CardioNet first quarter revenue decreases 20.5% to $27.0 million

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 first quarter-ended March 31, 2012.

First Quarter 2012 and Recent Highlights

• Completed acquisition of ECG Scanning and Medical Services, Inc. ("ECG Scanning")
• Experienced increased sequential patient volume across all cardiac service lines
• Realized benefit from cost reductions in the quarter; on track to realize $7.5 million of annualized cost reductions
• Commenced full scale operations in west coast monitoring facility
• Secured 14 new payor contracts during the quarter
• $37.0 million in cash and investments as of March 31, 2012, with no outstanding debt

President and CEO Commentary

Joseph Capper, President and Chief Executive Officer of CardioNet, commented: "The first quarter results were in line with expectations representing a solid start to the year. Patient volume across all service lines increased sequentially, indicating healthy demand for CardioNet's suite of cardiac monitoring tools. Offsetting the volume growth was the continued pressure on our commercial reimbursement. Looking forward, our revenue will benefit from the opening of our west coast monitoring facility as well as the continued roll-out of our next generation MCOT^TM device.

"During the quarter, we continued to focus on our key strategic objectives of gaining efficiencies, growing volume and revenue diversification. Our progress against these goals is demonstrated by our execution of our previously announced $7.5 million of cost reductions and the full commercial launch of our new MCOT^TM device with positive feedback from our physicians and patients. We have made great progress in getting our west coast monitoring facility fully operational, providing us the opportunity to optimize our reimbursement as well as redundancy. Finally, we announced the acquisition of ECG Scanning which will leverage our existing infrastructure and provide access to additional physician relationships.

"With continued demand for our services and the progress that we have made on our strategic goals, we are well positioned to achieve future profitability. Despite the cash outlays during the quarter, we still maintain a healthy cash and investment balance of $37 million with no outstanding debt, ultimately providing us the opportunity to continue to invest strategically."

First Quarter Financial Results

Revenue for the first quarter 2012 was $27.0 million, a decrease of 20.5% compared to $34.0 million in the first quarter 2011. Revenue decreased $7.0 million due to lower MCOT^TM reimbursement and volume which correlates to the lower volumes being experienced in physicians' offices, as well as lower average MCOT^TM reimbursement. This decrease was partially offset by an increase in event and Holter revenue, primarily due to the inclusion of ECG Scanning revenue. For the three months ended March 31, 2012, patient revenue was comprised of 40% Medicare and 60% commercial, and patient volume was comprised of 53% Medicare and 47% commercial.

Gross profit for the first quarter 2012 decreased to $15.6 million, or 57.7% of revenue, compared to $20.3 million, or 59.8% of revenue, in the first quarter of 2011. Gross profit for the first quarter 2012 on an adjusted basis was $16.0 million, or 59.1% of revenue, excluding $0.4 million related to restructuring and other nonrecurring charges. The decrease in adjusted gross profit percentage was primarily related to the decrease in MCOT^TM reimbursement.

On a GAAP basis, operating expenses for the first quarter 2012 were $19.2 million, a decrease of 12.5% compared to $21.9 million in the first quarter 2011. Operating expenses on an adjusted basis were $18.4 million, an 11.7% decline compared to $20.9 million for the prior year quarter, excluding $0.8 million in the first quarter 2012 and $1.0 million in the first 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 first quarter 2012 was $3.5 million, or a loss of $0.14 per diluted share, compared to a net loss of $1.6 million, or a loss of $0.06 per diluted share, for the first quarter 2011. Excluding expenses related to restructuring and other nonrecurring charges, adjusted net loss for the first quarter 2012 was $2.4 million, or a loss of $0.10 per diluted share. This compares to an adjusted net loss of $0.5 million, or a loss of $0.02 per diluted share, for the first quarter 2011, which also excludes the impact of restructuring and other nonrecurring charges.

Liquidity

As of March 31, 2012, the Company had total cash and investments of $37.0 million compared to $46.5 million as of December 31, 2011, a decrease of $9.5 million. The significant cash uses during the first quarter 2012 included $6.3 million related to the acquisition of ECG Scanning, $1.4 million for capital expenditures and $1.3 million related to the settlement of the shareholder litigation. DSO increased slightly compared to year end 2011 to 81 days with the inclusion of ECG Scanning's receivables.

Source: CardioNet, Inc.