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, 2011.
Third Quarter 2011 and Recent Highlights
- Achieved positive adjusted EBITDA year to date
- Biotel contributed positive EBITDA and is on track to exceed our expectations
- Improved GAAP and adjusted operating loss as a percentage of revenue compared to prior year due to efficiency and cost-saving initiatives
- Secured 13 new payor contracts during the quarter
- Appointed existing Director Kirk Gorman as Chairman of the Board; replaces Randy Thurman following successful completion of transition plan
- Launching next-generation MCOTTM device during fourth quarter 2011
- $43 million in cash and investments as of September 30, 2011, with no outstanding debt
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of CardioNet, commented: "During the third quarter, we advanced on our strategic initiatives and positioned the Company for long-term success. We added 13 new payor contracts and maintained a strong presence in the physicians' office by offering an entire suite of cardiac monitoring tools. We spent significant time and money in the quarter evaluating ongoing strategic opportunities. We expect a limited market release of our next generation MCOTTM in the fourth quarter, which will assist in reducing our overall cost structure. To further reduce costs in response to a down market, we have identified and will eliminate another $5 to $7 million of expenses. Year-to-date, we have generated positive adjusted EBITDA and have $43 million in cash and investments with no debt. This positions us to capitalize on opportunities to drive future growth and profitability.
"Despite the many examples of operational progress during the third quarter, our financial results were impacted by a decline in overall patient volume, coupled with continued pressure on reimbursement. We believe our results are reflective of the overall macro-economic environment, which includes declines in physician office visits compared to the prior year and a drop-off in the U.S. Consumer Confidence Index, which fell to its lowest level in over two years. While the current environment has been challenging, we believe the long-term prospects for MCOTTM are strong given the growing awareness of the risks associated with atrial fibrillation."
Third Quarter Financial Results
Revenue for the third quarter 2011 was $26.6 million, a decrease of 3.2% compared to $27.5 million in the third quarter 2010. The decrease in revenue was primarily due to lower patient volume, which we believe is as a result of an overall decline in physician office visits compared to prior year. This decrease was partially offset by the addition of Biotel revenue. For the three months ended September 30, 2011, patient revenue was comprised of 39% Medicare and 61% commercial, and patient volume was comprised of 51% Medicare and 49% commercial.
Gross profit for the third quarter 2011 decreased to $14.4 million, or 53.9% of revenue, compared to $15.5 million, or 56.6% of revenue, in the third quarter 2010. The decline in gross profit percentage was related to lower patient volume, costs related to the launch of our next generation product, lower average MCOTTM reimbursement and the addition of the lower margin Biotel business.
On a GAAP basis, operating expenses for the third quarter 2011 were $21.5 million, a decrease of 6.8% compared to $23.1 million in the third quarter 2010. Operating expenses on an adjusted basis declined by 10.1% compared to the prior year quarter, excluding $2.0 million in the third quarter 2011 and $1.4 million in the third quarter 2010 related to restructuring and other nonrecurring charges. The decrease in operating expenses was driven by a reduction in bad debt expense, as well as the Company's cost reduction initiatives that were implemented in early 2010. These reductions were partially offset by the addition of Biotel's operating expenditures in the quarter.
On a GAAP basis, net loss for the third quarter 2011 was $7.1 million, or a loss of $0.29 per diluted share, compared to a net loss of $7.5 million, or a loss of $0.31 per diluted share, for the third quarter 2010. Excluding expenses related to restructuring and other nonrecurring charges, adjusted net loss for the third quarter 2011 was $5.1 million, or a loss of $0.21 per diluted share. This compares to an adjusted net loss of $6.1 million, or a loss of $0.25 per diluted share, for the third quarter 2010, which also excludes the impact of restructuring and other nonrecurring charges.
Liquidity
As of September 30, 2011, the Company had total cash and investments of $43.2 million compared to $45.5 million as of December 31, 2010, a decrease of $2.3 million. This decrease is primarily due to payments for certain one-time items of $3.4 million as well as an extended cash collection cycle. During 2011, the Company experienced an increase in patient related receivables which, on average, take longer to collect. In addition, the number of carriers requesting additional information in order to adjudicate our claims increased. These factors created a longer collection cycle thereby negatively impacting DSO, which increased to 93 days.
Low-income Medicare Advantage beneficiaries face barriers to dental, vision and hearing care