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 fourth quarter and full year-ended December 31, 2011.
2011 Highlights
- Achieved positive adjusted EBITDA for the fourth quarter and full year 2011
- Reduced quarter-end DSO to 75 days
- Reached an agreement to settle shareholder litigation
- Implemented over $7 million of annualized cost reductions
- Launched next-generation MCOTTM device
- Opened west coast monitoring location
- Secured 52 new payor contracts covering over 10 million lives
- Completed Biotel integration and generated positive EBITDA contribution
- $46.5 million in cash and investments as of December 31, 2011, with no outstanding debt
President and CEO Commentary
Joseph Capper, President and Chief Executive Officer of CardioNet, commented: "During the fourth quarter, we continued to successfully execute on our operational initiatives as evidenced by the positive adjusted EBITDA generated for the quarter and full year 2011. We launched our next-generation MCOTTM device, implemented approximately $7.5 million of annualized cost reductions, reached an agreement to settle the outstanding class action litigation and opened the west coast monitoring facility. We will ramp up our activity in this new facility over the next three months and expect to be fully operational in the second quarter. Given this significant progress, we are now in a far better position to capitalize on a variety of growth opportunities.
"As an example, we recently announced the purchase of ECG Scanning & Medical Services, Inc. ("ECG Scanning"), a $7 million cardiac monitoring company focused on event, Holter and pacemaker monitoring. The acquisition is expected to be accretive in the first year and improve the Company's position in the cardiac monitoring market by leveraging our infrastructure and ECG Scanning's customer relationships.
"Although results have improved, our stock price has clearly been under pressure particularly since the announcement of the civil investigative demand in August 2011. As a result, we were required by accounting guidance to take a non-cash goodwill impairment charge. This charge has no impact on the Company's business operations or cash flow.
"2011 presented a number of challenges for the Company and the healthcare industry overall; however, we improved our year-over-year operating results and are even more excited about the future. With a number of operational improvements in place and the full commercialization of our next-generation MCOTTM device, we are confident that we can continue to enhance performance and strategically leverage our balance sheet."
Fourth Quarter Financial Results
Revenue for the fourth quarter 2011 was $26.8 million, a decrease of 6.6% compared to $28.7 million in the fourth quarter 2010. Patient revenue decreased $3.9 million due to slightly lower MCOTTM volume which correlates to the lower volumes being experienced in physicians' offices, partially offset by an increase in event and Holter volumes. Largely offsetting the patient revenue decline was the addition of Biotel, which generated revenue of $2.0 million. For the three months ended December 31, 2011, patient revenue was comprised of 36% Medicare and 64% commercial, and patient volume was comprised of 54% Medicare and 46% commercial.
Gross profit for the fourth quarter 2011 decreased to $16.6 million, or 62.1% of revenue, compared to $16.7 million, or 58.3% of revenue, in the fourth quarter 2010. The increase in gross profit percentage was related to cost reduction initiatives implemented during the quarter.
On a GAAP basis, operating expenses for the fourth quarter 2011 were $66.2 million, an increase of 210.7% compared to $21.3 million in the fourth quarter 2010. This increase was driven by a goodwill impairment charge of $46.0 million due to a suppressed market price which the Company believes is primarily a result of market reaction to the ongoing Department of Justice inquiry. Operating expenses on an adjusted basis declined by 11.1% compared to the prior year quarter, excluding $48.7 million in the fourth quarter 2011 and $1.6 million in the fourth quarter 2010 related to restructuring and other nonrecurring charges. The decrease in operating expenses was driven partially by the implementation of cost reductions in the quarter as well as a reduction in bad debt expense. These reductions were partially offset by the addition of Biotel's operating expenditures in the quarter.
On a GAAP basis, net loss for the fourth quarter 2011 was $49.8 million, or a loss of $2.03 per diluted share, compared to a net loss of $4.8 million, or a loss of $0.20 per diluted share, for the fourth quarter 2010. Excluding expenses related to restructuring and other nonrecurring charges, adjusted net loss for the fourth quarter 2011 was $1.1 million, or a loss of $0.04 per diluted share. This compares to an adjusted net loss of $3.2 million, or a loss of $0.13 per diluted share, for the fourth quarter 2010, which also excludes the impact of restructuring and other nonrecurring charges.
Full Year 2011 Financial Results
Revenue for the twelve months ended December 31, 2011 was $119.0 million, a decrease of 0.8% compared to $119.9 million reported in the prior year. Patient revenue decreased $13.1 million due to slightly lower MCOTTM volume in the second half due to lower patient census in physicians' offices as well as lower reimbursement rates, partially offset by an increase in event and Holter volumes. Substantially offsetting the patient revenue decline was the addition of Biotel, which generated revenue of $12.2 million. For the twelve months ended December 31, 2011, patient revenue was comprised of 36% Medicare and 64% commercial, and patient volume was comprised of 51% Medicare and 49% commercial.
Gross profit for the twelve months ended December 31, 2011 decreased to $69.9 million, or 58.8% of revenue, compared to $72.4 million, or 60.4% of revenue, in the prior year. The decline in gross profit percentage was related to the addition of the lower margin Biotel business.
On a GAAP basis, operating expenses for the twelve months ended December 31, 2011 were $131.3 million, an increase of 42.5% compared to $92.1 million in the prior year. This increase was driven by a goodwill impairment charge of $46.0 million. Operating expenses on an adjusted basis declined by 8.6% compared to the prior year, excluding $53.5 million for the twelve months ended December 31, 2011 and $7.1 million for the twelve months ended December 31, 2010 related to restructuring and other nonrecurring charges. The decrease in operating expenses was substantially driven by a reduction in bad debt expense, as well as a reduction in outside services and professional fees. These reductions were partially offset by the addition of Biotel's operating expenditures.
On a GAAP basis, net loss for the twelve months ended December 31, 2011 was $61.4 million, or a loss of $2.51 per diluted share, compared to a net loss of $19.9 million, or a loss of $0.82 per diluted share, for the twelve months ended December 31, 2010. Excluding expenses related to restructuring and other nonrecurring charges, adjusted net loss for the twelve months ended December 31, 2011 was $7.9 million, or a loss of $0.32 per diluted share. This compares to an adjusted net loss of $12.8 million, or a loss of $0.53 per diluted share, for the twelve months ended December 31, 2010, which also excludes the impact of restructuring and other nonrecurring charges.
Liquidity
As of December 31, 2011, the Company had total cash and investments of $46.5 million compared to $45.5 million as of December 31, 2010, an increase of $1.0 million. Benefits from process improvements in the billing and collections areas resulted in strong cash collections throughout the year, as well as a significant decrease in bad debt expense. These factors created a shorter collection cycle, thereby positively impacting DSO, which decreased to 75 days.
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