Good afternoon and thank you for joining us for the BioTelemetry Second Quarter 2020 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 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. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release, which is distributed and available to the public through the Investor Information section of the BioTelemetry website at gobio.com. 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 of BioTelemetry. Sir, you may begin.

Thank you, operator, and good afternoon, everyone. I’m Joe Capper, President and CEO of BioTelemetry. With me for today’s call is Heather Getz, our Chief Financial Officer. I hope you all remain in good health and spirits as we continue to navigate the significant challenges presented by the COVID-19 pandemic. When we last spoke in early May, we were about six to seven weeks into the economic shutdown, and we were still trying to get a handle on its potential impact on our daily lives and on our business. At that time, we stated that we had experienced a 30% year-over-year reduction in revenue for the month of April. We also said that we expected it to be our worst-performing month with anticipated sequential improvement coming to May and June. That forecast proved to be quite accurate. To provide you with an appreciation of how well we are weathering the current challenges, I will start with comments about our second quarter performance and then provide details about how our strategy continues to drive growth and create new opportunities in our three major areas of focus: healthcare services, clinical research, and population health management. Our diversified structure has served us well in the downturn with approximately 20% of our business largely unaffected by the events of the day. After my update, Heather will provide more details on our Q2 financial results. I will make closing comments and we’ll then open up the call for your questions. Before providing further detail on the quarter, I would like to thank the many dedicated team members at BioTelemetry for the way you have seamlessly adapted while remaining steadfast in your commitment to the health and wellbeing of our customers and fellow employees, your devotion and resolve are nothing short of amazing. As a result…

Thank you, Joe and good afternoon, everyone. as Joe just announced, we reset 2020 in the second quarter with $99.1 million of total revenue, down 11.4% versus prior year. as expected, April revenue was the most negatively impacted by COVID; and from there, we saw sequential growth in may and June. healthcare revenue was $84.4 million, driven by patient volume in MCOT and extended-wear Holter, as well as from a recurring monitoring revenue. We also received a grant of $19.7 million for a portion of lost revenue due to COVID, which was included in the healthcare segment numbers. Our Research revenue was $11.5 million, benefiting from a higher proportion of longer duration imaging studies. Lastly, revenue from our corporate and other segment was $3.3 million, resulting from a higher percentage of revenue coming from our digital population health business. Moving to gross profit. Our margin for the second quarter was 62.1% versus 62.8% in the prior-year period. the inclusion of the grant funding positively impacted margins by 420 basis points. Excluding the grant, our gross margin was approximately 58%. The lower margin is largely attributable to inefficiencies caused by the drop-off in volume in our health care segment. this was partially offset by higher margins in our research segment due to efficiencies created by automation put in place later in 2019. our second quarter adjusted EBITDA was $25.6 million, a 25.8% return on revenue. Excluding the stimulus, EBTIDA was $15.9 million or a 17.8% return. our EBITDA margin was supported by the flexibility in our business to adjust the cost structure to the appropriate level in response to the demand for our services. We struck a balance between removing excess cost and ensuring we were appropriately staffed as volume returns to pre-COVID levels. As for our tax rate. In the…

Thanks, Heather. As you’ve just heard, we had a much better-than-expected Q2. Given the challenges posed by the COVID-19 outbreak. We started 2020 strong out of the gate, poised to shatter expectations. when the crisis hit, we made the necessary adjustments to scale back our operating cost structure without dramatically changing our capabilities. These modifications coupled with our flexible business model allowed us to generate excellent EBITDA margin in the quarter. Naturally, our primary focus is to guide the company through this crisis as effectively as possible. as you can see, however, we have not let the current conditions divert us from our growth plans. On the contrary, we remain quite active on all fronts. to recap, during the quarter, we generated better-than-expected Q2 revenue and earnings. We paid $70 million for our credit facility. We have been experiencing a V-shape recovery with respect to MCT and extended-wear Holter volumes. We continued to grow Geneva activations. We acquired Roche’s INR business, expanding the continuous care revenue in our cardiac business. We partnered with Boston Scientific to help commercialize their new insertable cardiac monitor, broadening our already comprehensive cardiac monitoring offering. We experienced record high growth in our research study backlog. We added business development resources to the pop health team. We acquired the On.Demand assets from Centene corporation and entered into a partnership to provide comprehensive pop health services to their members. At the outset of the COVID-19 crisis, we made a conscious decision to remain as active as possible throughout the economic slowdown and recovery phase. From today’s commentary, it is clear we have done just that. We now expect to grow into the third and fourth quarters barring any major changes that would trigger another slowdown. We also have reason to be extremely optimistic about the longer-term prospects for the company. This crisis has necessitated rapid change in healthcare, much of which will be permanent. regulatory and reimbursement organizations, the traditional obstacles to change have adapted like never before. The post corona healthcare environment will demand greater access and payment for telehealth and remote monitoring applications. As one of the largest fastest growing the most profitable connected health companies in the market, we could not be better positioned. With that, we’ll 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 Kaila Krum with SunTrust. Your line is now open.

Great. Thanks. How are you doing, Heather? Thanks so much for taking our questions. So first, you guys called out just a grant from lost revenue of about $10 million in the quarter. This may be just a simple question to start out. But can you give us a little detail on what this is? Should we view it as a onetime item going forward? Just additional clarity there would be helpful.

It was part of CARES Act. It was geared for Medicare providers. It was a calculation based on previous year’s business. And it was designed to cover lost revenue in the quarter, which it did, not all of it, but it certainly helped, and it is a one-time event as far as we know.

Great, okay. And then I want to talk about some of the announcements you’ve made over the last 48 hours and starting with On.Demand. Can you just give us a sense for how much revenue that the acquired business generated perhaps over the last six to 12 months or so and really how big this business could be for you guys over the next two to three years? Just to be curious, if you could talk about that in a little bit more detail.

Yes. This is a really interesting one for us. We had been dealing with this group for some time as a partner. And I think between the two organizations, we came to the conclusion that it was better for us to take over full control for a lot of different reasons, which I won’t go into. But it was just a better setup for us to take over control of the platform. And so we’re in the process of fully integrating it. We were early on in that. It was probably few million dollars worth of revenue so far. I think the important thing is they had just signed several plans, and we’re in early stages of ramping up those plans. Now how much business could it potentially be? The plans that are under contract already, I think, amounts to about 3.7 million lives. And you could run a calculation on that, maybe 8% of them, 10% of them have diabetes. What percentage we ultimately pull-through to the program is yet to be seen. And then together, we’ll market – we’ll continue to market to their other plans. And I think in total, it was about 12.5 million lives. But I think the important thing, though, Kaila, is think about this as probably our first meaningful commercial step. A few years back, we had acquired technology in this space. And we, for lack of a better term, sort of put it on the shelf for a year or two. And then we started to upgrade the technology, in this space. And we, for lack of a better term, sort of put it on the shelf for a year or two. And then we started to upgrade the technology, build out the platform, add some resources to sales and marketing resources but really kind of incremental steps. We had other things to focus on with the acquisition of Geneva and a few other initiatives we had in the company. But we always saw this as a really important segment as the market kind of unfolds, right, and – or develops. And the market has developed a lot in the last couple of years, as evidenced by one of the big players out there who’s running relatively unchallenged. So, we see it as – so the cardiac monitoring business, our core business, is a great market, $3 billion, $4 billion worth of total available market. When you start talking pop health and care management, you’re talking hundreds of millions of dollars of potential market. So this could be really big. It’s a commercial partnership to anchor customer that will help us get started a lot faster, and we anticipate continuing to invest much more aggressively in the commercial side of this business. We think it can make a beautiful third leg to the stool.

Great. That makes a lot of sense. And then I want to touch just on the ICM partnership as well because, again, this is another item that we think could be augmented to grow. So what is sort of the subset of customers? I think you guys had said in your press release this morning that it would be a subset of your customers that you would act – or subset of Boston’s customer that you’d act as a sales agent for. Can you just speak to how big sort of that group of customers is, or give us a sense for the size there? That would be helpful.

I cannot give you an exact number how big that segment will be. Again, I think if we back up, I think the important point to get across is we’re forming a relationship with quality organizations to help them launch what looks like a competitively superior product in the marketplace, and we’re happy to be part of that. We don’t have an ILR or ICM in our current monitoring portfolio. We stop at 30 days. These are the only products that go beyond 30 days. So I think working together, we can help them extend the reach of their current sales organization. They can leverage our relationships. And frankly, as the relationship builds, more than likely, we’ll be able to leverage their relationships. So I think it’s a pretty exciting opportunity.

Got it, okay. And then just I guess one last question, and then I’ll cut off. But I – just in terms of the growth profile of the business, I mean, looking at some of these recent partnerships and opportunities that you guys are investing in. I mean, are these sort of opportunities, things that could potentially push the growth rate, significantly higher over time? Just to be curious, how you’re thinking about these being sort of additive to the long-term growth profile of the business. Thank you for taking the questions.

We do. Yes, Kaila, we do. We see them as – all of doing that. As we’ve sort of messaged in the past, the business has been kind of a double-digit organic growth company, sometimes a little bit higher pre-COVID. And we were accelerating back to that earlier in the year, January, February, we’re seeing those double-digit numbers, and we were kind of getting back into that phase. We see all these things as accelerators. Obviously, it will take us a little bit longer to build out the pop health business, but that’s probably the biggest market opportunity. But the other one certainly should help accelerate our growth.

Thank you, guys.

Thanks, Kaila.

Our next question comes from Brooks O’Neil with Lake Street Capital Markets. Your line is now open. Brooks O’Neil: Great. Thank you. Good afternoon. Congratulations on the terrific performance. I do want to focus first just a little bit on these new opportunities. So obviously, you have the relationship with Centene, here at the pop health, and you talked about making investments to accelerate the commercialization of that effort. I’m guessing, but I would like to hear from you guys your opportunity to go to other commercial health plans or friends with United Healthcare, some of the blues, whatever, and how you think about that opportunity developing? And then maybe whether you see big opportunities in Medicaid and Medicare advantage as well?

Yes. We do. So Brooks, we already had kind of portfolio of customers or a set of customers that was growing. Our pop health revenue was increasing outside of the Centene relationship. So, we were starting to get traction. It was really important for us, over the last few years, to make the service offering as competitive as possible. So, we spent time building out the program, building out the service capabilities. Now, Centene is probably one of our bigger customers, and the partnership has taken on a different type of relationship. But there are other customers that we currently service and other customers that are growing. We’re having nice early success leveraging the remote patient monitoring codes that Medicare activated in early 2019 and among other, some other tactical activities with the team. We plan to continue to market and probably market more aggressively within that Centene world and certainly, without – outside of the Centene world. So, you’ll see us add more resources to this program. Brooks O’Neil: All right, that’s great. Let me just ask you a little bit about the BSX agreement. Do you have any sense for why they picked you guys versus your neighbors at iRhythm or Preventice, which I think I remember, they might own 25% of?

I cannot speak to why, but I will just take it as another endorsement of the quality of our service as a best-in-class provider. We’re looking forward to working with them. Brooks O’Neil: Yes. Yes. They’re a great company. Congratulations and keep up all the great work.

Thank you.

Thank you.

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

Thanks, operator and sorry about the printer noise, guys. How’s everybody doing out there?

Good. Thanks.

We’re doing good we’re doing good. Thanks, Bill.

So, the On.Demand business, I’m kind of curious, so you’re bringing your platform that you’ve developed, the BioTel platform to bear on their, on the 3.7 million lives, correct? There’s no – or is there a technology on demand that you’re assuming, and I guess, integrating into what you have?

There was some – yes, there was some technology more in the coaching side on how they manage the patient base, and that will be easily integrated into our platform.

So, but you’ve got the superior technology and analytics and so forth in your mind. I mean you just have to – like that’s kind of the whole point of this?

Yes. I think we had developed some nice capabilities together. And it just – I think the combination of the two was really becoming a formidable offering, but it just made more sense given their focus and our focus, it made more sense for us to take control of it.

Do you – with what you guys have done, Joe, have you approached mostly other health plans? Or are you focused more on the self-insured employer market? I’m just curious where you have gotten traction.

A little bit of traction on a couple of different fronts. But look, the effort has – the commercial effort has been relatively limited because of the way we’ve resourced the business over the last few years. We think there’s opportunities to sell at multiple different levels that the employer helped self-insured market, the payer market – within the payer market, the Medicaid, Medicare market but also the commercial market, leveraging the RPM codes at the provider level. Especially if providers are at risk for cost of care, they become wonderful target customers. So there’s ample opportunity. The important thing for us was to tighten up the offering before we started to really add a lot of commercial resources.

And so will this begin to impact as soon as the current quarter, the third quarter? And does it begin immediately with monetizing 3.7 million lives with the enormous kind of metrics that these businesses have?

You’ll start to see some impact immediately. It will be small to start out with. It will take time to pull through lives on those programs.

Okay. Is the BDX deal exclusive? Or are there other sales agents involved?

No, just us. It’s exclusive to us in the U.S.

Okay. And that will start – and you said that starts this quarter as well?

Yes. It will – we probably won’t start sales activities until a little bit later in the year, maybe a fall timeframe.

Okay. And then Heather, would you mind breaking down the monitoring – the cardiac monitoring components a little bit for us, whatever size that you’d like to provide or growth – relative growth?

Yes. the MCT – the percentage of total healthcare revenue, MCT events, is that what you’re asking for?

Yes.

Yes. So, MCT is about 66%; event was 11%; Holter was 14%; and what we’re calling recurring with Geneva is 9%.

And Holter includes extended?

Correct.

Okay. What else is in there except Geneva in that other category?

That’s why we’re including Geneva in our INR business. So, any of the recurring cardiac – any of the recurring cardiac revenue has always been in that number.

Great. And all those data points were going to go through the same portal, so we’ll commercialize in the same way.

Right. Okay. I’ll hop off and let someone else on. Thanks, guys. Appreciate it.

Thank you, Bill.

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

Hi, good afternoon. Hope everyone is well. Just maybe just to follow up on the last question. Heather, the percent of healthcare, does that include the grant money? Or is that backing that out?

That’s backing that out.

Okay. And then just similarly on that, you gave a breakdown of revenue by month percent. Was that the whole company, or was that just health care ex the grant?

Yes. That was the whole company.

Okay. When did you see the grant? I hate to get granular, but…

Yes. We just – we spread it over. We assumed it was spread evenly across the three months.

Okay. Perfect. Okay, perfect. And I apologize, but can you just walk through the math on the Centene agreement? I was a little unclear as to how many folks are currently utilizing the On.Demand platform?

We did not share that. What we said was the current agreements that are in place to their plans amount to about 3.7 million covered lives. And then from that, you’d have to estimate the number of people that are eligible for the program and then start to sell to those people to try to engage them, enroll them and ultimately retain them to show a good outcome.

Okay. So it’s a subsegment of that 3.7 million that you’re targeting.

Correctly.

Okay. And then, I guess, it – what’s the expected revenue contribution from the agreement with Boston?

We didn’t put that out. It’s too early to tell.

Okay. I don’t think you mentioned the service business from Roche. I guess, how big was your existing home INR business? And then is there any way you can kind of bracket how big this could be for you?

Our own business was a few million dollars of revenue a year. And I cannot give you that yet. But give us some time to – we just took the business over and we want to see what’s really there and see what the patient base looks like, see what portion of the patient base is actually testing on a recurring basis. So we’ll have a better handle for it – handle on it for you soon.

Okay. Thank you.

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

Yes. Hi, good afternoon. Thanks for taking the questions. Just a couple. First, Joe, I know you mentioned, based on these new initiatives, you plan on aggressing – investing aggressively. And I just want to get a sense in terms of what some of these investments might look like as it relates to maybe expanding sales force or technology, et cetera. Maybe if you can just give us some color on that.

So anything that you would typically see in a commercial plan, sales marketing, studies, technology enhancements, partnership agreements. It’s a business that – we’ve come to the point in time where we’ve said as an organization that it makes sense, right? We did some of the early investment. We have all the infrastructure in place to scale the business. We’ve made sure it’s a scalable platform. And now we need to start to take it to market. So all of the above. And look, I don’t want you to think that all of a sudden, we’re going to go crazy and make monumental investments. They’ll be measured investments. But we are focused more on driving top line.

Yes, I know, for example, with Geneva, you committed the dedicated sales force. I’m assuming now that digital population is starting to really take off, especially with these new agreements that you probably will have a dedicated sales force for that also. So yes, just trying to get a sense on that. But…

You got it.

I guess, yes, the focus will be on the top line. Also, with the surge you were seeing with COVID in a number of states, based on your comments in terms of the second half, it certainly seems that it’s not going to have anywhere close to the impact you probably saw back in April on the business.

I would say from your lips to God’s ears, we have not seen it – that we have not seen our business trend back down. We were – we kind of came up very quickly in May and June and July, we’ve seen some growth but, obviously, at a slower rate because we’re starting to get back up to more normalized levels. Unfortunately for us, from a business perspective, the state is going to be impacted, some of our large states, Florida, Texas, California or similar bigger states. But so far, okay, right? We don’t know – it’s going to be hard to tell you, as we sit here today, what Q3 will actually look like. At its current trends, it will look carefully decent. But Q3 is usually a seasonally soft quarter for us, as you may recall. With the dynamics of people taking vacation and starting back-to-school, all of that is up in the air, right? So we’re in an unusual seasonal cycle because of this as well. So that’s why we’re not – we’re trying – what we’re trying to indicate to you today is that business is trending in a good direction. We like where it is. It came back better than we had anticipated. If it continues along these trends, we’ll have a good quarter. Certainly, we anticipate third and fourth quarter to be better, right? How much better is just hard to say at this point. And we’re not trying to be coy, we just don’t know.

Right. No. No. That’s fair. And then the cash flow from operations is really strong this quarter. I was just wondering if there was anything in particular that drove that.

Well, yes, you have – within the – our cash from operations line, you have the advance on Medicare claims, which was $23.7 million. And then we had the $9.7 million grant. When you back those out, we still had very strong operating cash flow. So about half of it was related to that stuff.

Which, going into the quarter, we did not anticipate once this happened. We think the organization responded really well, and we’re able to generate cash.

Right. Okay. No, that’s great. And then finally, I don’t know if you could maybe give us an update in terms of the reimbursement environment.

No, new news.

We’re waiting.

Okay. Thanks again for taking the questions. Great quarter.

Sure. Thank you.

Next question comes from Gene Mannheimer with Colliers. Your line is now open.

Thanks good afternoon. It sounds like you guys have been busy. Congrats on the quarter. I wanted to ask if you can disclose how much your MCOT volume declined in Q2 on a year-over-year basis? I know it was way down in April then bounced back some. But how do we look at that?

On a quarter-over-quarter – so versus Q1?

Year-over-year.

Year-over-year, it was about 17%.

Okay. That’s good. Thanks. And the Medicare advance payment that you talked about, why – can you just tell me why you got that? And what is the time line to repay that?

Yes. So that was something that was offered to all companies who had prior billings with Medicare, and it was based on some formula that they used. And it was just an advance on future claims. So that is something that will get offset in the future. We expect that it will start in Q3, or at least that’s what they indicated when we received the money, but that could change. And right now, it’s sitting as a liability on our balance sheet.

Okay, good. Great. Helpful to understand that. And just so I’m clear, on the business with Boston Scientific, what is their share of the ICM market today? And are you going to leverage your IDTF to monitor patients that are wearing that LUX monitor? And does this deal compromise anything that you’re doing on the Geneva side with respect to monitoring Medtronic implantables and the like?

No, the Geneva platform is an impartial platform, hence the name. We do not show a preference to one device over another. And this is – we do hope that we have preferential treatment with the LUX system moving into the Geneva platform, but we’ll see. And really, this was an opportunity to leverage our sales organization to help them get a more rapid launch of that product. The product is just FDA approved. So I believe their share is next to zero.

Okay. Great. Thank you. Congrats again.

Thanks.

Thank you. And our next question comes from Alex Silverman with AWM Investments. Your line is now open.

Hey, good afternoon, everybody. So the vast majority of my questions have been asked and answered, with the exception of, we’re seeing lots and lots of articles about cardiac damage related to COVID. Wondering if those are some of the studies that you were alluding to, ramping up that you’re being – that your devices are being used for.

We are being used in some studies around COVID. I don’t know if it directly pertains to what you’re talking about. And we have seen those same studies about long-term impact cardiac-related to patients that had COVID. But nothing significant that I could share with you other than our devices are participating in some of those studies.

Okay. And are you seeing physicians at this point prescribing any of your devices to monitor post-COVID patients?

No. Not post. We saw kind of a spike up of utilization around COVID early on because MCOT has a specific FDA indication for use when trying to detect problems with the QT interval, which is one of the potential side effects of one of the medications. But we haven’t – not that I’m aware of. We haven’t seen a whole lot of post-COVID monitoring yet.

Okay. Got it. Rest of my questions have been asked and answered. Thank you guys.

Thanks, Alex.

Thank you. And we have follow-up from Brooks O’Neil with Lake Street Capital Markets. Your line is now open. Once again we have question form Brooks O’Neil from Lake Street Capital Markets. Your line is now open. Brooks O’Neil: Sorry. I was on mute guys. I apologize. I think Joe said, you guys expect to grow in the third and fourth quarter. And I was just curious if you’re talking about sequentially or year-over-year?

Yes. I’m confident, we’ll say is sequentially, not a big risk, but – given what we’re seeing. But I would – I was stopped short of saying year-over-year at this point. Brooks, it may well be. If we see the trends continue, we will. But I’m not making that prediction at this point, given all the activity. Brooks O’Neil: Okay, I got it. Thanks a lot. Thank you. And I’m showing no further questions in the queue at this time. I’d like to turn the call back to the speakers for any closing remarks.

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

Thank you. Ladies and gentlemen, thank you for participation on today’s conference. This does conclude your program, and you may now disconnect.