Good afternoon. Thank you for joining us for the BioTelemetry Second Quarter 2019 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 on the BioTelemetry website at gobio.com. [Operator Instructions] The floor will be opened for questions and comments following the presentation.

Please note that today's call is being recorded.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. I am joined by Heather Getz, our Chief Financial Officer. I will start with highlights about 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 2019. After our prepared remarks, we will open up the call for questions.I am pleased to report on another excellent quarter during which we again met or exceeded all of our expectations, setting a new all-time-high in quarterly revenue and EBITDA.

Moreover, despite a strong comparison from the prior year period, we still grew the top line by 10%, marking our 28th consecutive growth quarter with year-over-year revenue growth. This remarkable consistency is a result of several factors, which we have spent years developing on a very difficult to replicate.

Specifically, we possess a multi-fascinate product portfolio encompassing gold standard technology. Our deep understanding of the cardiac monitoring market has allowed us to forge an effective strategy and grow market share.

As you will hear today, we are implementing our plan with great discipline and the results speak for themselves.Another important part of our success is our industry leading sales and service infrastructure, which supports an ever growing physician network.

These and other competitive advantages have fueled this seven year run, over which time our business has grown fourfold. We are clearly not resting on this success.

In fact, we were using our position of strength to chart a course of dynamic growth for many more years to come.As my custom on these calls, let me again remind you of the three primary tenants of the plan that dictate our resource allocation and continue to drive our unparalleled performance.First, we have been and remain committed to investing in our core cardiac monitoring business to expand our capabilities.

Most recently evidence by the acquisition of Geneva Healthcare. This acquisition alone has increased our addressable market by $1 billion and that estimate may very well proved conservative. Additionally, this expansion of our data management and aggregation solutions may provide new sources of revenue at some point down the road.

We have strong IP and an impressive internal R&D capability, which has allowed us to introduce several new products and service enhancements.In addition to product R&D, we continue to invest in ways to apply AI and system automation to improve performance and gain efficiencies.

We've recently expanded our sales and marketing organization to accelerate the growth of our product monitoring and Geneva data management and workflow solutions. As you know, prior to Geneva, we completed several other highly beneficial acquisitions, providing scale and additional capabilities.

You can expect us to continue funding a myriad of investments designed to further expand our addressable market, within and beyond traditional cardiac monitoring. We see vast opportunities that are well suited to the core strengths of this company.

BioTelemetry's Technology is extremely well tailored to address the current, and importantly, the future needs of payers and providers.The second pillar of our strategy is to look for ways to expand the capabilities of our leading research services business.

This focus led the key acquisition, providing us with revenue diversification, and impressive growth.

We have also invested in numerous system enhancements to improve service performance, and we have continued to evaluate additional capabilities to further strengthen our Research services offering and competitive position.Third, we've allocated time and resources exploring new ways to leverage our platform and connected technology in adjacent markets.

Among other projects, these efforts have led to the incubation of our digital population health management solution. As I have said before, this segment has the potential to one day far exceed a patient monitoring business.

We believe population health will play a critical role in the way healthcare is managed and delivered, employing technology to more effectively manage large numbers of people living with chronic conditions.As you will recall, our initial pop health focus is in the multibillion dollar diabetes market, whereby we use a cellular enabled blood glucose monitor and a cloud based analytical platform to power a care management program designed to modify behavior and ultimately improve the health of people living with diabetes.Over the past few years, we have focused primarily on upgrading our technology with minimal resources allocated to expanding our go-to-market efforts.

The more we learn about the population health business, the more convinced we are the demand for these services is real and sustainable. And Wall Street seems to agree. A huge market potential for these solutions became quite evident last week with the IPO of a company that commercialize is a similar diabetes care management solution.

The initial offer was well received by the market and the company was rewarded with an extremely high valuation. While we are not professing an equivalent capability at this time, this development certainly further validates that our efforts in this field are warranted.

We will continue to assess the most appropriate way for us to invest in and grow this business.I reiterate these three things quarterly to provide you an understanding of how we allocate our time and resources. It's also important to stress our comprehensive approach to growing this connected health platform versus a focus on any single product.

Further, we think it's worthwhile to understand the framework that drove the seven years of consecutive quarterly growth.Some may call seven years of growth a heck of a run. We consider it a pretty good start. As you heard, we have more opportunities for growth today than ever before.

Our challenge is how to address them effectively using both our human and financial capital. We are confident we will continue to find the right balance.Let's take a look at some of the quarterly highlights. During the period, revenue grew by 10% to nearly $112 million, at the higher end of expectations and a new high for the company.

Adjusted for the Medicare rate reduction, this represents 12% growth. Overall margins were above expectations as quarterly EBITDA grew to $31.6 million, again setting a new all-time high. We ended the quarter with $51.7 million in cash, up 6.2 million and period. We spent time integrating Geneva into the Healthcare business.

We completed the recently announced acquisition of ADEA and early stage Swedish medical technology company that delivers remote health services in the Nordics.

Our Research services team continued to outperform the market with revenue up 11% and we continued efforts to build upon our new digital population health management business through key partnerships and internal investment.Taking a closer look at the Healthcare services business, you will see why we remain extremely optimistic about the prospects for this sector, especially in light of recent developments.

During the quarter, we remained focused on expanding the market penetration for the new MCT and extended wear Holter patch products and the Geneva application. The Healthcare sales team continued to execute incredibly well, posting impressive growth in new and existing accounts.

The Healthcare revenue up approximately 10% in the quarter.As I mentioned on previous calls, they're in the process of growing the Healthcare services sales team by approximately 20%. We have completed most of this expansion, which we anticipate will begin to contribute in the second half of 2019 and beyond.

Expanding the size of the sales organization, which is by far the most productive in our industry, will support continued growth in patient monitoring and a more rapid penetration for the Geneva platform.Speaking of Geneva, we are delighted to have added this capability to our cardiac solutions portfolio and trust, we're beginning to appreciate the massive potential this asset adds to the business.As a reminder, Geneva is an innovative, proprietary cloud based platform that aggregates data from the leading cardiac devices, enabling the company to remotely monitor all the physicians, patients with implanted devices, such as pacemakers, defibrillators and loop recorders.

The Geneva platform provides physicians a single portal to order patient monitoring, view monitoring results and request routine device checks, helping drive significant in-office efficiencies and patient compliance.

This solution is transforming the way physician offices consolidate and manage data from implantable cardiac devices, giving precious time back to the staff to focus on patient care.

The acquisition of Geneva repositions BioTelemetry as a much more progressive data consolidation and solutions oriented company and hedges against any potential shift in favor of implant monitoring devices.We are initially focused on the rapid introduction of Geneva into the thousands of accounts for which we currently provide cardiac monitoring services.

Our Healthcare services sales team, nearing 120 strong has been trained on the Geneva solution and armed with appropriate marketing materials. They have been instructed to target our largest accounts, where early receptivity has been nothing short of amazing.

We are obviously very pleased with a wide acceptance of Geneva solution.Based on our current pipeline activity, we expect its impressive performance to continue throughout 2019 and beyond. With such strong demand, our challenge is to quickly add support staff adequate to maintain a high level of service to the many new customers coming on board.

In addition to the sales push and resource allocation, we have our software technical team working on further enhancements to the platform’s capabilities. We are close to having the BioTel Heart’s user interface merged into the Geneva portal, providing even greater workflow and data management efficiencies.

This will radically change the way we relate to customers in the cardiology market and will further solidify our leadership position in remote cardiac monitoring. We have also begun to evaluate other applications for potential interface into the Geneva platform.

These applications will build more value into the solution and may create additional sources of revenue.Switching to Research Services, we are happy to report on another excellent quarter, during which Research revenue grew by 11% heading new all-time highs in both revenue and pipeline.

As mentioned on previous calls, we’re having more success incorporating our proprietary ePatch monitor as a critical element of new cardiac studies, creating cost segment, top line synergy and a distinct competitive advantage.

We have a few large scale ePatch studies now underway and several more in the pipeline.During the quarter, we invested in a new faster and more efficient image analysis software system which will create greater efficiency and scalability.

BioTelemetry has also been working with innovative consumer tech companies as they seek to integrate heart health trackers into their popular wearable devices. As reported in the media, these screening tools are designed to notify consumers of potential cardiac risk that may require medical monitoring, diagnosis and possible treatment.

The good news for us is that these devices do not replace what we provide but rather increase the number of patients who will need monitoring services.During the quarter, the Research team continued our support of a few of these studies, which has the potential to substantially expand our market and closely aligned with our mission to improve human health.

In studies like these, BioTelemetry is uniquely positioned to leverage the strengths of our Research and Healthcare divisions.In terms of new business opportunities, we continue to work during the quarter on our digital population health initiative. This project is taken on a whole new level of excitement given the recent IPO mentioned earlier.

We have excellent technology and a comprehensive cloud based analytical platform, providing a foundation from which to build upon.

This gives us a potential fast follower opportunity in a very large and growing market.As we move into 2019, we began allocating more business development resources to the payer and at risk segment and are starting to see positive results.

On our last call, I spoke about the potential for developing an additional physician driven sales channel through the use of the new remote patient monitoring CPT codes, which CMS activated at the beginning of the year.

We now have several pilots underway has through the application of these codes, and are optimistic that this may develop into a viable alternative to bring this care management service to market.While we're making good headway with our pop health Initiative, I don't want to leave you thinking we are where we need to be in order to compete effectively on a large scale at this point.

However, we are currently analyzing our options for moving more aggressively in that direction in order to take advantage of this sizable opportunity.We're also developing additional opportunities to unique partnerships, with companies looking to enter the healthcare space that the Heart Study being a prime example.

These are just a few of the many exciting prospects for the company expect by BioTelemetry to continue to lead these market development efforts as no other company is as well positioned to capitalize on such opportunities.To sum up, we are obviously extremely pleased with the company's second quarter performance.

More importantly, we expect that the investments we are making across the company will support our continued growth well into the future.With that, I'll now turn the call over to Heather for detailed financial review of the quarter.

Heather?.

Thank you, Joe. And good afternoon, everyone. As Joe just announced, we continued our record setting performance in the second quarter with our 28th consecutive quarter of year-over-year revenue growth. Total revenue grew 10% year-over-year reaching $112 million and exceeding our expectations.

This growth resulted from revenue increases in all of our business lines. Healthcare revenue increased $8.3 million or 10% to $95 million, once again driven by patient volume growth in both our MCT and extended wear Holter service lines as well as the addition of Geneva's revenue from the monitoring of implantable cardiac devices.

These increases were partially offset by the $1.5 million impact from a slight reduction in the Medicare pricing which went into effect January 1. Excluding the production, our healthcare revenue growth would have been over 11%.

Our Research revenue also increased up 11% or $1.3 million to $13.9 million benefiting from new studies utilizing our ePatch extending wear Holter service and other revenue increased 40% to $2.9 million, resulting from new partnerships in our digital population health business.Moving to gross profit.

Our margin for the second quarter of 2019 was 62.8% versus 64.9% in the prior year period. The decrease in our margin was primarily due to an above average margin in Q2 of 2018, when our patient volume was growing rapidly, but our hiring did not keep pace. Also impacting the margin comparison is the lower MCT Medicare price.

We've used 62% to 63% as a more normal range for our gross margin at this point.Our second quarter adjusted EBITDA was $31.6 million, a new high for us and representing a 28.4% return on revenue.

This increase in our adjusted EBITDA was thoroughly due to the increase revenue, partially offset by the impact of the investments we are making in our sales and technology areas.As for a tax rate, for 2019, we expect our GAAP tax rate to be approximately 21%.

We anticipate that we will continue to be able to utilize our $160 million of federal net operating loss carry forward. And as a result, we believe that we will pay approximately $2 million in cash for taxes in 2019.Moving to our balance sheet. We ended the quarter with $51.7 million in cash and $198 million of indebtedness.

Putting our debt to EBITDA ratio lower than 1.5 times, year-to-date we generated $36 million in cash from operations and used about $16 million for capital expenditures.

These expenditures were driven by purchases of our MCT and extended wear Holter Patch devices as well for capitalized software and hardware as we invest in our IT, environment and infrastructure.

Free cash flow was $20 million, and we used $45 million of our cash in the first quarter for the upfront payment for the Geneva acquisition.Shifting gears, I will now touch on the outlook for the third quarter. We are projecting revenue of approximately $111 million or about 11% growth with an adjusted EBITDA return of about 28%.

As many on the call may know, we typically experienced a slowdown in volume during the summer month, mainly in the healthcare segment, which we’ve reflected in this guidance.

That being said, with the continued penetration in the extended wear Holter market, as well as increased contribution from the monitoring of implantable devices, we believe there is a potential upside to this number.To summarize, the company remains in a strong financial position with modest leverage and additional capacity is needed.

We are pleased to have delivered another great quarter with our highest quarterly revenue with EBITDA in the history of the company. These results and consistent growth have provided and will continue to provide the financial strength and flexibility to execute on our key growth initiative.And with that, I will now turn the call back over to Joe..

Thanks, Heather. As you have just heard, we had another great quarter, continuing to build upon our long standing momentum. A forward thinking strategy is yielding the results we had envisioned when we developed it, and it has positioned us well to compete within today’s evolving healthcare market.

We continue to develop new opportunities and are in the early stages of several potentially significant drivers of future growth.

The addition of Geneva will further broaden our cardiac offering, strengthen our leadership position and significantly accelerate our growth plan.To ensure our continued success throughout 2019, we will focus on completing the healthcare sales force expansion to help drive further market penetration of our MCT and extended wear Holter services, integrating and resourcing Geneva as rapidly as possible to take advantage of its wide market demand, continuing to grow our research business by making additional business development and infrastructure-related investments, building out our digital population health management business by continuing our current market development efforts, and expanding on key partnerships we have developed.Given our consistently strong performance and business momentum, we remain bullish on our prospects for the remainder of 2019 and beyond.

Based on Heather’s comments about how we anticipate things taking shape for the second half of 2019, it is clear we are in store for another great year. We have all the key elements for continued success.

Our proven and experienced management team, market-leading products, exceptional sales and service, a solid financial foundation and large market opportunities, many of which are still in early stages.For the full year 2019, we will monitor over 1.3 million people. Our revenue will grow by double-digits with an EBITDA margin in the high 20s.

And the company will generate a significant amount of free cash, allowing for accelerated investments into other connected health solutions.As I close, I would again like to thank those of you who helped deliver our 28th consecutive growth quarter.

Your efforts continue to improve our ability to help save more and more lives every day.With that, we will now pause and open the call to your questions. Operator, we’re ready for our first question..

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

Good afternoon and congratulations on the terrific quarter. I personally appreciated the expanded commentary today, guys. So thank you very much. I have a couple of questions. First, I think there’s been some commentary in recent weeks about the reimbursement outlook, particularly related to Medicare.

Would you guys just summarize what you’ve seen and then give us your perspective on the impact any reimbursement changes might have on BioTelemetry?.

So, Brooks, what products that you refer to, all of them, MCT in particular?.

I’m thinking mostly about Holter and MCT..

So our MCT, as you know, we’re fairly stable position, we have some ups and downs over the years. Part of the position fee schedule, the preliminary position fee schedule was published literally yesterday. Upon initial review, it looks like there’s no real movement in one direction or another.

And that will cover all products then Holter and MCT, a sort of net out neutral from what we can tell, which only leaves extended wear Holter as you know, is still under a temporary code. There has been movement in that area.

We believe ACC made a recommendation to AMA to move again to permanent code status, so that has to go through the approval process with AMA and eventually question with them. So that process is unfolding as we speak..

Would you say if there was a change of the temporary code to a permanent code, and the extended wear Holter, wouldn’t have much impact on BioTelemetry and the revenue you would expect in 2020 or beyond?.

My understanding is that the impact would likely not – if any impact will likely not happen until 2021, at the earliest. So nothing in 2020. That’s a product category that as you know, is growing rapidly for us.

So, fingers crossed that as we move into a permanent code status, they take in a cost information from all the players in the industry, and we can make a good case that we’re driving a favorable result with that product and it gets adequate coverage..

Okay, that makes sense to me. Second question I have is, you talked a little bit more today that you have recently about the potential of the population health business, obviously, potentially stimulated by the recent IPO.

But do you think that business has the potential to impact the company’s results I mean, specifically revenue and earnings in next year or two, or do you think that’s more something that’s likely to potentially have an impact further out in the future?.

I think it depends on how much we’re willing to invest in the development of the business. And as you know, we’re a publicly traded company whose shareholders have become a custom to us generating a decent return on our revenue. So you don’t have – you don’t have the luxury of doing it in a startup capacity. But I do think there’s a lot we can do.

And then we could do it in a reasonable way. So we’re going through kind of an assessment phase and we would like to be more aggressive in that area, I don’t want to put a time frame on. But I’m going to pump that in terms of when we expect significant impact. Because we really just incubated.

We picked up some assets, late 60s and early 70s and then as you know, we did the LifeWatch acquisition integration in 2017, 2018 in Geneva, this year.

So we’ve, we’ve had some great opportunities to expand our footprint and cardiac monitoring.We would like to pivot back and spend a little more time on this and some other opportunities that we’re looking at. But we do think it’s a big market potential and it’s wide open space right now.

So I think we should be spending more time on it, just we have to be prudent about the way we approach it..

I’m particularly excited about the opportunities in that area myself. So I applaud you for looking at it and I understand the pressures you face as a public company. Let me ask just one more. Obviously, we’re all excited about that edition of Geneva to the mix and your comments were well – well taken.

But there again, do you think Geneva is the kind of an asset in the business opportunity that might drive accelerated? What we might call organic growth from BioTelemetry in the relatively near term? Or how do you think about that the impact of Geneva, going forward?.

I do think it will drive organic growth. I think it’s going to be a big part of our growth as we move into 2020 and beyond. We’re shifting more to kind of a data aggregation solutions provider. Obviously, our core remote cardiac monitoring, business will be a big part of that.

But now we’re able to bring a wider array of solutions into the cardiology practice. And it’s a really solid solution. It’s a great product, and it’s a one that really drives workflow efficiency, a lot of benefits within the cardiology practice was incredibly well received. It is a tech enabled service.

And as you know, tech enabled services require infrastructure support people. So our challenges, let’s not overheat it, let’s make sure we’re grabbing as much of that market as we can. But at the same time, resource in a property, so people keep asking me how much margin what contribute.

And right now, I’m saying I think it can pay its own freight and I don’t expect a lot of margin contribution from it. In the near term, I’d rather feel gross and draw that topline. So I think it’s going to be a big contributor..

Well, that makes total sense. Congratulations. Keep it up. Thank you very much for taking my questions..

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

Hi, good afternoon. Thanks for taking the questions. Just a few. You called out the strength in MCT and extended Holter.

Do you can put numbers on it in terms of the growth contribution here in the quarter?.

So on the MCT side, the volume growth was about 7% in the quarter over last year..

Last two quarters, we’ve been there we had 7% to 8% range in MCT. And extended wear Holter is much higher than. I think we put that number..

Yeah, yeah, we haven’t put the actual growth number of that..

But a smaller base, you can imagine it’s a much higher growth number and revenue on a combined basis for that 10%..

Okay.

And I’m sorry if I missed this, but did you give Geneva contribution in the quarter?.

We did. We didn’t break it out, it’s rolled up into our Healthcare revenue..

Yeah. So if you look at overall healthcare revenue, MCT was about 69%, event was 14, Holter was just north of 11 and Geneva was about 6% of healthcare revenue..

Okay. Great.

And then, Joe, I think you mentioned the more aggressive move into population health and as a little unclear as to whether that was internally driven or externally in terms of M&A?.

Right now we’re focusing on our capabilities, our options to internal investment. Obviously, Jayson, if we can find ways to accelerate that plan with partnerships or some M&A activity, we would look at it.

But really what we’re focused on is, we already have a big part of the puzzle solved, we already have the technology developed and we already have the cloud based platform in place, we have customers, we have distribution, we have growth. So, for us, it’s kind of like how do we develop a more all-encompassing, robust go-to-market strategy.

And then how do we resource that effort so that we can start to grab more market share..

Okay. And maybe just the last one for me.

As you put your core cardiac monitoring software and technology on the Geneva platform, what does that do to the business? Is that a bad loan revenue generator, or is it just facilitate more accelerated access to new accounts?.

So, first it’s going to provide far more workflow efficiency within the cardiology practice. So imagine combining five user interfaces into one. And so that is tremendous workflow efficiency, which means greater patient compliance, which means better outcomes within the practice. It also makes you a lot stickier within the practice, right.

So that’s part of it is a more comprehensive software solution and the next phase obviously would be integrated with MRS were appropriate. So it just makes a whole lot stickier..

Okay, great. Thank you..

Sure..

Thank you. Our next question comes from the line of Gene Mannheimer with Dougherty & Company. Your line is now open..

Thanks. Good afternoon and nice quarter. Just a few from me. If you could just discuss your rationale for buying ADEA, I think it is, your Nordic partner looks like they use your product overseas, seem to be struggling a bit.

I’m just wondering why exercise your right to buy them and what type of revenue and EBITDA contribution can we expect from that this year?.

So we already had an investment in the company. They were a partner of ours that we made investment in. Some time ago, we had rights under that agreement to acquire the rest of it. We thought it was the best way to realize the potential within the regions.

We’re going to give them opportunity to expand undoubtedly, just really good sales and marketing, focus and a really good sales and marketing effort in the region. So we started to see growth, but we really want to free them up to focus on just that.

In terms of revenue and EBITDA contribution it’s immaterial at this point, so we’re not breaking that out..

Okay, thank you.

And Joe, regarding the change to the CPT code on the temporary patches, what does your gut or intuition tell you about how that might – how the rate might change on that and when would be the timeframe?.

You are out of your mind. You think I’m going to give you my gut response. That’s over a beer conversation.

The only thing I can tell you is we’re doing everything we can to support the movement from – into the permanent code in a proper category that’s step number one, and then everything we can do to help support keeping that reinforcement as perfectly price as possible..

Okay, fair assessment. And Joe last for me then. Your expectations for MCT this year certainly, I think it’s natural that growth would decline some following 14% year last year in that segment.

But is that – is it tough comps that just are challenging here or is there any new competition that you would characterize around the slowing of this segment?.

It seems always hard to tell right, exactly what’s happening. I think you hit on a couple of number one, tough comps, high growth last year coming out of the acquisition integration of LifeWatch business.

If you look the – look since we don’t really have market growth data, I think we’ve mentioned in the past, we use doctor office visits as a proxy for market size and market growth. Doctor office visits this time versus last year actually flat. There’s no real growth in the market itself.

We suspect there, there might be a little bit of movement back and forth because the service for the – move from the hospital into the physician office. Short term, we believe that will be the case as a kind of cycle through. But again, I think it’s important for us to strip.First of all, it is a strong growth, the high single-digits, right.

And I think it’s really important for us to stress that we don’t go to market saying, hey, buy MCT from us. What we do is we say, we have the most comprehensive cardiac monitoring data management solutions portfolio in the marketplace. Here’s what we can do for you.

If you have a practice, whose patients are more appropriate for an extended wear Holter for an event because of insurance reasons, we provide that. And we again, we don’t push one product. So you’re going to see ups and downs from year-to-year in the portfolio.

And what we have communicated continually is, we still think we can grow our share of this at an above market rate, and we use the number you know approximately 10%. Geneva will feed into that. They will help us. Geneva has nice hedge against potential movement from one product category to another.

So I do want to stress the fact that think of it as a portfolio of products, not just a product and hold us accountable to hit those high double-digit low or high double-digit – high single-digits, low double-digit numbers and we think we can manage the business in that way..

Very good, thanks..

And obviously, we can’t augment that with acquisition..

Very good. Thank you..

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

Yes. Hi. Yeah. Good afternoon. Heather, I was just wondering given a guidance for 3Q, it seems like it will require quite a bit of a step-up in the fourth quarter to get to even the midpoint of the annual range.

I was just wondering what you’re looking for in terms of getting that step-up from 3Q to 4Q of its investments being made in sales or anything else..

Yeah. So we would expect a step up from Q3 to Q4, we normally do get that. But as you know, in my guidance, I also mentioned the fact that there was some upside in Q3.

So I think that you kind of have to look at the two quarters together, the 111 that we guided to, along with the full year guidance, and, you know, give us a little bit of leeway there from a standpoint of what Q4 is going to look like, based on what we ultimately are able to achieve in Q3..

Okay. That's great.

And whatever, any one time expenses, aside from the one I think you'd pointed out in the release the integration expense with Geneva?.

Are there any...?.

One time, yeah..

Yeah. So there's Geneva related one time, but then there's also some FX related to the LifeWatch acquisition as well, that's being pulled out, also being offset by a pension reversal. But it's all related to LifeWatch, Geneva and then obviously the income tax effect of those adjustments..

Okay, right. I believe you said normalized tax rate would have been closer to like 20%, 21%.

No, to the GAAP tax rate. Yeah. If you look at this, here we are expecting a GAAP tax rate of about 20% – 21%. But that's being – we're actually utilizing our NOLs offset that. So we're looking at more like $2 million in cash taxes..

Okay. That's great. And then find the Joe, you did talk about the expansion of the sales force 20%.

And I just wondering how far along you are there if you're almost done?.

Almost finished?.

Almost finished. Okay, that's it for me. Great quarter. Thanks again..

Thank you..

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

Hey, guys. Heather, you ran through the percentage of revenue pretty quick. I didn't keep up.

You said Geneva was what percent?.

It was about 6% of healthcare..

Healthcare. Okay..

About $4 million in the quarter..

So it's growing very nicely. And, and total I hope there was 11 including extended..

So if you perform it for the Medicare reduction, it was north of 11%..

With extended?.

Oh, no, no, overall, I am sorry, I thought you said for Healthcare. Extended, we didn't give the number..

No, I know you did. You said Holter was 11% of Healthcare..

Yeah, total Holter, which includes....

Including and that total Holter includes extended?.

Correct..

Okay. That's all I was trying to get straight on. In the Research revenue area, you guys have talked about this because of the project cycles, you know, ends and starts just timing but there might be a slow down there.

Is that being part of what's going on in third quarter?.

It could be. I mean third quarter is a tough quarter forecast because you don't know how long the summer is going to last. The summer months do slow down. And in years past, we've had you know a decent slowdown the kind of pushed late in the third quarter. So we're usually you know – we try to do a little bit conservative there.

And then compounding that is cycling some of these research studies..

Okay. And last one for me is on, Joe, you had mentioned in the early comments about the investments you're making in the research surface area that would yield some potential.

Any color you want to get into there, is at all skunk works at this point?.

No, no, we're actually investing a decent amount of money in infrastructure system enhancements trying to drive more efficiency. Its opening will, provide more margin down the road, but it's important for us to do that from a capabilities perspective.

And then obviously we're constantly looking for you know, potential add-ons for that business to round out the service offering..

Oh, I see, expand the testing areas?.

Yes..

Yeah. Okay, I think that's it for me. Thank you..

Thanks, Bill..

Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to Mr. Joseph Capper for any further remarks..

Thanks, operator, and thank you everybody for your continued support and interest in the company. We will speak to you next quarter. Operator that concludes today's call. Thank you very much..

If you join today's conference late, you may listen to the conference call via digital replay which will be available through the Investor Information section of the BioTelemetry website at gobio.com until August 13th 2019. Thank you and have a good day..