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CardioNet Inc. Reports Operating Results (10-Q)

November 06, 2009 | About:

10qk

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CardioNet Inc. (BEAT) filed Quarterly Report for the period ended 2009-09-30.

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 $133.8 million; its shares were traded at around $5.62 with a P/E ratio of 15.3 and P/S ratio of 1.1.

Highlight of Business Operations:

Gross Profit. Gross profit increased to $21.5 million for the three months ended September 30, 2009, or 64.5% of revenues, from $21.2 million for the three months ended September 30, 2008, or 67.9% of revenues. The increase of $0.3 million was due to increased revenue from MCOT services. The increase in revenue was offset by an increase in cost of sales related to payroll expense due to higher headcount of $1.1 million, an increase in supplies and other miscellaneous expenses of $0.4 million and increased depreciation expense related to additional devices being in service in the 2009 period compared to the 2008 period of $0.3 million. Gross profit as a percentage of revenue was negatively affected by the decline in reimbursement rates.

General and Administrative Expense. General and administrative expense increased to $15.4 million for the three months ended September 30, 2009 from $10.8 million for the three months ended September 30, 2008. This increase of $4.6 million, or 42.6%, was primarily due to an increase in the provision for bad debt of $1.9 million, increase in stock compensation expense of $0.7 million, increase in payroll costs of $0.7 million, increase in legal fees of $0.6 million and an increase of $0.7 million of miscellaneous expenses. As a percentage of total revenues, general and administrative expense was 46.1% for the three months ended September 30, 2009 compared to 34.5% for the three months ended September 30, 2008.

Gross Profit. Gross profit increased to $71.7 million for the nine months ended September 30, 2009, or 66.8% of revenues, from $56.7 million for the nine months ended September 30, 2008, or 65.9% of revenues. The increase of $15.0 million, or 26.5%, 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 $4.4 million, increased depreciation expense related to additional devices being in service in the 2009 period compared to the 2008 period of $1.3 million and an increase in miscellaneous costs of $0.6 million.

General and Administrative Expense. General and administrative expense increased to $43.8 million for the nine months ended September 30, 2009 from $29.8 million for the nine months ended September 30, 2008. This increase of $14.0 million, or 47.0%, was primarily due to an increase in the provision for bad debt of $5.2 million, increase in stock compensation expense of $3.7 million, increase in payroll expense of $1.5 million, increase in rent expense of $0.5 million, increase in depreciation and amortization of $0.5 million, increase in legal fees of $0.4 million, increased professional fees of $0.4 million and $2.3 million of miscellaneous expenses. As a percentage of total revenues, general and administrative expense was 40.8% for the nine months ended September 30, 2009 compared to 34.7% for the nine months ended September 30, 2008.

Research and Development Expense. Research and development expense was $4.3 million for the nine months ended September 30, 2009 compared to $3.0 million for the nine months ended September 30, 2008. The increase of $1.3 million, or 43.3%, was due primarily to an increase in payroll expense of $0.7 million, increase in consulting fees of $0.3 million and miscellaneous expenses of $0.3 million. As a percent of total revenues, research and development expense increased to 4.0% for the nine months ended September 30, 2009 from 3.5% for the nine months ended September 30, 2008.

For the nine months ended September 30, 2008, integration, restructuring and other charges were $4.8 million. Integration charges relating to the PDSHeart acquisition were $0.8 million for the nine months ended September 30, 2008, and restructuring charges relating to consolidating our Finance and Human Resources functions in Pennsylvania were $1.0 million. Secondary offering costs were $0.9 million, costs related to the resolution of intellectual property litigation were $1.0 million and other nonrecurring charges related to the departure of certain directors were $1.1 million for the nine months ended September 30, 2008.

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10qk
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