Q1 revenues up 40 percent at CardioNet

Medical Product Outsourcing, June, 2009

Randy Thurman is calling it "an inflection point." Marty Galvan considers it a "heavy investment year."

The terms executives are using this year to predict the financial performance of CardioNet Inc. are not as important as their underlying message: 2009 is shaping up to be a year of change at the Conshohocken, Pa.-based firm.

"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," said Thurman, CardioNet's new chairman, president and CEO. "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. We have made concrete progress in expanding our leadership position in wireless cardiac monitoring and establishing our first adjacent market business in clinical services ... the future looks very promising for CardioNet."

So does the present.

In the first quarter of 2009, ended March 31, the company reported revenue of $35.7 million, a 40.3 percent increase when compared with the $25.4 million CardioNet posted in the first quarter of 2008. Gross profit jumped 49.7 percent to $23.8 million, and net interest income climbed 5.3 percent to $118,000.

The company's net loss, however, more than doubled. It went from $340,000 in the first quarter of 2008 to $722,000 in the same period this year. Its operating loss totaled $1.3 million, a 96.64 percent increase compared with the $684,000 operating loss CardioNet reported in the first quarter of 2008.

Operating expenses went up significantly, going from $16.6 million in the first quarter of 2008 to $25.2 million in the first three months of 2009. Galvan, CardioNet's chief financial officer, attributed part of the increase ($3 million) to the company's pending merger with Biotel Inc., an Eagan, Minn.-based firm that manufactures wearable diagnostic electrocardiology devices. Announced April 2, the $14 million deal will allow CardioNet to expand its position in the wireless medicine sector, executives said.

Some of the increase in operating expenses also was attributed to the expansion of CardioNet's sales staff in the beginning of the year. Thurman said the additional 41 sales staff members will help the company gain a larger share of the cardiac arrhythmia market in the future.