Good afternoon. Thank you for joining us for the BioTelemetry first quarter 2016 earnings conference 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 Private Securities and Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance and 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 filings with the 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 opened for question and comments following the presentation. It is now my pleasure to turn the floor over to your host, Mr. Joseph Capper, President and CEO. Sir, you may begin.

Thank you, operator, and good afternoon, everyone. I'm Joe Capper, President and CEO of BioTelemetry. Also with me on call today is our Chief Financial Officer, Heather Getz. I'll start with an overview of over first quarter performance, Heather will take you through a more detailed review of our operating results, I will make closing comments, and we'll then open up the call to your questions. Let's get started. I am extremely pleased to report this afternoon that we started out the New Year the same way we exited 2015, with another record-setting quarter, during which we surpassed all expectations, posting our 15 consecutive growth period, with new highs in volume, revenue and EBITDA. This performance is even more noteworthy, given the first quarter is typically our most challenging, especially in terms of EBITDA and cash due to certain front-end loaded expenses. If you followed the company last quarter, you know that our financial guidance for 2016 was a meaningful increase over an extremely successful 2015, calling for revenue between $195 million and $200 million and EBITDA of at least $40 million. In order to achieve these lofty objectives, we must continue to execute on our three-point plan, which is to, solidify our leadership position in cardiac monitoring, establish a leading research services business around the cardio core platform, and look to identify markets that would benefit from the application of a wireless platform and proprietary technology. Our adherence to these principles has been instrumental in generating the consistent growth we have had for more than three-and-a-half years, including the strong results we achieved this most recent quarter. In fact, as you'll hear, our first quarter was such a tremendous success, we once again find ourselves in a position where we are compelled to increase our EBITDA guidance for the…

Thank you, Joe, and good afternoon, everyone. As Joe just announced, Q1 was another record breaking quarter with revenue coming in ahead of our expectations at $48.6 million. Healthcare revenue was strong with an increase of $6.1 million or 18% growth over the prior year. Our research revenue was essentially flat and technology revenue declined $900,000. The strength in the healthcare revenue resulted from a 10% volume increase across all healthcare product lines, with our MCTs growing at an impressive 19%. Remarkably, this came on the heels of a record-setting fourth quarter. Also contributing to the healthcare revenue was the increased Medicare rate, which as expected added about $1 million. In our technology segment, the softness experienced in the second half of 2015 continued into Q1 2016, as customers have delayed purchases pending the release of our 3G devices to the market. We expect this buying pattern to reverse in the second half of 2016. Moving to gross profit. Our margin was 63%, which was 500 basis points higher than the prior-year quarter. This margin improvement comes from favorable pricing dynamics in the healthcare segment as well as operational and volume efficiencies. These positive benefits were partially offset by lower margins in our research segment due to investments made in the business during 2015 and slightly lower technology margin stemming from the lower revenue and product mix. We have continued to see our increased gross margin leverage combined with operating expense discipline positively impacting the bottomline. We generated adjusted EBITDA of $10.8 million for the first quarter of 2016, a 68% increase, as compared to our Q1 2015 adjusted EBITDA of $6.4 million and a 22% return on revenue. This is our eighth consecutive quarter of EBITDA margin expansion. Now, turning to the balance sheet. We ended the quarter with…

Thanks, Heather. As you have just heard, we had a highly successful first quarter, starting off 2016 ahead of expectations. In addition to achieving excellent results and improving margins, we completed over 4,000 CardioKey services, acquired ePatch division of DELTA and made progress across our research and INR businesses. Our strategy is clearly working as designed. To ensure continued success in 2016, we must stay laser-focused on the following items. We must build on our comprehensive approach and expand market penetration of CardioKey, followed by our next-generation telemetry system. We need to capitalize on the increased base of awareness and education in the marketplace by showcasing the best-in-class attributes of our technology. We will continue our efforts to expand payor coverage for all services, continue growing our research backlog, at least double the size of our INR services business, drive further efficiencies throughout the organization to maximize margin opportunity, and last, assess additional acquisition targets that will accelerate our strategic plan. By executing on each of these objectives, we expect to be in a strong position to deliver more record-setting quarters. Our guidance for 30% year-over-year EBITDA growth demonstrates the confidence we have in our business. Moreover, we are excited to see a growing trend towards use of remote monitoring technology in healthcare. Given our strong core competency in that area, we are extremely optimistic about what the future holds for us. So in closing, I would again like to thank those at the company who helped deliver our 15 consecutive growth quarter. You should be proud that your hard work is positively affecting the lives of hundreds of thousands of people. With that, we'll not pause and open the call for questions. Operator, we are ready for our first question.

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

Just a couple of questions, I guess. On the research services side, backlog is growing, revenues are flat. When are we likely to see revenue to start to expand or increase in this year or next year or how should we looking at it in terms of our models?

Yes, I think we'll see some expansion this year, Jan. It's a little flatter in the first half than we had anticipated. As you know, that's kind of a choppy business and we had a few cancellations, none of them material, but in aggregate it starts to add up a little bit. So it's flattened out a little bit in the first half of the year. So we hope to see a little bit more of an increase in the back half. I think the good news is we continue fill the backlog at an accelerated rate and we're making some progress obviously with some of the strategic initiatives that we spoke about. So it's a good healthy business, nice margin, nice return, it complements our healthcare services business, but it does tend to be a little bit choppy.

I guess in terms of EBITDA, I guess, given the guidance for the second quarter, I'm surprised that EBITDA guidance is sort of flat with the first quarter. Are there some expenses in the second quarter that are driving that being as flat as it is or what?

So as you can imagine, Jan, with the kind of growth that we experienced in Q1, we really weren't able to hire to meet the demand and we will have to layer in some additional people up in cost to sales. So that will affect the bottomline a little bit. So we're calling for about 22% return, which is on par with what we saw in Q1. But you are going to see a little bit more expense in the latter quarters in addition to potential investments that we've discussed at the end of last year that we may do to accelerate the topline.

So we've given ourselves a little bit of room, Jan.

I guess, my last question is data and, clinical data is what I mean, there is a lot of data coming out from Medtronic that you guys can counter, and it sounds as if your sales force is using data that you have to market with. But are you going to -- is there anything that we can expect to see at the Heart Rhythm Society Meeting or is there any data that's going to made public down the road that we would be able to see and that would support your claims for better specificity, sensitivity than the competition and things like that?

As you're aware, Jan, there has been at least five studies that I'm aware of that have published peer reviewed studies that demonstrate exactly what you say, which forces people to ask the question why, when they ask a question why you drill into product performance capability, re-product inserts and you find out that one product is incapable of detecting what the other product is capable of detecting. So part of that is, as you mentioned, getting that out there promoting it. We're doing it through our sales organization today. I think we're having a tremendous amount of success with that, as demonstrated by the almost 20% increase we saw in MCT. So I think the message is getting out there. We don't have the marketing prowess and resources of Medtronic, but it's certainly not hurting us today. I think it's helping us. And I think we're getting our message out there. So we mentioned that we hedged a little bit of EBITDA, because we intended on investing a little bit in the business. That may be one area where we invest. We have a couple of studies that are under-evaluation, and. I think would be well-received in the marketplace, if we can get those launch this year.

And our next question comes from the line of Alex Silverman from Special Situations.

Really great quarter, 22% EBITDA margins, pretty shocking. Wondering your prior 2016 guidance was for low double-digit revenue growth with patient reps growth rate sort of continuing at these levels, product sales looking positive in the second half, research services turning positive in the second half, that former guidance seems low, am I wrong?

No. I think the low double-digit got you to the midpoint of $195 million to $200 million, we're probably a little bit more bullish on the upper end of that, but it's only one quarter, so we basically have a year or so to unfold.

You finished last year with just jumping around; you finished last year with 2,500 INR patients. I think you said your goal for this year is to double that?

Yes, double at least the active patient count and the revenue. So just kind of rule of thumb about it, each 1,000 patients is roughly $1 million in annualized revenue on a run rate basis.

Each 1,000 is -- okay, that's right.

What we did last year, we sort of skunkwork it, worked up at [indiscernible] set up operations for it. This year we assigned quota to our sales organization and we're starting to promote it and we're starting to get some traction in the marketplace around our product offering or service offering. And I think we'll start to see that pickup as we move through the year.

And then last question, you said, CardioKey volume was up by a third sequentially. Can you give us some number what that was?

Well, as Joe mentioned in his script, we've done about 4,000 patients to date and we launched it in like the end of Q3 for sure,

We're kind of selective in how we rolled it out. We did it where we had market opportunity to go against a specific competitor who already had an extended-wear Holter in the marketplace. We're really focused on targeting those accounts and we've had some success there. We're just now starting to kind of roll it out on a wider basis, if you will, and evaluating how we want to position the product vis-à-vis traditional 24 and 48 hours Holters.

And our next question comes from the line of Chip Saye from AWH Capital.

Number one, Heather, I have asked you about this before, but could you give a breakout between Holter, Event and MCOT in your cardiac services revenue?

Absolutely. So if I look at it as a percentage of healthcare revenue, MCOT was about 70%, Event was about 21% and Holter was the remaining.

And secondly, my second question revolves around physician reimbursement for MCOT. I didn't realize this, but I was reading the cardiacmonitoring.com website and it said that MCOT uptake was really hurt by the fact that physicians have poor reimbursement for doing this monitoring. And number one, is that the case that they're reimbursed around the $1 a day. And number two, are there business models out there that maybe you could split some of the revenue with physicians in attempt to increase usage? And I guess, thirdly, have you guys looked at this?

Yes. So to answer your first question, the economic incentive for a physician to use this service is almost non-existent specific to the service itself. However, we have thousands of physicians that use it, because it produces a yield that nothing else is even close to, which means, their revenue will come with follow-on procedures and inflations and implants and such. So if you think about it in terms of a treating physician, the quicker they get the diagnosis, the more accurate diagnosis, the faster they can get into the therapy. But I'd be lying if I told you that hadn't been a barrier to growth and a challenge the growth over the years that we've been in the marketplace with it, but it hasn't stopped us, because it's a wonderful product. Your second question was about business models that would allow us to share some of that revenue. We really can't do that. You run into -- you want to [ph] follow a lot of regulations and compliance rules and what not when you start talking about revenue sharing. So it's not a subject that that we entertain much. There are opportunities at times for physicians to make an investment in capital, both software and hardware, which would allow them to take a partial ownership of the business and then outsource some of the monitoring. There is relatively few. We have found relatively few locations in the market that have an appetite for that. I'd say, less than 5% of the market is somewhere in the neighborhood with an appetite for making a capital investment like that, it's just not a big revenue generator for them. So you understand that when there are other services out there, that do offer economic incentives to physicians, you could see where they might be lowered in that direction. However, when those products are far inferior at actually arrhythmia when a physician is attempting to diagnose to saving a life, they do tend to follow there more accomplish and use the most accurate device available.

Lastly, and this is INR business that you talked about doubling that business this year. What is the incremental cost or incremental spend that you'll have to have in order to double that business this year?

Yes, I mean it's nominal to be honest with you, because the business is still so small. So I mean it's not -- you're talking about maybe $1 million or so dollars of the capital that's required. Your first part of your question was is it just the capital or are you saying how much would drop to the bottomline?

It's just how much additional incremental expenses would you have to incur in order to have that double the patients in the revenue?

So on the capital side you're looking at maybe a $1 million to $2 million depending on where the patients come in; if they're brand new patient versus coming over from another service provider. And then on the margin side, right now given the low scale, we have about 40% gross margins that obviously will increase with scale, probably closer to what we're experiencing now in the 60% to 70% range.

And our next question comes from the line of Marco Rodriguez from Stonegate Capital.

I have to apologize, I have some technical difficulties with my phone and miss part of the Q&A session. So if I have repeated a question, please let me know and I'll follow back up with you.

No problem.

In terms of the guidance, I just want to get a little bit better handle on the gross margin aspect. I know that in Q4, you were looking for kind of flattish gross margins and then 60% to 61% gross margins in the following quarters through fiscal '16. Obviously you did substantially better in Q1 on your gross margins. Just trying to understand how you seem those gross margins proceed to the rest of fiscal '16?

I would expect it to remain relatively flat maybe give or take 50 basis points to 75 basis points, Marco. And that's because as I mentioned earlier that we will need to hire some additional folks to keep up with the volume, that we're seeing, but I believe that will be offset by some favorable pricing dynamics on the commercial side as they follow Medicare. So you're probably looking at given the mix that that also helps that 63% see a higher margin, because 85% of our revenue came from patients or healthcare, which has typically been closer to 80%. All those factors contributed to the higher margin and I why would expect it to continue.

And then in terms of the performance, I mean very impressive growth rates on the revenue side. I'm just wondering, if -- obviously it's above what you guys were kind of expecting and I do appreciate the commentary you guys had in prepared remarks in terms of what was kind of driving things there. I am just kind of curious here though, were there certain things that basically really took you guys by surprise or was it just kind of again being conservative on your Q1 type guidance?

Maybe a little bit of both. MCT growth probably was slightly more them we expected. And that obviously is our best revenue generating product line. So that was probably slightly better than we had anticipated, but I'd say probably a little bit of both.

And a last quick question. Was there any update on the MCOT patch?

No. It's currently in FDA for review, so nothing really to report.

And our next question comes from the line of Bruce Jackson from Lake Street Capital.

If we could just follow-up on one of the comments made about some patent litigation that's ongoing, are there any major events coming up with regard to any hearings or decisions, trials, anything?

Not before September, would be the next event that we would be dealing with and that's a trial date for one of the cases that we are involved in.

And then Jan mentioned the R&D backlog, what's it going to take to shake loose some of that backlog and when do you think that that could happen?

The research services backlog?

Yes. Some of it's in the back half of the year, so in our guidance, we still have year-over-year growth related to the research business, but as we get larger studies and longer-term studies that impacts the timing. So even though our backlog can grow the length of the studies are growing as well, so it's going out further. We do expect to see year-over-year growth, even though it was flattish this quarter.

And then last question. You've got a fair number of challenges here 2016, what are you are envisioning right now as a long-term growth rate for the business going into like 2017 and beyond?

Look, we evaluate the business on ongoing basis and we look at the factors that are affecting our growth. And I have talked about the ones that are most important to us. But the ones that we saw affecting the growth this quarter and last couple of quarters frankly, none of those looked like they're going to change anytime soon, so the way we've discussed the business, look we think could still handle over the long-term, high single-digit, low double-digit growth rates. I mean that's pretty healthy for a healthcare services platform like this. So if we can do that, we can continue to find margin with scale, I think that's going be a darn healthy business for the foreseeable future.

And I am not showing any further questions. I would now like to turn the call to Mr. Joseph Capper for any further remarks. End of Q&A

Thanks to everybody. Thanks for getting in the call today and thanks for your continued support and interest in the company. That concludes today's call. And we will speak to you next quarter. Thanks, operator.

If you join the conference late today, you may listen to the conference call via digital replay, which will be available through the investor information's section of BioTelemetry, let's say, at www.gobio.com until Tuesday, May 10, 2016. Thank you. Have a wonderful day, ladies and gentlemen.