Good afternoon. Thank you for joining us for the BioTelemetry Second Quarter 2017 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 the 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 or achievements of the Company in the future to be materially different from those 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 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.

Thank you, Operator, and good afternoon everyone. I'm Joe Capper, President and CEO of BioTelemetry. I'm joined by Heather Getz, our Chief Financial Officer. I'll start with a recap of our second quarter performance and other key developments. Heather will take you through a more detailed review of our financial results. I will then provide commentary on how we see the business continuing to evolved in the second half of 2017 and beyond, especially in light of our recent acquisition of LifeWatch. After our prepared remarks, we will open up the call for questions. Let's get started. I am extremely pleased to report this afternoon the successful completion of another record-setting quarter during which we set all-time highs in revenue and EBITDA, posting our 20th consecutive growth period. This performance is even more noteworthy given the amount of time and resources that were needed to complete the LifeWatch acquisition. This was a large and complex transaction for a company of our size, and if not managed properly, it could have resulted in our core business loosing momentum. But as you can tell from the quarter, we did not miss a beat. If we had not completed the acquisition, today we would be reaffirming our full-year revenue guidance and even increasing our EBITDA guidance. This is really quite remarkable and indicative of the quality of our organization. Naturally, the acquisition is a subject of great interest. And now that it has closed, we can dive further into our rationale and highlight several key metrics for combined company. But before I do that, I'd like to remind you of how we arrived at this point. We did so by adhering to the same three principles that have guided our strategy for the past several years, during which we have made great progress…

Thank you, Joe, and good afternoon everyone. As Joe just announced, the second quarter of 2017 marked our 20th consecutive quarter of year-over-year revenue growth with total revenue of $58.1 million, which was in line with our expectations. This represents a 10% increase as compared to the second quarter of 2016. Healthcare revenue was strong with an increase of $1.9 million resulting from volume increases largely in MCOT. Partially offsetting these positive drivers was the slower Medicare rate that became effective January 1, which as expected impacted us by about $1 million. Our research revenue increased $1.6 million largely due to imaging study volume growth and the full quarter impact of the acquisition of VirtualScopics, partially offset by lower cardiac revenue. Finally, the Technology segment increased by $1.9 million, bolstered by sales of wireless blood glucose monitors through our Telcare division. Moving to gross profit, our margins for the second quarter was 62% versus 62.5% in the second quarter of 2016. The decline in margin was primarily due to the impact of the Medicare rate reduction and the 2016 acquisition which carry lower margins than our existing businesses. Partially offsetting these declines were volume driven efficiencies. Our second quarter adjusted EBITDA of $14 million was our highest quarterly adjusted EBITDA in the company's history and represented a 24% return on revenue. This was above our expectations and reflects the positive impact of targeted investments that we have made in the business. Before moving on to the balance sheet, I want to touch on our adjustments to our GAAP results and remind you of how we are reporting our income tax on a GAAP and adjusted basis. Our total adjustments to our second quarter results totaled $5.6 million and included $4.5 million for expenses related to the acquisition of LifeWatch and…

Thanks, Heather. As you just heard, we had a strong second quarter building on the momentum we have cultivated over the last five years. Our strategy is yielding the results we expected, and we continue to broaden our opportunities. With the recent acquisition of LifeWatch we have accelerated our growth plan by several years. To ensure our continued success in 2017, we will focus on completing the integration of LifeWatch, expanding our comprehensive approach with the continued rollout of a series of Patch products, and developing a longer-term product roadmap that takes full advantage of our unparalleled technology and IP portfolio, contracting with additional payers, including Anthem subsidiaries, and ensuring maximum pull-through for those services, continuing to grow our Research Services backlog at the accelerated rate we are now experiencing, and building out a world-class digital population health management business. In summary, given the success of the business, the stable reimbursement environment, and with greater visibility into the synergies created by the acquisition, we are tremendously optimistic about our future prospects. By the time we enter into 2018, most of the costs associated with reorganizing the merged business should be behind us, setting the stage for a spectacular year. Both Heather and I spoke about how we see 2018 shaping up from a revenue and EBITDA perspective. These numbers are compelling, and when you factor in the amount of free cash, which will be available for additional investments, we can't help but to get pretty darn excited about where this company is going. We are already the largest and most profitable connected health company in the world. As we continue to bring solutions into the larger chronic care markets, our opportunities compound at a tremendous rate. The company has come a long way, but as I have said in the past and continue to believe, our best days are still ahead. Our business is benefiting from trends that favor our strengths, and we are excited about our future prospects. As I close, I would again like to thank those at company who helped deliver our 20th consecutive growth quarter. By joining forces with the LifeWatch team we are in an excellent position to tackle numerous business opportunities. More importantly, we will positively impact the lives of over one million patients annually. It doesn't get much better than that. With that, we will now pause and open the call to your questions. Operator, we are ready for our first question.

Certainly. [Operator Instructions] Our first question comes from the line of Brooks O'Neil from Lake Street Capital. Your line is now open.

Good afternoon everyone and congratulations on all you've accomplished. It's amazing, it's great.

Thanks, Brooks.

So I have a couple of questions, and I'm in particular curious about your perspective on product and technology leadership. Clearly, you are the revenue and profit leader in remote monitoring. And I'd love for you to give us your perspective on whether you consider yourself today the product, and technology, and innovation leader in the space? And if for any reason you don't, maybe you could talk a little bit about the product roadmap going forward.

Yes, Brooks, no doubt. No doubt about it. Again, I go back to the fact that, first and foremost, we are a diagnostic product attempting to provide the most accurate information possible for physicians to diagnose a patient, and then put that patient down the proper care path. So in the field of diagnostics the most important things you could do is provide the most accurate information in the most timely fashion, and we do that better than anybody else. I always use the [AFib] [ph] market as an example. The AFib detection capability associated with the MCT technology that we market is second to none in the world. It'll detect AFib down at runs of 30-second with 100% sensitivity, and positive predictability. No one else can touch that. And that's measured against a standard database. So I think when you look at what's inside of these devices no one's even close to us. We've [technical difficulty] developing more patient-friendly form factors or at leasing giving patients more alternatives in terms of form factor, that's why we have a couple of Patch products that we're in the process of rolling out. But Brooks, I think you also have to look at moving forward. What organization has the most resources, the most technology bench strength, the most understanding and awareness of the industry, there's no one that's even close to us. So I think I would have to say, yes. And I would say that the close second is a pretty long distance away.

That's very, very helpful. And then maybe you could just talk a little bit about the payer situation. Obviously you have huge opportunities with the Blue Cross organization, but give us a quick update on where you stand with Anthem, and with the other Blues organizations that are out there?

Yes, we have contracted with Anthem -- let me rephrase that. We have got a change in coverage policy for MCOT, and then we started the contracting process with Anthem. There's 14 subsidiaries, unfortunately you are required to contract with all subsidiaries. We're in the process of doing that. We're about half way through that process. And I'm hoping to have that completed not later than the end of the year. And again, I think that gives us a pretty strong competitive advantage within the Anthem network. There's still another handful of Blues that aren't contracting with MCOT for MCT unfortunately. So we continue to work with those folks. That means more clinical studies, that means more research, and obviously we continue to fund those initiatives. But payer expansion is an opportunity for us, Brooks, as you know. And it's created opportunity for us as we've grown the company over the last five years. It's not the only one, we talked about the technology. Because we're the technology leader, that's opened up new use indications for use of the product. In prior calls we've talked about using MCT in the neurology market because of its clinical accuracy. A neurologist does not want to use a -- or does not want the product to be ordered unless they're pretty confident that you can detect AFib if it's there. We have demographics in our favor, the aging population; AFib is more prevalent with the ageing population, as is some of the other arrhythmias we detect. We haven't even tapped into the international market. One of the nice things about brining LifeWatch into the fold is they actually have some experience outside the U.S., and they have people who have more experience outside the U.S., so it's incredibly complementary to our organization. So a lot of good stuff happening. Yes, payer expansion is important, but I think there's other things in terms of driving revenue within the cardiac monitoring business are just as important.

That's great. I'll just ask one more. I'm particularly excited about your opportunity in diabetes. I know there's a lot of other disease states that are amenable to remote monitoring and the services you offer. But can you just give us quick update on where you're at in the diabetes space.

Yes, so in late December we acquired -- or in December we acquired a company called Telcare, which was a company that had the first cellular-enabled blood glucose monitoring system approved through the FDA. So since we've acquired the company we've concentrated more on partnering with other participants or other stakeholders in that space who could open up distribution channels for us. So it's more of a partnership leverage play rate now. Second thing we focused on is investing in the technology necessary to take that business to the next level. So we need technology that's going to take it into the out years. And so we spent a decent amount of time on that in the first six or seven months that we've owned the company. I could tell you I'm incredibly optimistic about some of the products that we have underway. Obviously you can't speak in too much detail about them, but these could be fairly significant relationships.

That's great. And I guess I lied, I have one more question.

Okay.

With the strong cash flows you're going to generate beginning now, but leaning into 2018, do you think you're done with acquisitions or how do you feel about that?

Well, no, I wouldn't say done. Look, I think the best way to think about it, Brooks, is we just spent an awful lot of money to acquire a company that will transform our business. As Heather and I talked about, when you start getting up in revenue numbers approaching $400 million and EBITDA returns in the mid 20s, and you're getting close to $100 million of EBITDA you can back into a pretty nice free cash flow number. The main thing we need to do is integrate that business. We just spent an awful lot of money with acquiring that company, and I want to make sure that our objectives are met. So integrate, integrate, integrate are our top three objectives for the time being. That being said, we always have a very robust business development, corporate development function with in the company to look for those opportunities. The cardiac monitoring business is only so big. We're already the dominant player, but I think we're in such a good position because we have more expertise with regard to moving data from remote locations, centralizing that data, synthesizing it, and getting it back to a healthcare provider in a user friendly format than anyone else on the planet. So now that we can generate some of our -- or fund some of that additional growth with our own internal free cash flow, it gets pretty darn exciting. All that being said, integrate, integrate, integrate.

That's perfect. Congratulations. I'm really excited for you.

Thanks.

Thank you. Our next question comes from the line of Bill Sutherland from Benchmark. Your line is now open.

Thanks, and hi, Joe, and Heather. I was curious if you could update us on the commercial launch of the next-gen MCOT device?

Still in beta phase, so we still have it on a limited use with the market. So you won't see full market release of that product until later this year or early next year. And obviously we have a bit more work to do now, Bill, because we have to rationalize two product portfolios in two product roadmaps, so main objective there is minimize customer disruption. Customers can continue to use the same products and services that they're used to, that then start to move those products and services together over time. And in the context of doing that we will have a more -- I'd say a more robust commercial launch of those products.

And so, as you repeat the three I's of what you're going to be up to, what are kind of the most important elements of integration of these two companies as you've gotten into it?

Well, the guiding things that I talk about, customer retention. Why do some mergers not meet the stated objectives? Typically the number one reason is culture clash. So we're working very hard to integrate all aspects of the organization. I think we're blessed in that regard because the leadership team at LifeWatch are a very talented group of people, very cooperative, very collaborative in the way we've been working together. I've done a lot of acquisitions and a lot of mergers in my day or been part of a lot of them. I've never seen one go quite this smooth this early on. So customer retention, make sure we adopt best practices. I talked about that in my commentary. We don't do everything right, they don't do everything right. I think there's aspects of your company, and our company that are incredibly -- or the two companies that are incredibly complementary. It's incumbent on us to make sure that we adopt those. Obviously we have a redundant product portfolio. We have redundant technology. We have to figure out which technology, which products are best, which services are best. Highly impressed with some of the things I see in their customer service area. So I think there's enough complementary aspects with the two organizations. And as we put them together we have a great opportunity to build something really special.

Great. And then, Heather, just a couple of questions on the guidance; the new revenue guidance for the year, does that imply the same growth rates for legacy BioTelemetry?

Yes, it does.

Okay. And for next…

And just keep in mind, Bill, just to put in there, the 10 less days, 11 less days that we have of LifeWatch in Q3 is impactful. So if you go back and look at last year and compare it to this year, there's just north of $3 million that we don't have in Q3 of this year that they would've had in Q3 of last year because of the timing of the acquisition.

Okay. And then can you give us any kind of range of CapEx to think about next year?

It would be really difficult right now. As Joe mentioned, we're in the process of evaluating both of the portfolios. If you wanted to be conservative take about 2x what we have this year. I'm guessing it'll probably be slightly less than that, but that could account for if we replace any products. But that's really a conservative guess at this point.

And then just last on the model. The amortization that we should think about, I mean, I realize you probably haven't got that nailed yet?

Yes, no, that's something as we -- as Joe mentioned, we've had about two weeks to start to really get the information from LifeWatch. I do have some estimates, but as we move into Q3 I'll have a better number. Right now what we used in our estimates was about $10 million annualized. But again, that could change as we do the opening balance sheet and refine that.

Okay. That's incremental, right, just the LifeWatch, the $10 million?

That's right.

Okay. Thanks so much, and congrats on the deal.

Thank you.

Thank you. Our next question comes from the line of Alex Silverman from Special Situations Fund. Your line is now open.

Hi, congratulations by the way.

Hi, Alex, thanks.

So, Heather, can you give us a quick pro forma 2017 for the combined companies, what the number would look like?

So what I had guided to in the script was the $285 million…

That's the actual, pro forma at the end.

You want pro forma.

Pro forma, what the two companies would look like together.

Yes, about $350 million.

3-5-0?

Yes.

Okay. And then 2018 is 10% higher is what you're suggesting?

Yes. I mean, that was just to give people an indication, because, as we just mentioned, we gave a reported number in the script just to give people an idea of what they could look like, but it's a guideline, and we'll…

I just wanted to make sure you weren't suggesting 10% off of 285.

No, no, no. The 10% off of the 350.

Bill if we guide to -- I'm sorry, Alex. If we guide to the 10% it'll be off in the 350. That's where we came up with those kind of 380-ish plus numbers that we talked about. And I see no indication at this point as to why we won't be guiding off of a number of that. And I see no indication at this point why we wouldn't be guiding to double digits. Both companies, we're tracking to that. We slowed down a little bit as we entered into the integration process, frankly because we ran with several open headcounts in our sales organizations as we prepared to merge. It didn't make sense to fill openings as they came up over the last six months when we knew we were going to be slamming these two sales forces together. So we saw a little bit of a taper, but now that we've got them merged together I think you'll see momentum pick up in the second half. But I have no reason to believe we won't be growing at a rate like that. But as I've said, as we get a little bit closer to the end of the year we'll kind of refine that for you.

And along those lines, which was going to be my next question, how much overlap was there, is there between the two sales forces in terms of call-in on the same accounts?

Yes, more complimentary than overlap. There was some overlap. There were some accounts that were shared. We had to go through a process, and make decisions on how to allocate our resources and the right number of resources we needed to cover those accounts. If you think about it -- actually, we still had that team branded as CardioNet in the field. So the CardioNet team was probably somewhere in the 72 to 73 number, down from 80 because of the open headcount. And the LifeWatch group was somewhere in the kind of mid to high 40s. They were down a bit too due to open headcount. So as I indicated, with the new structure we're putting about 110 reps plus management, so you get about 120 folks. And I think we have wonderful coverage with that number. So clearly revenue per FTE when you combine the revenues in the two companies, really you can use your, again, your resources more intelligently within the same accounts. More complimentary than overlap though, in regions of the country were one company was strong the other one was not necessarily as strong.

Okay. Are you going to need to increase CapEx maybe just a one-time catch-up with the merger of the two companies?

Yes, that's what I was just mentioning to Bill. We haven't done a full evaluation yet of the technology platform and the rollout of the products on a combined basis. So it's possible, but we don't have that number right now.

Okay, that's reasonable. All right, and then Heather, I'm sorry, I missed. Third quarter guidance was 82 to 85, is that what I heard?

82 to 84.

82 to 84, is that with the 23% EBITDA margin?

That's right.

Okay, great. Thank you so much. Congrats.

Thanks.

Thank you. Our next question comes from the line of Marco Rodriguez from Stonegate Capital Markets. Your line is now open.

Good afternoon guys. Thank you for taking my questions. Heather, I wanted to follow up, we didn't catch all the balance sheet items post acquisition here coming into Q3. Can you review those again?

Yes, I just had mentioned that the Q3 balance sheet will reflect the $205 million of indebtedness that we incurred to finance the acquisition, as well as refinance our existing and LifeWatch's existing debt, so it'll be about $205 million. And then we'll carry about $15 million in cash.

Okay. So that's after integrating everything, 205 roughly in debt and $50 million in cash on the balance sheet in Q3, roughly?

Right. Yes, and that could fluctuate a little bit if we need to draw on the facility for anything related to one-time type costs, but I think that's a good estimate right now.

Got you, okay. And then, you have got to talk a little bit about the integration aspects, and obviously you've got some synergies that you're going to try to capture the majority of them here in fiscal '17. When we kind of take a look at your overall operating structure, where should we see most of these synergies coming from?

Different areas; Sg&A obviously is a big one. Over time there will be some rationalization and opportunity in R&D operations, some location rationalization. And then, a lot of kind of volume-related stuff with vendors; we went through that number pretty carefully as Heather indicated since we had -- since the acquisition, we've had more time to dig into the data. And we're very comfortable with that number.

Got you, okay. And then, maybe if you can talk a little bit about feedback maybe you received from end customers now that the acquisition is closed?

Well, I think a lot of customers were -- no, I shouldn't say lot, some customers were postponing decisions until the acquisition was closed. I think they wanted to see what would happen. And our messaging has been very clear. There's no disruption to customer relationships. They continue to use the same products and services that they're used to. In some cases there may be a change of representation, but that's part of the business anyhow. And then, over time we'll decide how to merge the best attributes of both platforms, both services, and both technologies, so that we give them something even better. And so, feedback is relatively positive, or it's not over the top positive but we're certainly not getting any negative feedback associated with it.

Got you. And any color, I know it's also pretty early days in terms of what working capital requirements might look like in the company?

You're not going to see big uses of working capital with the combined business. It's going to be similar to what you've seen with us just maybe on a little bit of a larger scale. So the cash flow is -- from an operating expense and a capital, CapEx requirements, but you're not going to see big changes in either direction.

Got you. Thanks a lot, guys. Appreciate your time.

Thanks Marco.

Thank you. [Operator Instructions] Our next question comes from the line of Mitra Ramgopal from Sidoti. Your line is now open.

Yes. Hi, good afternoon, just a couple of quick questions. First, I'm just wondering, again, it's a little early with the acquisition now being into full, but do you get a sense as you speak to your payers that how an increased scale will help you in terms of some additional revenue opportunities?

I don't know that I would characterize it that way in the payer market. I think the scale gives us opportunities from the standpoint of efficiency and improving service levels that you could deliver and reinvesting back into the business. The relationship with the payer is more contractual. Obviously as a larger participant in a competitive contractual selling, we have an advantage. I think the fact that we have an extensive product portfolio helps us. It is a competitive advantage in a contracting scenario. Nobody else has a line of products like we have. We obviously are dominant in the MCT market. We have a very extensive event in Holter market, and more recently we have entered into the extended-wear Holter market. So it's a pretty extensive product portfolio. That I think is probably more important in terms of being able to provide comprehensive solution to a payer world.

Thanks. And again, looking back to when you first announced a transaction and your expectations regarding the synergies, and the strategic investment you're making, how do you see it today? Would you say it's exceeding your expectations or pretty much as expected?

Oh, well above expectations.

Okay. Thanks again for taking the questions.

Thanks, Mitra.

Thank you. And at this time, I'm not showing any further questions on the phone lines. And I would like to turn the call back over to Joseph Capper for any closing remarks.

Thanks, Operator. Well, folks, we're going to go ahead and close up the call. Thanks again for your continued support and interest in the company, and we will speak to you next quarter. Operator, that concludes our call.

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 section of the BioTelemetry Web site at www.gobio.com until Tuesday, August 22, 2017. That concludes our conference today, everyone have a great day.