ (0.12) Diluted $ (0.05) $ (0.12) Weighted
Average Shares Outstanding: Basic 24,919 24,401 Diluted 24,919
24,401
Six Months
Ended
Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Amounts)
June 30,
2012
June 30,
2011
Revenue $ 54,495 $ 65,636 Cost of revenue 22,159
26,670 Gross profit 32,336 38,966 Gross profit % 59.3% 59.4%
Operating expenses: General and administrative expense
16,308 18,660 Sales and marketing expense 12,179 15,460 Bad debt
expense 5,870 5,292 Research and development expense 2,225 3,043
Integration, restructuring and other charges 1,003
1,138 Total operating expenses 37,585 43,593
Loss from operations (5,249) (4,627) Interest
and other income, net 86 73 Loss before income taxes (5,163)
(4,554) Provision for income taxes 431 (4) Net loss $
(4,732) $ (4,558)
Loss per Share:
Basic $ (0.19) $ (0.19) Diluted $ (0.19) $ (0.19) Weighted
Average Shares Outstanding: Basic 24,762 24,350 Diluted 24,762
24,350
Summary Financial Data
(In
Thousands) June 30,
2012
December 31,
2011
(unaudited) Cash and investments $ 34,128 $ 46,484
Accounts receivable, net 23,993 21,028 Other receivables, net 2,032
1,564 Days sales outstanding 88 75 Working capital 49,549 57,177
Total assets 91,328 94,975 Total debt - - Total shareholders’
equity 75,348 77,997
Three Months
Ended
June 30,
2012
June 30,
2011
(unaudited) Stock compensation expense $ 975 $ 1,231
Six Months
Ended
June 30,
2012
June 30,
2011
(unaudited) Stock compensation expense $ 1,830 $
2,380
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,
2012
June 30,
2011
Operating loss – GAAP $ (1,668 ) $ (3,038 ) Nonrecurring charges
(a) 1,289 1,816
Adjusted operating loss
$ (379 ) $ (1,222 ) Net
loss – GAAP $ (1,198 ) $ (3,006 )
Nonrecurring charges (net of income tax
benefit of $431 and $0, respectively) (a)
858 1,816
Adjusted net loss
$ (340 ) $ (1,190 )
Loss per diluted share – GAAP $ (0.05 ) $ (0.12 )
Nonrecurring charges per share (a) 0.04 0.07
Adjusted loss per diluted share $ (0.01
) $ (0.05 ) (a) In the
second quarter of 2012, we incurred $0.5 million related to
restructuring and other nonrecurring charges, $0.6 million of legal
fees related to litigation and $0.2 million for the forfeiture and
acceleration of certain options. These charges were partially
offset by a $0.4 million tax benefit related to the acquisition of
ECG Scanning. 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.
Three Months
Ended
(unaudited) June 30,
2012
June 30,
2011
Cash used by operating activities $ (1,915 ) $ 3,389 Capital
expenditures (1,376 ) (1,280 ) Free cash flow $
(3,291 ) $ 2,109
Three Months
Ended
(unaudited) June 30,
2012
June 30,
2011
Operating loss – GAAP $ (1,668 ) $ (3,038 ) Nonrecurring
charges 1,289 1,816 Depreciation and amortization expense
2,111 3,135 Adjusted EBITDA $ 1,732 $
1,913
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,
2012
June 30,
2011
Operating loss – GAAP $ (5,249 ) $ (4,627 ) Nonrecurring charges
(a) 2,417 2,869
Adjusted operating loss
$ (2,832 ) $ (1,758 ) Net
loss – GAAP $ (4,732 ) $ (4,558 )
Nonrecurring charges (net of income tax
benefit of $431 and $0, respectively) (a)
1,986 2,869
Adjusted net loss
$ (2,746 ) $ (1,689 )
Loss per diluted share – GAAP $ (0.19 ) $ (0.19 )
Nonrecurring charges per share (a) 0.08 0.12
Adjusted loss per diluted share $ (0.11
) $ (0.07 ) (a) In the
first six months of 2012, we incurred $1.2 million related to
restructuring and other nonrecurring charges, $0.8 million of legal
fees related to litigation and $0.4 million for the forfeiture and
acceleration of certain options. These charges were partially
offset by a $0.4 million tax benefit related to the acquisition of
ECG Scanning. 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.
Six Months
Ended
(unaudited) June 30,
2012
June 30,
2011
Cash used by operating activities $ (3,864 ) $
1,149
Capital expenditures (2,748 ) (1,676 ) Free cash flow
$ (6,612 ) $ (527 )
Six Months
Ended
(unaudited) June 30,
2012
June 30,
2011
Operating loss – GAAP $ (5,249 ) $ (4,627 ) Nonrecurring
charges 2,417 2,869 Depreciation and amortization expense
4,131 6,373 Adjusted EBITDA $ 1,299 $
4,615
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