Good afternoon. Thank you for joining us for the BioTelemetry Third 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 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 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 progressing as we close out the year and transition into 2019. After our prepared remarks, we will open up the call for questions. I'm extremely excited to share details with you this afternoon on another record-setting order to BioTelemetry, during which we once again exceeded all our expectations. During the quarter, we achieved 18% organic revenue growth surpassing the $100 million mark for the second consecutive quarter. We also achieved new all-time highs in EBITDA hitting $30 for the first time and EBITDA margin. This performance is particularly noteworthy given that the third quarter is seasonally our most challenging of the year and considering that our markets have not been growing anywhere near 18%. Our business is really firing on all cylinders. Since I've been with the company, we've had an unwavering commitment to being at the forefront of advancing connected solutions capable of meeting today's healthcare challenges. That focus has enabled us to achieve our 25th consecutive quarter of sustained year-over-year revenue growth with excellent performance across the entire company. In the remote cardiac monitoring segment, we have bought a steady stream of customer-focused products and enhancements to the market. Over the years, our commitment to innovation has produced the most technologically advanced and expensive portfolio in the industry. As a result, BioTelemetry in the far and away leader in this market as our results indicate. In our research division, we had -- we…

Thank you, Joe and good afternoon, everyone. As Joe just announced the third quarter of 2018 marked our 25 consecutive quarter of year-over-year revenue growth with total revenue reaching $100 million. This represents a 23% increase as compared to the third quarter of 2017 and resulted from robot overall organic growth of 18%, the full period impact of the acquisition of LifeWatch, which occurred in early July 2017, as well as higher research revenue. Healthcare revenue was remarkable with an increase of $14.7 million or 21%. On a pro forma basis, the healthcare segment grew by 115% with significant increases in both MCT and extended Ware Holter. Our research revenue increased 45% or $4.2 million largely due to a higher volume of studies in both imaging and cardiac with those new and existing customers. Other revenue was up 8%. Moving to gross profit margin and adjusted EBITDA, our gross profit margin for the third quarter of 2018 was 62.7%versus 60.6% in the prior year period. Our third quarter adjusted EBITDA was $30.1 million, our highest quarterly adjusted EBITDA in the company's history and represented a 30% return on revenue. The increases in our margins were primarily due to volume related efficiencies largely driven by the higher patient volume, synergies from the acquisition of LifeWatch as well as favorable products and payer mix To expand on the synergy from LifeWatch, we announced previously that we had specifically identified $30 million of savings and as of last quarter, we had met that target with $7.5 million of real-life synergies in Q2 getting us to the $30 million on an annualized basis. Going forward, now that we have reached our synergy target and have passed the one-year anniversary of the acquisition, to the extent there are additional benefits achieved through further enhancements to…

Thanks Heather. As you've just heard, we had another outstanding quarter in which we exceeded all of our expectations. As we close out this record-setting year and prepare for 2019, the company is benefiting from excellent momentum across the enterprise. Our strategy is yielding results better than expected and we continue to broaden our opportunities. The LifeWatch acquisition has advanced our growth plans by several years allowing for the allocation of more time and resources toward new initiatives, which will be powerful growth drivers for the future. To ensure our continued success, throughout the remainder of the year, we will focus on completing the remaining elements of the LifeWatch integration, expanding our approach with the ongoing promotion of our new patch products both MCT and extended Ware Holter, continuing to grow our research backlog and convert it to revenue at the accelerated rate we are now experiencing. Building our digital population health management business and expand on key partnerships we have developed. Our consistent performance has positioned BioTelemetry as one of the most influential connected health platforms in today's market. Our dominant cardiac monitoring clinical research businesses have the potential to provide solid growth for years to come, while affording us the ability to commercialize additional innovative connected health solutions. We expect a strong finish to 2018 as evidenced by our increased full year guidance. More importantly, we anticipate continued above-market performance well into the future. While we're pleased with how for the company has evolved, I firmly believe our best days are still ahead. When we closed out 2018, we will have monitored in excess of one million patients in a year, providing thousands of doctors with life-saving information with which to treat their patient. We must never lose sight of the fact that people's lives literally depend on the work that we do every day. I would again like to thank those of you who helped deliver our 25th consecutive growth quarter and I look forward to discussing number 26 next quarter. With that, we'll now pause and open the call for questions. Operator, we're ready for our first question.

[Operator Instructions] And our first question comes from the line of Bruce Nudell of SunTrust. Your line is now open.

Thanks very much and congratulations on a very, very strong quarter. Heather or Joe, last quarter you know helped break up the healthcare business into chunks and I was wondering now that you're disclosing the growth rate and extended Holter, if you could just kind of give us an approximation for the quarter in terms of the percent of healthcare this MCT event -- extended Holter and traditional Holter.

So Bruce, at this point in time, we're not giving out the extended versus traditional, but I can tell you that MCT was about 73% of healthcare with event being about 16% and both extended and traditional Holter at about 11%.

Okay Thank you very much. And Joe you guys are very buttoned-down in the cardiac monitoring realm. You've extended that capability into research and I was just wondering from your perspective are there kind of bite-size digital population health opportunities that can be secured and exploited without dilution of management effort and perhaps very, very large investment?

Yeah it's a very good question Bruce. I think that there are some smaller capabilities that we could acquire that would really complement our current service offering. As you know, up until maybe three weeks ago, valuations were a little bit in outer space, but we think that people would like to join a company like us and we think that acquiring these capabilities will become more plausible over time. I don't know that there is a big giant one in the space that we discovered yet that makes a whole lot of sense for us, but I do think that there's some smaller ones that would be very complementary to the service offering we're currently providing.

And I guess my follow-up on that is should we be thinking about kind of regional or payer-specific initiatives, here not the whole country, just something more circumspect and just on a broader level why won't be in your view the Googles, the Apples enter into the medical grade space as supposed to the consumer space, thanks so much.

Yeah I don't know that we would restrict ourselves to thinking about additional capabilities regionally. I think it would really depend on the opportunity. Obviously when you're small, you don't have the reach expand in all the geographic zone you might see. So you do that on an organized growth fashion -- in an organized growth fashion. The second part of your question about the consumer and consumer device oriented companies entering into that space in terms of offering clinical great product, I don't know that I would say would never happen, but obviously they don't have those core competencies within their organizations. And so I think the more probable path would be look for folks like us to partner with. I like I can't get inside their heads in terms of what they're thinking strategically to get public approach the market, but clearly, I think we're an interesting partner for anyone looking to get into this space.

Thanks again and congratulations on a great quarter.

Thanks Bruce.

Our next question comes from line of Brooks O'Neil of Lake Street Capital. Your line is now.

Good afternoon and congratulations on a terrific quarter and positive outlook. I was hoping guys you might be willing to describe your sense of your market share, your penetration in the cardiac services space. You mentioned that your 14%, 15% organic growth rate exceeded what you perceived to be the growth rate of the overall market, but maybe you could just say sort of how much more room you see for yourself in cardiac services as we think about the future of the core business?

It depends on how you're defining the remote cardiac monitoring business. If you're including all service lines which we typically do, extended Ware Holter advance and MCT were probably somewhere in that 25% market share range estimating obviously were a little bit disadvantaged in terms of not have great market data. But I would say based on the market data we do have -- we can probably -- we could probably back into a lot of 25% share. If you looked at MCT, we're probably 2X plus that. We're probably somewhere in that 50% to 50% range is my guess.

You would say you still see significant room for growth in the core business?

Absolutely for several reasons. One I think the market is growing at a pretty decent rate. Number two, we have plenty of opportunity to grow our market share within that space to take our unfair share of growth or unfair share of the market. Why do I think that, for all the reasons we talked about. We have the best technology by long shot. We have the most capable sales organization by a long shot. We have a great financial position. We have probably more insurance contracts than any other participant in the marketplace. So when you look at all of those elements that go into making a formidable competitor, there is nobody truly close to us. The ones that are behind us are really just the second and third. So I think yes, we can take more market share and I think of the market goes are going to benefit from that. We've done very little outside the U.S. that there is opportunities for us to look beyond our own borders. So I do think there is going to be a lot of opportunity. We're starting to see and I think I had mentioned this on previous calls, the utilization of our MCT technology in new areas of healthcare. We used to not use our technology in places like neurology market. They are starting to use it now in emergency department discharges. They're starting to see more uses of product there. So all of those things, I think bodes well for our potential growth in the future.

It's great Joe. Thank you for that color. Secondly, I was reading somewhere about increased use of remote patient monitoring in the research services sphere. Specifically, I think in home testing, have you seen that and do you see that as an opportunity for BioTelemetry during the short term and the longer-term?

We do. In fact, obviously we're restrict our naming who the partners are, but very large pharmaceutical partner launched the study using us as their partner and using our ePatch product in that money. So I mentioned that in my talking point that we're starting to see those opportunities, which are driving potential for topline cross segment revenue synergy. But yes, we are starting to see it and within the research market, we are hearing people talk more and more about our virtual studies where people are able to participate home and provide information from home and not necessary them to center-based studies.

It's great. Would you say you need to add any capability to take advantage of that opportunity or are you pretty well positioned today?

I think we are well-positioned in terms of our ability to grow with the services we have today. I do think that there are other services that make a lot of sense for us to add to the portfolio or partner with other companies who have those services to make us a more attractive competitor, more attractive partner to the sponsors that we currently serve.

Great. And then I know you mentioned the diabetes situation and your opportunity there, but could you elaborate just a little bit more about where you think you are in terms of pursuing a real business in diabetes monitoring and what you see in the marketplace today?

I think we are very early stage and talk about that this past year. We had -- obviously we focused a lot of time and attention on the LifeWatch integration and in terms of what we did with the top health business was really investing in new technology and building up platform, so it's scalable for future growth. As we move into '19, we will start to allocate more business development resources and then I believe we will start to see more or greater market penetration. We know there is demand for it to service. It's just a matter of getting our -- getting at the market and getting our voice heard.

That's great. As you know I've been involved with you since 2013 and I share your enthusiasm and I think you're just getting going. So keep it up.

Thank. Appreciate the continued support. There is time, so we call your and there is other times when you're a bad penny on those bad days.

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

Good afternoon. Thanks for taking my questions. I was wondering Joe if maybe you could talk a little bit more in regard to the PHM market and the particular opportunities you might be looking at and how you're thinking about the allocation of capital as we move into fiscal '19?

So, let's talk about healthcare just in general. What does it all mean? We're talking about using a technology today or a service where you can affect some change typically in the larger chronic market. So we selected diabetes given its size, epidemic portions in the U.S. and its growth and because it's one disease state where individuals, patients, participants are conditioned to take the information from the body on a daily basis. So the challenge for us will be how do we collect that information remotely, centralize it and then use that information in a behavior modification program to improve the disease state of those individuals and ultimately improve outcome and drive down total cost of care. That's it in a nutshell what top health is all about and that market mix -- that makes a lot of sense. Again I can tell you there is tremendous demand for these types of services not just in diabetes, but in hypertension, CHS and respiratory sleep. There is a lot of different opportunities here. So our challenge would be not to go too crazy out of the gain and collect a bunch of assets that are unrelated and can't market them in a coherent fashion. We went to get good at diabetes and build out technology and expand from there and make sure that we're proving along the way that we can affect outcomes, we can drive down any one disease and we can drive down total cost of care. We've had some excellent studies that have validated that thesis and again it's just a matter of getting those resources in place and getting our voice heard in the marketplace.

Understood in terms of the movement because I believe you said in your prepared remarks, that you are thinking that there might be some significant movement from that segment if you will in the latter part of fiscal '19. First off, did I hear that correctly? And second, I am sorry go ahead.

Yeah I think that we will start to see some meaningful contribution effect in half hear. At least that's what we are sort of planning. It's going to take a while to really build it up to the point where we are going to start seeing something that matters.

Got you. And will that flow through your patient services revenue area?

Right now it does not. We'll determine whether or not it needs to be broken out or rolled up into a different segment some point in the future.

It's sitting over in other right now.

Got you. Next question here just focusing on the operating expenses here in the quarter; came in a little bit lower than we were anticipating. Just kind of wondering if there were some one-time items that positively impacted G&A and sales and marketing or how should we think about that kind of trending going forward?

Yeah the only real one time item in the quarter that we had was the adoption of the stock comp for non-employees, which was about $500,000 in the quarter with a catch-up for the year, but other than that, we just had some higher items in Q2 as it relates to sales and marketing. But I think that this is a pretty reasonable run rate as far as G&A and sales and marketing are concerned. We do still have a fair number of open positions throughout the company. As we've grown, we talked about that last quarter that we have not been able to keep pace with our hiring, with our growth. So we will be adding some hedge as we progress, but we will also be gaining efficiencies at the same time.

Got you. and just to confirm those additional positions, those were at the cost of service line item or are they going to be spread also maybe sales and marketing?

You're going to see most of them up in cost of sales, but we are as Joe indicated, in his remarks adding additional sales and marketing resources as well.

And then in terms of the sales and marketing additions, how should we think about that progression as we look into fiscal '19? Should it be maybe just a onetime event or you are going to be layering in addition heads throughout the whole year?

Yeah, you're going to see it coming throughout the year. As we talked about, we don't have a specific number, like we are not saying we are going to hire 25 people. We look at each territory strategically and determine whether or not it makes sense to add additional heads there, combine territories or split them.

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

Yeah. No problem.

Thank you. And our next question comes from the line of Dennis Ding of Raymond James. Your line is now open.

Hi, this is Dennis on for Jayson Bedford. Thanks for taking the question. I had a couple of questions on the extended Holter, last quarter you mentioned that you rolled -- you rolled out your Holter product to around 50% of your install base. I was wondering if that rollout has continued, if you roll that out to 100% of your base yet? And my follow-up to that would be the impact of extended Holter on the rest of your business meaning have you seen any cannibalization of Holters or event monitors, thanks.

So just to clarify, I don't believe -- if we did say 50% of our account now had access or we had penetrated 50% of our accounts for extended Ware Holter that was this information. What I think we said was or what we intended to say was about 50% of our MCT accounts have been at the new MCT introduced to them. So we really haven't put out a number of accounts or a percentage of our accounts where extended Ware Holter has penetrated or been introduced and is currently being utilized. So what we have said is we're seeing really rapid market uptick and because it's so fast and because it's so early, it did make a lot of sense for us to start putting those numbers out and then projecting what that growth is going to look like in the coming quarters. So for us we were just trying to buy a little bit more time. Overall the Holter segment is growing. What we have see is rapid growth in extended Ware and low flat or flat maybe even a slight decline in the what we call the traditional Holters meaning the 24, 48 hour services. So we're seeing flat to declining traditional Holter, flat to declining event. We're seeing growth in extended Ware Holter and growth in MCT. So one can assume that we have some cannibalization. You probably have event business migrating MCT. You probably have traditional Holter business migrating through extended Ware Holter if that makes sense to you and then we're seen obviously growth above and beyond our own account base as we bring in new customers.

Okay. Got it. Thanks for the color.

Sure.

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

Thanks. Good afternoon and congrats on a great quarter and outlook.

Thanks Gene.

Question on pricing, can you comment at all about how pricing might have impacted some of those strength you saw this quarter and for your outlook and maybe what CMS might be thinking about with respect to their next fee schedule adjustment?

Yes. So in the Gene, we saw some favorable payer mix. So I would necessarily consider that pricing favorability as much as it would just favorable payers in the quarter. that was not a huge number, but it did benefit us. As far as the CMS, they have not been finalized yet for this year. We expect that to come out at some point in early November, but the proposed has a slight decline in the MCT rate and we would expect if that were to go into effect in 2019, it impact us by about 2%. That being said, we don't expect it to be implemented.

So let's comment on that just a little bit. We never know right when the final rates come out, but be up November, we were able to kind of unbundle the proposed rate and found that the consultants were hired by CMS we were using information that really wasn't relevant to the code and we were able to meet with them and explain our position and it seem like it was understood and accepted. That doesn't mean that we had any direction from the group. It was just -- we thought it was very positive dialogue. So Heather's comment that we don't expect it to be implemented, I would side with her on that, but I want to be careful that we're not forecasting that.

Sure. Makes sense. Thanks for that and with respect to the cash flow in the quarter was very strong. I think you said $27 million free cash flow. So that probably puts -- that's year-to-date. Okay. So how are you with respect to your $50 million full-year free cash flow target?

So we are pretty much on track for that. We may come in slightly under. We actually have a higher investment in CapEx than we expected going into the year because of the higher growth rate. So that's actually a good thing but we're looking pretty close to that $50 million.

That's terrific. Thank you. Okay. $45 million you said. Okay. Great. And then last thing just in terms of the strength you're seeing overall, is it, you're seeing more momentum across large hospital networks versus independent practices and how -- maybe you can share with us how your business -- your healthcare business breaks out across those two categories?

I cannot do that, cannot do the latter. I would tell you that we are seeing growth across the Board in our healthcare segment. I do think it's natural to conclude that we're seeing more growth in the larger system and larger accounts. We are very good at positioning ourselves within those large accounts from an EMR integration standpoint. Once you're integrated, you tend to have a stronger position relative to your competition and so that seems to help us and obviously it's the larger systems that tend to do those first and we have a number of those integrations completed across the U.S. So I would say that you'll probably get more growth there as a result of that focus.

That's terrific. Thanks again. Appreciate it.

[Operator Instructions] Our next question comes from the line of Bill Sutherland of Benchmark Company. Your line is now open.

Thanks. Hey Joe and Heather. How are you? Good. So the remarkable lift here in EBITDA margin, how should we think about this as -- how should we think about your sustainable margin at this point just based on what you got in place going forward?

Sure. So for the full year Bill we guided to 28% EBITDA return and that would imply about a 28% EBITDA return for Q4. As I mentioned, we did have some benefits in the quarter having some open positions and things like that, that did flow through to the bottom line as well as some favorable mix. So for the year, we're looking at about 28%. We have not yet guided into 2019, but as we've mentioned in the past that we are looking to make additional investments, but also looking to continue to expand our EBITDA returns. So stay tuned. We'll give some additional guidance on that number as we go.

And I would say too Bill, we've been kind of pleasantly surprised by margin accretion with scale in this business and obviously it's not always easy to see that until you get there. So while we anticipate resource in the business and higher level as we move forward, we don't know what kind of operational efficiencies we'll get as the company continues to grow. They seem to come a bit faster than our incremental spend has grown.

Right. I know you can't anticipate some of the investments you're going to be making, but it just feels like the model has kind of just shifted up asking anything dramatic like that. And then the other thing I'm wondering how to think about is research revenue growth, which is such a lift. Is there any way to frame like what you believe is reasonable or same with there?

Yeah I think I would just guide you back to our overall guidance and not focus on breaking it out and we're comfortable with kind of double-digit growth as we move forward and we'll talk more about that on success of quarters, but they had tremendous growth in the quarter. And as you know, we've talked about this business as being kind of choppy in the path. We guided towards like 15% to 20% when we came into the year. We had a 20% quarter, 30% quarter and a 45% quarter. That's a result of the team doing excellent work in '17 and into '18 building up their pipeline, building up their backlog, converting that backlog. It's a revenue with low cancellation rate. So that's how you got there, that's way, way above market growth. I would think it's safe to say that we're not going to grow it, 45% that's a business every quarter for the foreseeable future, but I think we're comfortable with the overall guidance for the company being around the double-digit range.

Okay. Couple of specifics Heather, what is the CapEx you think you're going to have for the year?

So we'll end up just north of $20 million, in that $20 million to $22 million range.

Okay. And remind me what Holter as a percent of revenue was last year for you guys?

So last year, it was around 8%. I am sorry, last year third quarter was around 8%.

That's kind of LIBOR, it's been there right.

It has been moving up a little bit but yes.

Real good. Great report. Thanks everybody.

Thanks.

And I'm showing no further questions at this time. I would like to turn the call back to Mr. Joseph Capper for any further remarks.

Thank you. operator. Thanks again everyone 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.

If you joined the conference late today, you may listen to the conference call via a digital replay, which will be available through the Investor Information section of the BioTelemetry website at www.gobio.com until November 13, 2018.