Good afternoon. Thank you for joining us for the CardioNet first quarter 2009 Earnings Call. Certain statements during the conference call and question-and-answer period to follow, may relate to future events and expectations, and as such constitute forward-looking statements within the meaning of the Private Securities and Litigations Act of 1995. Such statements involve unknown and known risks, uncertainties, and other factors, which may cause the actual results, performance or achievement of the company in the future to be materially different from the statements that the company's executive may make today. These risks are described and detailed in our public filings with the Securities and Exchange Commission, including our latest periodic report in Form 10-K or 10-Q. We assume no duty to update these statements. At this time, all participants have been placed in a listen-only mode and the floor will open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host Mr. Randy Thurman. Sir, you may begin.

Thank you very much, and welcome to the CardioNet Incorporated first quarter investor conference call. I am Randy Thurman, Chairman, President and Chief Executive Officer of CardioNet Incorporated. With me this afternoon is Marty Galvan, Senior Vice President and Chief Financial Officer and Anna McNamara, Senior Vice President of Clinical Operation, and Phil Leone, Senior Vice President of Managed Care. During the first quarter, we made excellent progress in the execution of our 2009 plans. We continue to leverage the clinically proven superiority of the MCOT systems and our world class customer service and monitoring organizations to effectively expand on the $2 billion cardiac monitoring market. We made significant strides in enhancing our corporate infrastructure through the expansion of our sales force and establishing a solid platform technology for accelerated growth in 2010 and beyond. We also announced a merger agreement with Biotel Incorporated, which we believe will diversify our revenue stream, accelerate next generation R&D and provide entry into the clinical research services business. During the quarter, we also announced the formation of a Medical Advisory Board comprised of some of the most notable professionals in cardiac medicine and beyond. Before I elaborate on our accomplishments, I would like to provide some of the key financial highlights for the quarter. Revenue in the first quarter increased 40% year-over-year, and is up 4% sequentially reaching $35.7 million. This marks our fifth consecutive quarter of increased revenues since going public. Gross margin increased year-over-year to 66.9% of revenue, and we delivered adjusted earnings per share of $0.04 in the quarter demonstrating our commitment to growing earnings while investing in our sales and corporate infrastructure to further expand our market share. Marty will provide you with a more detailed financial review in his prepared remarks. Now, I would like to provide some…

Thank you Randy, and good afternoon everyone. Now that Randy has commented on our operations, I will review our financial results for the first quarter of 2009. I want to remind everyone that unless mentioned otherwise, all of my comments will refer to financial result on a non-GAAP basis. There is a reconciliation included in the press release that we issued earlier today that describes in detail how we have calculated this non-GAAP figures. As Randy indicated in the first quarter, revenue increased by $10.2 million or 40.3% to $35.7 million compared to $25.5 million in the first quarter of 2008. Driving the growth were MCOT system revenues of $31.4 million up from $21.1 million in Q1 of 2008 or a increase of 56.2%. Revenue from the MCOT system continues to grow as a percent of revenue representing 88% of revenue in the first quarter, compared to 86% in the fourth quarter of 2008 and 79% of revenue in the first quarter of last year. Offsetting this growth our declines in event in Holter revenue, as we continue to convert physicians to the new technology. Consistent with the trend last year, our payer mix was 34% Medicare and 66% commercial in the quarter. Gross profit in the first quarter increased to $23.9 million or 66.9% of revenue, compared to gross profit of $15.9 million or 62.6% of revenue in the first quarter of 2008. This improvement of 430 basis points was primarily due to operational efficiencies largely in our cardiac monitoring center and related areas, cost reductions negotiated with our largest suppliers, as well as lower fuel surcharges and higher volume discounts on our device shipments. Turning to operating income. In the first quarter we achieved our seventh consecutive quarter of profitability with $1.6 million in adjusted operating income. This…

Thank you, Marty. Year-to-date, we have compiled an impressive list of accomplishments for young company in addition to posting our fifth consecutive quarter with increased revenues. We've launched a new state of the art monitoring center. We've increased our sales force by nearly 50%. We announced the acquisition of Biotel. We've added over 4 million covered new lives. We positioned ourselves for several major announcements at the heart rhythm society meeting. We’ve completely re-tooled our account receivables organization. We've obtained over 95% satisfaction rating from all MCOT users. We fully converted to the C3 MCOT platform. We've enhanced the leadership in the company by way of example with our new Senior Vice President of Sales. We've announced a medical advisory board with some of the most influential top leaders in our industry. We’ve improved new key operational metrics including reducing turnover by over 50%. As of yesterday, we hit a new milestone surpassing 600 physician MCOT referrals per day. The future for CardioNet is very bright indeed. We have already established ourselves as the best-in-class company in cardiac monitoring, and also building a platform for CardioNet as a leader in the emerging field of wireless medicine. At this point, we will take your questions.

(Operator Instructions). Your first question will come from the line of Amit Bahl with Citi.

I wonder if you start with just sales force for a minute given the ramp up in the sales force this quarter. Marty, can you just go back and just remind us what your assumptions for these sales reps, how long it will take them to be productive, and then just spend a minute talking through what assumptions there are for the revenue that could be generated for a new rep versus one that’s been on board for 12 months or long, and I have two more.

As far as our assumption about the productivity of a new rep, what we have modeled is that the rep is, an Account Executive as we call them are breaking even in terms of the revenue they generate versus the cost of them. We model that they are breakeven in the eighth or ninth month essentially. Then, what we do as far as modeling a new rep versus one has been on board more than 12 months, we have seen what the pattern is historically, primarily in 2007 and 2008, and model consistently with that to track out new rep and they will be held lower assumption of sales in their first 12 months compared to one that’s been on board for longer.

Can you put any numbers around that?

Over the top, you will see that 2008, the average rep was in the range of 1.2 million, 1.4 million. The new rep in their first year is less than that obviously somewhere in the half to three quarters range, about a half, usually half have that productive in his first year on annual business.

Two quick follow-ups. In terms of receivables and the DSOs, are CMS still collecting on the 30 to 60-day schedule and have any commercial payers taken longer to actually pay you guys. Then a question for Phil on reimbursement. Phil can you just go through for us the input that CMS looks at when they are trying to determine physician fee as well as technical fee rates for the technology?

So Amit, first let take the receivable and payment questions. So, Medicare, we have not seen Medicare increasing with the time and things they pay usually within 30 days. We are not seeing at this stage anything in terms of our commercial payers extending their amount of time.

In regards to the inputs with CMS, it’s broken down into two parts, one is what the (inaudible). Which is the number of minutes that actually are monitoring center technicians, monitor the patients over the course of the average length of service, which was established to be 14 days as related to valuing the CPT code and basically any technician time where we’re touching the patient either monitoring the patient, preparing the equipment for the patient, configuring the device for the patients, device which we will cause in patient education and that's one part of the process. The second part is, we would submit directly to CMS our capital equipment costs, which is the cost of the device, hardware, software to run the monitoring center and those two things go into formulae with CMS and ultimately the reimbursement for the technical component. As it relates to the professional component, there was survey data done by the ACC and HRS that CardioNet was not a part of and that information was submitted also directly to CMS last year.

And Maybe you just kind of talk to us about what you're assumptions are for reimbursements going forward and I'll jump back. Thanks.

In our three year, in our earnings projections that we put out through 2011, we have assumed some reduction in reimbursement that's factored into the earnings projections we have put out there. As a matter of process, we really work in hand glove with Highmark and with CMS on an ongoing basis. And as Phil went through the detail, candidly the argument is just as strong that we could justify a higher level of reimbursement as there would be any reduction. Certainly the process works, we know of reason today to expect any significant change in the reimbursement levels.

And your next question will come from the line of Bob Hopkins with Banc of America-Merrill Lynch. Please proceed.

Hi thanks and good afternoon. Can you hear me okay? Great Marty I just wanted to start with a question on the cash, and obviously as time goes on if you're projections coming through you’ll be generating more cash, but I'm just wondering what do you think the probability is over the next 12 months, given the current cash position and cash burn that you'll seek to raise additional capital?

Bob, we do not see, we do not anticipate needing to do that as business continues normal business

I can say definitively that based on our current projections, we would not encumber the balance sheet with any new debt vehicle or issuing shares to raise capital whatsoever. The cash flow from operation should more than meet our needs and any short-term debts that we would have would be well within our current cash flow ability.

Okay. Thanks. And then just wanted to ask a couple on reimbursement. First, I know that the back and forth with Highmark over the course of the last week, did you ask them specifically about your reimbursement rate and whether or not it was under review at the current time?

We really have an outstanding relationship with Highmark, and a dialogue with them that is weekly if not more frequently and this always happens. And Phil went through the kind of the detailed explanation of how reimbursement is determined and we have no question that if there was any meaningful or anticipated change in the reimbursement rates that we would be well aware of that, that's the professional relationship that exist with Highmark. And so at this point in time, we see nothing that would significantly change our current rate of reimbursement.

So you did, ask them specifically about whether or not reimbursement was under review at the current time, and they said, no.

As I just said, we know nothing based on our relationship with Highmark that would anticipate any change on reimbursement whatsoever.

Do you have a senses to whether or not Medicare will takeover the pricing process this July or whether that will take another year.

We are pursuing. I guess, it’s business as usual with the process of getting them the information, which we’ll be doing over the summer and meeting with them. Right now, it’s slated to go down that path, but given the fact that there is no appointed leadership yet. In CMS, the staffers that we are dealing with are moving ahead with the caveat that when the leadership disappointed things could change and their resources be pull to other places, but right now we are headed down that path.

Okay. So, would you care to put a probability on action this summer versus 2010?

No.

One other thing on Highmark just to clarify; in the past has there been sort of an annual review process or is it just been semiannual or is there have been any consistency to the process in the past?

Yeah. The consistency to the process has been what I stated before. In that there is an ongoing relationship between Highmark and ourselves and frankly with CMS, but there is not a scheduled event. You have to remember that CardioNet is really the pioneer in this whole area of wireless medicine, and I think there has been this absolutely professional collaborative relationship between the payers and us on justifying and understanding the cost benefit of what we do. So, it's really, I can't say it one more time that it's just an ongoing and a very collaborative effort between the parties that are involved.

And then last one for me, one back to Marty. Marty could you give us the bad debt expense this quarter and the last couple of quarters, so we can get a sense as to trend and right now our well point in United currently reimbursing for your procedure, your technology?

Well Bob, first I'll take the expense question. So, in the quarter, the bad debt expense that you'll find within G&A expense its $3.8 million or 10.7% of revenue. Actually, it compares to the fourth quarter of last year, which was $4.4 million or 12.7% of revenue.

Sequentially, okay.

Reimbursement.

Yes right now, with both companies were in active review on the technical assessment, when we do receive referrals. We've been able to get Ad-hoc coverage from the authorization procedure and then we've moved forward with providing them with the MCOT system.

And then sorry, one of the little one, it’s because I think this is important. Do you guys have evidenced that any of your insurers have turned down the competition for lack of data. Is that something that's happening in the marketplace or are the other insurance companies reimbursing for these guys despite the lack of data? Thank you.

And your next question will come from the line of Rick Wise with Leerink Swann. Please proceed.

Good afternoon everybody. Marty you highlighted that you expect and actually Randy too that you expect to complete the sales expansion by the middle of this year. It sounds like that's happening a little ahead of schedule, and maybe if you could help us sink through the dollars or as a percentage of sales, the impact that could have on the second quarter. Actually it makes it’s a tougher comp, but how do we think about the second half, do we take whatever that second quarter rate is and some of the dollar state is same in the second half. Can you help us think through those issues?

Well what happens is the sales expense does track up then from the first quarter to the second quarter. Okay and then you would see, Rick as that it pretty much holds at about that level in the third and fourth quarters in terms of the absolute dollars.

And so from that time on and maybe into 2010, we should expect to see some positive leverage on the SG&A line with SG&A growing slower than whatever your sales growth rate is?

We expect to see 2009 full year sales and marketing expense to be up over term as we've said that in the past. We do expect that you'd see that as a percentage of revenue coming down though in 2010 down 2000 levels we were at in 2008.

Turning to the Biotel, maybe talk a little bit about now you have adjust I think a little bit more, some of the potential there in terms of new technology and maybe more specifically Randy highlight some of the corporate initiatives. How quickly can you get that off the ground, and is that all reflected in your go forward guidance?

Yes. The Biotel acquisition, which we hope to close by mid year Rick, really there are several keys to the rationale that acquisition. One is of course, we believe they have the leading wireless event monitor in the industry today, and so when we add that to the CardioNet portfolio products, we think whether its at the Holter end of the business, the wireless event monitoring business, or certainly the MCOT will by-far have the most competitive range of products in the industry. So that’s going to be a real we think stimulus to our sales presentation and of course the wireless event introduces many physicians for the first time to wireless technology and we think that will accelerate the conversion from event MCOT. So we are very excited about that. The second aspect of the acquisition of Biotel is some of the research and development efforts they've made both on the hardware and the software and the algorithm design side of the business that we will be incorporating into our next generation MCOT system, next generation being the next system introduced beyond our current C3 system. The third dimension of the Biotel acquisition relates to the clinical research services business known as Agility within Biotel. Agility currently sells to medical device companies during clinical trials for device development. We have thought for a long time here that the MCOT technology as it currently exist and more importantly as it will evolve in the next generation is ideally suited to contract clinical research services for both device and drug companies during product development. So agility really gives us a bit of a jumpstart on that since they have an existing business in that space. We will be adding additional resource to the Agility business, the second half of this year…

You talked about the DSOs and the bad debt, Marty or Randy, where should we think DSOs can go by the end of this year and bad debt, the DSOs get back below 100 as bad debt get cut in half from here?

Yes, so, Rick, I’ll take that one. The DSO we have said in the past and still our belief that by the end of the year with the efforts ongoing there, we should be down somewhere in the 80s we would say. So, its certainly off the 100 days mark. And then, as far as the bad debt expense, we do see it in 2009 this year on a full year basis being in about the 9% somewhere in the ballpark, with more dramatic reduction in 2010. The initiatives as we’ve said as my prepared comment said, we’ll take some time to take effect. And clearly, we know we do think we can get the bad debt expense now, some I’m significantly over the two year period.

And just a last one -- just any updates on the competitive front, we welcome. We have been hearing that Lifewatches launched in newer generation free channel devise. Just may be your thoughts on how this might impact beat if at all. Thanks a lot.

Let me start first and I am going to just back up a little bit on all competitive front and readdress question that Bob Hawkins from BOA asked. Without question we win business today, because of the tremendous success of our clinical research. As I mentioned before, we have had published studies or abstract in 21 areas that range from efficacy, Catheter ablation, surgical ablation, rhythm control, cryptogenic stroke et cetera No one else has done that. We are selling to some of the smartest people in the medical industry, cardiologist and electrophysiologist, and so the answer certainly is yes, a majority of the time that we are selling to a new physician practice, that clinical research is overwhelmingly important, but I like to add a more specific example. A week ago, I was visiting with the leading cardiologist for one of the major healthcare institutes in America. When I sat down with him, the first thing he brought up when he joined this institute recently and found that they were using competitive technology. In his own words, he was outraged that they weren't using CardioNet, because the competitor had no clinical support for their claims whatsoever. And so, I think I can say with a high degree of probability that we will be winning CardioNet will be moving into that account in the very near future. And people like Anna who run our Clinical Research Organization and myself, personally make those kinds of -- build those kind of relationships, because this clinical research which Anna has really led is so compelling that any institute or any physician and in fact the payers really, really respect. Anna?

The device in the new one that was brought out by Lifewatch, has additional features and because it has additional features, the question is, it still always gets back to what is the research that show these things work. And I think that's the edge that CardioNet has in all of this.

And your next question will come from the line of Matt Dolan with Roth Capital. Please proceed.

Couple of follow-ups really, first on the sales force productivity, as you look at this new class of reps and considering that you are filtering through on about a 10:1 ratio, it sounds like you are getting a high quality group. Can you give some early feedback on how they might be tracking here in the early days relative to your prior additions and given your rapid hiring here in Q1, should we expect from a trajectory standpoint back half of the year to show an acceleration from this class in terms of revenue?

Okay, Matt. We're just entering the second quarter I think we hired relative to the 41 number relatively small number in the first quarter, so it's all anecdotal now. But I can tell you that I was meeting with the sales leadership this week. To give you an example in Houston, where we hired a new more experienced rep. The turnaround in that territory they sad was almost instantaneous. So a lot of these experienced reps that we're hiring. We're hiring them all within there existing geography. So they have a high level of experience with the cardiologists and the electrophysiologists, as well as the hospital in their geography. They have great relationship. So we think they are hitting the ground pretty quickly. We can't quantify that yet, because it's too early in the game. We just completed a sales training class this week. I think all of us in this room including myself were instructors then and again it's qualitative at this stage. But these are some high caliber people. So in terms of trajectory on the second half as you ask Matt, we think that it could be a positive trajectory from what we've planned, but it's just too early to even speculate.

Okay. I'm very good. And then on the reimbursement side how do you expect the 2010 reimbursement side, one question there, how do you expect the 2010 reimbursement rate to be determine from a I guess a timing standpoint maybe walk us through how that could possibly be disseminated if that something you can put together at this point?

This is Phil. If CMS goes through the process of nationally pricing the code for 2010 and beyond, we would go through that over the summer months and that information would be made public by CMS in the final rule for 2009, which would come out at the end of the October, beginning of November. It’s an annual process, and then that’s how it will be disseminated.

And through Highmark?

Its business as usual. The process that we go through this time every year.

Just on the Biotel side, when that deal closes, it looks like that was about a $12 million business last year. I know they sold to some competitors. How should we think about that in terms of revenue contribution, once integrated and maybe for Anna, do you foresee this? How do you foresee the timing of this integration and really the potential to add this service to your platform?

Yes Matt, so this is Marty. So as far as, what we're modeling going forward, should the deal occur is we're looking at the same historical as you are. And freaking the numbers down a bit, because of the elements where the competitors foreseeing product. But, then there is the opportunity then to grow the wireless event monitor. I think we are already at the stage to give you specific numbers. Once the deal close then we will be to talk to that more. So, but we have a wireless, event monitor and then obviously the clinical research piece.

And your next question will come from the line of Alan Fishman with Thomas Weisel Partners.

My first question, I guess right now you have 129 sales reps. What was the average number in the quarter for modeling purpose?

The average for the quarter was 101 reps.

101. Okay, thank you, and then my second question is. In the fourth quarter, you changed the amortizable life of the C3 device from three to five years. Can you quantify the impact of that on gross margin year-over-year comparison in the first quarter?

Before the 430 basis point improvement, there is about a 100 basis points due that change going from the two years to the three years.

Two to three years, thanks. My mistake.

And you next question will come from the line of [Kay McKee] analyst with Colin Stewart

Couple of questions about the Biotel acquisition. And specifically the Agility group, how many folks are in that group and how many would you expect to add?

Today in the agility group. There are only about seven or eight people there including those who sell and those who provide the support services. My expectation is that this year we will add another six to eight people, some directed towards selling to the device in the pharmaceutical industry, the rest would be adding additional infrastructure support. Agility is based in Chicago, so they have servers and computers for the data management for the services they sell. So, in order of magnitude we will about double the organization this year from, if you will, seven or eight to fourteen to sixteen.

As you move into supporting the clinical trials, especially on the pharma side. I assume you're talking about thorough QT studies and if so, what would you bring to the table in order to compete effectively against say any research?

We’re not really looking at thorough QT studies initially. Initially, we'll be looking at later phase trials and not only for the QT’s but also for arrhythmia.

Okay very good. And then just a final question, where would you estimate your market share is currently versus Lifewatch?

We all tend to close this [swaps and solvent] number of $2 billion. We are on a run rate this year, we think to do about $170 million, so that would put us where about 8 to 9% of the total market. I don't know what any competitors run rate would be for this year. So, you could probably take a look at there anybody's forecast against that 2 billion and estimate their share of the market.

And your next question will come from the line of Glenn Novarro with RBC Capital Markets. Please proceed.

Yes it's Michael Hunt from Barclays Capital. One question, have you seen any indication that the MCOT technical fee is currently under review at Highmark?

Okay where you on the call earlier?

Yes.

Yes okay, I think we pretty much covered, exhausted that. [Tania].

Your next question will come from the line of Milan Gupta with South Point Capital. Please proceed.

Can you guys say different question on reimbursement as percent of your peers, how many are reimbursing the positions on a case rate basis versus a daily rate?

As we migrate to the new CPT Code, it becomes less and less, but prior to the Code virtually all payers paid them on it other than medicare on a per day basis and throughout 2009 as the payers implement the new Code into their system, it'll decrease and we anticipate everyone being on the case rate payment by the end of the year.

Do you know where it stands right now as a rough mix?

I can speak on this, the technical side, we have transitioned roughly 22% of our contract over to the new code with many more pending for the next quarter.

Got you. And then how often are the actual costs, like you guys say you furnished Highmark with your cost information and in terms of capital costs being with that. How often are those data exchange?

Well, there is no calendar for when that happens. We have this ongoing dialogue with both Highmark and CMS and that whenever they want to engage in discussion on the cost structure of the CardioNet technology, we provide the information. They are essentially as up to date on our cost infrastructures, as we are. So that could happen at any given point in time, but it's really an ongoing process. There is no calendar event that dictates when that information is provided or even request.

There are no further questions at this time. I will now like to turn the call back over to Mr. Randy Thurman for closing remarks.

Well, thank you very much and thank all of you for participating in today's call. As you can see by not only the financial results of CardioNet year-to-date, but also the substantial progress that we've made on a lot of fronts, whether it's the hiring of the sales professionals or clinical research or the pending announcements at the Heart Rhythm Society, your company is doing extraordinarily well. People here are really focused on the near-term execution of all of our goals and objectives, as well as the very exciting long-term opportunity for CardioNet. So thank you very much. We look forward to speaking with you at the end of the second quarter.

If you joined the conference late today, you may listen to the conference on digital replay, which will be available from April 30 to May 7, 2009 on 888-286-8010 or 617-801-6888 with the pass code 80739901. You may disconnect. Have a great day.