Thank you for joining us for the BioTelemetry First Quarter 2015 Earnings Conference Call. Certain statements during this conference call and in the question and answer period to follow may relate to future events and expectation and as such, constitute forward-looking statements within the meaning of the Private Securities and Litigation Act of 1995. Such statements involve known and unknown risk, uncertainties and other factors which may cause the actual result, performance or achievements of the company in the future to be materially different from the statements that the company's executives may make today. These risks are described in detail in our public filing with Securities and Exchange Commission including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation, it is now my pleasure to turn the floor over to your host, Mr. Joseph Capper. Sir, you may begin.

I'm Joe Capper, President and CEO of BioTelemetry. Also with me on the call today is our Chief Financial Officer Heather Getz. I will provide commentary on our 1st Quarter performance, Heather will take you through a more detailed review of our operating results and we'll then open up the call to your questions. So let's begin. If you followed the company last quarter, you know that our financial guidance for 2015 was a meaningful increase over an extremely successful, 2014 falling for a 50% increase in EBITDA. In order to achieve this lofty objective, we would need to grow patient service volume faster than the industry, deliver terrific results for research services and continue to control expenses. I am pleased to report that is exactly what we did in Q1 Our 1st Quarter was a tremendous success. In fact, the year is off with such a great start that Heather will be providing commentary on our increased guidance. Remarkably, these terrific results came as part of certain unforeseen challenges. As you know, bad weather across the country created transportation challenges during the first few months of the year. We were not immune from this. In fact, we lost the equivalent of three full shipping days due to carrier shutdown. We also had to deal with an MCOT inventory shortage caused by increased demand. That issue has been resolved, however, it did cause us to end the quarter with nearly $1 million of business on backorder. In spite of these challenges, we had an outstanding quarter, both financially and operationally by adhering to the guidance principles we use to manage the company. As a reminder, our value focus is to solidify our leadership position in cardiac monitoring, establish a leading research services business around the cardio core platform and look…

We started 2015 off strong with revenue of $43.4 million. A $6.3 million or a 17% increase over the 1st Quarter of 2014 and in-line with the guidance provided on our yearend call. The increase revenue came from patient and research segments, but due substantially to a $5.7 million increase in our patient services business. Our patient volume grew 29% partially due to our 2014 acquisitions of Mednet and BMS, as well as strong organic growth of over 8%. While we had a great start to the year, our revenue was negatively impacted by the inventory backlog caused by higher than expected demand coming into 2015. And while difficult to quantify, we believe that we were also negatively impacted by the bad weather across the country in January and February. We estimate these factors impacted us by approximately $1 million to $2 million. We believe organic revenue growth would have been an excess of 10% without these factors. Moving to growth profit. Our margin was 58% which was flat to the prior year quarter and 140 basis points higher than the 4th Quarter of 2014. This marks the third consecutive quarter of growth margin -- growth profit improvement post-acquisition. While the growth margin percentage was flat year over year, there was a 250 basis point reduction due to the full quarter impact of Mednet and BMS which as we have discussed, carry a lower margin product mix. This reduction was offset by a 250 basis point increase related to benefits gained from expense leverage due to the substantial increase in the scale of our business. We expect to see an additional 100 basis point to 200 basis point improvement over the remainder of the year. As promised, we're also seeing the increased growth margin leverage dropping to the bottom line.…

As you just heard we had a highly successful 1st Quarter, starting 2015 in a much better position than anticipated. In addition to achieving excellent results and improving margins, we move cardio key into its early launch phase, continue to see progress in our research and INR [ph] businesses and received encouraging news on the reimbursement front with the passage of HR2. All of this of course, gives us greater confidence in our outlook for the future. As a result, you just heard Heather saying that we were increasing our full year EBITDA guidance from $30 million to over $32 million representing 60% growth year over year. Before I close, I would like to touch on one additional topic. It has been about a year and a half since we adopted our current holding company structure and new corporate name BioTelemetry. We're now transitioning into a phase where we will more assertively build out a corporate branch story. In so doing, you will notice a few nuanced changes in the way we speak about the company. We'll describe the three divisions of BioTelemetry as healthcare, research and technology. In the near future, we will launch a new website gobio.com for a look and feel that supports this transition. The legacy company and brand names that we own and migrate into this structure and begin to phase out over time. We originally selected BioTelemetry name because it most accurately represented the core mission of the company. We're pleased with how the transition has helped streamline the company and are excited about this next phase. In closing, I would again like to thank those of the company who helped deliver our 11th consecutive growth order. You should be proud that your hard work is positively affecting the lives of hundreds of thousands of people. With that, we will now pause and open the call to your questions. Operator, we're ready for our first question.

[Operator Instructions]. And our first question comes from the line of Jan Wald from Benchmark Company. Your line is open.

I guess I have a couple of questions. One is that study from UPenn sounds very interesting. Could you go into it a little bit more and tell us how you think it might help drive your business?

As you're probably aware, there's been several studies that have focused on the topic of cryptogenic stroke and particular, looking for A.F. in those patients. There's been three studies that use the MCOT as a tool to effect A.F. and a couple of studies that -- using implantable loop recorder that have been highly touted. We found it very interesting that in all of these studies, MCOT outperforms other devices that have been used and in particular, the studies that found the implantable loop recorder that the detection rate of A.F. is far, far greater using MCOT. It's not surprising when you break it down and look at the performance characteristics of these devices. You guys have asked me about this device in the past on these calls and I've told you that it's complementary for the most part. And I do believe it's complementary for the most part but there is some overlap and this is the one area where there's a little bit of overlap. So if you break it down, the characteristics of those devices, MCOT is far more sensitive and specific. We can detect A.F. with that device down in the 30-second range and it's 100% specific at that level where that implantable loop recorder to our knowledge based on their top most information cannot detect A.F. below two minutes and it's not 100% specific at 30 seconds. In fact, it takes them about four hours to become 100% specific. So when you talk about diagnostic tools and the ability to detect things like A.F. in cryptogenic stroke patients, the tools aren't even comparable. Why is it clinically significant? I think the Penn study points this out. And the patients where we did find A.F., almost all of them were anticoagulated. The only ones that were…

No. Joe, I agree. And this is in essence, the new patient population is cryptogenic stroke folks. They're being treated not necessarily by cardiologists, but treated by interventional radiologists and neurologists. So to me, it seems like it's a new market opportunity for you as -- is that your sense?

We've been focused on the market in the past. I think this is getting more attention from some of the studies that have been published and really touted. And then when clinicians back up and look at whether or not these are the right tools to use and they evaluate other tools on the market and they look at free studies that use MCOT and the results aren't even comparable. I mean, we're in order of three times better at detecting A.F. in the first 30-day range. I think more and more people are starting to look at this as a tool. We know insurance companies are because in some cases, insurance companies are now requiring an extended external monitoring session prior to an implantable loop recorder. We have one or two more insurance companies just move to that requirement recently.

And Jan, I just want to add and I think it's important to note that the Penn study wasn't completely an independent study, that BioTelemetry did not fund that study or have anything to do with that study.

Switching gears a little bit and I'll get back in queue, but I don't know, Joe, you mentioned that GAO is going to evaluate remote patient line management. I don't know if that's just a headline or if there's some detail that's below that that you can help us understand how longer it might take or what they're looking at or anything along those lines.

I think the long-acquired two-year -- the study be done in a two-year period. And Jan, this was a language that frankly, we pushed for through an industry group that we chair as a company. We pushed hard to have language like this added to -- in fact, we've been riding in multiple bills, this one happened -- they get passed first and it's a big deal as you know. It's kind of though the reimbursement exposure risk, the volatility, if you will, potential volatility associated with MCOT has been a challenge with the company to pass most notably in 2009 and then again in '13 and implemented in '14. So we've dealt with this in the past. We've always said, you got to take a more intelligent look at the way you price these services and with Medicare movement to -- sort of value based pricing to value based payments we thought was a good time to really push for this. And we were pleased that it got in there. The SGR appeal is a big, big deal. As you know, that goes all back to 1997, was updated I think in 2003. But if the SGR mechanism has essentially called for physician rate reductions upwards to the 20% range over the last couple of years and every year, Congress realizes it's not practical so they've passed a legislation to fix it. The code word for this particular bill is Permanent Doc Fix Bill. So it's kind of exciting that that sort of disturbance in the market won't be there on an annual basis. We won't have the whole claims until the Congress fixes this. That's gone. And then moving -- looking at it in the future, we think it will be more -- this study will drive to a more intelligent weighted price, remote patient monitoring services in general and it will require input from the industry and we will work very closely with them to help them get educated properly.

And out next question come from the line of Bruce Jackson of Lake Street Capital. Your line is open.

First, just some housekeeping with the special charge in the quarter originally, I think that was -- can be spread out over two quarters. Is there going to be any special integration charge in the 2nd Quarter?

We don't expect much there's anything going into Q2. We may have a little bit more toward the end of the year because the trial which that trial that it relates to Scott [ph] got moved November. But it was a little bit higher than we had originally anticipated in Q1

Okay. And then with the progression of the growth margins over the course of the year, could we expect to see a sequential gross margin improvement quarter over quarter as we go through the rest of the year?

Yes. So Q1, we're at 58% and as I indicated, I believe that we could get another 100 or 200 basis point improvement on top of that.

And then if we could just talk a little bit more about the cardio key rollout, first, could you put some general timelines around the rollout of the Holter device and the MCOT device? And then if you could tell us a little bit more about how that might flow through to the gross margins over the course of the next two years.

So right now, we're focused on launching the first product which is the cardio key 14-day Holter. And we're in the early stage of that months between HR2 and beta testing or beta phase for this -- it's launched to a limited number of customers. Feedback from customers is very good. We're excited about the way it's progressing and then we'll move to a wider launch in a kind of a controlled fashion over the next two quarters. So that will happen this year. The next generation MCOT device won't launch until late this year, early next year -- late this year more than likely. And that's again, the next generation of our MCOT device and patch form factor. I don't think we've really programmed much of this in the P&L for this year in terms of margin. Speak to that Heather?

No. I mean, first, the whole term gets about slightly more than 50% growth margin now. And the low cost Holter because you can use it for a longer term, we can actually get a higher ASP with minimal increase in our cost. So it will definitely benefit all growth margins. We have not talked about to what extent and what the leverage on that will be in the overall business but there's definitely a benefit there.

Okay. And then, I mean, it's going to be -- you're not going to change out all of your Holters in one fee swoop. You're going to just kind of roll into this, the business over time, right?

Exactly.

And our next question comes from the line of Dan Trang from Stonegate Capital. Your line is open.

As you garnered top line and kind of pay market share, what's the response have been from your competitors?

Nothing. I would say terribly different than what we've seen in the past. It's more the same. Competitors are launching new products, it's not as crowded as it has been in the past, it's still an attractive market. Most of the technology is Me2 technology. Frankly, I haven't seen one that hasn't used this as a predicate device from their FDA applications. Most of them use us. None of them have the clinical studies and research associate with their product. Most of them just get a general cardiac monitoring claim. They don't get specific claims for utilization like we do because they don't have clinical work done. So it's an easy sale when we're going head to head. So it's also a service business, it's a technology-enabled service business, but it's a service business. So we compete on our ability to service customer and that's sometimes a harder sale than a technology sale by itself. So nothing terribly different that we've seen in the past. I think it's more the same. I think we're just winning more often than other folks are.

And switching gears a little bit, you mentioned your launching cardio key, was it later this month or the next few months? I couldn't relate your--

We're kind of in the process of it now, we're in like a control phase limited launch right now just to get customer feedback. It looks like we'll probably roll that out more widely over the next couple of quarters.

And the initial feedback has been very positive Dan.

And can you kind of give any additional color as how much do you think cardio key can contribute as a top line or--

There was going to be an incremental benefit to the top line from this. And then our main approach is to go after the longer term Holter market which is predominantly our algorithm today. So they do a pretty substantial business. Joe, I don't know if we have an idea of what the latest numbers are.

We have. We have talked about that. But I think you're spot on. It's a product that initially goes head to head against the [indiscernible] to your cost that had some success in the market. They've carved out a little nice. They've been working on additional reimbursement for the product and this product has essentially the same tune -- same thing that they do. Lower cost is good because it's two components instead of one. So it's the fact is that it's a lot easier to reuse the sensor. So I think we have some distinctive management cost perspective from a pricing perspective, we'll have two form factors so it's a little bit more flexible in the marketplace. So we're excited about it. It's hard to say how much revenue, it's a -- we can see how much of that market we can penetrate and take.

Okay. And regarding the HR2 legislation, does that pertain only to physician fee schedule or is that also -- regarding the device and reimbursement with that as well?

So we don't get reimbursed for the device. We get reimbursed for the service. The service is on the physician fee schedule. So when there's changes to the physician fee schedule, it affects us. And that's why every year, we can go through the exercise with the SGR calculation. So that kind of uncertainty is now off the table. And we have this 0.5% rate increase that actually the first one goes into effect July 1st and then January 1st and each January after that until there's five rate increases. And then this other thing that we just talked about, the GAO study should start to show or prove out better methodologies for the price in remote monitoring services going into the future.

[Operator Instructions]. Our next question comes from the line of Charley Jones from Dougherty market. Your line is open.

I'd like to get more comfortable with where your reimbursement rates are on the commercial side. I was hoping you could tell us what it is over the government business in general and whether or not you've been seeing stable pricing there?

Going back, yes. We have been seeing stable pricing there. And in general, it's about the same as the Medicare rate that we get. So there's movement in the Medicare rate across countries which give different monitoring centers. But in general, it's about the same as the Medicare rate. And there's a handful of commercial contracts that's actually tied to the Medicare rate. So when we saw in '14, when we saw the rate increase, that actually had a little bit of an effect upon us on the commercial side. We expect to see a reciprocal of that as rates move up.

Yes. I was hoping you could give us a little bit of a sense of where the pricing and volumes came out in the quarter, Heather. And then can you help us a little bit with the volumes between the three groups? You had 29% volume, obviously, your revenue growth is lower. Just kind of help us tie that together please.

So you had a few questions there. What was your first one?

So on the revenue, I'm trying to figure out how much was price, how much was volume. And then within the volume, maybe you could help us, give us an idea of which ones are growing faster and slower within the three modalities or what percentage they each made up on either volume or revenue. So the first question is related to price and volume and breaking apart the revenue that way.

So compared to prior year, Charley?

Sure.

Yes. Compared to prior year, we talked about patient services being up $5.7 million. That was almost entirely due to volume. So there is very little price benefit in the revenue.

And when we look at the difference between the MCOT volumes and the Holter and the event volumes, you had overall volume growth of 29% revenue growth was what, high teens? So can you just help us understand that? Is that just faster growth of event or Holter and what was the MCOT growth in the quarter?

Okay. Well, the revenue growth which would coincide with volume growth for MCOT was in line with basically our overall growth rate which was about 8% to 10%. And then because a substantial -- the rest of that, not the rest of it, but we look at our organic volume growth rate which was about 8% and then the rest of it was due to the annualization of the acquisitions, a lot of the volume that came from the acquisitions, as I mentioned, was event and Holter volume. So the rest of that increase basically came from those businesses -- those products.

Joe, I was hoping you could help us on a competitive question. I'm looking at the stock price decline and trying to understand what people have been worried about here. And I guess I'm wondering whether or not, obviously I don't think it's Medtronic, but do you get the sense that there's anything else out there? And I was hoping you could comment a little bit about how close these patches need to be to the heart. I would think they would need to be pretty close but just the ability to incorporate this in a watch-only device or with the watch. And then if you give us a little bit of timing on when you think your product that will be able to be used with our own cell phone as opposed to a dummy cell phone that can be out there in the market.

So a couple of things, Charley. I don't think that the company is being impeded at all by new products or ideas of new products that are coming to the market. The growth that we have been posting over the last year and this particular quarter is evidence that remote monitoring technologies in general are going to be more and more employed as the healthcare industry struggles the deal with escalating costs. And one way you can help decrease cost is you're going to apply technology to decrease inpatient labor-related cost. And this is one example of where that works. The idea that the a watch could replace an ECG monitor with the sensitivity and specificity that our devices have is not tenable today for a lot of different reasons. You don't get a signal from the wrist. So there are a lot of different concepts and ideas that are being tested and evaluated in the marketplace to make devices more consumer-friendly or consumer-oriented. It doesn't change the fact that somebody will need to evaluate the data being extracted from those devices either by machine or computer, through algorithm and/or through human interpretation. The art in this company is our ability to collect that data with proprietary technologies that is second to none, collect it, remotely and move it, centralize and synthesize it, analyze it and get it back into clinician's hands in a user-friendly format. Nobody is as good that as we're. So to the extent new technologies enter the market, they won't replace the surface platform that we have built. And frankly, I haven't seen a technology that comes close to ours yet. So we, as I said in the past, when these consumer-oriented devices are being spoken about, we tend to find ourselves in the middle of those conversations because of what I've just discussed. Nobody really knows what to do with the data. But we're kind of experts with that especially in the ECG arena. So I don't see that as a hindrance to our growth. If devices change, their form factor is modified over time, we will adapt accordingly.

Right.

And we will apply our intelligence from a technology standpoint and from a service platform standpoint to continue to deliver the service or services that we deliver today.

If I can reverberate a bag, I think what I'm hearing is we may see devices that are able to monitor our rates and check on different things that it picks up from our wrist. But it's never really going to be a clinical action information that's as accurate as yours. And so really, it won't make its way into the marketplace in any real way and may provide us interesting information of consumers but not necessarily replacing you and you're likely to be incorporated due to your scale and capability on the service side of it.

Yes. If the device is used by the produce date, it's clinical optimal. You're still going to need a service platform to collect the data and move it to a system and convert it back to a physician a useful format. So that's really where we're.

I would like to kind of understand your confidence and your ability, the growth of this market to continue to grow at least, high single digits or some reasonable growth rate that will allow you to get to a single low double digit for a couple of years rather than just a year. Do you worry about that or do you have a high degree of confidence that this is organic double digit grow or are you going to have to find new things to do for us next year to give us double digits if that's what we're looking for, not that your evaluation...

I kind of think it depends on a couple of things. First of all, I think it's really actually yes. So I am confident that we can continue to grow the top line double digits with a foreseeable future. And a couple of reasons why. There are still a handful of private insurance companies that don't provide coverage for some of the technology, in particular, Anthem and that can't last forever especially in lieu of some things that we've always spoken about on this call in terms of technology on previous calls, in terms of economy benefit. And I'm pretty comfortable that we'll get them there. And then there's a cascading effect with getting those last couple of big stores in line. So that's another 20% to 25% of the market that has opened up to us when that happens. I think you're going to continue to see the increased user proliferation of remote monitoring services to help reduce the cost of healthcare. Like I've spoken about before, I think that's in part, what's driving some of the growth we've seen over the last couple of years. Clearly, there's opportunity to apply some of these remote monitoring technologies to other disease states and we're looking at that. I don't know that that will happen this year but in the future, that will happen. But just in the remote cardiac monitoring, I think there's plenty of opportunity. We've talked a lot on this call already about the cryptogenic stroke market, that's a whole new area of opportunity that is just developing. So additional uses and different market segments is going to be applied to more of the market that opens up to us, demographic shift, ageing population, all of those things work in our favor. Again you've heard me say it a couple of times, across the healthcare and apply remote monitoring services, I think all of those things speak to healthy growth for this business for the foreseeable future.

Thank you. And at this time, I'm showing no further questions. I would like to turn the call back to Joseph Capper for any closing remarks.

Thanks operator. Thanks again everyone for your continued support and interest in the company. With that, we're going to conclude the call and we will speak to you next quarter. Thanks a bunch.

Thank you. If you joined the conference late today, you may listen to the conference via digital replay which will be available through the investor information section of the BioTelemetry website at www.biotelinc.com until Friday, May 22nd, 2015. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.