Good afternoon. Thank you for joining us for the BioTelemetry Third Quarter 2019 Earnings Conference Call.

Certain statements during this 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 meanings 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 questions 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'll start with highlights about our third quarter performance and other recent developments. Heather will take you through a detailed review of our financial results.

I will then provide commentary on how we anticipate closing out the calendar year and why we believe 2020 is setting up to be another tremendous year for BioTelemetry.

As always, we will open up the call for questions after our prepared remarks.I am pleased to report that we delivered another excellent quarter once again meeting or exceeding all of our expectations marking our 29th consecutive growth quarter.

As you may recall from prior years, the third quarter is usually our toughest from a seasonal perspective with revenue typically pulling back on a sequential basis because we had an acceleration of MCT growth during Q3 this year's pullback was nominal compared to prior years, a particularly positive indicator for the business.Over the years our commitment to product innovation combined with exceptional client service has provided us with numerous competitive advantages and consistent results.

We now possess an unrivaled portfolio of connected health solutions that is taking the company to new heights. Our innovation in the cardiac monitoring market has produced the most technologically advanced and expansive offering in the industry. As a result, BioTelemetry remains the far and away leader in this market.

And like all successful growth companies, we seek to augment our growth through the acquisition of other accomplished innovators whenever possible.Earlier this year, we delivered on that strategy once again with the purchase of Geneva, which increased our addressable market by over $1 billion.

Geneva is off to a remarkable start since joining the company and we expect to add capabilities to this platform in order to create additional sources of revenue. Our research division has also benefited from select acquisitions that have expanded our service offerings and accelerated growth.

By adding imaging capabilities a few years ago, we were able to dramatically improve our market position, allowing us to compete for business that was previously out of our reach.And as you know, we have been busy leveraging our wireless platform and proprietary technology to develop new opportunities for growth in digital population health.

This field is wide open for companies like us, who possessed the experience and technology to remotely monitor and transmit data. We are extremely optimistic about the future of population health given the magnitude of the markets and the need for the healthcare industry to migrate to such solutions.

I routinely reiterate our focus in these three areas to provide clarity on how we allocate our time and resources. For those of you who are new to the story, we believe it's worthwhile for you to understand the facets of the strategy that have driven our more than seven years of consecutive quarterly growth.

It's also important to stress our comprehensive approach to growing this connected health platform versus a focus on any single product or segment.Let's take a look at some of the highlights that drove our success in the quarter.

During the period revenue grew by over 11% to $111.3 million, exceeding our expectations, again adjusted for the 2019 Medicare rate reduction, this represents closer to 14% quarter. Overall, margins were above expectations as quarterly EBITDA grew to $31.5 million, right about where we were in Q2 and up $1.4 million versus the prior year.

We ended the quarter with $61.6 million in cash, up approximately $10 million in the period.

We spent time integrating Geneva into the healthcare business and evaluating options to best leverage this powerful platform.We completed the integration of ADEA, an early-stage Swedish medical technology company that delivers remote health services in the Nordics with plans to expand to other parts of Europe.

Our research services team turned into another strong performance growing revenue by nearly 6% off of a tough prior year comp and we continued efforts to build upon our new digital population health management business through key partnerships and internal investments.As we dig deeper in the healthcare services business, we continue to uncover numerous opportunities for continued growth in this sector.

During the quarter, the teams executed extremely well with a focus on expanding the market for MCT, extended wear Holter and the Geneva application, resulting in an accelerated growth rate of 11.5% in this segment.

Importantly, the MCT growth rate claims an impressive 11% in the quarter and extended wear Holter grew at a rate well above the market evidenced that the decision to expand the sales force beginning in the first half of the year is yielding the anticipated results.

In the area of reimbursement, we received two positive updates.First, the new physician fee schedule indicates no significant changes to the MCT rate for 2020, as such there will be no financial impact to our business. Second, as you know, the code status for extended wear Holter has been a frequent topic of conversation on these calls.

Specifically, what is the timeline for moving from a temporary to a permanent code and at what level will reimbursement be set? We now have clarity on the first part of that question.

AMA recently accepted the societies and industry’s recommendation for permanent coding extended wear Holter.This new code structures should become effective January 1, 2021. The next step is for the RUC to review cost inputs in order to determine the proper reimbursement level for the codes.

We will get our first indication of where the rates will most likely be set when the proposed physician fee schedule is posted in the summer of 2020. This brings me to the Geneva platform.

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 of the physicians’ patients with implanted devices such as pacemakers, defibrillators and loop recorders.This solution transformed the way physician offices consolidate and manage data from implantable cardiac devices helping to drive significant efficiencies and patient compliance.

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 implanted monitoring devices.During the quarter, we made excellent progress in our initial effort to introduce Geneva into the thousands of accounts for which we currently provide cardiac monitoring services.

Our 120 person healthcare sales team has been trained on the Geneva solution and armed with the appropriate marketing message. They have been instructed to target our largest accounts and we are very pleased with the wide acceptance for the solution.

In addition to the sales and marketing activity, we are aggressively investing in the development of follow on capabilities, which will further enhance the value of the Geneva platform for years to come.Switching to research services, we are happy to report on another excellent quarter during which restarts grew by nearly 6% from the prior year while maintaining it's extremely healthy pipeline level.

I have mentioned on previous calls that our proprietary ePatch product is becoming an important element of many new cardiac safety studies. During the quarter, we launched several such projects including one large study that requires a one hour turnaround time from remote upload.

We were likely the only vendor capable of meeting such a commitment for extended wear Holter in a research setting.We anticipate continuing to see demand for this service from various sponsors in the research market.

During the quarter, we also continued to invest in new, faster and more efficient processing systems, which will create greater efficiency and scalability. We anticipate rolling out several enhancements over the next few quarters. In terms of new market opportunities, we continue to work during the quarter on our digital population health initiative.

As we move into 2019, we began allocating more business development resources to the payer segment and exploring the potential for developing a physician driven sales channel, leveraging the new remote patient monitoring CPT codes.We have several pilots underway testing the application of these codes and are optimistic that this may develop into a viable alternative for commercializing our care management solutions.

While we were making good headway with our pop health initiative, we were actively evaluating options to move more aggressively in this developing and sizable market. We also continued to work with several collaborations in an effort to leverage our capabilities through the unique strengths of these potential partners.

To sum up, we are extremely pleased with the company's third quarter performance. More importantly, we expect that the investments we’re making across the company will support our continued growth well into the future.Before I turn the call over to Heather, I want to provide commentary on the fourth quarter.

Coming off of a strong Q3, during which it was acceleration in our MCT growth rate, we were poised for another record setting Q4. In fact, three weeks in the month of October, we were trending toward our best month ever with MCT growth up nearly 15%. Unfortunately, we were met with an unforeseen challenge.

In late October, we detected a new variant of malware on our information technology network and immediately took steps to maintain patients’ safety, protect sensitive information and contain the activities.We properly disengage the impacted systems to sequester and remove the malware resulting in a temporary disruption of our services.

We also immediately assembled a response team comprised of data privacy counsel and cyber security experts to conduct a forensic investigation to determine the nature and scope of the incident.

It is important to stress that the malware did not access or transfer any patient or client data outside of the system.The company expects to incur lost revenue and direct expenses resulting from this incident, but our insurance does cover us for both business interruptions and cyber attacks.

We attempted to capture revenue impact in our Q4 guidance, which Heather will cover. However, I must caution that it will be several more weeks before we can assess the full financial impact of this incident with more specificity. I would like to thank the team, who worked on this matter for their rapid response and high degree of professionalism.

You were instrumental in getting our systems back online expeditiously ensuring continued access to our lifesaving technology.With that, I'll now turn the call over to Heather for a 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 third quarter with our 29th consecutive quarter of year-over-year revenue growth. Total revenue grew 11% reaching $111.3 million and exceeding our expectations.

This quarter resulted from the revenue increases in all of our business lines.

Healthcare revenue increased $9.7 million, or 12%, to $93.9 million, once again driven by patient volume growth in both our MCT and extended 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 $3 million impact from the reduction in MCT Medicare pricing and negative payer mix.

Excluding this reduction, our healthcare revenue growth in the quarter would have been over 15%. Our research revenue also increased 6% to $14.2 million benefiting from new studies utilizing our ePatch extended wear Holter service.

Lastly, our other revenue increased 35% to $3.2 million resulting from new partnerships in our digital population health business.Moving to gross profit, our margin for the third quarter of 2019 was 62.3% versus 62.7% in the prior year period. This slight decrease in our margin was primarily due to the MCT price.

We view 62% to 63% as a more normal range for our gross margin at this point. Our third quarter adjusted EBITDA was $31.5 million, representing a 28.3% return on revenue.

The increase in our adjusted EBITDA was primarily due to the increased revenue, partially offset by the impact of the investments we are making in our sales and technology areas as well as the lower MCOT average rates.As for our tax rate for 2019, while we expect our GAAP tax rate to be approximately 20%, we anticipate that we will continue to be able to utilize our $150 million of federal net operating loss carry forwards.

And as a result, we believe that we will pay approximately $1 million to $2 million in cash for taxes in 2019.Moving to our balance sheet. We ended the quarter with $62 million in cash and $196 million of indebtedness, putting our debt-to-EBITDA ratio lower than 1.5 times.

Year-to-date, we generated $53 million in cash from operations and used $24 million for capital expenditures. These expenditures were driven by purchases of our MCT and extended wear Holter patch devices as well as for capitalized software and hardware as we invest in our IT environment and infrastructure.

Free cash flow was $29 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 fourth quarter.

But now we're even that Joe discussed, did temporarily disrupt our ability to deliver our services, which we expect will impact our fourth quarter results. Given the information we currently have, we expect our fourth quarter revenue to be $108 million to $113 million resulting in full-year 2019 revenue in the range of $435 million to $440 million.

As Joe mentioned, we believe the majority of the direct costs associated with the disruption will be covered by insurance. As such, we expect to maintain an EBITDA margin of approximately 28%.Despite the recent temporary disruption to the business, our long-term expectations for the company remain on changed as Joe will discuss in more detail.

For 2020 we expect our revenue growth to be in the low-double digits. Moreover, there's a potential for EBITDA margin expansion as we begin to realize the benefits from the 2019 investments made in the business.

We will provide more specific guidance for the first quarter and full year 2020 on our year-end call.To summarize, the company remains in a strong financial position with modest leverage and additional capacity if needed. We are pleased to have delivered another great growth order with consistently strong results.

These results have provided and will continue to provide us with the financial strength and flexibility to execute on our key growth initiatives.And with that, I will now turn the call back to Joe..

Thanks, Heather. As you've just heard, we had another great quarter continuing to build upon our longstanding momentum. Our forward thinking strategy is yielding the results we had envisioned and it has positioned us well to compete within today's evolving healthcare market.

To ensure our continued success as we close out the year and set the stage for 2020, we will remain focused on continuing the healthcare sales force expansion to help drive further market penetration of our MCT and extended wear Holter services.Completing the integration of the Geneva application into the healthcare sales organization, in order to fully leverage this well established channel and drive rapid market penetration.

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.Before we opened the call to your questions, I want to take a few minutes to paint a picture of how we see next year taking shape.

For the full-year 2020 we would expect double-digit organic revenue growth, which will have us bumping up against a $0.5 billion in revenue, prior to any acquisitions.Let's break that down and see why we are confident this will be the case.

In order for the company to achieve this objective, the healthcare segment, which constitutes 85% of the company's revenue must achieved double-digit growth with reimburse rates expected to be flat from year-to-year the primary factors affecting the healthcare revenue [indiscernible] revenue growth will be MCT and extended wear Holter volume and sales of the Geneva platform.As mentioned, with MCT growth at 11% in Q3, we are starting to see the impact of the 20% expansion in the healthcare sales team.

We also expect the continued high growth rate for extended wear Holter. If these assumptions prove true, we are most of the way home. Now, add to that an increased investment in the sale of the Geneva platform.

Since acquiring Geneva in March 2019, we have had excellent early success with only six dedicated sales professionals carrying quota and selling the solution full time.The much larger healthcare sales team has been charged with lead generation in our largest accounts.

On January 1, 2020 we plan to have six more dedicated sales professionals selling to Geneva Solution full time for a total of 12.

Additionally, all 120 account executives in the healthcare service to sales organization will carry quotas for and have a significant portion of their target bonus tied to revenue growth associated with the Geneva service.Finally, the ADEA business, our first investment outside of U.S.

market is expected to contribute few million dollars of healthcare revenue growth in 2020 as well.

This being the state of affairs in the healthcare segment, we should comfortably exceed a double-digit revenue growth objective, even with more modest growth contribution from the other businesses.Add to this the possibility of initial investments and acquisitions in various parts of the enterprise.

Our business development pipeline is active and we are able to execute on it, given our strong balance sheet and significant free cash generation. We are confident we will continue to execute the way we have for the past seven-plus consecutive years. Given that we expect 2020 to be another record setting year.

I would again like to sincerely thank those of you who helped deliver our 29th consecutive growth quarter. It's a privilege to work with such a prolific and dedicated team.With that, we'll now pause and open the call to your questions. Operator, we're ready for our first question..

Thank you. [Operator Instructions] And our first question is going to come from Brooks O'Neil from Lake Street Capital. Your line is now open..

Well good afternoon, Heather and Joe. I’ve a couple of questions.

I was hoping you might tell us just a little bit about the nature of the disruption and whether you think any of the suspicious activity was specifically targeted at BioTelemetry or whether it was something that just somehow inadvertently got into your systems?.

From what we can tell – from what we've been told from the people who've been working on the issue for us that it's a typical malware attack on the company. And it was able to get into our systems.

Obviously we have a multilayered cyber security system, but apparently this was a brand new form of malware that hadn't been seen anywhere in the world prior to us getting hit by it..

Okay. And then secondly, obviously you're talking about a significant increase in focus around Geneva.

Can you just tell us anything about the nature of the contribution Geneva made in Q3? What the growth rate is today and what you hope it might be as you go into 2020?.

Yes. Hi, Brooks. So in Q3 it was about 5% of our healthcare revenue. And we haven't given specific guidance going into 2020 on Geneva, but we have talked at a high level around the expectation that, that business should double next year relative to this year..

And then just lastly, obviously there's a lot of excitement and interest in the population health side of your business.

Can you just share with us any sort of specifics, whether we're talking about diabetes or other chronic diseases, any progress you're making in that side of the business?.

Yes. It's still relatively small in early stages, obviously, but we are making progress. Revenue is growing at a high rate off of a low base, obviously. We've added additional capabilities to it and we're starting to market a more expansive, whole body if you will solution. And we're doing it both direct and indirect through partners..

And Joe, are you continuing to focus on payers or are you thinking about employers? How do you position that business today?.

Right now our concentration is payers and we're in the process of sort of developing this other channels, I talked about leveraging the new CPT codes that CMS activated Gen 1.

There's still a lot of confusion about those codes, but the intent our understanding is, and from what we're – what we're told is the intent is to develop a code package that allows physicians to bill for remote monitoring and Telehealth services so that we can start to leverage their time more appropriately.

So we think that there's an opportunity there and early indications – again, we're in pilot phase but early indication is it looks like it's going to be a viable channel..

Cool. Thank you very much. Congratulations on the quarter..

Sure..

Thanks, Brooks..

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

Hi, this is Matt Wizman for Jayson Bedford. Thanks for taking the questions. I have a couple on Geneva. So you mentioned that you are investing in some follow-on capabilities for Geneva for kind of future revenue.

Can you speak a little bit more to this specific opportunities there and what kind of capabilities you're investing into expand that business? Thanks..

Yes. More capabilities for billable services through the same platform and you can imagine heart failure makes logical sense. And then we're also exploring other potential to add applications like a Telehealth capability embedded in the platform, as well as other things, right. So there's a lot we think we can do with the platform..

Okay. Got it. Thanks.

And then I guess from a profitability standpoint, is Geneva still expected to be a breakeven or so in business this year? And then as far as 2020, could that contribute a little bit of accretion next year?.

Yes. So for 2019 yes we're taking any contribution that they may have made and putting it back into the business to accelerate the top-line. We have not put out specific guidance for 2020 yet on that, but I would expect to continue that investment in the business for the near future..

Okay. Got it. Thanks. And then just my last one on the research business.

What are the puts and takes there, as we should think about that for 4Q and then in 2020, obviously you're not having guidance, but given your current visibility of ongoing trials and some upcoming activity, I'm assuming we should expect that to grow and then in 4Q what should we expect for that one? Thank you..

No. It’s probably not – you're probably not going to see growth in that in the near-term. The research business kind of goes through cycles. We get – and it's – unfortunately, it's a choppy business and it tends to track with the start and stop, which of large studies.

High growth year last year, we had a decent growth year this year or we'll have a decent growth year this year. And as we exited the year, it's probably slower growth at least, what we can see right now it's probably a little bit slower growth..

All right, great. Thanks for the color..

Thank you. And our next question comes from Bill Sutherland from Benchmark Company. Your line of no open..

Thanks. Hey guys..

Hey, Bill..

We're – what do you think the revenue impact is going to basically settle out in terms of a malware attack?.

It’s too soon to say with great specificity. We're only two – it's only a two-week old initiative or something along those lines, 2.5 weeks, something like that. And we attempted to capture it in our guidance, but really we're going to need a little more time to fully assess the impact of it.

It's a slowdown of systems for few days and we were able to get back up and running at full strength in pretty short order, which is remarkable. The team was able to do that. But it did slow us down when we took the system down to sort of sequester the issue..

Okay. I'm just – just sort of like comparing where the guidance is now compared to where it was.

Wondering if that's the delta that the malware represents?.

Yes. That's what we're trying to capture there, but again we're still a little early on here..

Okay. Okay.

Heather, what was extended Holter’s percent of healthcare revenue in the quarter?.

Extended wear Holter, which we typically give was about 12% of healthcare..

Okay..

And Bill, if we're way off on that, obviously we'll come back and update you and we're trying to give you the best information we have available to us today. I think the good news is we caught this thing early. We were able to put a fence around it and get rid of it.

Unfortunately and the proponents of caution, your main concern is patient safety, patient information, client information. So we had to – we had to protect that.The good news is it happened early in the quarter and we got our hands around it and we'll start to see better performance throughout the rest of the quarter.

And I think the most important message is [indiscernible] we were having a heck of a start to the quarter and we think that there is just going to be an unbelievable year.

The rates being flat year-to-year and the kind of growth we're seeing in the core business and the market acceptance we're seeing with the Geneva application, we think it's going to be a pretty incredible year..

Understood.

So should we think about kind of your listing of placeholder that most likely gets, if it gets revised, it gets revised up for the quarter?.

Say that again..

Should we think about, so the guidance for the fourth quarter since there's still a lot of uncertainty, should we think of this as a pretty conservative starting point?.

Look, I think for today's call, we're going to say that this is our best estimate right now. Again, only a couple of weeks old and we still have to assess the financial impact from it. If there's – if it was dramatically different than what we put out today, we will update you..

Okay.

And then last, Joe, are you all what are you hearing in the marketplace about the – this reimbursement change for the position implant procedures and whether it's changing anything as far as their utilization of monitoring?.

Are you talking about the [indiscernible]..

[indiscernible].

Yes.

But are you talking about the side of service change that took place in the beginning of year?.

Yes. I'm just wondering if there's any – been any trend developing? That's all..

We saw it in the first part of the year, but then it sort of – it sort of tapered a bit and I think we're back to kind of normal growth with that product. I don't want to speak for someone else's product, but it's – I think early in a year we thought we saw a little bit of impact on our MCT growth rate. But that sort of has tended to wane.

I think the products are more complimentary than anything. There's obviously some overlap, but I think they're more complimentary than anything. And as we mentioned a couple of times in our commentary, the MCT growth rate ticked up to 11% in the quarter, which we felt was a really positive sign..

Yes. Okay, that’s good to hear. Thanks Joe. Thanks, Heather..

Sure..

Thanks, Bill..

Thank you. And our next question comes from Marco Rodriguez from Stonegate Capital Partners..

Good afternoon. Thank you for taking my questions. Wanted to – hey, I want to kind of follow-up just a little bit here on the malware attack.

I'm just kind of curious from what some of the answers that I heard, it sounded like the – it took down your system for just a few days, wanting to confirm that? And then also the guidance you're – I wanted to confirm that you're including what might be an estimate of the insurance recoveries in there as well?.

No. We're telling you what we – as we sit here today, our best estimate for a range of revenue, whenever we recover..

Yes. So the – on the revenue side, it's our best estimate. There will be no impact from the insurance recovery on revenue. From an expense perspective we're expecting majority of those incremental expenses to be covered.

So that was put into the 28% EBITDA return from a bottom-line perspective, but there should be no impact on the top-line regarding the insurance recovery..

Got it. Okay.

And can you maybe talk a little bit about how the conversations kind of went when you obviously discussed this issue with the end customers?.

Surprisingly well. Unfortunately for all of us this is not an uncommon event and healthcare companies tend to get hit, especially large hospitals. So our larger counsel are very understanding and quite grateful that we appreciative of that, we took the steps that we did as rapidly as we did to protect patient information and client information..

Got it. It's helpful.

And then in terms of the sales force expansion, the additional six people that you're looking to add to the Geneva dedicated sales force, can you kind of give us a sense, is there more specialization there that will require a little bit longer of a lead time to get that person trained up or is it pretty similar to your current structure?.

It's probably – it's more specialized. It's a different kind of sale than the current remote monitoring sales process. So it's a little bit longer sales time in terms of background necessary to sell. Very similar, right, so they both fell into the same sales channel. It's just a different product, different solution, and different sales approach..

Got it. Okay.

And just confirming as well, is there an additional sales force expansion or did you already complete that, that we had kind of discussed that earlier in the year?.

We're just about finished the healthcare sales expansion and then as I mentioned we're going to add more resources to the Geneva sales team, but we still make the deal..

Got it. Okay, perfect. I appreciate your time guys..

Sure..

Thanks..

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

Thanks, good afternoon and congrats on the good quarter.

Joe, can you tell us, does your 2020 guidance for double-digit growth contemplate or factor in any potential pricing impact from the extended Holter code change?.

It does not because any pricing – as we understand it today any potential price changes would take place 2021..

Right, right. Okay, yes.

So you'll provide us with any update to that as you get an update saying in mid next year, is that correct?.

Yes. As we understand the process now, since the code structure has been accepted, it now needs to go through the pricing process. And that process should result in the codes with reimbursements, proposed reimbursement rates, published as part of the physician fee schedule, which usually happens right around the July 4th weekend.

There's a common period that follows and then the permanent codes usually go into effect sometime around now for a use starting January 1st. And we just – in fact we just saw the published rates for MCT, that's why we know that there's no real change moving into 2020..

Got you, got you. Okay. Very good. Thanks, Joe. And on the Geneva margins, I know you're reinvesting in the business now, but at scale, I'm assuming there's more of a software component in that business.

Would the Geneva margins be above the corporate average over time?.

I hate to speculate right now. Look, I think, you hit the nail on the head. It's not a capital intensive product. It is a service intensive offering. And we think that there is – all indications are that it will be obviously good gross margins and good operating margins, but our focus right now is really expand that market.

We have such a superior solution than anything else that's out there. And we really want to make sure that we get to as much of the marketplace as possible. And I think we're going to make plenty of money off of this thing by accident..

Okay. All right. Very good. And then just to clarify or what you said earlier on the malware attack, you're attributing the change in the Q4 guidance entirely to that event.

So if it weren't for that, you basically would have reiterated the year, right?.

I don't know that we would have been. Usually, we have a better look at the quarter by the time we have this call because usually October is our biggest month of the year. Obviously that changed quite a bit for us.

So, I mean, there may have been a chance that we were bringing down guidance a little bit anyhow because we had a pretty big number to hit for Q4, just to be honest, but this is the bulk of it..

Okay, perfect. Thank you..

Thank you. And our next question comes from Mitra Ramgopal from Sidoti & Company. Your line is now open..

Yes. Hi. Good afternoon. Joe, I was wondering if you're seeing any change in the competitive environment. I noticed there are a number of small firms that are increasingly advertising in the remote cardiac monitoring space. And I was just wondering if you're noticing any impact on your business..

Nothing that I would say it has anything dramatically different. There is obviously a wide array way of competitors in the marketplace, some as direct competitors, some as we mentioned earlier we compete in maybe niches of our market, but nothing that's dramatically changed in the last couple of quarters.

We've got pretty strong competitors in the market place. And we think we compete just as good as any of them and we'll continue to do so..

Okay, thanks. And then I know at one point the wearables market seemed like a nice opportunity for you. Obviously, you have the relationship with Apple and I noticed how Fitbit was acquired recently.

I was wondering if you have any thoughts in terms of where do you see this market going and if there's any opportunities for you still?.

Personal opinion is it's still early. We'll see where it ends up. You mentioned two companies that we have worked within our research division and helping them get their products to a point where they're a higher functioning product more usable obviously in that clinical grade.

My personal opinion again is that that will tend to increase the amount of business we have in the clinical market, but I think it's early yet to see how – and I couldn't tell you how big that consumer segment is going to be..

Okay. Now, that's great. And then finally, obviously on the acquisitions, that's always a part of the story here.

And I was just wondering if as you look out over the next – I don't know what your potential pipeline is, but are you seeing some opportunities out there that you think it could really be a nice fit for the company and allow you to grow even faster?.

We do. We see opportunities to invest in technology and future technology and in potential add-ons to the enterprise. And we see it across the company. We see it in cardiac monitoring. We see it in research and we see it in pop health. We see it across the board.

Obviously, some are more valuable than others and has to deal with things like valuation, but most importantly does it do anything for us from a strategic perspective, does it accelerate our strategic plan. If it doesn't, we eliminate it right away. If it does, we work it and see if there's a fit.

And we have again a very active and robust portfolio of assets that we look at any given time..

Okay. Thanks again for taking the questions..

Sure..

Thank you. And I'm showing no further questions. I would now like to turn the call back over to Mr. Joseph Capper, President and CEO of BioTelemetry.

Sir?.

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

If you joined the 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 November 19, 2019..