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CardioNet Inc. Reports Operating Results (10-Q)

August 10, 2009 | About:

CardioNet Inc. (BEAT) filed Quarterly Report for the period ended 2009-06-30.

CARDIONET INC 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 the CardioNet System. CardioNet Inc. has a market cap of $175.1 million; its shares were traded at around $7.37 with a P/E ratio of 19.9 and P/S ratio of 1.4.

Highlight of Business Operations:

Gross Profit. Gross profit increased to $26.3 million for the three months ended June 30, 2009, or 68.7% of revenues, from $19.5 million for the three months ended June 30, 2008, or 66.5% of revenues. The increase of $6.8 million, or 34.7%, was due to increased revenue from MCOT services, offset by an increase in cost of sales related to payroll expense due to higher headcount of $1.5 million, increased depreciation expense related to additional devices being in service in the 2009 period compared to the 2008 period of $0.6 million, and an increase in supplies and other miscellaneous expenses of $0.1 million.

General and Administrative Expense. General and administrative expense increased to $14.1 million for the three months ended June 30, 2009 from $10.0 million for the three months ended June 30, 2008. This increase of $4.1 million, or 41.1%, was primarily due to an increase in the provision for bad debt of $1.9 million, increase in stock compensation expense of $1.7 million, increase in professional fees of $0.4 million, and $0.1 million of miscellaneous expenses. As a percentage of total revenues, general and administrative expense was 36.9% for the three months ended June 30, 2009 compared to 34.1% for the three months ended June 30, 2008.

Research and Development Expense. Research and development expense was $1.8 million for the three months ended June 30, 2009 compared to $0.9 million for the three months ended June 30, 2008. The increase of $0.9 million, or 89.9%, was due primarily to an increase in consulting fees of $0.5 million, increase in payroll expense of $0.2 million and miscellaneous expenses of $0.2 million. As a percent of total revenues, research and development expense increased to 4.6% for the three months ended June 30, 2009 compared to 3.2% for the three months ended June 30, 2008.

General and Administrative Expense. General and administrative expense increased to $28.5 million for the six months ended June 30, 2009 from $19.1 million for the six months ended June 30, 2008. This increase of $9.4 million, or 49.2%, was primarily due to an increase in the provision for bad debt of $3.3 million, increase in stock compensation expense of $2.9 million, increase in payroll expense of $1.5 million, increase in bonus expense of $1.2 million, increase in professional fees of $0.4 million, and $0.1 million of miscellaneous expenses. As a percentage of total revenues, general and administrative expense was 38.5% for the six months ended June 30, 2009 compared to 34.8% for the six months ended June 30, 2008.

Research and Development Expense. Research and development expense was $3.0 million for the six months ended June 30, 2009 compared to $2.1 million for the six months ended June 30, 2008. The increase of $0.9 million, or 43.9%, was due primarily to an increase in payroll expense of $0.4 million, increase in consulting fees of $0.3 million and miscellaneous expenses of $0.2 million. As a percent of total revenues, research and development expense increased to 4.0% for the six months ended June 30, 2009 from 3.8% for the six months ended June 30, 2008.

Integration, Restructuring and Other Charges. Integration, restructuring and other charges was $2.0 million, or 2.6% of revenues, for the six months ended June 30, 2009, comprised primarily of severance expenses of $2.1 million related to departure of certain executives in the first quarter of 2009. The severance costs were offset slightly by an insurance payment received related to the fire that occurred at our Conshohocken, PA facility in August 2008. For the six months ended June 30, 2008, integration, restructuring and other charges totaled $1.9 million, or 3.5% of revenues. The charges for the six months ended June 30, 2008 included $1.0 million related to the resolution of intellectual property litigation, integration charges relating to the PDSHeart acquisition of $0.6 million, and restructuring charges relating to the consolidation of our Finance and Human Resources functions in Pennsylvania of $0.3 million.

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