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, 2012.
Third Quarter 2012 Highlights
- Completed acquisition of Cardiocore
Lab, Inc., a leading research services business
- Introduced CardioNet’s new wireless
event device, wEvent
- Generated positive adjusted EBITDA of
$0.3 million in the third quarter 2012
- Experienced increased patient volume
year over year
- Reduced DSO to 67 days, an 8 day
improvement compared to year end 2011
- $17.9 million in cash as of September
30, 2012
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of
CardioNet, commented: “In August, we completed the acquisition of
Cardiocore Lab, Inc. (“Cardiocore”), a leading cardiac core lab.
This acquisition will enable us to leverage our strength in cardiac
monitoring and the clinical superiority of our technology in a
research setting. We believe the research market represents a
significant growth opportunity for CardioNet and we are excited
about the future potential.
“Also in the quarter, we introduced the wEvent to a select group
of practices. This new wireless event monitor expands CardioNet’s
portfolio by offering physicians an alternative to the traditional
event monitor. With the full market release of the wEvent expected
later this quarter, CardioNet now offers the most comprehensive
suite of cardiac outpatient monitoring solutions in the
industry.
“The progress that we have made on our strategic initiatives has
had a positive impact on our third quarter results. For the
quarter, we experienced positive adjusted EBITDA of $0.3 million,
an improvement of $2.6 million over the prior year despite a
challenging healthcare environment. This reflects our continued
optimization of the patient services business in addition to an
EBITDA benefit from the acquisition of Cardiocore.
“Looking forward, we will continue to focus on growing our
research and patient service businesses while investing in our
infrastructure in order to streamline our operations. We continue
to look for additional opportunities to expand into adjacent
markets. Despite the cash outlays this year for acquisitions, we
have maintained a strong balance sheet that we can leverage to
support our strategic vision.”
Third Quarter Financial Results
Revenue for the third quarter 2012 was $27.0 million, an
increase of 1.6% compared to $26.6 million in the third quarter
2011. Despite an increase in overall patient volume, patient
services revenue declined $0.2 million primarily due to a shift in
product mix to event and Holter monitoring which carry a lower
reimbursement rate. Additionally, product revenue declined $1.2
million with lower volume partially attributable to the timing of
orders. This decline was offset by an increase in clinical research
revenue of $2.0 million primarily related to the acquisition of
Cardiocore. For the three months ended September 30, 2012, patient
revenue was comprised of 45% Medicare and 55% commercial, and
MCOTTM patient volume was comprised of 51% Medicare and 49%
commercial.
Gross profit for the third quarter 2012 increased to $16.4
million, or 60.6% of revenue, compared to $14.4 million, or 53.9%
of revenue, in the third quarter of 2011. Gross profit for the
third quarter 2012 on an adjusted basis was $16.6 million, or 61.5%
of revenue, excluding $0.2 million related to restructuring and
other nonrecurring charges. The increase in adjusted gross profit
percentage was related to the impact of cost reductions implemented
at the end of 2011 and lower depreciation partially offset by the
addition of the lower margin Cardiocore business.
On a GAAP basis, operating expenses for the third quarter 2012
were $19.5 million, a decrease of 9.1% compared to $21.5 million in
the third quarter 2011. Operating expenses on an adjusted basis
were $18.6 million, a 4.8% decline compared to $19.5 million for
the prior year quarter, excluding $0.9 million in the third quarter
2012 and $2.0 million in the third 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 and Cardiocore’s operating
expenses for the quarter.
On a GAAP basis, net loss for the third quarter 2012 was $3.1
million, or a loss of $0.12 per diluted share, compared to a net
loss of $7.1 million, or a loss of $0.29 per diluted share, for the
third quarter 2011. Excluding expenses related to restructuring and
other nonrecurring charges, adjusted net loss for the third quarter
2012 was $1.9 million, or a loss of $0.08 per diluted share. This
compares to an adjusted net loss of $5.1 million, or a loss of
$0.21 per diluted share, for the third quarter 2011, which also
excludes the impact of restructuring and other nonrecurring
charges.
Liquidity
As of September 30, 2012, the Company had total cash and
investments of $17.9 million compared to $46.5 million as of
December 31, 2011, a decrease of $28.6 million. The significant
cash uses during the first nine months of 2012 included $23.4
million related to the acquisition of Cardiocore, $5.8 million
related to the acquisition of ECG Scanning, $4.4 million for
capital expenditures and $1.3 million related to the settlement of
the shareholder litigation.
As previously disclosed at the end of the second quarter, the
Company had a delay in collections of approximately $7.0 million as
it awaited receipt of its Medicare designation for the San
Francisco monitoring center. This designation was subsequently
received and the outstanding claims were processed with
substantially all of the outstanding cash received by the end of
the third quarter. This resulted in the Company having positive
operating cash flow for the year to date period and a reduction in
the Company’s DSO to 67 days at quarter end. This reflects an 8 day
decrease compared to year end 2011 and a 21 day reduction compared
to the second quarter 2012.
Conference Call
CardioNet, Inc. will host an earnings conference call on Monday,
November 5, 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 23386171.
About CardioNet
CardioNet is the 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 Cardiocore Lab, Inc. and ECG
Scanning & Medical Services, Inc. acquisitions on our business
operations and financial results, our ability to effectively
integrate these 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, success of 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, 2012 2011 Revenue
$ 27,040 $ 26,602 Cost of revenue 10,642 12,252 Gross
profit 16,398 14,350 Gross profit % 60.6% 53.9% Operating
expenses: General and administrative expense 7,969 8,655 Sales and
marketing expense 6,476 6,621 Bad debt expense 3,195 3,263 Research
and development expense 1,143 1,329 Integration, restructuring and
other charges 741 1,619 Total operating expenses
19,524 21,487 Loss from operations (3,126)
(7,137) Interest and other income, net 5 34 Loss
before income taxes (3,121) (7,103) Provision for income taxes
- - Net loss $ (3,121) $ (7,103)
Loss per Share:
Basic $ (0.12) $ (0.29) Diluted $ (0.12) $ (0.29) Weighted
Average Shares Outstanding: Basic 24,995 24,451 Diluted 24,995
24,451
Nine Months
Ended
Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Amounts) September
30, September 30, 2012 2011 Revenue
$ 81,535 $ 92,238 Cost of revenue 32,801 38,922 Gross
profit 48,734 53,316 Gross profit % 59.8% 57.8% Operating
expenses: General and administrative expense 24,276 27,315 Sales
and marketing expense 18,655 22,081 Bad debt expense 9,066 8,555
Research and development expense 3,368 4,372 Integration,
restructuring and other charges 1,744 2,757 Total
operating expenses 57,109 65,080 Loss from operations
(8,375) (11,764) Interest and other income, net 91
107 Loss before income taxes (8,284) (11,657) Benefit
(Provision) for income taxes 431 (4) Net loss $
(7,853) $ (11,661)
Loss per Share:
Basic $ (0.32) $ (0.48) Diluted $ (0.32) $ (0.48) Weighted
Average Shares Outstanding: Basic 24,840 24,384 Diluted 24,840
24,384
Summary Financial
Data (In Thousands) September 30,
December 31, 2012 2011 (unaudited)
Cash and investments $ 17,887 $ 46,484 Accounts receivable,
net 17,276 21,028 Other receivables, net 5,314 1,564 Days sales
outstanding 67 75 Working capital 26,357 57,177 Total assets 94,309
94,975 Total debt - - Total shareholders’ equity 73,257 77,997
Three Months
Ended
September 30, September 30, 2012
2011 (unaudited) Stock compensation expense $
826 $ 917
Nine Months
Ended
September 30, September 30, 2012
2011 (unaudited) Stock compensation expense $
2,656 $ 3,297 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, 2012 2011 Operating loss – GAAP $ (3,126) $
(7,137) Nonrecurring charges (a) 1,190 1,982
Adjusted operating loss
$ (1,936) $ (5,155) Net loss – GAAP $
(3,121) $ (7,103)
Nonrecurring charges (net of income tax
benefit of $0 and $0, respectively) (a)
1,190 1,982
Adjusted net loss $
(1,931) $ (5,121) Loss per diluted
share – GAAP $ (0.12) $ (0.29) Nonrecurring charges per share (a)
0.04 0.08
Adjusted loss per diluted share
$ (0.08) $ (0.21) (a) In
the third quarter of 2012, we incurred $0.7 million related to
integration, restructuring and other charges, $0.3 million of other
nonrecurring expenses primarily related to the San Francisco
monitoring center and $0.1 million for the forfeiture and
acceleration of certain options. In the third quarter of 2011, we
incurred $1.6 million of integration, restructuring and other
charges largely related to the integration of Biotel’s operations
as well as $0.4 million for the forfeiture and acceleration of
certain options and other nonrecurring items.
Three Months
Ended
(unaudited) September 30, September 30,
2012 2011 Cash provided / (used) by operating
activities $ 7,478 $ (659) Capital expenditures (1,609)
(1,138) Free cash flow $ 5,869 $ (1,797)
Three Months
Ended
(unaudited) September 30, September 30,
2012 2011 Operating loss – GAAP $ (3,126) $
(7,137) Nonrecurring charges 1,190 1,982 Depreciation and
amortization expense 2,210 2,896 Adjusted EBITDA $
274 $ (2,259) 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, 2012 2011 Operating loss – GAAP $ (8,375) $
(11,764) Nonrecurring charges (a) 3,607 4,851
Adjusted operating loss
$ (4,768) $ (6,913) Net loss – GAAP $
(7,853) $ (11,661)
Nonrecurring charges (net of income tax
benefit of $431 and $0, respectively) (a)
3,176 4,851
Adjusted net loss $
(4,677) $ (6,810) Loss per diluted
share – GAAP $ (0.32) $ (0.48) Nonrecurring charges per share (a)
0.13 0.20
Adjusted loss per diluted share
$ (0.19) $ (0.28)
(a)
In the first nine months of 2012, we
incurred $1.7 million related to integration, restructuring and
other charges, $1.4 million of other nonrecurring charges primarily
related to the San Francisco monitoring center and legal fees
related to litigation and $0.5 million for the forfeiture and
acceleration of certain options. In the first nine months of 2011,
we incurred $2.8 million of integration, restructuring and other
charges largely related to the integration of Biotel’s operations,
$1.3 million of other nonrecurring charges as well as $0.8 million
for the forfeiture and acceleration of certain options.
Nine Months
Ended
(unaudited) September 30, September 30,
2012 2011 Cash provided by operating
activities $ 3,614 $ 490 Capital expenditures (4,357)
(2,814) Free cash flow $ (743) $ (2,324)
Nine Months
Ended
(unaudited) September 30, September 30,
2012 2011 Operating loss – GAAP $ (8,375) $
(11,764) Nonrecurring charges 3,607 4,851 Depreciation and
amortization expense 6,341 9,269 Adjusted EBITDA $
1,573 $ 2,356
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