CardioNet, Inc. Reports First Quarter 2008 Results.CONSHOHOCKEN, Pa. -- CardioNet, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BEAT), a leading wireless medical technology company with an initial focus on the diagnosis and monitoring of cardiac arrhythmias cardiac arrhythmia n. See cardiac dysrhythmia. Cardiac arrhythmia An irregular heart rate or rhythm. Mentioned in: Holter Monitoring, Stress Test cardiac arrhythmia , today reported results for the quarter ended March 31, 2008. Q1 2008 Highlights Highlights of the first quarter of 2008 included: * Reported Q1 2008 revenue growth of 67.9% compared to the same period last year adjusted to include the impact of the acquisition of PDSHeart, Inc. ("PDSHeart") as if the acquisition occurred on January 1, 2007 (1A), and 129.4% revenue growth for the same period last year on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis. * Achieved the third consecutive quarter of profitability. * Completed our $82.8 million initial public offering at $18.00 per share (inclusive of inclusive of prep. Taking into consideration or account; including. the underwriters' partial exercise of its over-allotment option), raising net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to CardioNet of $46.9 million. * Secured a new direct contract with a national commercial payor representing over 16 million lives, bringing the total number of lives covered by the CardioNet System to 176 million covered by 170 commercial contracts and Medicare. * Celebrated the one year anniversary of the March 2007 publication of a 300-patient randomized clinical trial randomized clinical trial, n a clinical study where volunteer participants with comparable characteristics are randomly assigned to different test groups to compare the efficacy of therapies. finding that the CardioNet System detected clinically significant arrhythmias nearly three times as often as traditional loop event monitors in patients who had previously experienced negative or non-diagnostic Holter monitoring Holter Monitoring Definition Holter monitoring is continuous monitoring of the electrical activity of a patient's heart muscle (electrocardiography) for 24 hours, using a special portable device called a Holter monitor. . * Initiated final integration plans related to the March 2007 PDSHeart acquisition, including the elimination of redundant operations, overhead and facilities. We currently expect this plan to be substantially implemented by mid-2008. * Bolstered our senior management team with the hiring of experienced executives in key management positions in Sales, Marketing and R&D. President and Chief Executive Officer ("CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. ") Commentary Arie Cohen cohen or kohen (Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. , President and CEO, commented: "We are pleased to report a record first quarter that exceeded our expectations. Our performance reflects continued recognition by physicians and payors of the benefits of utilizing the CardioNet System. We believe that CardioNet only has approximately 5% penetration of an estimated $2 billion market, and that the future growth opportunities for our company are quite compelling. "We have seen significant payor momentum since the publication of a 300-patient randomized clinical trial in March 2007, which illustrated a three times higher diagnostic yield of the CardioNet System versus event monitoring In computer science, event monitoring is the process of collecting, analyzing, and signalling event occurrences to subscribers such as operating system processes, active database rules as well as human operators. for patients who previously had negative or non-diagnostic Holter monitoring. From March 2007, we have signed 28 new commercial payor contracts representing over 34.9 million lives, including two significant national payors, one of which was signed late in the first quarter of 2008. We believe this momentum of payor acceptance will continue and that we will secure additional new contracts going forward." Financial Results Revenues for the first quarter of 2008 increased to $25.5 million compared to $11.1 million in the first quarter of 2007, an increase of $14.4 million, or 129.4%. After taking into account the acquisition of PDSHeart, the $25.5 million of first quarter 2008 revenue compares to adjusted revenue of $15.2 million for first quarter 2007 (1A), an increase of $10.3 million, or 67.9%. Gross profit increased to $15.9 million in the first quarter of 2008, or 62.6% of revenues, compared to $7.3 million in the first quarter of 2007, or 65.9% of revenues. After taking into account the acquisition of PDSHeart, the 62.6% gross profit in the first quarter of 2008 compares to 64.0% adjusted gross profit in the first quarter of 2007 (1A). Marty Galvan, CardioNet's Chief Financial Officer, commented: "The adjusted gross profit of 64.0% for the first quarter of 2007 is lower than the reported GAAP gross profit of 65.9% due to the impact of the inclusion of an entire quarter of the lower margin PDSHeart event and Holter monitoring products. Year over year, the reduction in gross profit to 62.6% is primarily due to a fuel surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. on device shipments to and from patients. Although we expect this charge to continue in 2008, we have identified manufacturing cost and operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. reductions to offset its impact on our 2008 results." On a GAAP basis, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased to $0.3 million in the first quarter of 2008 compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $2.2 million in the same period last year. Excluding the impact of $0.4 million of integration and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. primarily related to integration of PDSHeart (1B), adjusted operating income increased to $0.6 million in the first quarter of 2008 compared to an operating loss of $2.2 million in the first quarter of 2007. The PDSHeart integration plan is expected to be substantially implemented by mid-2008 with additional integration charges anticipated in the second and third quarters of 2008. Marty Galvan commented: "We are very excited to report our third consecutive quarter of profitability. In the first quarter of 2008, CardioNet invested heavily in sales and marketing, additional management talent, research and development and other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. that will help drive our future growth. As our revenue continues to grow over the balance of 2008, we will be able to leverage these expenses over a larger revenue base. The first quarter 2008 adjusted operating income exceeded our expectations and the sequential decline from the fourth quarter 2007 to the first quarter 2008 reflects the investments outlined above. We expect operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: to increase substantially over the next several quarters." On a GAAP basis, net income for the first quarter of 2008 increased to $0.2 million compared to a net loss of $3.2 million for the same period last year. Adjusted net income for the first quarter of 2008 increased to $0.4 million, or $0.02 per diluted share, excluding the impact of integration and restructuring costs (1B), compared to a net loss of $3.2 million, or a loss of $1.06 per diluted share, for the same period last year. Net loss available to common shares, which is derived by reducing net income by the accrued dividends and accretion on mandatorily redeemable convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". , was $2.4 million, or a loss of $0.50 per diluted share, compared to a net loss of $3.6 million, or a loss of $1.22 per diluted share, for the same period last year. The mandatorily redeemable convertible preferred stock, which was issued to finance the March 2007 PDSHeart acquisition, was converted to common stock in connection with CardioNet's March 2008 initial public offering. 2008 Outlook CardioNet CEO Arie Cohen noted, "Looking ahead, we believe that we are well-positioned to deliver sustained revenue and earnings growth and have set a revenue target for 2008 of $117.0 to $120.0 million. We expect to leverage our strong balance sheet to invest in sales and marketing resources to drive revenue growth, R&D projects to enhance our product portfolio, and opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. strategic acquisitions that we believe will further strengthen our performance in 2008 and beyond." Conference Call CardioNet, Inc. will host an earnings conference call on Tuesday, April 29, 2008, at 8:00 AM Eastern Time. The call will be simultaneously webcast on the investor information page of our website, www.CardioNet.com. The call will be archived on our website and will also be available for two weeks via phone at 888-286-8010, access code 50515401. CardioNet, Inc. is a 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 with a solution that it markets as the CardioNet System. More information can be found at http://www.CardioNet.com. Forward Looking Statements This press release includes certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 regarding, among other things, our ability to deliver sustained revenue and earnings growth, our ability to implement manufacturing cost and expense reductions, our ability to increase our operating margin, the performance of our recent acquisition of PDSHeart, our ability to integrate it into our operations during mid-2008, its affect on earnings and whether it will contribute to higher rates of revenue and earnings growth in the future, our ability to secure additional contracts in 2008, our outlook for our businesses, our expectations regarding the integration and restructuring charges and our ability to recover the costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our acquisition of PDSHeart, our expectations for our research and development pipeline and new product introductions, our ability to create stockholder value, our 2008 revenue target, our prospects for continued growth, our ability to successfully execute on our business strategies and our confidence in the Company's future. These statements may be identified by words such as "expect," "anticipate," "estimate," "project," "intend," "plan," "believe," and other words and terms of similar meaning. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including important factors that could delay, divert, or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, the integration of our recent acquisition of PDSHeart, the continued implementation of the company's restructuring plans, sales and marketing initiatives, our ability to attract and retain talented sales personnel, the commercialization of new products, market factors, internal research and development initiatives, partnered research and development initiatives, competitive product development, changes in governmental regulations and legislation, the continued consolidation of payors, acceptance of our new products and services, patent protection and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , a successful mergers and acquisitions strategy, the ability to locate and acquire companies, the existence of businesses and products that are strategic to the Company and accretive to earnings, and the market for mergers and acquisitions. For further details and a discussion of these and other risks and uncertainties, please see our public filings with the Securities and Exchange Commission, including our final prospectus Final Prospectus A legal document stating the price of a newly issued security, the delivery date, and other facts that are important for investors. Notes: The final prospectus must be given to every investor who purchases a new issue of registered securities. filed on March 19, 2008 in connection with our initial public offering. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. 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