Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 28, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | BioTelemetry, Inc. | |
Entity Central Index Key | 1,574,774 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 28,231,128 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 32,255 | $ 18,986 |
Accounts receivable, net of allowance for doubtful accounts of $12,569 and $11,185, at September 30, 2016 and December 31, 2015, respectively | 15,654 | 15,179 |
Other accounts receivable, net of allowance for doubtful accounts of $335 and $416, at September 30, 2016 and December 31, 2015, respectively | 12,794 | 8,997 |
Inventory | 3,810 | 2,378 |
Prepaid expenses and other current assets | 3,831 | 1,505 |
Total current assets | 68,344 | 47,045 |
Property and equipment, net | 26,313 | 25,554 |
Intangible assets, net | 31,606 | 19,981 |
Goodwill | 37,251 | 29,831 |
Other assets | 1,697 | 1,732 |
Total assets | 165,211 | 124,143 |
Current liabilities: | ||
Accounts payable | 9,755 | 8,496 |
Accrued liabilities | 14,958 | 11,230 |
Current portion of capital lease obligations | 211 | 287 |
Current portion of long-term debt | 12,818 | 1,250 |
Deferred revenue | 4,945 | 2,625 |
Total current liabilities | 42,687 | 23,888 |
Deferred tax liability | 1,340 | 1,233 |
Long-term capital lease obligations | 141 | 101 |
Long-term debt | 24,244 | 21,944 |
Other liabilities | 1,767 | 1,051 |
Total liabilities | 70,179 | 48,217 |
Stockholders' equity: | ||
Common stock-$.001 par value as of September 30, 2016 and December 31, 2015; 200,000,000 shares authorized as of September 30, 2016 and December 31, 2015; 28,231,078 and 27,277,939 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 28 | 27 |
Paid-in capital | 278,767 | 272,070 |
Accumulated other comprehensive loss | (10) | (12) |
Accumulated deficit | (183,753) | (196,159) |
Total stockholders' equity | 95,032 | 75,926 |
Total liabilities and stockholders' equity | $ 165,211 | $ 124,143 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 12,569 | $ 11,185 |
Other receivable, allowance for doubtful accounts (in dollars) | $ 335 | $ 416 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 28,231,078 | 27,277,939 |
Common stock, shares outstanding | 28,231,078 | 27,277,939 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues: | ||||
Healthcare | $ 40,395 | $ 35,687 | $ 123,709 | $ 106,923 |
Research | 10,420 | 5,484 | 23,709 | 16,353 |
Technology | 2,240 | 2,321 | 6,957 | 8,463 |
Total revenues | 53,055 | 43,492 | 154,375 | 131,739 |
Cost of revenues: | ||||
Healthcare | 13,030 | 12,314 | 39,662 | 38,299 |
Research | 5,604 | 3,220 | 13,306 | 9,406 |
Technology | 1,555 | 1,621 | 4,993 | 5,741 |
Total cost of revenues | 20,189 | 17,155 | 57,961 | 53,446 |
Gross profit | 32,866 | 26,337 | 96,414 | 78,293 |
Operating expenses: | ||||
General and administrative | 13,853 | 11,497 | 40,577 | 35,100 |
Sales and marketing | 7,018 | 6,632 | 21,687 | 20,741 |
Bad debt expense | 2,495 | 2,245 | 7,797 | 6,769 |
Research and development | 2,137 | 1,565 | 5,888 | 5,161 |
Other charges | 2,397 | 1,392 | 5,844 | 4,462 |
Total operating expenses | 27,900 | 23,331 | 81,793 | 72,233 |
Income from operations | 4,966 | 3,006 | 14,621 | 6,060 |
Interest and other loss, net | (630) | (391) | (1,686) | (1,220) |
Income before income taxes | 4,336 | 2,615 | 12,935 | 4,840 |
Provision for income taxes | (235) | (137) | (529) | (260) |
Net income | 4,101 | 2,478 | 12,406 | 4,580 |
Other comprehensive income: | ||||
Foreign currency translation gain (loss) | 150 | 1 | 2 | (8) |
Comprehensive income | $ 4,251 | $ 2,479 | $ 12,408 | $ 4,572 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 0.15 | $ 0.09 | $ 0.45 | $ 0.17 |
Diluted (in dollars per share) | $ 0.14 | $ 0.08 | $ 0.42 | $ 0.16 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 28,102,196 | 27,181,250 | 27,810,763 | 27,062,630 |
Diluted (in shares) | 30,333,577 | 29,311,060 | 29,857,225 | 29,019,141 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING ACTIVITIES | ||
Net income | $ 12,406 | $ 4,580 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Bad debt expense | 7,797 | 6,769 |
Depreciation | 7,884 | 6,343 |
Non-cash lease expense | 111 | 11 |
Deferred income tax expense | 107 | 260 |
Stock-based compensation | 3,757 | 3,321 |
Amortization of intangibles | 2,735 | 2,781 |
Accretion of discount on debt | 163 | 149 |
Changes in operating assets and liabilities: | ||
Accounts and other receivables | (8,390) | (6,820) |
Inventory | (1,221) | (241) |
Prepaid expenses and other assets | (1,895) | (403) |
Accounts payable | 934 | (2,682) |
Accrued and other liabilities | 2,017 | (515) |
Liability associated with the Civil Investigative Demand | (6,400) | |
Net cash provided by operating activities | 26,405 | 7,153 |
INVESTING ACTIVITIES | ||
Acquisition of businessess, net of cash acquired | (17,970) | |
Purchases of property and equipment and investment in internally developed software | (8,507) | (10,310) |
Net cash used in investing activities | (26,477) | (10,310) |
FINANCING ACTIVITIES | ||
Proceeds (payments) related to the exercising of stock options and vesting of RSUs and PSUs | 56 | (352) |
Borrowings under revolving loans | 14,500 | |
Principal payments on long-term debt | (958) | (625) |
Principal payments on capital lease obligations | (257) | (382) |
Net cash provided by (used in) financing activities | 13,341 | (1,359) |
Net increase (decrease) in cash and cash equivalents | 13,269 | (4,516) |
Cash and cash equivalents - beginning of period | 18,986 | 20,007 |
Cash and cash equivalents - end of period | 32,255 | 15,491 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 965 | 706 |
Cash paid for taxes | $ 289 | $ 322 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. In the opinion of management, these consolidated financial statements reflect all adjustments which are of a normal recurring nature and necessary for a fair presentation of BioTelemetry, Inc.’s (“BioTelemetry,” “Company,” “we,” “our” or “us” ) financial position as of September 30, 2016 and December 31, 2015, the results of operations for the three months and nine months ended September 30, 2016 and 2015 and cash flows for the nine months ended September 30, 2016 and 2015. The financial data and other information disclosed in these notes to the consolidated financial statements related to the three and nine months ended September 30, 2016 and 2015 are unaudited. The results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for any future period. Net Income Per Share We compute net income per share in accordance with Accounting Standards Codification (“ASC”) 260, Earnings Per Share. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by giving effect to all potential dilutive common shares, including stock options and restricted stock units. The following table presents the calculation of basic net income per share: Three Months Ended Nine Months Ended 2016 2015 2016 2015 (Net income in thousands) Numerator: Net income $ $ $ $ Denominator: Weighted average shares used in computing basic net income per share Potential dilutive common shares due to dilutive stock option and restricted stock units Weighted average shares used in computing diluted net income per share Net income per share: Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ Certain stock options, which are priced higher than the market price of our shares as of September 30, 2016 and 2015, would be anti-dilutive and therefore have been excluded from the weighted average shares used in computing diluted net income per share. These options could become dilutive in future periods. Fair Value of Financial Instruments The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. We have financial instruments falling into all three levels of the fair value hierarchy. Our Level 1 financial instruments consist primarily of cash and cash equivalents, accounts receivable, other accounts receivable and accounts payable. The carrying value of these financial instruments approximates their fair value because of their short-term nature. Long-term debt, which is given a Level 2 classification within the fair value hierarchy, was determined to have a fair value of $37,767 as of September 30, 2016. This is equal to the nominal value, which is the carrying value, exclusive of debt discount and deferred charges. The fair value of contingent consideration, which is a Level 3 fair value instrument, is measured on a recurring basis using unobservable inputs such as projected payment dates, probabilities of meeting specified milestones and other such variables resulting in payment amounts which are discounted back to present value using a probability-weighted discounted cash flow model. In addition to our recurring fair value measurements, we have assets acquired in connection with business combinations, which are recorded at fair value on the acquisition date using a discounted cash flow model, which is a Level 3 classification. This valuation technique requires the Company to make certain assumptions, including, but not limited to, future operating performance and cash flows, royalty rates and other such variables which are discounted to present value using a discount rate that reflects the risk factors associated with future operating cash flow of the acquired business, the characteristics of the assets acquired and liabilities assumed and the experience of the acquired business. Equity Method Investments We account for investments using the equity method of accounting if the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at cost in the consolidated balance sheets as a component of other assets and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of interest and other loss, net in the consolidated statements of operations and comprehensive income. In December 2015, we acquired an ownership interest in Well Bridge Health, Inc. (“WellBridge”) through the conversion of an outstanding note receivable and the related accrued interest. The investment is accounted for under the equity method. At the time of the acquisition, the equity method basis difference of $891 was allocated to equity method goodwill. As of September 30, 2016, our investment in WellBridge represented 32% of the outstanding stock. A summary of our investment in Wellbridge is as follows: Three Months Ended Nine Months Ended Opening balance $ $ Capital contributions Our share of the investee’s losses ) ) September 30, 2016 Balance $ $ Goodwill and Acquired Intangible Assets Goodwill is the excess of the purchase price of an acquired business over the amounts assigned to the assets acquired and liabilities assumed in a business combination. In accordance with ASC 350, Intangibles — Goodwill and Other (“ASC 350”), goodwill is reviewed for impairment annually, or when events arise that could indicate that an impairment exists. The provisions of ASC 350 require that we perform a two-step impairment test. In the first step, we compare the fair value of our reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units’ goodwill. If the carrying value of the reporting units’ goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. For the purpose of performing our goodwill impairment analysis, we consider our business to be comprised of three reporting units: Healthcare, Research and Technology. We calculate the fair value of the reporting units utilizing a weighting of the income and market approaches. The income approach is based on a discounted cash flow methodology that includes assumptions for, among other things, forecasted income, cash flow, growth rates, income tax rates, expected tax benefits and long-term discount rates, all of which require significant judgment. The market approach utilizes our market data. There are inherent uncertainties related to these factors and the judgment applied in the analysis. We believe that the combination of an income and a market approach provides a reasonable basis to estimate the fair value of our reporting units. Acquired intangible assets are recorded at fair value on the acquisition date. The estimated fair values and useful lives of intangible assets are determined by assessing many factors including estimates of future operating performance and cash flow of the acquired business, the characteristics of the intangible assets acquired and the experience of the acquired business. Independent appraisal firms may assist with the valuation of acquired assets. The impairment test for indefinite-lived intangible assets other than goodwill consists of a comparison of the fair value of the indefinite-lived intangible asset to the carrying value of the asset. Recent Accounting Pronouncements Not Yet Adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard will revise accounting for share-based compensation arrangements, including the income tax impact and classification on the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . The standard will require lessees to recognize most leases on their balance sheet and makes selected changes to lessor accounting. The standard is effective for annual and interim reporting periods beginning after December 15, 2018. A modified retrospective transition approach is required, with certain practical expedients available. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory . The standard will require inventory to be measured at the lower of cost or net realizable value. The guidance will not apply to inventories for which cost is determined using the last-in, first-out method or the retail inventory method. The standard is effective for annual and interim reporting periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which has been updated through several revisions and clarifications since its original issuance. The standard will require revenue recognized to represent the transfer of promised goods or services to customers at an amount that reflects the consideration which a company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. The standard will be effective January 1, 2018 with early adoption permissible beginning January 1, 2017. We are currently evaluating the transition method we will elect and the impact the adoption of this standard will have on our consolidated financial statements. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2016 | |
Acquisitions | |
Acquisitions | 2. Acquisitions VirtualScopics, Inc . On March 25, 2016, the Company, through its wholly-owned subsidiary BioTelemetry Research Acquisition Corporation, entered into a definitive Agreement and Plan of Merger with VirtualScopics, Inc. (“VirtualScopics”), a leading provider of clinical trial imaging solutions. Under the terms of the Merger Agreement, the Company purchased: (i) any and all outstanding shares of VirtualScopics’ $0.001 par value common stock for $4.05 per share; (ii) any and all outstanding shares of VirtualScopics’ $0.001 par value Series A and Series B Convertible Preferred Stock for $336.30 per share; and (iii) any and all outstanding shares of VirtualScopics’ $0.001 par value Series C-1 Convertible Preferred Stock for $920.00 per share. The all cash acquisition of VirtualScopics was completed on May 11, 2016. The total consideration paid at closing amounted to $14,970, net of cash acquired of $849. The acquisition of VirtualScopics expands the Company’s existing clinical research offerings and gives the Company further access to established customer relationships. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the consideration paid over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. The Company recognized $4,453 of goodwill as a result of the acquisition, all of which has been assigned to the Research segment. We do not expect that any of this goodwill will be deductible for tax purposes. The amounts below represent our preliminary fair value estimates as of September 30, 2016 and are subject to subsequent adjustment as additional information is obtained during the applicable measurement period. The primary areas of these preliminary estimates that are not yet finalized relate to certain tangible assets acquired and liabilities assumed, as well as the identifiable intangible assets. The Company expects to finalize all accounting for the acquisition of VirtualScopics within one year of the acquisition date. The total consideration and related allocation for VirtualScopics is summarized as follows: Amount Fair value of assets acquired: Cash and cash equivalents $ Other accounts receivable Inventory Prepaid expenses and other current assets Weighted Property and equipment Average Life Identifiable intangible assets: (Years) Customer relationships 12 Technology 10 Backlog 4 Total identifiable intangible assets Total assets acquired Fair value of liabilities assumed: Accounts payable Accrued liabilities Current portion of capital lease obligations Current portion of long-term debt Deferred revenue Long-term capital lease obligations Long-term debt Total liabilities assumed Total identifiable net assets Goodwill Net assets acquired $ For the period from May 11, 2016 to September 30, 2016, VirtualScopics contributed revenues of $7,774 and net income of $1,091 to our consolidated results of operations. The following unaudited pro forma financial information has been prepared using historical financial results of the Company and VirtualScopics as if the acquisition had occurred as of January 1, 2015. Certain adjustments related to the elimination of transaction costs and acquisition related indebtedness, as well as the addition of depreciation and amortization related to fair value adjustments on the tangible and identifiable intangible assets acquired, have been reflected for the purposes of the unaudited pro forma financial information presented below. No adjustments for synergies or certain other expected benefits of the acquisition have been included. We believe the assumptions used in preparing the unaudited pro forma financial information are reasonable, but not necessarily indicative of actual results should the acquisitions have occurred on January 1, 2015. Pro forma financial information for the periods presented is summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Revenue $ $ $ $ Net income $ $ $ $ Net income per common share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average number of common shares outstanding: Basic Diluted ePatch Division of DELTA Danish Electronics, Light, and Acoustics On April 1, 2016, the Company, through its wholly-owned subsidiary BioTelemetry Technology ApS, entered into an Asset Purchase Agreement (“APA”) with DELTA Danish Electronics, Light, and Acoustics (“DELTA”), pursuant to which the Company acquired substantially all of the assets of the ePatch division of DELTA, inclusive of all products and indications currently under development. The total consideration paid at closing amounted to $3,000 in cash and 244,519 shares of the Company’s common stock valued at $2,885. In addition, there is the potential for a performance based earn out up to $3,000 upon reaching certain milestones, as defined in the APA. The fair value of the total consideration transferred in the ePatch acquisition, including contingent consideration, was $6,490 at the acquisition date. The ePatch acquisition is expected to generate future cost savings for the Company and will provide control over proprietary components for the Company’s next generation Mobile Cardiac Outpatient TelemetryTM (“MCOTTM”) device. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the consideration paid over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. The company recognized $2,965 of goodwill as a result of the acquisition, all of which has been assigned to the Technology segment. We expect all of this goodwill to be deductible for tax purposes. The amounts below represent our preliminary fair value estimates as of September 30, 2016 and are subject to subsequent adjustment as additional information is obtained during the applicable measurement period. The primary areas of these preliminary estimates that are not yet finalized relate to certain tangible assets acquired and liabilities assumed, as well as the identifiable intangible assets. The Company expects to finalize all accounting for the ePatch acquisition within one year of the acquisition date. The total consideration and related allocation for the ePatch acquisition is summarized as follows: Amount Fair value of assets acquired: Inventory $ Weighted Property and equipment Average Life Identifiable intangible assets: (Years) Customer relationships 10 Technology 10 Trade names Indefinite Total identifiable intangible assets Total assets acquired Fair value of liabilities assumed: Accrued liabilities Total liabilities assumed Total identifiable net assets Goodwill Net assets acquired $ While the ePatch acquisition provides control over proprietary components of our next generation cardiac monitoring device, the acquisition did not have a material effect on our consolidated results of operations. Contingent Consideration The APA includes the potential for a performance based earn out up to $3,000 upon reaching certain milestones. The fair value of the contingent consideration associated with the ePatch acquisition was $605 at September 30, 2016 and is included as a component of other liabilities in the accompanying consolidated balance sheets. The following summarizes the changes in our contingent consideration during the nine months ended September 30, 2016: Total Contingent Consideration Balance at December 31, 2015 — Purchase price contingent consideration $ Balance at September 30, 2016 $ |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2016 | |
Inventory | |
Inventory | 3. Inventory Inventory consists of the following: September 30, 2016 December 31, 2015 Raw materials $ $ Finished goods Total inventory $ $ Inventory, which includes purchased parts, materials, direct labor and applied manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets and Goodwill | |
Intangible Assets and Goodwill | 4. Intangible Assets and Goodwill Goodwill was recognized at the time of our acquisitions. The carrying amount of goodwill as of September 30, 2016 and December 31, 2015 was $37,251 and $29,831, respectively. The increase in goodwill during the nine months ended September 30, 2016 relates to the Company’s acquisitions of VirtualScopics and the ePatch division of DELTA. The changes in the carrying amounts of goodwill by segment were as follows: Reporting Segment Healthcare Research Technology Total Balance at December 31, 2015 $ $ $ $ Goodwill acquired during the year — Impact of foreign exchange — — Balance at September 30, 2016 $ $ $ $ The gross carrying amounts and accumulated amortization of our intangible assets as of September 30, 2016 and December 31, 2015 are as follows: Estimated September 30, December 31, Customer relationships 5 - 15 $ $ Technology, including internally developed software 3 - 10 Signed backlog 1 - 4 Unsigned backlog 4 Covenants not to compete 5 - 7 Total intangible assets, gross Customer relationships accumulated amortization ) ) Technology accumulated amortization ) ) Signed backlog accumulated amortization ) ) Unsigned backlog accumulated amortization ) ) Covenants not to compete accumulated amortization ) ) Total accumulated amortization ) ) Indefinite-lived trade names Total intangible assets, net $ $ The estimated amortization expense for the next five years and thereafter is summarized as follows at September 30, 2016: Remainder of 2016 $ 2017 2018 2019 2020 2021 Thereafter Total estimated amortization $ Amortization expense for the three months ended September 30, 2016 and 2015 was $1,062 and $896, respectively, and amortization expense for the nine months ended September 30, 2016 and 2015 was $2,735 and $2,781, respectively. |
Credit Agreement
Credit Agreement | 9 Months Ended |
Sep. 30, 2016 | |
Credit Agreement | |
Credit Agreement | 5. Credit Agreement On December 30, 2014, we entered into a Credit Agreement with Healthcare Financial Solutions, LLC (“HFS”), previously the General Electric Capital Corporation, as agent for the lenders (“Lenders”), and as a lender and swingline lender. Pursuant to the Credit Agreement, the Lenders agreed to make loans to us as follows: (i) Term Loans in an amount of $25,000 as of the closing date with an uncommitted ability to increase such Term Loans up to an amount not to exceed $10,000 and (ii) Revolving Loans up to $15,000. As of September 30, 2016, $14,500 was drawn on the Revolving Loans. The loan, inclusive of Term Loans and Revolving Loans, is recorded on our consolidated balance sheets as of September 30, 2016 in the amount of $36,920, which is net of a debt discount and deferred charges of $705. The loan bears interest at an annual rate of LIBOR plus 4.0%, subject to a LIBOR floor of 1.0%. The outstanding principal of the Term Loans will be paid as follows: (i) beginning April 1, 2015, the principal amount of the Term Loans will be repaid, on a quarterly basis, in installments of $312, plus accrued interest; (ii) beginning January 1, 2018, the principal amount of the Term Loans will be repaid, on a quarterly basis, in installments of $625, plus accrued interest; and (iii) the remaining $16,563, along with any outstanding Revolving Loans, will be paid in full on or before December 30, 2019, or such earlier date upon an acceleration of the Term Loans by the Lenders upon an event of default or termination by us. The loan is secured by substantially all of our assets and by a pledge of the capital stock of our U.S. based subsidiaries, as well as a pledge of 65% of the capital stock of the Company’s foreign subsidiaries. The Credit Agreement contains affirmative and financial covenants regarding the operations of our business and certain negative covenants that, among other things, limit our ability to incur additional indebtedness, grant certain liens, make certain investments, merge or consolidate, make certain restricted payments and engage in certain asset dispositions, including a sale of all, or substantially all, of our property. As of September 30, 2016, we were in compliance with all covenants. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity | |
Stockholders' Equity | 6. Stockholders’ Equity Stock-Based Compensation Stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) and performance stock options (“PSOs”) are granted under the BioTelemetry, Inc. 2008 Equity Incentive Plan (“EIP”). In January 2016, the number of shares available for grant was increased by 1,091,118 shares, per the EIP documents. At September 30, 2016, 2,744,028 shares remain available for grant under the EIP. We recognized $1,138 and $1,139 of stock-based compensation expense for the three months ended September 30, 2016 and 2015, respectively. We recognized $3,757 and $3,321 of stock-based compensation expense for the nine months ended September 30, 2016 and 2015, respectively. Stock option, RSU and PSU activity is summarized as follows: Stock Options Restricted Stock Units Performance Stock Units Number of Weighted Number of Weighted Average Number of Weighted Average Stock outstanding as of December 31, 2015 $ $ $ Granted — — Cancelled/forfeited ) ) — — Exercised/vested ) ) — — Stock outstanding as of March 31, 2016 $ $ $ Granted — — Cancelled/forfeited ) — — — — Exercised/vested ) ) ) Stock outstanding as of June 30, 2016 $ $ $ Granted — — — — Cancelled/forfeited ) ) — — Exercised/vested ) ) — — Stock outstanding as of September 30, 2016 $ $ $ Stock-based compensation expense is only recognized for outstanding PSUs where the performance conditions are deemed probable for achievement. For PSUs deemed probable for achievement, stock-based compensation expense is recognized ratably over the expected vesting period. For the three and nine months ended September 30, 2016 we incurred PSU expenses of $0 and $444, respectively. No stock-based compensation expense was recorded on our PSUs for the three and nine months ended September 30, 2015. As of September 30, 2016 the Company has not deemed it probable that the outstanding PSUs will vest. In 2015, 200,000 PSOs were granted to a non-employee. There were no forfeitures or vesting of PSOs during the three or nine months ended September 30, 2016. Stock-based compensation expense will only be recognized once the performance conditions of the outstanding PSOs have been met. Through September 30, 2016, no stock-based compensation expense has been recognized related to the PSOs. Employee Stock Purchase Plan In the nine months ended September 30, 2016, 150,888 shares were purchased in accordance with the Employee Stock Purchase Plan (“ESPP”). Net proceeds from the issuance of shares of common stock under the ESPP for the nine months ended September 30, 2016 were $1,050. In January 2016, the number of shares available for grant was increased by 272,779 shares, per the ESPP documents. At September 30, 2016, 625,176 shares remain available for purchase under the ESPP. |
Other Charges
Other Charges | 9 Months Ended |
Sep. 30, 2016 | |
Other Charges | |
Other Charges | 7. Other Charges We account for expenses associated with exit or disposal activities in accordance with ASC 420, Exit or Disposal Cost Obligations, and record the expenses in other charges in our consolidated statements of operations and comprehensive income and record the related accrual in the accrued liabilities line on our consolidated balance sheets. These costs are primarily disclosed as severance and employee related costs below. We account for expenses associated with integration and certain litigation as other charges as incurred. These expenses were primarily a result of legal fees related to patent litigation and activities surrounding our acquisitions. A summary of these expenses is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Legal fees $ $ $ $ Professional fees Severance and employee related costs Other costs — — Total $ $ $ $ |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Taxes | |
Income Taxes | 8. Income Taxes The income tax provision for interim periods is determined using an estimated annual effective tax rate adjusted for discrete items, if any, which are taken into account in the quarterly period in which they occur. We review and update our estimated annual effective tax rate each quarter. At September 30, 2016, our estimated annual effective tax rate was 4.78%. Income tax expense of $529 was recorded for the nine months ended September 30, 2016, primarily due to Alternative Minimum Tax (“AMT”) levied on current year taxable income, net of allowable AMT net operating loss carryovers. At September 30, 2015, our estimated annual effective tax rate was 5.57%. We recorded a tax provision of $260 for the nine months ended September 30, 2015, which includes a discrete charge of $117 related to a deferred tax liability recorded for indefinite-lived intangibles. As of September 30, 2016, in accordance with ASC 740, Income Taxes , we maintained a full valuation allowance against net deferred tax assets, with the exception of the deferred tax liability recorded for indefinite-lived intangibles. We will continue to maintain a full valuation allowance until such time we can reasonably estimate the probability of realizing a benefit from our deferred tax assets. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2016 | |
Segment Information | |
Segment Information | 9. Segment Information We operate under three segments: Healthcare, Research and Technology. The Healthcare segment is focused on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm disorders with our comprehensive suite of cardiac monitoring solutions in a healthcare setting. Our Research segment is engaged in central core laboratory services providing cardiac monitoring, imaging, scientific consulting and data management services for drug and medical device trials. The Technology segment focuses on the development, manufacturing, testing and marketing of medical devices to medical companies, clinics and hospitals. Intercompany revenues relating to the manufacturing of devices by the Technology segment for the other segments is included on the intersegment revenues line. Expenses that can be specifically identified with a segment have been included as deductions in determining pre-tax segment income. Any remaining expenses, including research and development costs incurred by the Technology segment for the benefit of the other segments, as well as the elimination of costs associated with intercompany revenues are included in Corporate and Other. Also included in Corporate and Other is our net interest expense and other financing expenses as well as the loss from equity method investments. We do not allocate assets to the individual segments. For the three months ended: Healthcare Research Technology Corporate and Consolidated September 30, 2016 Revenues $ $ $ — $ Intersegment revenues — — $ ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate and Consolidated September 30, 2015 Revenues $ $ $ — $ Intersegment revenues — $ ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures — — For the nine months ended: Healthcare Research Technology Corporate Consolidated September 30, 2016 Revenues $ $ $ — $ Intersegment revenues — — $ ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate Consolidated September 30, 2015 Revenues $ $ $ — $ Intersegment revenues — $ ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures — |
Subsequent events
Subsequent events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events | |
Subsequent Events | 10. Subsequent Events On October 4, 2016, the performance condition for 100,000 of the outstanding PSOs was met. As a result of meeting the performance obligation, 100,000 options vested, with an exercise price of $18.33. The stock-based compensation expense related to these PSOs will be recognized in the fourth quarter of 2016. On October 11, 2016, we repaid $11,500 of Revolving Loans. As of November 3, 2016, $3,000 of Revolving Loans remains drawn. Under the Credit Agreement, we have the ability to draw up to $15,000 of Revolving Loans. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Net Income Per Share | Net Income Per Share We compute net income per share in accordance with Accounting Standards Codification (“ASC”) 260, Earnings Per Share. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by giving effect to all potential dilutive common shares, including stock options and restricted stock units. The following table presents the calculation of basic net income per share: Three Months Ended Nine Months Ended 2016 2015 2016 2015 (Net income in thousands) Numerator: Net income $ $ $ $ Denominator: Weighted average shares used in computing basic net income per share Potential dilutive common shares due to dilutive stock option and restricted stock units Weighted average shares used in computing diluted net income per share Net income per share: Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ Certain stock options, which are priced higher than the market price of our shares as of September 30, 2016 and 2015, would be anti-dilutive and therefore have been excluded from the weighted average shares used in computing diluted net income per share. These options could become dilutive in future periods. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. We have financial instruments falling into all three levels of the fair value hierarchy. Our Level 1 financial instruments consist primarily of cash and cash equivalents, accounts receivable, other accounts receivable and accounts payable. The carrying value of these financial instruments approximates their fair value because of their short-term nature. Long-term debt, which is given a Level 2 classification within the fair value hierarchy, was determined to have a fair value of $37,767 as of September 30, 2016. This is equal to the nominal value, which is the carrying value, exclusive of debt discount and deferred charges. The fair value of contingent consideration, which is a Level 3 fair value instrument, is measured on a recurring basis using unobservable inputs such as projected payment dates, probabilities of meeting specified milestones and other such variables resulting in payment amounts which are discounted back to present value using a probability-weighted discounted cash flow model. In addition to our recurring fair value measurements, we have assets acquired in connection with business combinations, which are recorded at fair value on the acquisition date using a discounted cash flow model, which is a Level 3 classification. This valuation technique requires the Company to make certain assumptions, including, but not limited to, future operating performance and cash flows, royalty rates and other such variables which are discounted to present value using a discount rate that reflects the risk factors associated with future operating cash flow of the acquired business, the characteristics of the assets acquired and liabilities assumed and the experience of the acquired business. |
Equity Method Investments | Equity Method Investments We account for investments using the equity method of accounting if the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at cost in the consolidated balance sheets as a component of other assets and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of interest and other loss, net in the consolidated statements of operations and comprehensive income. In December 2015, we acquired an ownership interest in Well Bridge Health, Inc. (“WellBridge”) through the conversion of an outstanding note receivable and the related accrued interest. The investment is accounted for under the equity method. At the time of the acquisition, the equity method basis difference of $891 was allocated to equity method goodwill. As of September 30, 2016, our investment in WellBridge represented 32% of the outstanding stock. A summary of our investment in Wellbridge is as follows: Three Months Ended Nine Months Ended Opening balance $ $ Capital contributions Our share of the investee’s losses ) ) September 30, 2016 Balance $ $ |
Goodwill and Acquired Intangible Assets | Goodwill and Acquired Intangible Assets Goodwill is the excess of the purchase price of an acquired business over the amounts assigned to the assets acquired and liabilities assumed in a business combination. In accordance with ASC 350, Intangibles — Goodwill and Other (“ASC 350”), goodwill is reviewed for impairment annually, or when events arise that could indicate that an impairment exists. The provisions of ASC 350 require that we perform a two-step impairment test. In the first step, we compare the fair value of our reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units’ goodwill. If the carrying value of the reporting units’ goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. For the purpose of performing our goodwill impairment analysis, we consider our business to be comprised of three reporting units: Healthcare, Research and Technology. We calculate the fair value of the reporting units utilizing a weighting of the income and market approaches. The income approach is based on a discounted cash flow methodology that includes assumptions for, among other things, forecasted income, cash flow, growth rates, income tax rates, expected tax benefits and long-term discount rates, all of which require significant judgment. The market approach utilizes our market data. There are inherent uncertainties related to these factors and the judgment applied in the analysis. We believe that the combination of an income and a market approach provides a reasonable basis to estimate the fair value of our reporting units. Acquired intangible assets are recorded at fair value on the acquisition date. The estimated fair values and useful lives of intangible assets are determined by assessing many factors including estimates of future operating performance and cash flow of the acquired business, the characteristics of the intangible assets acquired and the experience of the acquired business. Independent appraisal firms may assist with the valuation of acquired assets. The impairment test for indefinite-lived intangible assets other than goodwill consists of a comparison of the fair value of the indefinite-lived intangible asset to the carrying value of the asset. |
Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard will revise accounting for share-based compensation arrangements, including the income tax impact and classification on the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . The standard will require lessees to recognize most leases on their balance sheet and makes selected changes to lessor accounting. The standard is effective for annual and interim reporting periods beginning after December 15, 2018. A modified retrospective transition approach is required, with certain practical expedients available. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory . The standard will require inventory to be measured at the lower of cost or net realizable value. The guidance will not apply to inventories for which cost is determined using the last-in, first-out method or the retail inventory method. The standard is effective for annual and interim reporting periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which has been updated through several revisions and clarifications since its original issuance. The standard will require revenue recognized to represent the transfer of promised goods or services to customers at an amount that reflects the consideration which a company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. The standard will be effective January 1, 2018 with early adoption permissible beginning January 1, 2017. We are currently evaluating the transition method we will elect and the impact the adoption of this standard will have on our consolidated financial statements. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Schedule of calculation of basic and diluted net income per share | Three Months Ended Nine Months Ended 2016 2015 2016 2015 (Net income in thousands) Numerator: Net income $ $ $ $ Denominator: Weighted average shares used in computing basic net income per share Potential dilutive common shares due to dilutive stock option and restricted stock units Weighted average shares used in computing diluted net income per share Net income per share: Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ |
Summary of investment | Three Months Ended Nine Months Ended Opening balance $ $ Capital contributions Our share of the investee’s losses ) ) September 30, 2016 Balance $ $ |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Acquisitions | |
Summary of changes in contingent consideration | Total Contingent Consideration Balance at December 31, 2015 — Purchase price contingent consideration $ Balance at September 30, 2016 $ |
VirtualScopics | |
Acquisitions | |
Schedule of total consideration and related allocation for net assets acquired | Amount Fair value of assets acquired: Cash and cash equivalents $ Other accounts receivable Inventory Prepaid expenses and other current assets Weighted Property and equipment Average Life Identifiable intangible assets: (Years) Customer relationships 12 Technology 10 Backlog 4 Total identifiable intangible assets Total assets acquired Fair value of liabilities assumed: Accounts payable Accrued liabilities Current portion of capital lease obligations Current portion of long-term debt Deferred revenue Long-term capital lease obligations Long-term debt Total liabilities assumed Total identifiable net assets Goodwill Net assets acquired $ |
Schedule of unaudited pro forma financial information | Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Revenue $ $ $ $ Net income $ $ $ $ Net income per common share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average number of common shares outstanding: Basic Diluted |
ePatch Division | |
Acquisitions | |
Schedule of total consideration and related allocation for net assets acquired | Amount Fair value of assets acquired: Inventory $ Weighted Property and equipment Average Life Identifiable intangible assets: (Years) Customer relationships 10 Technology 10 Trade names Indefinite Total identifiable intangible assets Total assets acquired Fair value of liabilities assumed: Accrued liabilities Total liabilities assumed Total identifiable net assets Goodwill Net assets acquired $ |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory | |
Schedule of inventory | September 30, 2016 December 31, 2015 Raw materials $ $ Finished goods Total inventory $ $ |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets and Goodwill | |
Schedule of changes in the carrying amounts of goodwill by segment | Reporting Segment Healthcare Research Technology Total Balance at December 31, 2015 $ $ $ $ Goodwill acquired during the year — Impact of foreign exchange — — Balance at September 30, 2016 $ $ $ $ |
Schedule of gross carrying amounts and accumulated amortization of the entity's intangible assets | Estimated September 30, December 31, Customer relationships 5 - 15 $ $ Technology, including internally developed software 3 - 10 Signed backlog 1 - 4 Unsigned backlog 4 Covenants not to compete 5 - 7 Total intangible assets, gross Customer relationships accumulated amortization ) ) Technology accumulated amortization ) ) Signed backlog accumulated amortization ) ) Unsigned backlog accumulated amortization ) ) Covenants not to compete accumulated amortization ) ) Total accumulated amortization ) ) Indefinite-lived trade names Total intangible assets, net $ $ |
Summary of estimated amortization expense for the next five years | The estimated amortization expense for the next five years and thereafter is summarized as follows at September 30, 2016: Remainder of 2016 $ 2017 2018 2019 2020 2021 Thereafter Total estimated amortization $ |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity | |
Summary of stock option and restricted stock units and performance stock units activity | Stock Options Restricted Stock Units Performance Stock Units Number of Weighted Number of Weighted Average Number of Weighted Average Stock outstanding as of December 31, 2015 $ $ $ Granted — — Cancelled/forfeited ) ) — — Exercised/vested ) ) — — Stock outstanding as of March 31, 2016 $ $ $ Granted — — Cancelled/forfeited ) — — — — Exercised/vested ) ) ) Stock outstanding as of June 30, 2016 $ $ $ Granted — — — — Cancelled/forfeited ) ) — — Exercised/vested ) ) — — Stock outstanding as of September 30, 2016 $ $ $ |
Other Charges (Tables)
Other Charges (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Other Charges | |
Summary of expenses related to other charges | Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Legal fees $ $ $ $ Professional fees Severance and employee related costs Other costs — — Total $ $ $ $ |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Information | |
Summary of financial information concerning the entity's reportable segments | For the three months ended: Healthcare Research Technology Corporate and Consolidated September 30, 2016 Revenues $ $ $ — $ Intersegment revenues — — $ ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate and Consolidated September 30, 2015 Revenues $ $ $ — $ Intersegment revenues — $ ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures — — For the nine months ended: Healthcare Research Technology Corporate Consolidated September 30, 2016 Revenues $ $ $ — $ Intersegment revenues — — $ ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate Consolidated September 30, 2015 Revenues $ $ $ — $ Intersegment revenues — $ ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures — |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Net Income (Loss) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Numerator: | ||||
Net income | $ 4,101 | $ 2,478 | $ 12,406 | $ 4,580 |
Denominator: | ||||
Weighted average shares used in computing basic net income per share | 28,102,196 | 27,181,250 | 27,810,763 | 27,062,630 |
Potential dilutive common shares due to dilutive stock option and restricted stock units | 2,231,381 | 2,129,810 | 2,046,462 | 1,956,511 |
Weighted average shares used in computing diluted net income per share | 30,333,577 | 29,311,060 | 29,857,225 | 29,019,141 |
Net income per share: | ||||
Basic net income per share | $ 0.15 | $ 0.09 | $ 0.45 | $ 0.17 |
Diluted net income per share | $ 0.14 | $ 0.08 | $ 0.42 | $ 0.16 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Summary of Significant Accounting Policies | |
Fair value of long-term debt | $ 37,767 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Equity Method Investments (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($)segment | Sep. 30, 2016USD ($) | |
Segment Information | |||
Number of reportable segments | segment | 3 | ||
Well Bridge Health, Inc | |||
Equity Method Investments | |||
Equity method investment | $ 985 | $ 1,100 | $ 1,228 |
Percentage of ownership acquired | 32.00% | ||
Summary of investments | |||
Beginning balance | 985 | 1,100 | |
Capital contributions | 312 | 312 | |
Our share of the investee's losses | (69) | (184) | |
Ending balance | $ 1,228 | 1,228 | |
Well Bridge Health, Inc | Goodwill | |||
Equity Method Investments | |||
Equity method investment | 891 | ||
Summary of investments | |||
Beginning balance | $ 891 |
Acquisitions - VirtualScopics,
Acquisitions - VirtualScopics, Inc. (Details) - USD ($) | May 11, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Acquisitions | |||||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | |||
Total consideration paid, net of cash acquired | $ 17,970,000 | ||||||
Fair value of liabilities assumed: | |||||||
Goodwill | $ 37,251,000 | $ 37,251,000 | 37,251,000 | $ 29,831,000 | |||
Revenues | 53,055,000 | $ 43,492,000 | 154,375,000 | $ 131,739,000 | |||
Net income | 4,101,000 | $ 2,478,000 | 12,406,000 | $ 4,580,000 | |||
VirtualScopics | |||||||
Acquisitions | |||||||
Total consideration paid, net of cash acquired | $ 14,970,000 | ||||||
Maximum period for finalizing accounting for acquisition from acquisition date (in years) | 1 year | ||||||
Fair value of assets acquired: | |||||||
Cash and cash equivalents | 849,000 | 849,000 | 849,000 | ||||
Other accounts receivable | 3,679,000 | 3,679,000 | 3,679,000 | ||||
Inventory | 111,000 | 111,000 | 111,000 | ||||
Prepaid expenses and other current assets | 396,000 | 396,000 | 396,000 | ||||
Property and equipment | 521,000 | 521,000 | 521,000 | ||||
Identifiable intangible assets: | |||||||
Total identifiable intangible assets | 10,300,000 | 10,300,000 | 10,300,000 | ||||
Total assets acquired | 15,856,000 | 15,856,000 | 15,856,000 | ||||
Fair value of liabilities assumed: | |||||||
Accounts payable | 325,000 | 325,000 | 325,000 | ||||
Accrued liabilities | 3,081,000 | 3,081,000 | 3,081,000 | ||||
Current portion of capital lease obligations | 59,000 | 59,000 | 59,000 | ||||
Current portion of long-term debt | 66,000 | 66,000 | 66,000 | ||||
Deferred revenue | 700,000 | 700,000 | 700,000 | ||||
Long-term capital lease obligations | 162,000 | 162,000 | 162,000 | ||||
Long-term debt | 97,000 | 97,000 | 97,000 | ||||
Total liabilities assumed | 4,490,000 | 4,490,000 | 4,490,000 | ||||
Total identifiable net assets | 11,366,000 | 11,366,000 | 11,366,000 | ||||
Goodwill | 4,453,000 | 4,453,000 | 4,453,000 | ||||
Net assets acquired | 15,819,000 | 15,819,000 | 15,819,000 | ||||
Revenues | 7,774,000 | ||||||
Net income | 1,091,000 | ||||||
VirtualScopics | Customer relationships | |||||||
Identifiable intangible assets: | |||||||
Total identifiable intangible assets | 5,200,000 | 5,200,000 | $ 5,200,000 | ||||
Weighted Average Life (Years) | 12 years | ||||||
VirtualScopics | Technology | |||||||
Identifiable intangible assets: | |||||||
Total identifiable intangible assets | 2,000,000 | 2,000,000 | $ 2,000,000 | ||||
Weighted Average Life (Years) | 10 years | ||||||
VirtualScopics | Backlog | |||||||
Identifiable intangible assets: | |||||||
Total identifiable intangible assets | $ 3,100,000 | $ 3,100,000 | $ 3,100,000 | ||||
Weighted Average Life (Years) | 4 years | ||||||
VirtualScopics | Common Stock | |||||||
Acquisitions | |||||||
Common stock, par value (in dollars per share) | $ 0.001 | ||||||
Share price (in dollars per share) | 4.05 | ||||||
Series A and B Convertible Preferred Stock | VirtualScopics | |||||||
Acquisitions | |||||||
Share price (in dollars per share) | 336.30 | ||||||
Preferred stock, par value (in dollars per share) | 0.001 | ||||||
Series C-1 Convertible Preferred Stock | VirtualScopics | |||||||
Acquisitions | |||||||
Share price (in dollars per share) | 920 | ||||||
Preferred stock, par value (in dollars per share) | $ 0.001 |
Acquisitions - Pro Forma Financ
Acquisitions - Pro Forma Financial Information VirtualScopics (Details) - VirtualScopics - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Pro Forma Financial Information | ||||
Revenue | $ 53,055 | $ 46,716 | $ 160,313 | $ 140,797 |
Net income | $ 4,353 | $ 2,616 | $ 13,996 | $ 4,157 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 0.15 | $ 0.10 | $ 0.50 | $ 0.15 |
Diluted (in dollars per share) | $ 0.14 | $ 0.09 | $ 0.47 | $ 0.14 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 28,102,196 | 27,181,250 | 27,810,763 | 27,062,630 |
Diluted (in shares) | 30,333,577 | 29,311,060 | 29,857,225 | 29,019,141 |
Acquisitions - ePatch Division
Acquisitions - ePatch Division of DELTA Danish Electronics, Light, and Acoustics (Details) - USD ($) $ in Thousands | Apr. 01, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Fair value of liabilities assumed: | |||
Goodwill | $ 37,251 | $ 29,831 | |
Technology | |||
Fair value of liabilities assumed: | |||
Goodwill | 6,124 | $ 3,157 | |
ePatch Division | |||
Acquisitions | |||
Cash consideration | $ 3,000 | ||
Consideration in common stock (in shares) | 244,519 | ||
Consideration in common stock | $ 2,885 | ||
Maximum performance based earn out | 3,000 | ||
Total consideration transferred | $ 6,490 | ||
Maximum period for finalizing accounting for acquisition from acquisition date (in years) | 1 year | ||
Fair value of assets acquired: | |||
Inventory | 100 | ||
Property and equipment | 175 | ||
Identifiable intangible assets: | |||
Total identifiable intangible assets | 3,500 | ||
Total assets acquired | 3,775 | ||
Fair value of liabilities assumed: | |||
Accrued liabilities | 250 | ||
Total liabilities assumed | 250 | ||
Total identifiable net assets | 3,525 | ||
Goodwill | 2,965 | ||
Net assets acquired | 6,490 | ||
ePatch Division | Customer relationships | |||
Identifiable intangible assets: | |||
Total identifiable intangible assets | $ 400 | ||
Weighted Average Life (Years) | 10 years | ||
ePatch Division | Technology | |||
Identifiable intangible assets: | |||
Total identifiable intangible assets | $ 3,000 | ||
Weighted Average Life (Years) | 10 years | ||
ePatch Division | Trade Names | |||
Identifiable intangible assets: | |||
Total identifiable intangible assets | $ 100 |
Acquisitions - Contingent Consi
Acquisitions - Contingent Consideration (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Apr. 01, 2016 | |
Contingent Consideration | ||
Fair value of contingent consideration | $ 605 | |
Summary of changes in contingent consideration | ||
Purchase price contingent consideration | 605 | |
Ending balance | 605 | |
ePatch Division | ||
Contingent Consideration | ||
Maximum performance based earn out | $ 3,000 | |
ePatch Division | Other liabilities | ||
Contingent Consideration | ||
Fair value of contingent consideration | 605 | |
Summary of changes in contingent consideration | ||
Ending balance | $ 605 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory | ||
Raw materials | $ 3,123 | $ 2,115 |
Finished goods | 687 | 263 |
Total inventory | $ 3,810 | $ 2,378 |
Intangible Assets and Goodwil32
Intangible Assets and Goodwill - Changes In Carrying Amounts (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the beginning of the period | $ 29,831 |
Goodwill acquired during the year | 7,418 |
Impact of foreign exchange | 2 |
Balance at the end of the period | 37,251 |
VirtualScopics | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the end of the period | 4,453 |
ePatch Division | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the end of the period | 2,965 |
Healthcare | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the beginning of the period | 14,724 |
Balance at the end of the period | 14,724 |
Research Services | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the beginning of the period | 11,950 |
Balance at the end of the period | 16,403 |
Research Services | VirtualScopics | |
Changes in the carrying amounts of goodwill by segment | |
Goodwill acquired during the year | 4,453 |
Technology | |
Changes in the carrying amounts of goodwill by segment | |
Balance at the beginning of the period | 3,157 |
Impact of foreign exchange | 2 |
Balance at the end of the period | 6,124 |
Technology | ePatch Division | |
Changes in the carrying amounts of goodwill by segment | |
Goodwill acquired during the year | $ 2,965 |
Intangible Assets and Goodwil33
Intangible Assets and Goodwill - Gross Carrying Amounts and Accumulated Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Intangible assets | |||||
Total intangible assets, gross | $ 43,282 | $ 43,282 | $ 29,022 | ||
Total accumulated amortization | (14,276) | (14,276) | (11,541) | ||
Total intangible assets, net | 31,606 | 31,606 | 19,981 | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||||
Remainder of 2016 | 1,081 | 1,081 | |||
2,017 | 5,019 | 5,019 | |||
2,018 | 4,533 | 4,533 | |||
2,019 | 4,046 | 4,046 | |||
2,020 | 3,495 | 3,495 | |||
2,021 | 2,198 | 2,198 | |||
Thereafter | 8,634 | 8,634 | |||
Total estimated amortization | 29,006 | 29,006 | |||
Amortization of Intangible Assets | 1,062 | $ 896 | 2,735 | $ 2,781 | |
Trade Names | |||||
Intangible assets | |||||
Indefinite-lived trade names | 2,600 | 2,600 | 2,500 | ||
Customer relationships | |||||
Intangible assets | |||||
Total intangible assets, gross | 16,300 | 16,300 | 10,700 | ||
Total accumulated amortization | (3,443) | $ (3,443) | (2,520) | ||
Customer relationships | Minimum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 5 years | ||||
Customer relationships | Maximum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 15 years | ||||
Technology, including internally developed software | |||||
Intangible assets | |||||
Total intangible assets, gross | 19,082 | $ 19,082 | 13,522 | ||
Total accumulated amortization | (6,240) | $ (6,240) | (5,422) | ||
Technology, including internally developed software | Minimum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 3 years | ||||
Technology, including internally developed software | Maximum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 10 years | ||||
Signed backlog | |||||
Intangible assets | |||||
Total intangible assets, gross | 6,260 | $ 6,260 | 3,160 | ||
Total accumulated amortization | (3,357) | $ (3,357) | (2,609) | ||
Signed backlog | Minimum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 1 year | ||||
Signed backlog | Maximum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 4 years | ||||
Unsigned backlog | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 4 years | ||||
Total intangible assets, gross | 600 | $ 600 | 600 | ||
Total accumulated amortization | (600) | (600) | (500) | ||
Covenants not to compete | |||||
Intangible assets | |||||
Total intangible assets, gross | 1,040 | 1,040 | 1,040 | ||
Total accumulated amortization | $ (636) | $ (636) | $ (490) | ||
Covenants not to compete | Minimum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 5 years | ||||
Covenants not to compete | Maximum | |||||
Intangible assets | |||||
Estimated Useful Life (Years) | 7 years |
Credit Agreement (Details)
Credit Agreement (Details) - USD ($) $ in Thousands | Dec. 30, 2014 | Sep. 30, 2016 |
HSF | Term Loan | ||
Credit Agreement | ||
Maximum borrowing capacity | $ 25,000 | |
Additional uncommitted borrowing capacity | 10,000 | |
HSF | Revolving Loan | ||
Credit Agreement | ||
Maximum borrowing capacity | 15,000 | |
Amount drawn on credit borrowing | $ 14,500 | |
HSF | Term Loans and Revolving Loans | ||
Credit Agreement | ||
Loan balance net of original issue discount | 36,920 | |
Debt discount and deferred charges | $ 705 | |
GE Capital | ||
Credit Agreement | ||
Percentage of capital stock of Cardiocore Lab Ltd. and BioTelemetry Belgium pledged to secure loan | 65.00% | |
GE Capital | LIBOR | ||
Credit Agreement | ||
Debt instrument, basis spread on variable rate (as a percent) | 4.00% | |
LIBOR floor (as a percent) | 1.00% | |
GE Capital | Term Loan | April 2015 to December 2017 | ||
Credit Agreement | ||
Principal amount of quarterly installment payments | 312 | |
GE Capital | Term Loan | January 2018 to September 2019 | ||
Credit Agreement | ||
Principal amount of quarterly installment payments | 625 | |
GE Capital | Term Loan | October 2019 to December 2019 | ||
Credit Agreement | ||
Principal amount of quarterly installment payments | $ 16,563 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Jan. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Stock-Based Compensation | ||||||||
Stock based compensation | $ 1,138 | $ 1,139 | $ 3,757 | $ 3,321 | ||||
Stock options | ||||||||
Number of Shares | ||||||||
Balance at the beginning of the period (in shares) | 3,420,519 | 3,593,098 | 3,557,717 | 3,420,519 | 3,420,519 | |||
Granted (in shares) | 25,000 | 100,000 | 282,270 | |||||
Cancelled/forfeited (in shares) | (20,050) | (7,600) | (19,422) | |||||
Exercised (in shares) | (121,178) | (57,019) | (125,650) | |||||
Balance at the end of the period (in shares) | 3,476,870 | 3,593,098 | 3,557,717 | 3,476,870 | 3,420,519 | |||
Weighted Average Exercise Price | ||||||||
Balance at the beginning of the period (in dollars per share) | $ 6.69 | $ 7.33 | $ 7.04 | $ 6.69 | $ 6.69 | |||
Granted (in dollars per share) | 17.74 | 16.61 | 9.67 | |||||
Cancelled (in dollars per share) | 12.13 | 9.78 | 8.38 | |||||
Exercised (in dollars per share) | 5.17 | 4.94 | 3.37 | |||||
Balance at the end of the period (in dollars per share) | $ 7.45 | $ 7.33 | $ 7.04 | $ 7.45 | $ 6.69 | |||
RSUs | ||||||||
Number of Shares | ||||||||
Balance at the beginning of the period (in shares) | 690,936 | 620,696 | 588,950 | 690,936 | 690,936 | |||
Granted (in shares) | 47,986 | 177,212 | ||||||
Forfeited (in shares) | (2,000) | (7,405) | ||||||
Vested (in shares) | (11,367) | (16,240) | (271,793) | |||||
Balance at the end of the period (in shares) | 607,329 | 620,696 | 588,950 | 607,329 | 690,936 | |||
Weighted Average Grant Date Fair Value | ||||||||
Balance at the beginning of the period (in dollars per shares) | $ 6.85 | $ 10.06 | $ 9.57 | $ 6.85 | $ 6.85 | |||
Granted (in dollars per share) | 15.44 | 9.87 | ||||||
Forfeited (in dollars per share) | 7.44 | 9.57 | ||||||
Vested (in dollars per share) | 15.42 | 8.01 | 2.87 | |||||
Balance at the end of the period (in dollars per shares) | $ 9.97 | $ 10.06 | $ 9.57 | $ 9.97 | $ 6.85 | |||
PSUs | ||||||||
Stock-Based Compensation | ||||||||
Stock based compensation | $ 0 | $ 0 | $ 444 | $ 0 | ||||
Number of Shares | ||||||||
Balance at the beginning of the period (in shares) | 265,990 | 132,992 | 265,990 | 265,990 | 265,990 | |||
Vested (in shares) | (132,998) | |||||||
Balance at the end of the period (in shares) | 132,992 | 132,992 | 265,990 | 132,992 | 265,990 | |||
Weighted Average Grant Date Fair Value | ||||||||
Balance at the beginning of the period (in dollars per shares) | $ 8.68 | $ 8.68 | $ 8.68 | $ 8.68 | $ 8.68 | |||
Vested (in dollars per share) | 8.68 | |||||||
Balance at the end of the period (in dollars per shares) | $ 8.68 | $ 8.68 | $ 8.68 | $ 8.68 | $ 8.68 | |||
PSOs | ||||||||
Stock-Based Compensation | ||||||||
Stock based compensation | $ 0 | |||||||
Number of Shares | ||||||||
Granted (in shares) | 200,000 | |||||||
Number of Shares | ||||||||
Forfeited (in shares) | 0 | 0 | ||||||
Vested (in shares) | 0 | 0 | ||||||
2008 Option Plan | ||||||||
Stock-Based Compensation | ||||||||
Common stock available for grant (in shares) | 2,744,028 | 2,744,028 | ||||||
2008 Option Plan | Stock options | ||||||||
Stock-Based Compensation | ||||||||
Increase in the number of options available to be granted (in shares) | 1,091,118 |
Stockholders' Equity - Employee
Stockholders' Equity - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended |
Jan. 31, 2016 | Sep. 30, 2016 | |
Employee stock purchase plan | ||
Common stock purchased (in shares) | 150,888 | |
Net proceeds from the issuance of shares of common stock (in dollars) | $ 1,050 | |
Increase in number of shares available for grant | 272,779 | |
Number of remaining shares available for purchase | 625,176 |
Other Charges (Details)
Other Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Other Charges | ||||
Legal fees | $ 1,965 | $ 1,377 | $ 4,576 | $ 4,176 |
Professional fees | 144 | 13 | 590 | 37 |
Severance and employee related costs | 238 | 2 | 561 | 249 |
Other costs | 50 | 117 | ||
Total | $ 2,397 | $ 1,392 | $ 5,844 | $ 4,462 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes | ||||
Estimated annual effective tax rate (as a percent) | 4.78% | 5.57% | ||
Income tax expense (benefit) | $ 235 | $ 137 | $ 529 | $ 260 |
Mednet | ||||
Income Taxes | ||||
Income tax expense (benefit) | (260) | |||
State income tax expense (benefit) | $ 117 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)item | Sep. 30, 2015USD ($) | |
Segment information | ||||
Number of operating segments | item | 3 | |||
Revenues | $ 53,055 | $ 43,492 | $ 154,375 | $ 131,739 |
Income (loss) before income taxes | 4,336 | 2,615 | 12,935 | 4,840 |
Depreciation and amortization | 3,689 | 3,165 | 10,619 | 9,124 |
Capital expenditures | 2,815 | 3,641 | 8,507 | 10,310 |
Healthcare | ||||
Segment information | ||||
Revenues | 40,395 | 35,687 | 123,709 | 106,923 |
Capital expenditures | 2,481 | 2,530 | 6,797 | 6,860 |
Research Services | ||||
Segment information | ||||
Revenues | 10,420 | 5,484 | 23,709 | 16,353 |
Capital expenditures | 327 | 1,111 | 1,677 | 3,380 |
Technology | ||||
Segment information | ||||
Revenues | 2,240 | 2,321 | 6,957 | 8,463 |
Capital expenditures | 7 | 33 | 70 | |
Operating segments | Healthcare | ||||
Segment information | ||||
Revenues | 1 | 5 | ||
Income (loss) before income taxes | 14,722 | 11,141 | 44,504 | 31,020 |
Depreciation and amortization | 2,434 | 1,820 | 7,415 | 5,482 |
Operating segments | Research Services | ||||
Segment information | ||||
Income (loss) before income taxes | 1,442 | 148 | 1,847 | 350 |
Depreciation and amortization | 1,180 | 1,053 | 3,064 | 2,894 |
Operating segments | Technology | ||||
Segment information | ||||
Revenues | 3,396 | 3,476 | 9,070 | 7,490 |
Income (loss) before income taxes | 1,059 | 1,276 | 2,752 | 3,548 |
Depreciation and amortization | 141 | 93 | 333 | 278 |
Corporate and Other | ||||
Segment information | ||||
Revenues | (3,396) | (3,477) | (9,070) | (7,495) |
Income (loss) before income taxes | (12,887) | (9,950) | (36,168) | (30,078) |
Depreciation and amortization | $ (66) | $ 199 | $ (193) | $ 470 |
Subsequent (Details)
Subsequent (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 11, 2016 | Oct. 04, 2016 | Nov. 03, 2016 | Sep. 30, 2016 | Dec. 30, 2014 |
Subsequent event | PSOs | |||||
Subsequent events | |||||
Stock outstanding (in shares) | 100,000 | ||||
Options vested (in shares) | 100,000 | ||||
Exercise price (in dollars per share) | $ 18.33 | ||||
HSF | Revolving Loan | |||||
Subsequent events | |||||
Amount drawn on credit borrowing | $ 14,500 | ||||
Maximum borrowing capacity | $ 15,000 | ||||
HSF | Subsequent event | Revolving Loan | |||||
Subsequent events | |||||
Repayments under revolving credit facility | $ 11,500 | ||||
Amount drawn on credit borrowing | $ 3,000 |