CardioNet, Inc. (CardioNet), a US-based medical device company, has reported revenues of $35.7 million for the first quarter of 2009, up 40.3%, compared with the revenues of $255 million in the year-ago quarter. It has also reported a net loss of $0.7 million, or $0.03 loss per share, for the first quarter of 2009, compared with the net loss of $0.3 million, or $0.07 loss per share, in the year-ago quarter.
Sales force currently at 129 account executives, up from 88 at end of 2008;
Restructured and expanded medical advisory board;
Secured contract with Great-West Health Care, a national payor, adding 3.0 million lives covered by Mobile Cardiac Outpatient Telemetry (MCOT);
Entered into a definitive merger agreement to acquire Biotel Inc;
Strengthened management team with the appointment of Randy Thurman as president and chief executive officer;
Chairman, President And Chief Executive Officer of the company, Randy Thurman, said: We are pleased to announce another quarter of strong results, demonstrating our ability to deliver earnings while also investing in strategic initiatives to increase market share and deliver world class service to our prescribing physicians and patients. During the quarter we made substantial progress in the expansion of our sales force and the development of our corporate infrastructure, including enhancements to our customer service unit. Overall, our financial and operating performance in the quarter reflects the continued strong adoption of the MCOT(TM) system in the healthcare community and our commitment to excellence in all areas of our business.
We continue to view 2009 as an inflection point in our business and believe that we can achieve accelerated growth and profitability in 2010 and beyond through strategic investments in our sales organization and corporate infrastructure. Since year end, we have added 41 sales executives, most of whom are currently in the training process and should begin to gain traction in the marketplace beginning in the second half of the year. We are ahead of our sales force expansion plans and expect to substantially complete our expansion by mid-year 2009. As we continue to expand our sales organization, we anticipate being well positioned to gain significant market share in the future as our new account executives become fully established and proficient in marketing our services primarily to cardiologists and electrophysiologists. Our infrastructure enhancements have already translated to improvements in customer service and monitoring operations. Continued investments in the business will be a high priority for CardioNet, particularly as our customer base grows, to insure that CardioNet is the leader in all aspects of ambulatory cardiac monitoring and diagnosis.
In addition to our organic growth and infrastructure development, we also entered into a definitive merger agreement to acquire Biotel Inc., a leading provider of cardiac monitoring devices, which we believe is a strong strategic fit for CardioNet. We expect that the acquisition will expand our leadership position in wireless medicine with a wireless event monitoring device that will complement our existing product portfolio. We also expect to gain a clinical research services business that will establish a new business segment for CardioNet to leverage for future growth. We believe that our resources and expertise combined with the strong foundation developed by Biotel provide a substantial opportunity to build a meaningful clinical services franchise. We remain on track with the acquisition and expect the transaction to close around mid-year.
We are also looking forward to the upcoming Heart Rhythm Society (HRS) meeting in May 2009 where we plan to make several announcements regarding important advances in our technology. We firmly believe these announcements will further demonstrate the superiority of our technology and will reflect that CardioNet is without peer in terms of advancing the clinical efficacy in the wireless cardiac monitoring industry.
The future looks very promising for CardioNet. We have made concrete progress in expanding our leadership position in wireless cardiac monitoring and establishing our first adjacent market business in clinical services through our pending merger with Biotel Inc. Looking forward, we expect to be well positioned to leverage our technical expertise, customer service and monitoring infrastructure to be the clear leader in wireless medicine.
Gross profit increased to $23.9 million in the first quarter of 2009, or 66.9% of revenues, compared to $15.9 million in the first quarter of 2008, or 62.6% of revenues.
On a GAAP basis, operating loss was $1.3 million in the first quarter of 2009 compared to a loss of $0.7 million in the first quarter of 2008. Excluding $3.0 million of expense related to management restructuring, primarily severance costs for former senior executives, and costs incurred in connection with the definitive merger agreement to acquire Biotel Inc., adjusted operating income increased to $1.6 million in the first quarter of 2009, or 4.6% of revenue. This compares to adjusted operating income of $0.6 million, or 2.4% of revenue, in the first quarter of 2008, which excludes $1.3 million of charges related to the resolution of a legal matter and for integration and restructuring primarily related to the integration of PDSHeart.
Marty Galvan, chief financial officer of the company, stated: Gross margins continued to benefit from the positive shift in sales mix towards MCOTTM along with ongoing improvements in our efficiency and productivity. The expected sequential decline in our adjusted operating margins reflects the strategic investments we are making in our sales organization and infrastructure that we believe will provide a solid foundation for market share gains and long term growth. However, adjusted operating margins improved compared to the first quarter of 2008, reflecting our ability to expand profitability in a heavy investment year.
Adjusted net income for the first quarter of 2009 was $1.0 million, or $0.04 per diluted share, excluding the impact of the management restructuring and costs incurred in connection with entering into the definitive merger agreement to acquire Biotel Inc. This compares to adjusted net income of $0.4 million, or $0.02 per diluted share, for the first quarter of 2008, which excludes charges related to the resolution of a legal matter and for restructuring and integration primarily related to the integration of PDSHeart.
On a GAAP basis, net loss available to common shareholders, which is derived by reducing net income by the accrued dividends and accretion on mandatorily redeemable convertible preferred stock, was $0.7 million, or a loss of $0.03 per basic and diluted share, for the first quarter of 2009, compared to a net loss of $2.9 million, or a loss of $0.63 per basic and diluted share, for the first quarter of 2008. The mandatorily redeemable convertible preferred stock, which was issued in part to finance the March 2007 PDSHeart acquisition, was converted to common stock in connection with CardioNet’s March 2008 initial public offering.
Randy Thurman commented: Based on our first quarter results, along with the continued strong outlook for our core business, we are reaffirming our 2009 financial guidance of revenue of $170.0 to $175.0 million and earnings of $0.69 to $0.73 per diluted share excluding any impact of net operating losses, other tax related items, and any nonrecurring charges. This also excludes the $0.01 per share dilutive impact that we are anticipating as a result of the Biotel Inc. acquisition, which we expect to close mid-year. Beyond 2009, we are comfortable with our previous guidance of revenue growth of at least 50% combined with earnings growth of 100% in 2010, with earnings per diluted share that could reach $2.00 in 2011.