CardioNet, Inc. Reports Second Quarter 2008 Results

CONSHOHOCKEN, Pa.--(Business Wire)--
CardioNet, Inc. (NASDAQ:BEAT), a leading wireless medical
technology company with an initial focus on the diagnosis and
monitoring of cardiac arrhythmias, today reported results for the
quarter ended June 30, 2008.

Q2 2008 Highlights

-- Reported revenue of $29.3 million, up 68.4%, compared to $17.4
million in the same period last year.

-- Experienced a profitable quarter with an 8.7% operating margin
in Q2 2008 compared to a loss in Q2 2007.

-- Continued to build on the momentum of payor acceptance
generated from the publication of our clinical trial results
in March 2007, securing 9 new direct payor contracts in the
second quarter representing approximately 1 million additional
lives, bringing the total number of covered lives to
approximately 177 million covered by 181 commercial contracts
and Medicare.

-- Expanded our direct sales force by 11.0% from the end of Q1
2008, broadening our footprint as the largest arrhythmia
monitoring sales force.

-- Appointed Randy Thurman, former Chairman and CEO of VIASYS
Healthcare (acquired by Cardinal Health for $1.5 billion in
June 2007), as Executive Chairman to replace founder Jim
Sweeney.

-- Bolstered our senior management team with the hiring of
additional experienced executives in key management positions
in Operations and Human Resources.

-- Entered into a settlement agreement with LifeWatch Corp., in
the amicable resolution of a lawsuit with dismissal by both
sides of all claims asserted in the litigation.

President and CEO Commentary

Arie Cohen, President and CEO, commented: "We are excited to
report a record second quarter that builds on our market momentum. The
CardioNet System has demonstrated a 3x higher yield in diagnosing
cardiac arrhythmias versus event monitoring for patients who
previously had negative or non-diagnostic Holter monitoring. We
believe that the enhanced ability to diagnose and manage patients with
cardiac arrhythmias results in superior clinical outcomes and reduced
health care costs. Accordingly, the momentum we are experiencing in
payor adoption continues, demonstrated by CardioNet reaching the
milestone of approximately 70% of lives under coverage from commercial
payors and Medicare. During the first six months of 2008, we secured
14 new contracts representing 19 million covered lives.

"Our recent appointment of Randy Thurman as Executive Chairman
further enhances CardioNet's leadership team, as we seek to expand our
penetration in the $2 billion arrhythmia monitoring opportunity.
Annualizing our Q2 revenue suggests that we have achieved less than 6%
penetration, underscoring the significant growth opportunity going
forward in our core business. We believe our wireless medicine
platform also can be leveraged in the future for other new
applications and markets and remain excited about the potential for
this innovative and scalable technology."

Financial Results

Revenues for the second quarter of 2008 increased to $29.3 million
compared to $17.4 million in the second quarter of 2007, an increase
of $11.9 million, or 68.4%. Revenues for the six months ended June 30,
2008 increased to $54.8 million compared to $28.5 million in the
comparable period in the prior year. After taking into account the
acquisition of PDSHeart, Inc. ("PDSHeart"), which the Company acquired
in March 2007, revenue in the first half of 2008 increased 68.2% to
$54.8 million compared to $32.6 million in the same period last
year(1A).

Gross profit increased to $19.5 million in the second quarter of
2008, or 66.5% of revenues, compared to $11.5 million in the second
quarter of 2007, or 65.8% of revenues. The 66.5% gross margin in
second quarter of 2008 also compares favorably to the 62.6% gross
margin in the first quarter of 2008. For the first half of 2008, gross
profit increased to $35.5 million, or 64.7% of revenues, compared to
$18.8 million, or 65.8% of revenues, in the comparable period in the
prior year. After taking into account the acquisition of PDSHeart, the
64.7% gross profit in the year to date period compares to 65.0% gross
profit in the same period last year, a decrease of 30 basis points due
to first quarter performance(1A).

Marty Galvan, CardioNet's Chief Financial Officer commented: "Our
second quarter gross profit reflects cost reductions and productivity
improvements that successfully offset the negative factors experienced
in the first quarter of 2008, primarily a fuel surcharge. In addition,
our revenue mix continues to shift towards our proprietary CardioNet
System, away from legacy event and Holter monitoring products based on
the strength of its superior diagnostic yield. It is important to
emphasize that the gross margin for the CardioNet System is higher
than the gross margin for the legacy event and Holter monitoring
products, thereby contributing to the gross margin improvement."

On a GAAP basis, operating income increased to $2.5 million in the
second quarter of 2008 compared to an operating loss of $1.0 million
in the second quarter of 2007. Excluding $0.6 million of expense
related to the integration of PDSHeart and other restructuring
efforts(1B), adjusted operating income increased to $3.1 million in
the second quarter of 2008, or 10.7% of revenue, compared to an
operating loss of $1.0 million in the second quarter of 2007.

On a GAAP basis, operating income for the year to date period
increased to $1.9 million compared to an operating loss of $3.2
million in the comparable period in the prior year. Excluding the
impact of $1.9 million of integration, restructuring and other
nonrecurring charges(1B), adjusted operating income increased to $3.8
million in the first half of 2008, or 6.9% of revenue, compared to an
operating loss of $3.2 million in the first half of 2007.

Marty Galvan remarked: "As previously discussed, we expect to
record approximately $1.3 million in PDSHeart integration charges in
2008. In the first half of the year, we have reported approximately
$1.0 million in charges, with the balance expected primarily in the
third quarter of 2008. The litigation settlement charges with
LifeWatch announced in May 2008 were included in Q1 2008 results and
did not impact the second quarter results."

On a GAAP basis, net income for the second quarter of 2008
increased to $1.6 million, or $0.07 per diluted share, compared to a
net loss of $1.1 million, or a loss of $0.36 per diluted share, for
the same period last year. Adjusted net income for the second quarter
of 2008 increased to $2.0 million, or $0.08 per diluted share,
excluding the impact of integration, restructuring and other
nonrecurring charges(1B), compared to a net loss of $1.1 million, or a
loss of $0.36 per diluted share, for the same period last year.

On a GAAP basis, net income for the first half of 2008 increased
to $1.3 million, or $0.06 per diluted share, compared to a net loss of
$4.3 million, or a loss of $1.41 per diluted share, for the first half
of 2007. Adjusted net income for the first half of 2008 increased to
$2.4 million, or $0.11 per diluted share, excluding the impact of
integration, restructuring and other nonrecurring charges(1B),
compared to a net loss of $4.3 million, or a loss of $1.41 per diluted
share, for the same period last year.

Net income available to common shareholders, which is derived by
reducing net income by the accrued dividends and accretion on
mandatorily redeemable convertible preferred stock, was $1.6 million,
or $0.07 per diluted share, for the second quarter of 2008 compared to
a net loss of $3.5 million, or a loss of $1.13 per diluted share, for
the second quarter of 2007. Net loss available to common shareholders
for the six month period ending June 30, 2008 was $1.3 million, or a
loss of $0.10 per diluted share, compared to a loss of $7.1 million,
or a loss of $2.35 per diluted share, for the same period last year.
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.

Marty Galvan noted: "During our first quarter 2008 earnings
release, CardioNet announced 2008 revenue guidance of $117 to $120
million. The strength of our second quarter increases our level of
comfort toward the high-end of that range. We believe that the third
quarter will be impacted by seasonality related to physician and
patient schedules over the summer months, which will moderate our
sequential growth. In regard to expenses, today we also announced a
secondary offering and we expect to incur charges related to the
offering in the third quarter of 2008. We also expect to make
continued investments in sales and marketing resources, infrastructure
to support our growth and R&D projects to enhance our product
portfolio over the second half of 2008, positioning the Company for
growth in 2009 and beyond. Going forward, we firmly believe that we
remain well-positioned to deliver sustained revenue and earnings
growth and will continue to maintain a very strong balance sheet."

Conference Call

CardioNet, Inc. will host an earnings conference call on Tuesday,
July 22, 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 61950613.

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
within the meaning of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995 regarding, among other
things, our ability to deliver sustained revenue and earnings growth,
to maintain a strong balance sheet, the momentum in payor acceptance,
the ability of our products and services to deliver superior clinical
outcomes and reduced heath care costs, our ability to increase our
market penetration, the size of our potential markets and growth
opportunities, our ability to leverage our platform for other
applications and markets, our expectations with respect to our revenue
mix or the continued shift from legacy products to the CardioNet
System, the amount of our integration charges related to the PDSHeart
acquisition, our expectations with respect to future financial
performance and seasonality in our business, expectations with respect
to charges relating to the planned secondary offering, expectations
with respect to future investments, our outlook for our businesses,
our 2008 revenue target, our prospects for continued growth 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 our 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, changes to reimbursement
levels for our products, the continued consolidation of payors,
acceptance of our new products and services and patent protection and
litigation. 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 latest periodic
report on Form 10-K or 10-Q. 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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Three Months Ended
----------------------

Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Amounts)
June 30, June 30,
2008 2007

Revenues $ 29,340 $ 17,419
Cost of revenues 9,834 5,953
---------- ----------
Gross Profit 19,506 11,466
Gross Profit % 66.5% 65.8%

Operating Expenses:
Research and development expense 931 1,019
General and administrative expense 9,768 6,834
Sales and marketing expense 5,412 4,377
Amortization of intangibles 246 246
Integration, restructuring and other
nonrecurring charges 610 -
---------- ----------
Total Operating Expenses 16,967 12,476

---------- ----------
Operating Income (Loss) 2,537 (1,010)
---------- ----------
Interest Income (Expense), net 267 (94)

Income (Loss) before Income Taxes 2,804 (1,104)
Provision for Income Taxes (1,172) -
---------- ----------
Net Income (Loss) $ 1,632 $ (1,104)
Dividends on and accretion of mandatorily
redeemable convertible preferred stock - (2,362)
---------- ----------
Net Income (Loss) available to common
shareholders $ 1,632 $ (3,466)
========== ==========

Earnings (Loss) per Share:
Basic $ 0.07 $ (1.13)
Diluted $ 0.07 $ (1.13)

Weighted Average Shares Outstanding:
Basic 23,098 3,054
Diluted 24,191 3,054

Six Months Ended
----------------------

Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Amounts)
June 30, June 30,
2008 2007

Revenues $ 54,803 $ 28,519
Cost of revenues 19,353 9,743
---------- ----------
Gross Profit 35,450 18,776
Gross Profit % 64.7% 65.8%

Operating Expenses:
Research and development expense 2,073 2,010
General and administrative expense 18,589 11,974
Sales and marketing expense 10,527 7,696
Amortization of intangibles 492 307
Integration, restructuring and other
nonrecurring charges 1,916 -
---------- ----------
Total Operating Expenses 33,597 21,987

---------- ----------
Operating Income (Loss) 1,853 (3,211)
---------- ----------
Interest Income (Expense), net 379 (1,047)

Income (Loss) before Income Taxes 2,232 (4,258)
Provision for Income Taxes (940) -
---------- ----------
Net Income (Loss) $ 1,292 $ (4,258)
Dividends on and accretion of mandatorily
redeemable convertible preferred stock (2,597) (2,845)
---------- ----------
Net Income (Loss) available to common
shareholders $ (1,305) $ (7,103)
========== ==========

Earnings (Loss) per Share:
Basic and Diluted $ (0.10) $ (2.35)

Weighted Average Shares Outstanding:
Basic and Diluted 13,368 3,024

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The following table presents detail of the stock-based
compensation expense that is included in each functional line item in
the Condensed Statement of Operations above (000's):

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Three Months Ended
--------------------------

Stock based compensation expense (unaudited)
(In Thousands)
June 30, June 30,
2008 2007

Stock based compensation expense included
in:
Cost of revenues $ 8 $ -
Research and development expense 17 -
General and administrative expense 227 132
Sales and marketing expense 139 -
------------ ------------

Total stock based compensation
expense $ 391 $ 132

Six Months Ended
--------------------------

Stock based compensation expense (unaudited)
(In Thousands)
June 30, June 30,
2008 2007

Stock based compensation expense included
in:
Cost of revenues $ 15 $ -
Research and development expense 32 -
General and administrative expense 466 201
Sales and marketing expense 238 -
------------ ------------

Total stock based compensation
expense $ 751 $ 201

Summary Consolidated Balance Sheet Data
(In Thousands)
June 30, December 31,
2008 2007
(unaudited)

Cash and cash equivalents $ 54,572 $ 18,091
Accounts receivable, net 29,301 22,854
Working capital 71,031 29,375
Total assets 152,842 103,040
Total debt 346 2,744
Mandatorily redeemable convertible
preferred stock - 115,302
Total shareholders' equity (deficit) 137,255 (26,865)

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Reconciliation of Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)

In accordance with Regulation G of the Securities and Exchange
Commission, the tables set forth below reconcile certain financial
measures used in this press release that were not calculated in
accordance with generally accepted accounting principles, or GAAP,
with the most directly comparable financial measure calculated in
accordance with GAAP.
*T

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(1A) The following table provides a reconciliation of year to date
2007 results as if the PDSHeart acquisition had been completed
as of January 1, 2007.

*T

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Six Months Ended
----------------

(unaudited)

June 30, 2007

Total Revenue - GAAP $ 28,519
PDSHeart Revenue prior to acquisition - January 1 to
March 7, 2007 4,069
----------------
Adjusted Revenue $ 32,588
================
Total Gross Profit - GAAP $ 18,776
PDSHeart Gross Profit prior to acquisition - January
1 to March 7, 2007 2,423
----------------
Adjusted Gross Profit $ 21,199
================
Adjusted Gross Profit % 65.0%

*T

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(1B) The following tables reconcile certain financial measures used in
this press release that were not calculated in accordance with
GAAP.

*T

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Three Months Ended
----------------------------

(unaudited)

June 30, 2008 June 30, 2007
------------- -------------
Operating Income (Loss) - GAAP $ 2,537 $ (1,010)
Integration, Restructuring and Other
Nonrecurring Charges(a) 610 -
------------- -------------
Adjusted Operating Income (Loss) $ 3,147 $ (1,010)
============= =============

Net Income (Loss) available to common
shareholders - GAAP $ 1,632 $ (3,466)
Dividends on and accretion of mandatorily
redeemable convertible preferred stock
which converted to common stock in the
first quarter of 2008 - 2,362
------------- -------------
Net Income (Loss) - GAAP $ 1,632 $ (1,104)
Integration, Restructuring and Other
Nonrecurring Charges (net of income
taxes of $255) (a) 355 -
------------- -------------
Adjusted Net Income (Loss) $ 1,987 $ (1,104)
============= =============

Diluted Earnings (Loss) per Share - GAAP $ 0.07 $ (1.13)

Dividends on and accretion of mandatorily
redeemable convertible preferred stock
which converted to common stock in the
first quarter of 2008 and Integration,
Restructuring and Other Nonrecurring
Charges per Share (a) 0.01 0.77
------------- -------------
Adjusted Diluted Earnings (Loss) per
Share $ 0.08 $ (0.36)
============= =============

(a) In the second quarter of 2008, we incurred $0.6 million of
integration and restructuring charges.

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Six Months Ended
----------------------------

(unaudited)

June 30, 2008 June 30, 2007
------------- -------------
Operating Income (Loss) - GAAP $ 1,853 $ (3,211)
Integration, Restructuring and Other
Nonrecurring Charges(a) 1,916 -
------------- -------------
Adjusted Operating Income (Loss) $ 3,769 $ (3,211)
============= =============

Net Income (Loss) available to common
shareholders - GAAP $ (1,305) $ (7,103)
Dividends on and accretion of mandatorily
redeemable convertible preferred stock
which converted to common stock in the
first quarter of 2008 2,597 2,844
------------- -------------
Net Income (Loss) - GAAP $ 1,292 $ (4,258)
Integration, Restructuring and Other
Nonrecurring Charges (net of income
taxes of $807) (a) 1,109 -
------------- -------------
Adjusted Net Income (Loss) $ 2,401 $ (4,258)
============= =============

Diluted Earnings (Loss) per Share - GAAP $ (0.10) $ (2.35)

Dividends on and accretion of mandatorily
redeemable convertible preferred stock
which converted to common stock in the
first quarter of 2008 and Integration,
Restructuring and Other Nonrecurring
Charges per Share (a) 0.21 0.94
------------- -------------
Adjusted Diluted Earnings (Loss) per
Share $ 0.11 $ (1.41)
============= =============

(a) For the six month period ending June 30, 2008, we incurred $0.9
million of integration and restructuring expense and $1.0 million of
expense related to the resolution of litigation.

*T

CardioNet, Inc.
Marty Galvan
Investor Relations
800-908-7103
investorrelations@cardionet.com

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