CardioNet, Inc. (NASDAQ:BEAT), the leading wireless medical
technology and research services company with a current focus on
the diagnosis and monitoring of cardiac arrhythmias, today reported
results for the fourth quarter and full year ended December 31,
2012.
2012 Highlights
- Generated positive adjusted EBITDA for
the fourth quarter and full year 2012
- Experienced increased patient volume
year over year
- Completed acquisition of Cardiocore
Lab, Inc., a leading research services business
- Completed acquisition of ECG Scanning
and Medical Services, Inc., a cardiac monitoring company
- Introduced CardioNet’s new wireless
event device, wEventTM
- Reduced DSO to 56 days, a 19 day
improvement compared to year end 2011
- $18.3 million in cash and no debt as of
December 31, 2012
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of
CardioNet, commented: “2012 was a pivotal year for CardioNet,
capped by a solid fourth quarter performance with positive adjusted
EBITDA and revenue growth. The Company had several significant
achievements this year, including the successful completion of two
acquisitions, which provided scale and diversification. Our
research services business, bolstered by the acquisition of
Cardiocore in August, contributed strong results for the quarter,
as evidenced by a shift in our revenue to 17% from research as
compared to 1% in the fourth quarter 2011. As we have previously
stated, we view the clinical research market as a significant
avenue for growth.
“In our patient services segment, volume increased year over
year, aided by the acquisition of ECG Scanning early in the year.
During the fourth quarter, we launched the wEventTM, our wireless
event monitor, as part of our “CardioNet Comprehensive” initiative,
demonstrating our focus on offering the most extensive suite of
cardiac outpatient monitoring solutions in the industry. We have
also aligned the sales force compensation structure to facilitate
this initiative. We have seen a positive market response as we
continue to grow our prescribing physician base. We believe this
strategy will allow us to increase our market share and grow
revenue.
“As we continue our efforts to grow the business, we have not
lost focus on gaining efficiencies, improving operations or
containing costs, as evidenced by the reduction in the core
business’ cost structure. Over the past three years, we have
removed more than $30 million of expense, resulting in a more
efficient and focused organization. As part of our operational
improvements, we now offer MCOTTM patient monitoring through
centers on both coasts, providing better service to our
patients.
“Despite the investments and the acquisitions made this year,
the Company continues to maintain a strong balance sheet with over
$18 million in cash and no debt. Excluding acquisitions, the
Company was cash flow neutral for the year, despite capital
expenditures and the shareholder and patent litigation settlements.
This enabled us to reduce our DSO to 56 days, a significant
reduction compared to the prior year and on par with other health
care providers. With our strong balance sheet, more efficient
operations and diversified business model, we are building an
organization that is poised for growth.”
Fourth Quarter Financial Results
Revenue for the fourth quarter 2012 was $30.0 million, an
increase of 11.9% compared to $26.8 million in the fourth quarter
2011. Despite an increase in overall patient volume, patient
services revenue declined $2.7 million primarily due to a shift in
product mix to event and Holter monitoring which carry a lower
reimbursement rate. This decline was offset by an increase in
research services revenue of $4.9 million primarily related to the
acquisition of Cardiocore. Additionally, product revenue increased
$0.9 million due to increased volume in the quarter. For the three
months ended December 31, 2012, patient revenue was comprised of
48% Medicare and 52% commercial.
Gross profit for the fourth quarter 2012 increased to $17.2
million, or 57.3% of revenue, compared to $16.6 million, or 62.1%
of revenue, in the fourth quarter of 2011. The decline in the gross
profit percentage was primarily related to the growth in the
research services segment with the addition of Cardiocore, which
has a lower gross margin than the Company’s patient services
business.
On a GAAP basis, operating expenses for the fourth quarter 2012
were $22.0 million, a decrease of 66.8% compared to $66.2 million
in the fourth quarter 2011. This decrease was driven by a goodwill
impairment charge of $46.0 million in the fourth quarter 2011. On
an adjusted basis, operating expenses for the fourth quarter were
$19.3 million, a 10.1% increase compared to $17.5 million for the
prior year quarter, excluding $2.7 million in the fourth quarter
2012 and $48.7 million in the fourth quarter 2011 related to
restructuring and other nonrecurring charges and the 2011 goodwill
impairment charge. This increase in operating expense was driven by
the addition of the ECG Scanning and Cardiocore operations in
2012.
On a GAAP basis, net loss for the fourth quarter 2012 was $4.3
million, or a loss of $0.17 per diluted share, compared to a net
loss of $49.8 million, or a loss of $2.03 per diluted share, for
the fourth quarter 2011 which includes the goodwill impairment
charge of $46.0 million. Excluding expenses related to
restructuring and other nonrecurring charges, adjusted net loss for
the fourth quarter 2012 was $2.3 million, or a loss of $0.09 per
diluted share. This compares to an adjusted net loss of $1.1
million, or a loss of $0.04 per diluted share, for the fourth
quarter 2011, which excludes the impact of restructuring and other
nonrecurring charges and the goodwill impairment charge.
Full Year 2012 Financial Results
Revenue for the twelve months ended December 31, 2012 was $111.5
million, a decrease of 6.3% compared to $119.0 million reported in
the prior year. Patient services revenue decreased $13.2 million.
Higher patient volume was offset by a decrease in the average
reimbursement rate as the service mix changed. Additionally,
product revenue declined $1.6 million with lower volume. Offsetting
this decline was an increase in research services revenue of $7.3
million primarily due to the acquisition of Cardiocore in August
2012. For the twelve months ended December 31, 2012, patient
revenue was comprised of 44% Medicare and 56% commercial.
Gross profit for the twelve months ended December 31, 2012 was
$65.9 million, or 59.1% of revenue, compared to $69.9 million, or
58.8% of revenue, in the prior year. On an adjusted basis, gross
profit for the twelve months ended December 31, 2012 was $66.8
million, or 59.9% of revenue, excluding $0.9 million of start-up
costs associated with the San Francisco monitoring center. 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 growth in the lower margin
research services business.
On a GAAP basis, operating expenses for the twelve months ended
December 31, 2012 were $79.1 million, a decrease of 39.8% compared
to $131.3 million in the prior year. This decrease was primarily
driven by a goodwill impairment charge of $46.0 million in 2011. On
an adjusted basis, operating expenses for the full year 2012
declined 5.2% to $73.7 million compared to $77.7 million for the
prior year, excluding $5.4 million for the twelve months ended
December 31, 2012 and $53.5 million for the twelve months ended
December 31, 2011 related to restructuring and other nonrecurring
charges and the 2011 goodwill impairment charge. The decrease in
adjusted operating expense was primarily driven by lower employee
related expenses due to efficiency measures implemented in the
fourth quarter 2011. Additionally, research and development
expenses declined due to prior year expenses incurred for the
development of the next generation MCOTTM device which was launched
in December 2011. These reductions were partially offset by the
addition of ECG Scanning’s and Cardiocore’s operating expenses.
On a GAAP basis, net loss for the twelve months ended December
31, 2012 was $12.2 million, or a loss of $0.49 per diluted share,
compared to a net loss of $61.4 million, or a loss of $2.51 per
diluted share, for the twelve months ended December 31, 2011.
Excluding expenses related to restructuring and other nonrecurring
charges, adjusted net loss for the twelve months ended December 31,
2012 was $6.9 million, or a loss of $0.28 per diluted share. This
compares to an adjusted net loss of $7.9 million, or a loss of
$0.32 per diluted share, for the twelve months ended December 31,
2011, which also excludes the impact of restructuring and other
nonrecurring charges.
Liquidity
As of December 31, 2012, the Company had total cash and
investments of $18.3 million compared to $46.5 million as of
December 31, 2011, a decrease of $28.2 million. The significant
uses of cash during 2012 included $22.0 million related to the
acquisition of Cardiocore, $5.8 million related to the acquisition
of ECG Scanning, $6.0 million for capital expenditures, primarily
medical devices, and $1.6 million related to the settlement of the
shareholder and patent litigation. Positive operating cash flow
from the Company’s core business helped offset these expenditures.
In addition, the Company significantly reduced its accounts
receivable balance which resulted in a decrease in the Company’s
DSO to 56 days at year end. This reflects a 19 day decrease
compared to year end 2011 and an 11 day reduction compared to the
third quarter 2012.
Conference Call
CardioNet, Inc. will host an earnings conference call on
Wednesday, February 13, 2013, 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 37095865.
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.
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 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 these expectations, and could cause actual outcomes and results
to differ materially from current expectations. These factors
include, among other things, the effect of the Cardiocore
acquisition on our business operations and financial results and
our ability to successfully integrate its operations into our
business, the national rate set by the Centers for Medicare and
Medicaid Services (“CMS”) for our mobile cardiovascular telemetry
service, effects of changes in health care legislation,
effectiveness of our cost savings initiatives, relationships with
our government and commercial payors, 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, 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) December 31,
December 31, 2012 2011 Revenue $ 29,959
$ 26,784 Cost of revenue 12,792 10,154 Gross profit
17,167 16,630 Gross profit % 57.3% 62.1% Operating expenses:
Goodwill impairment charge - 45,999 General and administrative
expense 8,368 7,697 Sales and marketing expense 6,949 5,740 Bad
debt expense 2,846 3,524 Research and development expense 1,296
1,326 Integration, restructuring and other charges 2,492
1,902 Total operating expenses 21,951 66,188
Loss from operations (4,784) (49,558) Interest and
other (expense), net
(39)
37 Loss before income taxes (4,823) (49,521) Benefit
(provision) for income taxes 474 (240) Net loss $
(4,349) $ (49,761)
Loss per Share:
Basic $ (0.17) $ (2.03) Diluted $ (0.17) $ (2.03) Weighted
Average Shares Outstanding: Basic 25,215 24,550 Diluted 25,215
24,550
Twelve Months
Ended
Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Amounts) December 31,
December 31, 2012 2011 Revenue $
111,494 $ 119,022 Cost of revenue 45,593 49,076 Gross
profit 65,901 69,946 Gross profit % 59.1% 58.8% Operating
expenses: Goodwill impairment charge - 45,999 General and
administrative expense 32,644 35,011 Sales and marketing expense
25,604 27,821 Bad debt expense 11,912 12,080 Research and
development expense 4,664 5,698 Integration, restructuring and
other charges 4,236 4,659 Total operating expenses
79,060 131,268 Loss from operations (13,159)
(61,322) Interest and other income, net 52 144 Loss
before income taxes (13,107) (61,178) Benefit (provision) for
income taxes 905 (244) Net loss $ (12,202) $ (61,422)
Loss per Share:
Basic $ (0.49) $ (2.51) Diluted $ (0.49) $ (2.51) Weighted
Average Shares Outstanding: Basic 24,934 24,425 Diluted 24,934
24,425
Summary
Financial Data (In Thousands) December 31,
December 31, 2012 2011 (unaudited)
(unaudited) Cash and investments $ 18,298 $ 46,484
Patient accounts receivable, net 13,792 21,028 Other accounts
receivable, net 6,515 1,564 Days sales outstanding 56 75 Working
capital 24,918 57,177 Total assets 93,048 94,975 Total debt - -
Total shareholders’ equity 69,998 77,997
Three Months
Ended
(unaudited) December 31, December 31,
2012 2011 Stock compensation expense $ 1,091 $
709
Twelve Months
Ended
(unaudited) December 31, December 31,
2012 2011 Stock compensation expense $ 3,747 $
4,006 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) December 31, December
31, 2012 2011 Operating loss – GAAP $ (4,784) $
(49,558) Nonrecurring charges (a) 2,672 48,675
Adjusted operating loss
$ (2,112) $ (883) Net loss – GAAP $
(4,349) $ (49,761)
Nonrecurring charges (a)
2,080 48,675
Adjusted net loss $
(2,269) $ (1,086) Loss per diluted
share – GAAP $ (0.17) $ (2.03) Nonrecurring charges per share (a)
0.08 1.99
Adjusted loss per diluted share
$ (0.09) $ (0.04)
(a)
In the fourth quarter of 2012, the Company
incurred $2.5 million related to integration, restructuring and
other charges, $0.1 million of other nonrecurring expenses
primarily for legal fees related to litigation and $0.1 million for
the forfeiture and acceleration of certain options. These charges
were partially offset by a $0.6 million tax benefit related to the
acquisition of Cardiocore. In the fourth quarter of 2011, the
Company incurred a $46.0 million goodwill impairment charge, $1.9
million of integration, restructuring and other charges primarily
related to the settlement of litigation, $0.6 million of other
nonrecurring charges primarily for legal fees as well as $0.2
million for the forfeiture and acceleration of certain options.
Three Months
Ended
(unaudited) December 31, December 31,
2012 2011 Cash provided by operating
activities $ 1,764 $ 4,540 Capital expenditures (1,605)
(1,140) Free cash flow $ 159 $ 3,400
Three Months
Ended
(unaudited) December 31, December 31,
2012 2011 Operating loss – GAAP $ (4,784) $
(49,558) Nonrecurring charges 2,672 48,675 Depreciation and
amortization expense 2,782 2,163 Adjusted EBITDA $
670 $ 1,280 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.
Twelve Months
Ended
(unaudited) December 31, December
31, 2012 2011 Operating loss – GAAP $ (13,159) $
(61,322) Nonrecurring charges (a) 6,280 53,527
Adjusted operating loss
$ (6,879) $ (7,795) Net loss – GAAP $
(12,202) $ (61,422)
Nonrecurring charges (a)
5,257 53,527
Adjusted net loss $
(6,945) $ (7,895) Loss per diluted
share – GAAP $ (0.49) $ (2.51) Nonrecurring charges per share (a)
0.21 2.19
Adjusted loss per diluted share
$ (0.28) $ (0.32)
(a)
For the twelve months ended December 31,
2012, the Company incurred $4.2 million related to integration,
restructuring and other charges, $1.5 million of other nonrecurring
charges primarily related to the San Francisco monitoring center
and legal fees and $0.6 million for the forfeiture and acceleration
of certain options. These charges were partially offset by a $1.0
million tax benefit related to the acquisitions of ECG Scanning and
Cardiocore. For the year ended 2011, the Company incurred a $46.0
million goodwill impairment charge, $4.6 million of integration,
restructuring and other charges primarily related to the settlement
of litigation, $1.9 million of other nonrecurring charges primarily
related to the acquisition of Biotel and legal fees as well as $1.0
million for the forfeiture and acceleration of certain options.
Twelve Months
Ended
(unaudited) December 31, December 31,
2012 2011 Cash provided by operating
activities $ 5,378 $ 5,030 Capital expenditures (5,962)
(3,954) Free cash flow $ (584) $ 1,076
Twelve Months
Ended
(unaudited) December 31, December 31,
2012 2011 Operating loss – GAAP $ (13,159) $
(61,322) Nonrecurring charges 6,280 53,527 Depreciation and
amortization expense 9,123 11,432 Adjusted EBITDA $
2,244 $ 3,637
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