BioTelemetry, Inc. (NASDAQ:BEAT), the leading remote medical
technology company focused on the delivery of health information to
improve quality of life and reduce cost of care, today reported
results for the quarter ended September 30, 2020.
Quarter Highlights
- Recognized quarterly total revenue of $114.7 million
- Reached 3.0% year-over-year quarterly revenue growth, despite
the impact of COVID-19
- Reported quarterly GAAP net income of $6.7 million, or 5.9% of
total revenue
- Realized quarterly adjusted EBITDA of $30.6 million, or 26.7%
of total revenue
- Acquired Remote Patient Monitoring (“RPM”) assets from a
subsidiary of Centene Corporation
President and CEO Commentary
Joseph H. Capper, President and Chief Executive
Officer of BioTelemetry, Inc., commented:
“We are pleased to announce that we achieved solid third quarter
results with record revenue of $114.7 million and EBITDA of $30.6
million despite the external challenges facing the market at
large. This is a testament to the dedication and commitment
of the entire BioTelemetry team. All segments of the business
contributed to this excellent Q3 rebound, posting 15.7% sequential
growth. Cardiac monitoring volumes exited the quarter above
pre-COVID levels, and our recurring cardiac revenue increased as a
percentage of total revenue. Our Population Health business
grew nicely as well, driven by the launch of the Centene
partnership.
“Despite the numerous challenges posed by the pandemic, we
remained focused on executing our strategy. We continued to
augment our Artificial Intelligence capabilities, which are
enhancing scalability and improving efficiencies across the
enterprise. Telehealth and remote monitoring will continue to
play an integral role in a post-COVID-19 marketplace. As one
of the largest, fastest growing and most profitable connected
health companies, we are perfectly positioned to capitalize on
these opportunities. As such, we expect to outperform the
market for years to come, with top-line growth of over 15% in
2021.”
Third Quarter Financial Results
Total revenue for the third quarter 2020 was $114.7 million
compared to $111.3 million for the third quarter 2019, an increase
of $3.4 million, or 3.0%.
Gross profit for the third quarter 2020 was $69.0 million, or
60.2% of total revenue, compared to $69.3 million, or 62.3% of
total revenue, for the third quarter 2019.
On a GAAP basis, net income for the third quarter 2020 was $6.7
million, or $0.18 per diluted share, compared to net income of $8.3
million, or $0.23 per diluted share, for the third quarter
2019. The decline in net income was primarily due to
increased fixed operating costs as we continue to invest in our
anticipated growth, which has been affected by COVID-19.
On an adjusted basis1, net income for the third quarter 2020 was
$16.5 million, or $0.45 per diluted share. This compares to
adjusted net income of $18.8 million, or $0.52 per diluted share,
for the third quarter 2019. The decline in non-GAAP adjusted
net income was consistent with the change in GAAP net income.
The details regarding adjusted net income are included in the
reconciliation tables included in this release.
1 The Company believes that providing non-GAAP financial
measures offers a meaningful representation of our performance, as
we exclude expenses that are not necessary to support our ongoing
business. We also make adjustments to facilitate year over
year comparisons. Please refer to our “Reconciliation of GAAP
to Non-GAAP Financial Measures” in this release for additional
information.
Conference Call
BioTelemetry, Inc. will host an earnings conference call on
Thursday, October 29, 2020, at 5:00 PM Eastern Time. The
call will be webcast on the investor information page of our
website, www.gobio.com. The call will be archived on our
website for at least two weeks.
About BioTelemetry
BioTelemetry, Inc. is the leading remote medical technology
company focused on the delivery of health information to improve
quality of life and reduce cost of care. We provide remote
cardiac monitoring, centralized core laboratory services for
clinical trials, remote blood glucose monitoring and original
equipment manufacturing that serves both healthcare and clinical
research customers. More information can be found at
www.gobio.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 our 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. Examples of forward-looking statements
include statements we make regarding the successful execution of
our operating plan, including our ability to increase demand for
our products and services, to grow our market share and to recover
from the impacts of the COVID-19 pandemic and our expectations
regarding revenue trends in our segments. 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: our ability to identify acquisition candidates,
acquire them on attractive terms and integrate their operations
into our business; our ability to educate physicians and continue
to obtain prescriptions for our products and services; changes to
insurance coverage and reimbursement levels by Medicare and
commercial payors for our products and services; our ability to
attract and retain talented executive management and sales
personnel; the commercialization of new competitive products;
acceptance of our new products and services, such as our mobile
cardiac telemetry patch; the impact of the COVID-19 pandemic; the
impact of the October 2019 information technology incident; our
ability to obtain and maintain required regulatory approvals for
our products, services and manufacturing facilities; changes in
governmental regulations and legislation; adverse regulatory
actions; our ability to obtain and maintain adequate protection of
our intellectual property; interruptions or delays in the
telecommunications systems and/or information technology systems
that we use; our ability to successfully resolve outstanding legal
proceedings; and the other factors that are described in
“Part I; Item 1A. Risk Factors” of our
Annual Report on Form 10-K for the year ended December 31, 2019, as
well as the factors that are described in “Part II; Item
1A. Risk Factors” of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2020.
We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events, or otherwise, except as may be required by law.
Contact:
BioTelemetry, Inc.Heather C. GetzExecutive Vice President, Chief
Financial and Administrative Officer(800)
908-7103investorrelations@gobio.com
BioTelemetry,
Inc.Consolidated Statements of
Operations(unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
(in thousands, except
per share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
$ |
114,655 |
|
|
$ |
111,291 |
|
|
$ |
317,093 |
|
|
$ |
327,073 |
|
Other revenue |
— |
|
|
— |
|
|
9,702 |
|
|
— |
|
Total
revenue |
114,655 |
|
|
111,291 |
|
|
326,795 |
|
|
327,073 |
|
Cost of
revenue |
45,668 |
|
|
41,952 |
|
|
125,773 |
|
|
122,716 |
|
Gross
profit |
68,987 |
|
|
69,339 |
|
|
201,022 |
|
|
204,357 |
|
Gross profit % |
60.2 |
% |
|
62.3 |
% |
|
61.5 |
% |
|
62.5 |
% |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
General and administrative |
32,757 |
|
|
29,651 |
|
|
95,737 |
|
|
87,845 |
|
Sales and marketing |
11,652 |
|
|
12,572 |
|
|
35,619 |
|
|
37,807 |
|
Credit loss expense |
6,465 |
|
|
5,858 |
|
|
18,651 |
|
|
16,385 |
|
Research and development |
3,039 |
|
|
3,661 |
|
|
9,306 |
|
|
10,526 |
|
Other charges |
3,186 |
|
|
2,598 |
|
|
10,273 |
|
|
7,902 |
|
Total operating
expenses |
57,099 |
|
|
54,340 |
|
|
169,586 |
|
|
160,465 |
|
|
|
|
|
|
|
|
|
Income from operations |
11,888 |
|
|
14,999 |
|
|
31,436 |
|
|
43,892 |
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
Interest expense |
(902 |
) |
|
(2,338 |
) |
|
(4,711 |
) |
|
(7,358 |
) |
Loss on equity method investments |
— |
|
|
(65 |
) |
|
— |
|
|
(251 |
) |
Other non-operating expense, net |
(312 |
) |
|
(845 |
) |
|
(781 |
) |
|
(1,813 |
) |
Total other expense,
net |
(1,214 |
) |
|
(3,248 |
) |
|
(5,492 |
) |
|
(9,422 |
) |
|
|
|
|
|
|
|
|
Income before income
taxes |
10,674 |
|
|
11,751 |
|
|
25,944 |
|
|
34,470 |
|
Provision for income
taxes |
(3,960 |
) |
|
(3,468 |
) |
|
(9,840 |
) |
|
(6,202 |
) |
Net
income |
$ |
6,714 |
|
|
$ |
8,283 |
|
|
$ |
16,104 |
|
|
$ |
28,268 |
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.20 |
|
|
$ |
0.24 |
|
|
$ |
0.47 |
|
|
$ |
0.83 |
|
Diluted |
$ |
0.18 |
|
|
$ |
0.23 |
|
|
$ |
0.44 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
34,321 |
|
|
33,908 |
|
|
34,267 |
|
|
33,885 |
|
Diluted |
36,624 |
|
|
36,268 |
|
|
36,629 |
|
|
36,445 |
|
BioTelemetry,
Inc.Condensed Consolidated Balance
Sheets
|
September 30, 2020 |
|
December 31, 2019 |
(in
thousands) |
|
ASSETS |
(unaudited) |
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
90,229 |
|
|
$ |
68,614 |
|
Healthcare accounts receivable, net |
72,351 |
|
|
71,851 |
|
Other accounts receivable, net |
16,287 |
|
|
15,625 |
|
Inventory |
5,538 |
|
|
5,738 |
|
Prepaid expenses and other current assets |
5,976 |
|
|
6,505 |
|
Total current
assets |
190,381 |
|
|
168,333 |
|
|
|
|
|
Property and equipment,
net |
63,138 |
|
|
56,380 |
|
Intangible assets, net |
129,023 |
|
|
129,596 |
|
Goodwill |
305,591 |
|
|
301,321 |
|
Deferred tax assets |
4,273 |
|
|
12,626 |
|
Other assets |
44,689 |
|
|
17,464 |
|
Total
assets |
$ |
737,095 |
|
|
$ |
685,720 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
21,229 |
|
|
24,198 |
|
Accrued liabilities |
46,530 |
|
|
27,318 |
|
Current portion of finance lease obligations |
253 |
|
|
394 |
|
Current portion of long-term debt |
— |
|
|
3,844 |
|
Total current
liabilities |
68,012 |
|
|
55,754 |
|
|
|
|
|
Long-term portion of finance
lease obligations |
194 |
|
|
289 |
|
Long-term debt |
157,883 |
|
|
190,823 |
|
Other long-term
liabilities |
114,625 |
|
|
71,937 |
|
Total
liabilities |
340,714 |
|
|
318,803 |
|
|
|
|
|
Total stockholders’
equity |
396,381 |
|
|
366,917 |
|
|
|
|
|
Total liabilities and
stockholders’ equity |
$ |
737,095 |
|
|
$ |
685,720 |
|
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresQuarterly Non-GAAP Adjusted Net Income and
Non-GAAP Adjusted Net Income Per Share
|
|
Three Months Ended |
(unaudited) |
|
September 30, 2020 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share |
GAAP |
|
$ |
11,888 |
|
|
$ |
10,674 |
|
|
$ |
6,714 |
|
|
$ |
0.18 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (a) |
|
3,186 |
|
|
3,186 |
|
|
3,186 |
|
|
0.09 |
|
Acquisition amortization (b) |
|
4,084 |
|
|
4,084 |
|
|
4,084 |
|
|
0.11 |
|
Other expense adjustments (c) |
|
— |
|
|
(6 |
) |
|
(6 |
) |
|
— |
|
Income tax effect of adjustments (d) |
|
— |
|
|
— |
|
|
(2,414 |
) |
|
(0.07 |
) |
Impact of NOL utilization (e) |
|
— |
|
|
— |
|
|
4,984 |
|
|
0.14 |
|
Non-GAAP
Adjusted |
|
$ |
19,158 |
|
|
$ |
17,938 |
|
|
$ |
16,548 |
|
|
$ |
0.45 |
|
|
|
Three Months Ended |
(unaudited) |
|
September 30, 2019 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share |
GAAP |
|
$ |
14,999 |
|
|
$ |
11,751 |
|
|
$ |
8,283 |
|
|
$ |
0.23 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (a) |
|
2,598 |
|
|
2,598 |
|
|
2,598 |
|
|
0.07 |
|
Acquisition amortization (b) |
|
3,668 |
|
|
3,668 |
|
|
3,668 |
|
|
0.10 |
|
Other expense adjustments (c) |
|
— |
|
|
787 |
|
|
787 |
|
|
0.02 |
|
Income tax effect of adjustments (d) |
|
— |
|
|
— |
|
|
(1,436 |
) |
|
(0.04 |
) |
Impact of NOL utilization (e) |
|
— |
|
|
— |
|
|
4,903 |
|
|
0.14 |
|
Non-GAAP
Adjusted |
|
$ |
21,265 |
|
|
$ |
18,804 |
|
|
$ |
18,803 |
|
|
$ |
0.52 |
|
- In the third quarter 2020, other charges of $3.2 million were
primarily due to a $1.2 million unfavorable change in the fair
value of acquisition-related contingent consideration, $1.1 million
for patent and other litigation and $0.9 million of integration and
other non-recurring charges. In the third quarter 2019, other
charges of $2.6 million were primarily due to $2.1 million for
patent and other litigation and $0.4 million for integration and
other non-recurring charges.
- In the third quarter 2020 and 2019, we recognized $4.1 million
and $3.7 million of expense, respectively, related to the
amortization of acquisition-related intangible assets. We
have excluded this amortization of acquisition-related intangible
assets from non-GAAP adjusted net income due to the non-operational
nature of the expense. This amortization was recorded as a
component of general and administrative expense.
- In the third quarter 2020, we had an unrealized foreign
exchange gain of $0.1 million, offset partially by $0.1 million of
interest expense related to a portion of the Geneva Healthcare
deferred purchase consideration. In the third quarter 2019,
we had an unrealized foreign exchange loss of $0.7 million and
interest expense of $0.1 million related to a portion of the Geneva
Healthcare deferred purchase consideration.
- Represents the tax effect of the non-GAAP adjustments at the
Company’s annual effective tax rate.
- After giving effect to taxes at the estimated annual effective
tax rate on the adjustments, the utilization of net operating loss
carryforwards had a positive $5.0 million and $4.9 million impact
on the third quarter 2020 and 2019, respectively.
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresYear-to-Date Non-GAAP Adjusted Net Income
and Non-GAAP Adjusted Net Income Per Share
|
|
Nine Months Ended |
(unaudited) |
|
September 30, 2020 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share* |
GAAP |
|
$ |
31,436 |
|
|
$ |
25,944 |
|
|
$ |
16,104 |
|
|
$ |
0.44 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (f) |
|
10,273 |
|
|
10,273 |
|
|
10,273 |
|
|
0.28 |
|
Acquisition amortization (g) |
|
11,492 |
|
|
11,492 |
|
|
11,492 |
|
|
0.31 |
|
Other expense adjustments (h) |
|
— |
|
|
1,159 |
|
|
1,159 |
|
|
0.03 |
|
Income tax effect of adjustments (i) |
|
— |
|
|
— |
|
|
(7,618 |
) |
|
(0.21 |
) |
Impact of NOL utilization (j) |
|
— |
|
|
— |
|
|
14,381 |
|
|
0.39 |
|
Non-GAAP
Adjusted |
|
$ |
53,201 |
|
|
$ |
48,868 |
|
|
$ |
45,791 |
|
|
$ |
1.25 |
|
* Total does not add due to
rounding |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
(unaudited) |
|
September 30, 2019 |
(in thousands, except per share data) |
|
Income from operations |
|
Income before income taxes |
|
Net income |
|
Net income per diluted share* |
GAAP |
|
$ |
43,892 |
|
|
$ |
34,470 |
|
|
$ |
28,268 |
|
|
$ |
0.78 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Other charges (f) |
|
7,902 |
|
|
7,902 |
|
|
7,902 |
|
|
0.22 |
|
Acquisition amortization (g) |
|
10,742 |
|
|
10,742 |
|
|
10,742 |
|
|
0.29 |
|
Other expense adjustments (h) |
|
— |
|
|
1,719 |
|
|
1,719 |
|
|
0.05 |
|
Income tax effect of adjustments (i) |
|
— |
|
|
— |
|
|
(4,146 |
) |
|
(0.11 |
) |
Impact of NOL utilization (j) |
|
— |
|
|
— |
|
|
8,942 |
|
|
0.25 |
|
Non-GAAP
Adjusted |
|
$ |
62,536 |
|
|
$ |
54,833 |
|
|
$ |
53,427 |
|
|
$ |
1.47 |
|
* Total does not add due to
rounding |
|
|
|
|
|
|
|
|
- For the nine months ended September 30, 2020, other
charges of $10.3 million were primarily due to $3.9 million for
patent and other litigation, a $3.1 million unfavorable change in
the fair value of acquisition-related contingent consideration,
$1.4 million of acquisition and integration costs and $1.9 million
of other non-recurring charges. For the nine months ended
September 30, 2019, other charges of $7.9 million were
primarily due to $5.8 million for patent and other litigation and
$3.3 million for integration and restructuring activities related
to our acquisitions, partially offset by a $1.7 million reduction
in the fair value of acquisition-related contingent
consideration.
- For the nine months ended September 30, 2020 and 2019, we
recognized $11.5 million and $10.7 million of expense,
respectively, related to the amortization of acquisition-related
intangible assets. We have excluded this amortization of
acquisition-related intangible assets from non-GAAP adjusted net
income due to the non-operational nature of the expense. This
amortization was recorded as a component of general and
administrative expense.
- For the nine months ended September 30, 2020, we incurred
$0.9 million of interest expense related to a portion of the Geneva
Healthcare deferred purchase consideration and had an unrealized
foreign exchange loss of $0.3 million. For the nine months
ended September 30, 2019, we had an unrealized foreign
exchange loss of $2.2 million and interest expense of $0.2 million
related to a portion of the Geneva Healthcare deferred purchase
consideration, partially offset by a $0.7 million gain associated
with the termination of a former LifeWatch foreign pension
plan.
- Represents the tax effect of the non-GAAP adjustments at the
Company’s annual effective tax rate.
- After giving effect to taxes at the estimated annual effective
tax rate on the adjustments, the utilization of net operating loss
carryforwards items had a positive $14.4 million and $8.9 million
impact for the nine months ended September 30, 2020 and 2019,
respectively.
BioTelemetry,
Inc.Reconciliation of GAAP to Non-GAAP Financial
MeasuresQuarterly and Year-to-Date Non-GAAP
Adjusted EBITDA and EBITDA Margin
(unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income - GAAP |
|
$ |
6,714 |
|
|
$ |
8,283 |
|
|
$ |
16,104 |
|
|
$ |
28,268 |
|
Provision for income taxes |
|
3,960 |
|
|
3,468 |
|
|
9,840 |
|
|
6,202 |
|
Total other expense, net |
|
1,214 |
|
|
3,248 |
|
|
5,492 |
|
|
9,422 |
|
Other charges |
|
3,186 |
|
|
2,598 |
|
|
10,273 |
|
|
7,902 |
|
Depreciation and amortization expense |
|
11,518 |
|
|
10,295 |
|
|
32,882 |
|
|
30,508 |
|
Stock compensation expense |
|
4,020 |
|
|
3,636 |
|
|
11,080 |
|
|
9,662 |
|
Non-GAAP Adjusted
EBITDA |
|
$ |
30,612 |
|
|
$ |
31,528 |
|
|
$ |
85,671 |
|
|
$ |
91,964 |
|
GAAP Net income as a
percentage of total revenue |
|
5.9 |
% |
|
7.4 |
% |
|
4.9 |
% |
|
8.6 |
% |
Non-GAAP Adjusted EBITDA
margin |
|
26.7 |
% |
|
28.3 |
% |
|
26.2 |
% |
|
28.1 |
% |
Quarterly and Year-to-Date Non-GAAP Free
Cash Flow
(unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Cash provided by operating activities |
|
$ |
21,889 |
|
|
$ |
16,472 |
|
|
$ |
91,434 |
|
|
$ |
52,602 |
|
Capital expenditures |
|
(10,767 |
) |
|
(7,594 |
) |
|
(27,877 |
) |
|
(23,686 |
) |
Non-GAAP Free Cash
Flow |
|
$ |
11,122 |
|
|
$ |
8,878 |
|
|
$ |
63,557 |
|
|
$ |
28,916 |
|
Use of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally
accepted accounting principles in the United States
(“GAAP”), this press release also includes certain
financial measures which have been adjusted and are not in
accordance with generally accepted accounting principles
(“Non-GAAP financial measures”). These
Non-GAAP financial measures include adjusted income from
operations, adjusted income before income taxes, adjusted net
income, adjusted net income per diluted share, adjusted EBITDA and
free cash flow. In accordance with Regulation G of the
Securities and Exchange Commission, we have provided a
reconciliation of these Non-GAAP financial measures with the most
directly comparable financial measure calculated in accordance with
GAAP.
These Non-GAAP financial measures are not intended to replace
GAAP financial measures. They are presented as supplemental
measures of our performance in an effort to provide our
stakeholders better visibility into our ongoing operating results
and to allow for comparability to prior periods as well as to other
companies’ results. Management uses these Non-GAAP financial
measures to assess the financial health of our ongoing operating
performance. Management encourages our stakeholders to
consider all of our financial measures and to not rely on any
single financial measure to evaluate our performance.
Adjusted net income for the third quarter 2020 excludes other
charges of $3.2 million, $4.1 million of amortization expense
related to our acquisition-related intangible assets, $0.1 million
of unrealized foreign currency gain, $0.1 million of interest
expense related to a portion of the Geneva Healthcare deferred
purchase consideration, the tax effect of these adjustments, as
well as the impact from the utilization of our net operating loss
carryforwards. Adjusted net income for the third quarter 2019
excludes other charges of $2.6 million, $3.7 million of
amortization expense related to acquisition-related intangible
assets, $0.7 million of unrealized foreign currency loss, $0.1
million of interest expense related to a portion of the Geneva
Healthcare contingent consideration, the tax effect of these
adjustments, as well as the impact from the utilization of net
operating loss carryforwards. By excluding expenses that are
considered unnecessary to support the ongoing business, are
nonrecurring in nature or which limit year over year comparability,
we believe these Non-GAAP financial measures offer a meaningful
representation of our ongoing operating performance. Included
in these excluded items are transaction related expenses, primarily
legal and professional fees, integration related expenses,
primarily severance, patent and other litigation, amortization of
acquired intangibles, costs related to the October 2019 information
technology incident net of insurance proceeds, costs related to
restructuring programs aimed at streamlining operations and
reducing future expense, as well as other one-time items.
These excluded charges are not part of the ongoing operations, and
therefore, not reflective of our core operations. We view
patent litigation as an extreme measure not typically required in
our industry to protect a company’s intellectual property and which
has not been common practice for us. We commenced patent
litigation proceedings after we uncovered specific evidence of four
distinct cases of misappropriation and infringement. We can
choose to resolve the outstanding matters and terminate the expense
at any time. We also included the income tax effect of these
adjustments.
In addition to adjusted income from operations, adjusted income
before income taxes, adjusted net income, adjusted net income per
diluted share and free cash flow, we also present adjusted
EBITDA. This Non-GAAP financial measure excludes income
taxes, total other expense, net, other charges, depreciation and
amortization and stock compensation expense. EBITDA is a
widely accepted financial measure which we believe our stakeholders
use to compare our ongoing financial performance to that of other
companies. Adjusting our EBITDA for other charges and other
one-time items is a meaningful financial measure as we believe it
is an indication of our ongoing operations. In addition, we
also add back stock-based compensation expense because it is
non-cash in nature. Other companies may calculate adjusted
EBITDA in a different manner.
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