Good afternoon. Thank you for joining us for the BioTelemetry Second Quarter 2018 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 the statements that the company’s executives make today. These risks are described in detail in our public filings within 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 am Joe Capper, President and CEO of BioTelemetry. I am joined by Heather Getz, our Chief Financial Officer. I will 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 evolve throughout 2018. After our prepared remarks, we will open up the call for questions. We have an abundance of good news to share on today’s call. As you will hear, BioTelemetry is performing exceedingly well with superb progress in all areas of focus. Since I have joined the company in 2010, we have concentrated on increasing market share, advancing our product technology, strengthening our intellectual property and developing additional opportunities for growth. Those of you who have followed the company know we have made great strides in each of these categories. We have also added key components along the way making us a far more formidable competitor. And now with LifeWatch on board, we operate from a position of even greater strength. I can say without hesitation that we are unmatched in the field of remote cardiac monitoring and we are enjoying tremendous success as a result. In fact, we have just recorded our 24th consecutive growth quarter, during which we exceeded all expectations and again set new highs in revenue, EBITDA and EBITDA margin. That’s 6 straight years of strong performance. In the second quarter, we achieved a notable milestone much sooner than anticipated as we crossed over the $100 million quarterly revenue mark for the first time. We are achieving these growth objectives well ahead of schedule for several reasons, not the least of which is the continued successful execution…

Thank you, Joe. Good afternoon, everyone. As Joe just announced, the second quarter of 2018 marked our 24th consecutive quarter of year-over-year revenue growth, with total revenue reaching $101.4 million. This represents a 74% increase as compared to the second quarter of 2017. Healthcare revenue was very strong with an increase of $42.7 million resulting from the acquisition of LifeWatch, organic volume growth and a favorable payer mix. On a pro forma basis, the healthcare segment grew by 16%, with an 11% increase in pro forma MCT volumes and significant increases in extended Holter volumes. Our research revenue increased 31% or $3 million largely due to a higher volume of imaging and cardiac studies resulting from new customers. Other revenue was down $2.4 million due to several large product sales made in Q2 of 2017. Moving to gross profit, our margin for the second quarter of 2018 was 64.9% versus 61.9% in the second quarter of 2017. The increase in margin was primarily due to the synergies from the acquisition of LifeWatch. Our second quarter adjusted EBITDA was $29.1 million was our highest quarterly adjusted EBITDA in the company’s history and represented a 28.7% return on revenue. This return is being driven by the over 14% organic growth on the top line, along with the synergies realized from the integration of LifeWatch. Even with this impact, we expect the full year margins to be approximately 26%, which is an 800 basis point improvement over the pre-acquisition pro forma EBITDA return of 18%. To expand on the synergies from LifeWatch, as you know, we committed to deliver $25 million to $30 million of synergies. I announced previously that we have already specifically identified $30 million of savings. I am pleased to announce that we have met the target in the second…

Thanks, Heather. As you have just heard, we had another outstanding quarter, exceeding all expectations, while recording or 24th consecutive quarter of year-over-year revenue growth. We entered the second half with excellent momentum as the company is on track for another record-setting year. Our strategy is yielding the results we expected and we continued to broaden our opportunities. The LifeWatch acquisition has advanced our growth plans by several years and we are now in the early stages of some really interesting initiatives, which could become additional drivers of future growth. To ensure our continued success throughout the remainder of the year, we will focus on completing the integration of LifeWatch, expanding our comprehensive approach with the ongoing promotion of our new patch products both MCT and extended ware Holter. Continuing to grow our research backlog at the accelerated rate we are now experiencing and converting that backlog into revenue, building out our digital population health management business and expanding on key partnerships we have developed. Our consistent performance over the past several years has positioned BioTelemetry as one of the most exciting connected health platforms in the market. Our powerful cardiac monitoring and clinical research businesses have the potential to provide solid growth for years to come, while at the same time affording us the flexibility to advance a variety of additional connected health solutions. We operate from a position of strength that is unmatched in our industry. We know what we need to accomplish to take the company to the next level and we have the organization in place to get the job done. As satisfying as it has been to experience the numerous advancements our company has made over recent years, we believe we have just scratched the surface. What lies ahead has the potential to far surpass that which we have achieved to-date. I would again like to thank those of you who helped deliver our 24th consecutive growth quarter. You are working wonderfully as a team delivering on our commitments to all stakeholders, the most important thing that more than 1 million people depending on us to deliver the superior services for which we are known. I couldn’t be more proud of all that we are accomplishing together. With that, we will now pause and open the call to your questions. Operator, we are ready for our first question?

Thank you. [Operator Instructions] Our first question comes from Brooks O'Neil with Lake Street Capital. Your line is now open.

Good afternoon and congratulations on a terrific quarter.

Thanks, Brooks.

So I guess my first question is a two-parter I guess, could you talk a little bit about what’s left in LifeWatch integration and perhaps more importantly, can you talk about whether you see additional synergy opportunities that you might realize as we go forward over and above your $30 million target?

Yes, Brooks. So most of the work that’s been done is what you would expect, sales force, G&A a lot operations, what’s left is really product rationalizations and some system consolidation and as you know that takes a bit longer. As far as additional synergies, I wouldn’t be comfortable putting a number out there. I would just characterize it more in line with what we have done over the years in terms of getting the efficiency out of the company as we scale. There has got to be more there. But we are at the point now where frankly I would like to invest back in the business at a faster pace than we have been. And so I am a little hesitant to say, expect X more in synergy if that makes sense to you.

It definitely makes sense to me. And especially given the opportunities you have across your business, I personally think that’s the right thing to do. So second question, can you just talk a little bit about sort of the cadence, the pace, activities related to the rollout of the patch products, is there anything specific you are doing to try to drive the rapid acceptance of those new products?

Yes, hire people to handle the demand. It’s there – both the MCT product as you know is more of a product line extension, our next generation product of an existing business of incredibly high acceptance rate in the marketplace, we are seeing some same-store growth as we move accounts over to that product. And then with the extended ware Holter, a lot of that’s new business. We had anticipated more cannibalization of our traditional Holter business and we are seeing a little bit of it, Brooks, but just not a lot. I mean that product is really taken off.

That’s tremendous. So I would just ask one more. Could you just talk a little bit about what you are seeing in the competitive environment, obviously, we know you are the leader in the arrhythmia monitoring business I’d love your perspective on what you are seeing on that side as well as any activity you are picking up from any potential new or different competitors in the spaces in which you are playing? Thanks a lot and again congratulations on a great quarter.

Thanks. We always take our competition seriously. In the MCT market, we probably have 3 or 4 or 5 formidable competitors. None of them have been able to achieve the scale that we have been able to achieve, but we take them very seriously. And yes, there are occasionally new entrants into the market. I would characterize this business in the past as having not the largest barriers to entry, but certainly a lot of barriers to scale. You may have remembered a time in the past when Medtronic decided to get in the business and they acquired a small company and there was some fear amongst some of our shareholder base that it was a doomsday for us both during the quarter, they got out of the business, out of the MCT business specifically and my understanding is to concentrate more on their implantable device, but they are doing quite well with, but so you win some business, you lose some business. Overall, we are able to grow the business and expand our footprint.

Perfect. Thank you very much.

Thanks, Brooks.

Thank you. And our next question comes from Bruce Nudell with SunTrust. Your line is now open.

Hi, thanks for taking my question and great quarter. I have two questions on extended Holter and one on MCT. With regards to the extended Holter specifically, the patch product, are you receiving any pushback with regards to 7 days versus 14 days and/or the potential, the accuracy of your algorithm versus Zio? And also with regards to extended Holter, I know you guys had reticence based on your experience with MCT as to an ultimate retrenchment in extended Holter pricing and compression of the Medicare and commercial that it’s spread between Medicare and commercial, is it still on the table and when do you think there might be final pricing decisions?

Let me see if I can unwrap that. So extended ware Holter was there some pushback on length of service, we can extend up to 14 days, with a recharge or stuff they can use, a CardioKey. What we found is most folks aren’t wearing it for that full period of time. So to answer your question very little pushback, but we will have – we will and do have the capability to cover that period of time. Expand on your question a little bit on, you talked about the difference between...

Yes. Any pushback on accuracy and then the reimbursement question is when do you think there will be a final reimbursement decision on extended Holter and do you expect a decent size compression?

We don’t know when there will be a decision on moving that to a permanent code and pricing it nationally. So, it’s hard to say. What could happen, the only thing we can do is disclose the risk and we think that there is some risk there, as far as your other question as far as pushback on accuracy, absolutely zero.

And my MCT question is, is there was some the Zio telemetrized version goes 2 weeks, the MCT code is up to 30 days, have you guys resolved whether or not 2 weeks is enough to get paid at MCT rates?

That’s a question for counsel. To be candid, I am not going to wait into that. Our opinion is that the code requires the ability to cover the patient for up to 30 days. As you know, our technology does that. Whether or not you can put a hard stop on that at some point forward and not offer it, I don’t know the viability of that. So I think I would advice people to just check with counsel.

Thanks so much and great quarter.

Thank you.

Thank you. And our next question comes from Bill Sutherland with Benchmark Company. Your line is now open.

Thanks and good evening guys. I was curious at this point if you could give us a breakdown roughly in the research segment between devices MCT, Holter, implantable?

I mean as far as the revenue and research.

Yes, percent of research revenue Joe by those technologies?

Yes, so think about research as more a cardiac safety study.

Hey, Joe, I am sorry, I meant monitoring healthcare?

Hi, Heather, you go.

So of the healthcare revenue we are about 73% and MCOT 16% event and about 11% Holter.

Okay. And that includes extended Holter?

Yes.

Heather, that was up a bit, any color there?

Yes, we had a specific reserve on a customer in our other segment that has filed for bankruptcy and we put a reserve up on what they owed us. So that basically accounts for the entire increase.

The CapEx was up, what are you thinking for the year on CapEx?

We are going to be pushing probably $20 million. We have been buying a lot of devices to meet demand and we are making sure that we are staying ahead of the demand. So, I think $20 million is probably a safe assumption for the year.

Okay. And then last Joe, I wonder if you could give us a little insight on you are evaluating a lot of things in both digital population health area, maybe one or two technologies that you think hold potentially a lot of promise for you guys?

Yes, I am not going to share too much, which probably frustrates you, but it’s – we made a initial investment in diabetes market given its size and it’s clear need for something better than what was happened in the marketplace. So we think that there is a lot yet to do there. We would like to potentially bolster our current service offering with a few more capabilities and then add more business development resources to that group. So what we did in this current year was obviously focus a lot on the LifeWatch integration and we used time to make investments in that business. I talked about the new device and we have also done some investing in our monitoring platform as well, our cloud-based platform. So, it was more infrastructure and system-related this year and then as we kind of move through the close of the year and into ‘19 we will focus more on business development. So again, we like that. We have looked at some other things in that space. There is other chronic areas that also lend themselves to connected health solutions like the ones we are bringing to bear. So, I know it’s a frustrating answer, but I am not telling you.

That’s alright. You have said before that the healthcare model, particularly the revenue model you wanted to move into more of a PMPM, how is the progress there going?

Yes, I think it’s going well. I think you are starting to see that take hold in the marketplace. It’s slow, but as you know things don’t change that fast in that world, but I think you will see more subscription models kind of like the PMPM models and I do think to the extent your ability to share risk, you will be well positioned from a competitive perspective. And that’s really kind of what we are gearing ourselves for it. A lot of movement in the field, in the market to move more to value-based pricing and I think that all makes good sense we have to be prepared for that and this is – there is some of the things we are doing to make sure that we can demonstrate savings necessary to win those contracts.

That makes sense. Thanks again for the answers.

Sure.

Thank you. And our next question comes from Marco Rodriguez with Stonegate Capital Markets. Your line is now open.

Afternoon guys. Thank you for taking my questions. I was wondering if you could circle back a little bit on the new MCOT, I think Joe you mentioned you started to see some accelerated same-store sales, can you maybe talk a little bit more about what you saw that might have been driving that?

Just acceptance of the product and more use of the product within a practice, more comfort putting in on more patients, again, it could be an early euphoria about the product. So we will wait and see, Marco, before we talk a whole lot more about. I thought it was an interesting tidbit to share today, because number one, it reinforces that there was the right investment to make, it was the right thing to do that changed the form factor that make it a little bit more patient friendly. And number two, it could be could be nice for from a growth perspective, because obviously we have a huge installed base already. If we can get that installed base to grow a couple of points faster than they have been growing that’s great for our business.

Got it. And in terms of the organic growth rates that you guys have been coasting up here in the last few quarters, I mean, you had some accelerating growth even post the LifeWatch acquisition, just trying to get a little bit of a sense as far as what are some of the drivers you are kind of looking at there, is it or do you think you guys are taking additional share, it is the new product launches if you can kind of maybe kind of rank them if you will?

Very difficult to rank. I will say I believe it’s all the above. I think since the acquisition of LifeWatch, we were able to take the two larger sales organizations that frankly went head-to-head against one another, align them, form one sales organization that was larger than either company’s prior organizations, give them a clean message, extend their reach and frequency throughout the U.S., equip them with new products as you mentioned, support them with as much support as they could possibly provide. And I think all of that has had an impact on our growth rate. So, I thought we would grow. Frankly, the double-digit growth rate over the course of the year has been a little bit of a pleasant surprise for us. We thought we just get there. We didn’t think we will be putting up the kind of numbers that we are putting up. And I think a lot of it has to do with getting the sales organization organized quickly, get a clean message supporting them with new product. We have got excellent leadership in place running that organization. We have got some very experienced tenured people as part of that organization. It’s – a lot of it is just sales execution. And I think we are benefiting as a result.

Understood. And then in terms of the gross margins for the quarter, Q2, fantastic number there in terms of some historical numbers and I think Heather you mentioned that it was primarily just synergies that drove that results, were there any other sort of one-time items that maybe kind of goose that up a little bit?

Yes. No, other than what I mentioned about being able to hire, we have ramped our sales so quickly. It’s tough to hire especially in a service industry and get people up to speed quickly to be able to address that volume. So, you are going to see that come down a little bit. So, if you want to call that a one-time kind of pickup, because we didn’t have those people you can. So, that’s part of why I mentioned that. I think you are going to see some compression in Q3 as well as Q4 relative to Q2.

Got it. And last quick question, just kind of a bigger picture question, Joe, on the new initiatives for like the diabetes and what have you, I was sort of trying to pin you down to a timeline, but it maybe kind of help us understand or frame your comment where you sought that it could become a much larger revenue generating pie or piece than the healthcare side? Are we talking like a 3-year window, a 5-year tenure window?

I think you will see impact inside of 3 years. I think you will see impact inside of 2 years. And the reason I made that comment is because the markets are so big. These are just really big markets. The cardiac monitoring space is large, but nowhere near as large as the chronics as you know, $0.80 on every $1 spent in healthcare is being spent on the chronic. So, as we start to wade into those, we are seeing just tremendous opportunities for growth. I apologize if it sounds like background noise, folks we are in the middle of another torrential downpour, so I guess I apologize if there is background noise.

Thanks a lot, guys. I appreciate your time.

Sure.

Thank you. And our next question comes from Jayson Bedford with Raymond James. Your line is now open.

Good afternoon and congrats on the progress.

Thank you.

So I apologize if I missed this, if healthcare grew 16% on a pro forma basis and MCT volumes were up 11%, what else grew so quickly and can you maybe comment on price as well?

Really, it was the extended ware Holter category that pulled it up. And I don’t think there was much more – there is not really much to say in terms of pricing.

Favorable mix.

Yes, a little bit of favorable mix, wasn’t driving it much.

Okay. Kind of the outside contributor to the growth here, it sounds like it was extended Holter?

Correct.

Okay. I too was intrigued by your comment around accelerating growth in those centers that have a new MCT system here. How many or maybe what percent of your base if you introduced this to it?

Probably about 50%.

And the rest, will that occur this quarter or during the back half of this year?

Haven’t put a timeline on it. It’s kind of where appropriate, where the opportunities are as needed.

And then just to follow on the last line of questioning, Heather, gross margin near 65%, it’s a pretty big change in trend. I know you have mentioned that it will dip a little bit near-term, but it’s kind of 63% plus kind of the new starting point going forward, I hate to pin you down, but it was such a big difference between what you have been doing over the last few quarters?

I think that 63% is a reasonable expectation.

Alright. Thank you.

Thanks.

Thank you. And our next question comes from Gene Mannheimer with Dougherty & Company. Your line is now open.

Thanks. Congrats on a great quarter. Yes, I have a similar question to the others, but I mean the revenue beat $5 million above the top end of your guidance, if you had to sort of single out an area that surprised you the most disproportionate strength would it be that extended Holter area, was it across the board, how would you sort of bifurcate that top line acceleration?

Adoption rate of MCT, the new MCT adoption rate of extended ware Holter and the research guys move the number out.

Yes, okay. Very good. And I know it’s early days on this, but Joe, are you able to share with us say the number of patients that you have equipped with extended Holter year-to-date and perhaps separate out CardioKey from ePatch, are you able to share that with us? And I know there is not a lot of cannibalization you are seeing, because maybe you can sort of talk about, is it 80/20 new customers versus existing, how should we look at that?

Gene, I really don’t want to get into those details yet, because we are a couple of quarters into this and it’s kind of silly growth at this point. I want to wait till we see a more stabilized growth rate and I started picking in part for you a little bit to give you a better understand of where it’s coming from, it’s coming from new business, is it coming from converting our traditional Holters, is it coming from converting somebody else’s traditional Holter, is it coming from taking share from extended ware Holter companies. I’d rather kind of wait and see. I think – I do want to share one point with you and it kind of circles back to the previous question where I said the research guys kind of blew out their number. I always feel like I am changing these guys, things that they started doing recently is using the ePatch, our extended ware Holter in some other studies. And as recently as yesterday, they want an incredibly large study from one of the biggest pharma companies in the country, a multimillion dollar multiyear study that has ePatch as an integral part of that study, so not only did they have to win the study against other contract research services companies, but we had to position ePatch as a superior product relative to other potential extended ware Holters. So those two divisions work unbelievably well in that regard and the research guys really did a great job pulling that piece of business across and that’s something we haven’t realized $1 from yet.

That’s terrific and a good segue into my other question around the research business, 30% plus growth, are there any drivers either at the regulatory level or otherwise that are driving that increase in demand on the imaging side or the cardiac safety side specifically?

Nothing terribly new from a regulatory standpoint, I think we are seeing more oncology drugs moving to the pipeline, so that the imaging business is growing at an accelerated rate. As a result, I mentioned that we saw a nice spike in the number of studies that include both cardiac and imaging, so that validates the strategy. Our plan was that if you remember when we bought the imaging business back in abut ‘16 we did it because we thought very strongly that with multiple service lines we would put ourselves in a more favorable position to win bids right. So, that’s coming to rue us we are starting to see that more and more.

It’s fantastic. And last question on the sort of the other growth initiatives you are talking about in digital population health, how would you expect to fund some of those growth initiatives?

Well, I think we are going to have a lot of cash flow, right. The business is very healthy. We are sort of at the back end of integration I should say. We are more than halfway through integration. We still have some expenses and some R&D and infrastructure spend that we are going to need to invest in, but you heard about the capital expenses we made for product introductions. The businesses, is doing fairly well. So, I anticipate a lot of free cash in the second half of the year and obviously an opportunity presents itself is larger than what we could fund with cash on hand. We have a balance sheet that’s pretty darn healthy right. If you look at what we are projecting now for EBITDA will be north of $100 million in 2018 and our debt is a little over $200 million. So, if you net out our cash, we are less than 1x leverage. So, I think we have some flexibility there.

Very good. Thank you. Congrats.

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

Hi, good afternoon. Joe, I just wanted to follow-up I know you mentioned you plan on making some investments to sort of meet the better than expected growth you are seeing with the extended Holter on the MCOT and if you can give us a sense, if you pretty much plan on making those the rest of this year or is it going to be much longer timeframe?

Well, for sure, we will be making investments in infrastructure, in system consolidation, product consolidation this year. If you are talking M&A I am really not going to put timelines on that. I would say as always we have a fairly active corporate development funnel and we look to – when we do those deals as you know there to accelerate our strategic plan. So we would never talk specifically about timeframe. I would say that near-term we are still more concerned if you are putting waiting on this, we are still more concerned with completing the integration and making sure that we make the proper investments to support the business for scale. We think there is a lot of room to grow this business.

Okay. And actually more specifically, in terms of the sales force or adding headcount, is that something we will be looking?

Yes, we are constantly evaluating that as well. And I think there is opportunity to expand that as we close out this year move into ‘19.

And I guess it’s also given….

That’s clearly more of a kind of a surgical approach to where it makes the most sense to allocate additional resources, but we have found that as we have extended our reach and frequency, supported that group with the proper products that we are able to grow this business at an accelerated rate.

Right. And given the strength you seeing on the research side, do you think you also need to bolster sales efforts there too?

No, they have too many people. That’s just the case, in case they are listening to me. They probably do, especially we added resource outside the U.S. I think you will see us probably look to do a bit more with that group as well.

Okay. Thanks again for taking the questions.

Thanks.

Thank you. I am not showing any further questions. I would now like to turn the call back to Joe Capper for any further remarks.

Thanks again everybody for your continued support and interest in the company. We will speak to you next quarter. Operator that concludes today’s call.

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 August 8, 2018. Thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.