Good afternoon. Thank you for joining us for the BioTelemetry Third 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 third 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 evolve as we closed our 2017 and move into next year, especially in light of our combination with 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 results of another record-setting quarter in which we set all-time highs in revenue and EBITDA and posted our 21st consecutive growth quarter. This performance is even more noteworthy given the time and resources required to facilitate the integration of LifeWatch and the challenge is closed by the Hurricanes in two of our largest markets, Texas and Florida. Our focus since the acquisition in July has been and continues to be maintaining continuity of operations. Our healthcare services business has been a standout performer due to our strategic focused and our ability to implement its various elements. As such our goal was to add LifeWatch to the portfolio as seamlessly as possible and continue to execute on our business objectives in the same fashion we did prior to the acquisition. I’m pleased to report that is exactly what is happening. Two areas of vital importance are to maintain a focus on customer retention and provide excellent customer service. Post the acquisition, we immediately began to identify best practices across the enterprise that would maximize our effectiveness in these and other areas, and began to take steps to embed these practices into all of our…

Thank you, Joe, and good afternoon everyone. As Joe just announced the third quarter of 2017 marked our 21st consecutive quarter of year-over-year revenue growth with total revenue of $81 million. This represents a 53% increase as compared to the third quarter of 2016. Healthcare revenue was strong with an increase of $29.1 million resulting from volume increases largely driven by the acquisition of LifeWatch and a 9% increase in pro forma MCOT volume. Partially offsetting these positive volume drivers or the lower Medicare rate that became effective January 1, which as expected impacted us by about $1 million, as well as the storms that occurred in Texas and Florida in September, which we estimate impacted us by about $2 million. On a pro forma basis, the healthcare segment grew by 7.5% and if we did not have the Medicare rate reduction, the revenue growth would have been 9%. Our research revenue decreased $1.1 million largely due to lower cardiac revenue partially offset by an increase in imaging studies. Moving to gross profit, our margins for the third quarter was 61% versus 62% in the third quarter of 2016. The decline in margin was primarily due to the impact of the Medicare rate reduction and the recent acquisitions, which carried slightly lower margins than our existing businesses. Partially offsetting these declines were volume driven efficiencies. Our third quarter adjusted EBITDA of $17.5 million was our highest quarterly adjusted EBITDA in the company’s history and represented a 22% return on revenue. This return was what we expected and reflects the positive impact of targeted investments that we have made in the business and synergies realized in the acquisition of LifeWatch. Remember pre-acquisition on a pro forma basis the combined company’s EBITDA return was approximately 18% and in less than one quarter…

Thanks, Heather. As you just heard, we had an excellent third 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. We are in a early stages of several potentially significant drivers of future growth. The importance of the recent acquisition of LifeWatch should not be underestimated. This transaction has advanced our growth plans by several years and the organization is every bit as exceptional as we had hoped. We compliment each other’s strengths to the benefit of those we serve. To ensure our continued success throughout the rest of the year and as we prepare to enter 2018, 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 unparallel 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 were now experiencing and converting that backlog into revenue and leveraging various developing relationships to build out a world class digital population health management business. In summary, given our solid results the strong momentum of our business the stable reimbursement environment and greater visibility into the synergies created by the acquisition we are tremendously optimistic about our future prospects. All in all things are tracking better than anticipated. We’re not pretty adverse weather in the first part of September revenue would have been right on target and EBITDA slightly better than expected. Heather spoke about what we expect in the fourth quarter and how we see 2018 beginning to take shape. By the time we…

Thank you. [Operator Instructions] Our first question or comment comes from the line of Brooks O'Neil from Lake Street Capital. Your line is open.

Good afternoon and thanks for taking my questions. The first thing, I was just a little curious about is, it look to me like the G&A number that you’ve reported of around $20 million was a little bit less than I was looking for and obviously we start off with the presumption that my modeling skills have limitations. But was there anything unexpected in terms of costs in the quarter that you might point too?

So Brooks, you’re saying that you modeled a higher G&A number?

No I don’t – I’m sorry, I model about $20 million in it if I read the press release correctly, it look like it was about $25 million?

So, one of the things that impacted the quarter was the amortization of intangibles that you may not have accounted for that would have been about $2.5 million.

Okay.

That’s probably the most significant item that I can think. The other or maybe geography, my guess would be that our margin was probably slightly better than you expected as well, so the other piece of it mostly likely is geography on the P&L.

Okay. And then, I appreciate your comments about expenses related to the merger. I think you did say previously $15 million, I thought, I recall that you’ve said you sort of thought is thirds of it or the majority of it might be in Q3 and it looks now like more like a 50-50 mix if I’m doing the math right?

Yes. So Brooks, there were some non-cash benefits that hit that $7.5 million, so the actual will return in cash expenses are closer to the $9 million number. So that’s why you still have a little bit of a range in Q4.

Okay. And then I’m just curious obviously there’s a lot of talk of competition in the market place, would you mind commenting at all about the competitive environment whether you think you see any impact from new or more aggressive competitors out there?

No, I mean look our primary market is to connected health markets. We think that’s for the action is, and that’s where we’ve been focused for the recent past and for the foreseeable future. The competitive landscape, I mean there’s always appears competitive sound there. I think – I’d like to think that we’re holding our own then that we’ve with the largest and the fact that we were able to grow through the first couple months of this acquisition is actually remarkable. I mean Brooks, when you integrate two competitors like this it is really not uncommon to have some customer churn in that, 5% sometimes 10% range. The fact is Europe maintaining all of our customers, we’ve got revenue growth in there. We have MCT accelerating that’s unheard of, again it’s only the first couple of quarters here, the first couple months into the second quarter of the integration. But you just typically don’t see that. So I think that is a reflection on how well the organizations have come together, how well the sales and – the sale leadership team integrated the two organizations. Remember you had – I had to take them out – we have to take them out of the market for the better part of a week in August to cross train them on products. And they still grew their business. So this is a pretty well received – merger and the integration is going much better than we had anticipated.

That’s fantastic. I appreciate all of that color. Just a couple more quick ones. I want to just confirm, I think I heard Heather say in the range of $385 million of revenue for next year, in the range of 23% EBTIDA margin, is that would you say Heather?

Yes. So what I had given for the year was about $283 million to $284 million for the full year…

For this year?

For this year. For next year, I said, we are comfortable with – it will come up with about a little over $380 million. Yes.

So book share is why would think about next year.

And again – it’s going – obviously third and fourth quarter this year coming probably little bit noise and so we work through all the aspects of the integration start to move in the next year. Our business will go as MCT goes, and the fact that our MCT volume is already tracking above 10% is really good news for our business in 2018. If you look at what’s happened so far this year, healthcare revenue was up about 7%, if on a pro forma basis, if we adjust that the Medicare wake up we took, it’s actually up closer to 9%, which is about the same rate if MCP volume is up. There is some question as to mix whether or not we were seeing in ASP degradation in our MCP business. That’s just not happening. So that business grows at 10%, it’s a pretty safe that the company grows 10% or north of 10%. Our overall revenue was only up 5% just after the Medicare rate about 6% why, because we had a drag on revenue this year from the research business and from the product business. So what’s research been doing all year as the cardiac monitoring portion of research slow down, imaging has picked up. They have built backlog at a record pace. They set themselves up for a really nice 2018. We have 10% growth plus in the healthcare services business, we’re going to have 10% growth plus in the research business and our new business, at healthcare business is in its infancy. And we just announced one major partnership. We have a couple other ones it hopefully you’ll hear about in the near future. So I can tell you we’re pretty darn optimistic about the way 2018 shaping up, obviously the risk associated with that would have been if we had a failed merger. This merger is gone better than any merger I’ve ever been part of my entire career.

Fantastic. That’s awesome. You mentioned just quickly healthcare, I just want to confirm that’s the diabetes monitoring business you’re beginning to grow?

That’s right. We acquired a small company back in late December 2016 and this year we’ve sort of been nurturing it making the kind of infrastructure investments and product investments necessary to grow the business in the years. And we’ve been working on a couple pretty unique partnerships one of which you’ve just heard about.

Great. Congratulations. Thanks for taking my questions.

Thanks.

Thanks Brooks.

Thank you. Our next question or comment comes from the line Nicholas Johnson from Raymond James and Associates. Your line is open.

Hi guys thanks for the color. First for me looks like your cost synergy estimate has gone up within about three months, of course in the deals. So just wanted to kind of get a sense of where those incremental monies are coming from and maybe just remind me how you guys are thinking about the revenue synergy opportunity. Because it doesn’t seems like you lost any customers yet, so I know you are holding that back on the revenue side just because you were fearful maybe loosing some customers as you combined the organization, so any thoughts on synergies would be helpful.

So, I mean cost synergies are coming in pretty much as we had anticipated kind of on the high end of our range where we had anticipated, no real big surprises. I think that overtime we’ll do even a little bit better mainly because we’ve got a pretty strong culture of driving efficiency throughout the organization. We can put our hands on 30 today, which is kind of remarkable. We’ve taken actions to implement the majority of those. And again they’re not going to be all pulled through Jan 1, but we plan to have a good portion of that by random, we’ll pull them through over the next few quarters. At the outside of this we said we’re probably taking full 18 months to get them all, that is probably not realistic. But the good news is, originally we thought would probably come a third, a third, and third and third about $10 million in first six months, $10 million in the second, $10 million in the third, we’re actually getting them an accelerated rate. So we’ll have the majority of those pull through in the first couple of quarters. And that’s kind of really good news for us, because it helps kind of pave the way for next year. In terms of revenue look – we don’t really know what we went into this merger, we didn’t really know how the market would respond. We had anticipated it would be positive. We’d hoped it would be positive certainly. We didn’t think it would be this positive. And you have to remember we haven’t really even fully launched our next generation MCT product, the nice thing is we’ll be able to launch that as our first product as a merged company. We’ve got about 2000 patients on it now, feedback is unbelievable. The product is incredibly well received. We’ll start to really launch that in the market come first quarter with 100 sales reps a level we’ve never been asked for it sell on these products. So I think it’s positive, I think we’ll probably see more revenue upside, but you just don’t know, it’s hard to put your finger on that. So we tend not to get out in front of that.

That’s great. And then just maybe on that last point in terms of kind of your technology, your roadmap, how do you think about the merging of the portfolios overtime, certainly there’s so competitive noise across the marketplace. But just want to get your sense of maybe giving us an updated timelines as we think about that road map maturing over the next two to three years? Thanks.

So, I mean – I think the focus right now is to fully launch our next generation MCT product, which comes in two form factors of patch form factor and then lead wire form factor, which we know is important to the market because not everybody responds well to wearing a patch for multiple weeks. So it was important for us to do that and do it right and maintain the same accuracy that we have in our current MCT product line, which is you know no one even close to that, right in terms of sensitivity and specificity. So it’s really important for us to keep all that and then put it in the form factor that was flexible for the patient base. We’re really – we’re there and that product is starting to roll up, that’s a big focus. We’ve also over the past year launched a couple of extended wear products, new market niche created by one of our competitors, we can’t keep up with it, frankly every – we are – in the first quarter we’ll make a whole lot more devices to service that product line, because we’ve been taking some business there at an accelerated rate, which is kind of a good sign for us. So what we have found overtime is, our customer base appreciates a product portfolio approach not a one product approach, clearly when you get into the higher clinical end of the market, they want connected health products, they want feedback quickly, they want accuracy, and we can offer that. We have the most accurate systems in the market. We have the fastest turnaround time in the market, and we have the – certainly the most cost effective in terms of overall cost of care pretty good position to be. For those who don’t want connected products, we haven’t product offerings for them as well, Holters, Events and now extended wear Holters. But the portfolio is really important.

Great. I can just squeeze one more for Heather, cash flow expectations, as we think about that normalized adjusted EBITDA margin for next year north of $90 million. How do we think about free cash flow generation and your appetite either do you ever and/or potentially pursue more tuck-in transactions? Thanks.

Sure. So, we’ll continue to pay down our debt on the – on schedule. We don’t anticipate accelerating the repayment that don’t give us some cash in the word just to be able to continue to evaluate additional opportunities, which we always are. And we’ll continue to look for different things. So next year we’re with $90 million plus of EBITDA even on a conservative basis, we’re going to be well in excess of that $60 million mark in free cash flow which obviously will provide us with some additional opportunities outside of paying down our debt.

Okay. Thank you. Thanks guys.

It is important. Like you mentioned potential tuck-in acquisitions, and yes, that’s always a way to accelerate our strategic plan, our focus in the near term is integrating LifeWatch and doing this right. And I think the early indicators are that the team is handling it quite nicely, but so yes we are always looking to augment that plan. We’ll focus right now is integrate this platform.

Thanks. I’ll hop back in queue.

Thank you. Our next question or comment comes from the line of Matthew Keeler from SunTrust Robinson Humphrey. Your line is open.

Hi guys. Thanks for taking the question. Just first a clarification on the effect of the storm, I think you said $2 million is that disproportionately felt in the healthcare business or was some of that technology and research as well.

Across the board, we had a little bit impact, but mostly healthcare, I think obviously it’s the biggest portion of our business, so yes.

Got it. And so the volume growth is stronger than we were expecting especially in light of the weather, but it looks like it was more driven by the LifeWatch side than the BioTelemetry side, is that correct and can you give us any color on kind of the differential performance of those two businesses?

I’m not sure what you’re getting that, but we saw growth across the board.

Got it.

And as you look at another thing to remember, I mentioned in my comments, we merged the two sales teams within the first two weeks of the acquisition. So those two sales teams are one now, and they represent the entire product portfolio, which means I have former LifeWatch sales reps doing an excellent job someone former CardioKey and MCT products and vice versa. So we’re not really looking at it that way. We’re looking at in their ability to affect and we have reassign reps along the way. The fact that we got through that process and accelerated growth is remarkable.

Got it. Maybe another way to look at it is, you gave I think 12.5% adjusted and product growth in August and September probably mid-to-high teens storm impact is what I’m guessing and somewhat slower than that in July, so was there – was there disruption ahead or as the merger was immediately implemented.

Yes, that’s probably a better way to look at it Matt. So I think if you went back and looked at both companies prior to the acquisition, you saw kind of decelerating growth, why is that? Because neither side was hiring replacement sales reps as you’re moving it into a merger, merger takes time and resource away from kind of management focus. So we like both groups start to slow down little bit. I can’t remember our exact numbers, but they were probably somewhere in a 4% and 6% range in Q1 and Q2, so it kind of mid-single digits. We knew that was going to happen when you run in 10% vacancies in your sales group due to your natural attrition, if you’re not back to one, you’re going to have some impact like that that’s natural. There are some inventory issues as well on kind of both sides. So maybe more in the cardio net side. But once we kind of got through that get a deal closed, and we can merge two groups, you went from now having a group with 70 in another group with 40 people competing with each other and some of the same accounts to have 100 people with the consistent message selling on the product portfolio. I personally did not anticipate seeing that type of ramp, it usually takes longer to kind of recalibrate the messaging, build relationships in new accounts workhouse get people trained on different products that all takes time. So I would have anticipated a little bit slower growth in that product line. We thought there would be some growth simply because of our size and in the market, but and our position both of our relative position, but I didn’t anticipate it being that strong. And like I said we saw the same thing in October. So it’s a really good three month trend. July was slower, because we just – we just that’s when we were sort of integrate the business, and we were training the sales reps right in the field.

Got it. That’s helpful. And then I guess, you commented and our ability to retain share across customers, you now have – I think you said 70% in product share with LifeWatch in hand. Do you think that level of share or around there is sustainable longer churn?

I think we’ll grow it. There is no one even close to us in this market. There are some competitors that are formidable, but there is no one, it has the technology, that’s even close to us. Remember, when you get into MCT market, it’s not like the Holter market. Now you’re talking about doctors who really care about accuracy, sensitivity, specificity, which your clinical research look like. Let me tell, who else using your product, but you could say, every major healthcare center in the country using one of our products that’s pretty powerful.

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

Thank you. Joe, did I you say sales – the combined sales force is around a 100.

Yes.

Okay. So you just kind of wondering to what you go rationalized it?

Well, if you go back and look at headcounts that was in place for 2016, which we tend to benchmark against, there was probably – the exact number, probably somewhere in the 25 to 30 range.

You mean total 125 to 130?

Yes.

It probably took about 25 to 30 heads off.

Okay, I see. So that’s a key part of the synergies. Is the G&A that’s five points higher, is that also place we’re going to see a big change as far as realizing the synergies?

Yes. So you’re going to see a kind of across the board here, that’s where the other large amount will be coming from.

And on Anthem, did you mentioned – if you got the subs kind of fully signed up at this point?

We got seven of the 14 and we’re contracting with other ones, very slow process. We got a few more in last quarter. So we had a hope to see more ramp that, we just haven’t seen much yet, but hopefully 2018 will be better in terms of volume.

And as you’re getting – so where are you roughly in terms of contracted revenue for MCT? I mean, for contracted?

You mean across the country?

Yes. Kind of, like, the percentage of the volume that’s over contract?

I have to back to you, because I don’t have an exact number. I think, one way to think about is there is a handful of payer that don’t pay for it now. We just talked – once we get Anthem, there is handful of Blues that’s still don’t pay for it. And then there is some like with Anthem relatively restricted coverage. So we’re constantly working to improve coverage and to improve insurance carriers reimbursement.

The coverage just shows us the whole ROI thing given the different indications?

I could speak to you for whole another hour about that. It makes no sense at all. We have proven clinical superiority versus other modalities. We have proven return on investment. I have guarantee that return and sometimes you got to wonder what they’re thinking.

All you can do is take into the water. And then you mentioned rollout of other patched products beyond I guess NexGen MCT and CardioKey?

That’s what I was referred to…

Those two?

Yes.

Okay, Okay. All right. I think all my other questions have been covered. Thanks guys.

Thank you. Our next question or comment comes from the line Marco Rodriguez from Stonegate Capital. Your line is open.

Good afternoon guys. Thank you for taking my questions. I just want to follow-up on just a few questions. Most of mine have been asked and answered, but the product road map and rationalization, I think last time you guys on a conference call talked about just kind of integrating everything, take a look at the different roadmaps. Has that all been finalized as far as what products might be kind of pushed to the wayside, if you will?

No. It’s not been finalized. it’s work in progress.

Okay. Is that some sort of time line that might be fully completed and I guess, the sales team is pushing those particular products?

Yes. I don’t want to go public with that, is because it is a work in progress, there’s a lot that goes into integrating platforms like that. I think we talked about that at the outside that would probably come from the latter part of this whole integration process. We have teams working on it outside help with that, that’s a fairly sizable undertaking. The good news is, there is a lot of similarity in technology. There is a lot of opportunity, we believe in the rationalization process. So we’ll see overtime.

Got it. That’s fair enough. And in terms of – just a clarification on the MCT patch version, did I hear you say going to be launched out in Q1 of 2018?

The MCT patches already in the market. It’s kind of a relatively confined rollout, which is typical with a new product. You want to get feedback from customers. I think we put in roughly2,000 patients so far. We’re in the build process as we ramp up inventory. It will be more of a push in the first quarter of next year.

Got it. And last quick question, in terms of the earlier question on the competitive environment and just kind of wondering what you guys thoughts on some of the I guess wearable device company that of come out with some little handy little features to their watches?

Can you be more specific?

Yes. We said that had some details on a diabetes management they might be integrating into their wearable as well as Apple?

Yes. So I think that’s positive for the marketplace cardiac monitoring some of the initiatives are more consumer device-oriented owned companies. It’s really a positive think it’s going to build more awareness. You’re talking about potentially screening patients that are asymptomatic. If you think about the number of folks that are on that AFib that end in stroke, that’s a pretty positive thing. And for us, we think market drive, because obviously, these are not clinical great products, if you go you doc and say hey, this is flagging my device [indiscernible] what a clinical great products. And obviously, we have the best clinical great products in the marketplace. So we kind of see that as a positive, and I think will watch it closely. We think opportunity for us to partner with some of these companies in the future. So again, I think it’s positive across the board.

Got it. And real quick last one for me and I apologize. Do you have a quantification as far as the headwind from the hurricane, what’s sort of was an EBITDA and maybe EPS for the quarter?

So – I mean, if you apply our standard margin, the 60% margin of the $2 million, that would be about the best guess.

Got it. Okay. Thanks a lot guys. I appreciate your time.

Thanks.

Thank you. Our next question or comment comes from the line Mitra Ramgopal from Sidoti. Your line is open.

Hi, good afternoon. Just a couple of follow-up questions. First Joe, regarding the MCT growth you saw, I assume most of that was from your existing base or are you continuing to add on your customers?

We continue to add the new customers. And I can tell you that, I personally think you’ll see us add more new customers accelerated capacity as we launch new product.

Okay, thanks. And It seems like you’re probably ahead of schedule. It sounds like in terms of the synergies, the integration with LifeWatch. I think initially, you’d said you expected to get that $30 million of savings, I think in – over 18-month period, is that still sort of the goal? Or do you think you might get already in now.

We’ll get ahead of schedule.

Okay. And just one on the sales force integration. It seems like it has been pretty seamless, no issues in terms of cultures being different or anything like that?

I want to say no issues, but I would say it’s going much, much better than anticipated. And again, I think that’s attributable to the leadership team, that’s in place of the quality of the sales professionals that both organizations had recruited and built overtime. I watch to come together, I attended some of the training sessions and I personally we have seen the as well done. So it was really important to do that, because obviously that’s your phase – your primary mechanism for relating with your customers.

Okay, thanks. And then just to be clear regarding the hurricane impact, effects into FX in 4Q is pretty much all 3Q event?

That’s correct.

Okay. Thanks again.

Thanks, Mitra.

Thank you. I’m showing no additional questions or comments in the queue at this time. I’d like to turn the conference back over to Mr. Joseph Capper for any closing remarks.

Thanks, operator. Appreciate everyone’s time and attention today. I just want to kind of reiterate one thing I talked about that is, as we ended this integration with this acquisition integration phase, consistently try to focus people on 2018, because I knew in Q3 and Q4 will be little bit noisy as we integrate. I’m going to tell you we’re doing much better than I thought. I mentioned in couple of times in this call, I certainly didn’t anticipate double-digit growth in MCT this son that really bodes well for 2018. The record level of backlog that the research services team has built really bodes well for 2018. Some of the relationships that we’re building in the PHM business really bodes well for 2018.The integration is going much, much better than anticipated Whenever you enter into acquisition integration like this, risk of culture clash, risk of customer attrition, risk of employee, all those things have been addressed and our through them. So we’re really feeling comfortable with where the business is today. Talk to you guys next quarter and hopefully will be any even better one the this one. Thanks.

Ladies and gentlemen, thank you for participating in today’s conference. If you joined 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 website at www.gobio.com until Tuesday, November 31, 2017. This concludes the conference. You may now disconnect. Everyone have a wonderful day.