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CardioNet, Inc. Reports Third Quarter 2012 Financial Results

Stocks in this article: BEAT

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 Telemetry TM (MCOT TM). 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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