Q3 2019 Earnings Call
Ladies and gentlemen.
Today's conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
Good afternoon.
Thank you for joining us for the Biotelemetry third quarter 2019 earnings conference call.
Certain statements. During this conference call in question and answer period to follow May relate to future, that's an expectations and as such constitute forward looking statements within the meaning of the private Securities Litigation Act of 1995.
Such statements involve known and unknown risks uncertainties and other factors, which may cause actual results or performance or achievements of the company in the future didn't materially different from the statement 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 , what 10-Q, we assume no duty to update these statements.
During this call will prevent present, both GAAP and non-GAAP financial measures.
Conciliation of GAAP to non-GAAP measures is included in todays earnings press release, which is distributed and available to the public do they investor information section of the Biotelemetry Web site at go bio dotcom.
At this time, all participants had in place on in listen only mode. The fold the open for questions and comments. Following the presentation. It is now my pleasure to turn the call Laura over to your host Mr., Joseph Kapur, President and CEO about telemetry, Sir you may begin.
Thank you off where like good afternoon, everyone I'll, just couple of President and CEO Biotelemetry.
With me for today's call is how to get our Chief Financial Officer.
I'll start with highlights about a third quarter performance and other recent developments how they will take you through a detailed review our financial results I will then provide commentary on how we anticipate closing out the calendar year and why we believe 2020 setting up to be another tremendous year for biotelemetry.
As always we'll 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 29 consecutive growth quarter.
As you may recall from prior years third quarter is usually our toughest forming seasonal perspective with revenue typically pulling back on a sequential basis.
Because we had an acceleration I've asked you to grow during Q3. This year's pullback was nominal compared to prior years, it 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 is that an honest weibo portfolio of connected health solution that is taking the company to new Heights.
Our innovation in the called yet monitory market has produced the most technologically advanced and expansive offering in the industry.
As a result.
Telemetry remain far and away leader in this market and like all successful growth companies, we seem to augment our growth.
Position a border accomplish innovator 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.
An Eva is off to a remarkable start since joining the company and we expect 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 I.
Allowing us to compete for business that was previously out of our rigs.
And as you know you had been busy leveraging our wireless platform and proprietary technology to develop new opportunities for growth and digital population health.
This deal is wide open for companies like us who possess an experienced high 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 being for the healthcare industry to migrate 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 were new to the story, we believe it's worthwhile for you to understand the facets of the strategy that have driven are more than seven years of consecutive quarterly growth.
It's also important to stress our comprehensive approach to growing that's connected health platform versus a focus on anything of product or segment.
Let's take a look at some of the highlights the drove more success in the quarter.
During the period.
Revenue grew by over 11% for $111.3 million exceeding our expectations again adjusted for the 2000 like P. Medicare weight reduction this represents closer to 14% cool.
Overall margins were above expectation as quarterly EBITDA grew to $31.5 million, what about what we weren't Q2 and 1.4 million versus the prior year.
We ended the quarter was 61.6 billion to catch up approximately $10 million in the period.
We spent time integrating in either the health care business and evaluate options. The best leverage is powerful platform.
We completed the integration of India, and always stage Swedish medical technology company that can live with remote health services in the Nordics with plans to expand to other parts of your.
Our research services team turned in another strong performance growing revenue by nearly 6% off of a tough prior year comp.
And you continue efforts to build upon our new digital population health management business.
Okay partnerships and internal investment.
Okay.
Okay. Good deeper in the health care 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 Brent Ti extended wear holter and the drilling application, resulting in an accelerated growth rate of 11.5% in this segment.
Importantly, the uncertainty both weight class an impressive 11% in the quarter.
Then it will hold your broader weight well above the market.
Evidence that the decision to expand the Salesforce beginning the first half of the year is really the anticipated results.
In the area reimbursement rate, we seek to positive updates.
The new physician fee schedule indicate no significant changes the S&P wait for 2020 as such there will be no financial impact to our business.
Second as you know the cold 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 permanent code.
What level, where reimbursement be set.
We now have clarity on the first part of that question.
I am a recently accepted the societies and industries recommendation for Palmer coding for extended were holder.
This new coach Dr. should become effective January 1st 2021.
The next step.
It is for the walk to review call inputs in order to determine the proper reinforcement level for the code.
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 2020.
This brings me to the Geneva platform.
As a reminder, Geneva is an innovative proprietary cloud based platform.
The big data from the leading cardiac devices.
Even the company to remotely monitor all physicians patients within planets devices, such as pacemakers, it's been lighters and loop of course.
[laughter] solutions transformed waste physician offices consolidate and that is made up from implantable cardiac devices, helping drive significant efficiencies and patient compliance.
The acquisition of Geneva, we positions Biotelemetry is a much more progressive data consolidation and solutions oriented company and hedges against any potential shift.
<unk> implant at 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 health care sales team has been trained on the Geneva solution and armed with the appropriate marketing message.
Yeah constructed target our largest account and we were very pleased with a 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 chamber platform for years to Tom.
Switching to restart services, we're happy to report when another excellent quarter. The one which we starts grew by nearly 6% kinda part here well maintained its extremely healthy pipeline level.
I have mentioned on previous calls that our proprietary patch product is becoming an important element of many new cardiac safety studies.
During the quarter, we lost several such prop projects, including one large study that requires a one hour turnaround time from remote upload we will likely be only vendor are capable of being such a commitment for extended world Turkana research setting.
We anticipate continuing to see demand for this service from various posture is gonna 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 what went out several enhancements over 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 opposition driven sales channel leveraging the new remote patient monitoring CPT codes.
We have several pilots underway testing the application of these codes and I'm optimistic that dismayed developed into a viable alternative for commercializing our care management solution.
While we were making good headway whatever pop health initiative, we're actively evaluating options to move more aggressively and is developing a sizable market.
We also continued to work with several.
Collaborations in an effort to leverage our capabilities through the unique stress of these potential partners.
So we're 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 a celebration at our NCP growth rate, we were poised for another record set in Q4 in fact, we weeks into them off the bottom caliber we were trending toward our best month ever with NTT rolled up nearly 15%.
Unfortunately, we were met with an unforeseen challenge.
In October we detected a new variant of malware well information technology network and immediately took steps to maintain patient safety protect sensitive information I can paint the activity.
Probably disengaged impacted system, it's a cluster and remove the malware, resulting in a temporary disruption almost services.
We also immediately assemble response team comprised of data privacy Council and cyber security experts to conduct the forensic investigations to determine the nature of scale for the accident. It is important to stress, but the malware did not access or transfer any patient client base outside of the system.
The company expects to incur lost revenue and direct expenses, resulting from this incident.
But I was really does cover us what both business interruption at cyber attacks.
We attempted to capture the 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 worked on this matter, but a rapid response and high degree of professionalism you were instrumental and getting those systems back one like expeditiously, ensuring continued access to our life saving technology.
With that.
Now turn the call over together for a detailed financial review the quarter header.
Thank you Joe and good afternoon, everyone. It's 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 expectation.
Digicore resulted from the revenue increases in all of our business line health care revenue increased $9.7 million or 12% to 93.9 million once again, driven by patient volume growth in both our MTT and extended hold or service lines as well with the addition of Guinea. This revenue from the monitoring of.
Play animal cardiac devices.
These increases were partially offset by the 3 million dollar impact and the reduction in and Matt and Hot Medicare pricing and negative payer Mac. Excluding this for adoption health care revenue grew in the quarter. Excluding this reduction our health care revenue growth in the quarter would have been over 15%.
Oh, we search revenue also increased 6% to $14.2 million benefiting from new studies utilizing our patch extended we're hoping device.
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 lower and a few key frame.
We do 60% to 63% I think more normal range for our gross profit margin at this point.
Our third quarter, adjusted EBITDA was $31.5 million, representing a 28.3% return on revenue.
Increasing our adjusted EBITDA was primarily due to the increased revenue, partially offset by the impact of the investments, we're making it our sales and technology area as well as the lower end Hot average rate.
As for tax rate for 2919, 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 a federal net operating loss carry forwards as a result, we believe that we will pay approximately one to 2 million in cash taxes for kids.
Now that 19.
Moving to our balance sheet.
Ended the quarter with $62 million in cash and 196 million of indebtedness, putting our debt to EBITDA ratio at 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 extend to work hold for patched devices as well for capitalized software and hardware as we invest in our IP environment and infrastructure.
Free cash flow was $29 million and we'll use 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.
And now were event 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 $138 million to $113 million, resulting in full year 2019 revenue in the range.
$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 20%.
Despite the recent temporary disruption to the business our long term expectations for the company remain unchanged I see I will discuss in more detail for 2020, we expect our revenue growth to be in the low double digit. 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 yearend call.
To summarize the company remains in a strong financial position with modest leverage and additional capacity if needed. We were pleased to have delivered another great fourth quarter. What's consistently strong results. These results have provided and we'll continue to provide us with the financial strength and flexibility to execute on our key growth initiatives.
With that I'll now turn the call back your job.
Thanks, a lot of.
You've just heard we had another great quarter continuing to build upon our longstanding momentum.
Our forward thinking strategy is yielding results, we had envisioned and its position 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 remain focused on.
Continuing to health care Salesforce expansion to help drive further market penetration of our Emcp extended wear hole for services.
Completing the integration of the Geneva application into the health care sales organization in order to fully leverage is well established channel and drive weapons market penetration.
Continuing to grow our research business by making additional business development and infrastructure related investments.
Nobody out or digital population health management business, but continuing to our current market development efforts and expanding on key partnerships we have developed.
Before we open the call your questions I want to take a few minutes to paint a picture of how we see next you're taking shape.
For the full year 2020, we would expect double digit organic revenue growth, which will help us bumping up against a half a billion dollars in revenue.
Prior to any acquisitions.
Let's break that down a few why we are confident this will be the case.
In order for the company to achieve this objective.
Health care sub segment, which constitutes 85% of the company's revenue most achieved double digit growth.
With reimbursement rates expected to be flat from year to year. The primary factors affecting the health care revenue, helping our revenue growth will be asking tea and extending world for volume and sales, but did you give a platform.
As mentioned well density growth at 11% in Q3, they're starting to see the impact of the 20% expansion in health care sales team.
We also expect the continued high growth wafer extending were holder.
If these assumptions prove true where most of the way home.
Now add to that and increased investments in the sale of the Geneva platform.
Since acquiring journeys in March 2019, we have had excellent early success with on six dedicated sales professionals carrying quota and selling the solution full time.
The much larger health care sales team has been charged with lead generation and our largest account.
On January 1st 2020, we plan to have six more dedicated sales professionals selling to do the solution full time for a total of 12.
Additionally, all 120 account executives in the health care services sales organization.
I won't carry quotas for and have a significant portion of the target bonuses tied to revenue growth associated with that you need a service.
Finally, you did business our first investment outside of U.S. market is expected to contribute a few million dollars of health care revenue growth in 2020 as well.
This being the state was there's going to health care segment, we should comfortably exceed a double digit revenue growth objective, even with more modest growth contributions from the other businesses.
Add p., there's the possibility of additional investments and acquisitions in various parts of the enterprise.
Business development pipeline is active and we were able to execute on 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 here.
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.
That will now Paulson open call your questions operator, we're ready for a first question.
Thank you as a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound Ji. Please standby letter compiled the kuni roster and again that is star one.
And our first question is gonna come from Brooks Oneil from Lake Street Capital Your line is Nelson.
Good afternoon, everyone, Joe I have a couple of questions.
I was hoping you might go it's just a little bit about the nature of disruption and whether you think.
Any of this vicious activity was specifically targeted at bio telemetry or weather was something that.
Somehow in the burden, we got into your systems.
From from what we can tell from what we've been told from that people were 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 multi layered cyber security.
System, but apparently this was a brand new form of malware that hadn't been seen anywhere in the world prior to two a basket hit by.
Okay, and then secondly, obviously, you're talking about a significant increase in a focus around GDP, but can you just tell us anything about the nature or the contribution Geneva made in Q3.
Threed is today and what you hope it might be as you go into 20 Twond.
Yeah, Hi, Brooks so in in Q3, it was about 5% of our health care.
Revenue and haven't we haven't given specific guidance I'm going into 2020 onto me, but but we have talked at a high level around the expectation that that business should double next year relative to their here.
Okay.
And then just lastly, obviously, there's lot of excitement and interest in the population now.
Your business can you just sheer was us any sort of specifics, whether we're talking about diabetes or other.
Grant of 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 more expansive.
Whole body.
If you will solution and and we're doing it both direct and indirect through partners.
And Joe are you continuing to focus on payers are oh or are you thinking about employers.
You position that business today.
Right now are concentration as payers and were in the process of sort of developing this other channels I talked about leveraging the a new CPT codes that CMS activate a genuine there's still a lot of confusion about those codes.
But the intent I understand it it has come from what were what we're told is the intent is to develop.
Code package that allows physicians to build 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 to bear in early indications downward pilot phase, but probably indication as it looks like it's going to be a viable channel.
Well, thank you very much.
Sure.
Thanks Brooks.
Thank you and our next question comes from Jason Bedford from Raymond James Your line is an open.
Hi, This is Matt was going on for Jason Bedford. Thanks for taking the questions I've a couple on Geneva. So you mentioned that you were investing in some follow on capabilities for Geneva for kind of future revenue can you speak live in more to the specific opportunities there and what kind of capabilities, you're you're investing into expand that business. Thanks.
More capabilities were billable surface or through the same platform and you can imagine heart failure makes logical sense and then we're also exploring the potential that had applications like a tele health capability and embedded in the platform as well as other things like so there's a there's a lot we think we could do with platform.
Okay got it thanks, and then I guess from a profitability standpoint is Geneva still expected to be a break even or so in that business. This year and then you know as far as 2020 or you know could that contribute a little bit of accretion next year.
Yes, so for 2019, yet what 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, where 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 for Q1 done in 2020, obviously, you're not giving guidance, but you know given your current visibility of of ongoing trials in some upcoming activity.
I'm, assuming we should expect that to grow when done in four key what should we expect to that one thank you.
Oh, no, but probably not you're probably not going she growth in that in the near term research business kind of goes through cycles, we got it and it's unfortunately, it's a choppy business.
The tends to track with starting stoppage of of large studies, we have a high growth. Your last year, we had a decent growth you're this year or will have a decent growth here this year and as we exit the year. It's it's probably a slower growth at least at least what we can see right now, it's probably a little bit slower growth.
Great. Thanks for the color.
Thank you and the next question comes from Bill Sutherland from Benchmark and company. Your line is now open.
Thanks, Hey, guys.
No we're.
Do you think the revenue impact is going to basically subtle loughney out in terms of the malware attack.
It's too soon to say with great specificity Roni too you know it doesn't it's only a two week old initiative or something along those lines, two and half weeks something like that and we we attempted to capture their guidance.
But really we we are we're going to maybe a little more time to fully assessed the impact of it.
Yeah. It was the slowed down the systems for a few days and we were able to get back up and running at full strength in pretty short order, which is remarkable how did the team was able to do that but it did slow us down when we took the systems down to the sort of sequester the issue.
Okay, I'm, just I'm, just sort of like comparing you know where the guidance who's now compared to where it was.
Wondering if that's the delta.
Malware and represents.
Yeah, that's what we're trying to capture their but again were.
Well around we're still a little early on here.
Okay.
Okay.
Set or what was extended holter as percent of health care revenue.
It will no longer which we typically do it was about 12% of health care.
Okay.
[noise] and bill and so.
We're way off on that obviously, we'll come back an update you I'm. We're trying to 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 to get rid of it Unfortunately and the preponderance of caution you. Your 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.
Got her hands around it and and we'll start to see better performance throughout the rest of the quarter I think the most important messages.
Oh man, we were having a heck of a start to the quarter.
And we think there is just going to be an unbelievable year the rates being flat year to year end to kind of growth, we're seeing in the core business and.
But the market acceptance, we're saying with the geneve application, we think it's going to be pretty incredible year.
Understood. So should we think about comp you're seeing a place holder that most likely gets if it gets revised it gets advise you know for the quarter then so that again.
Should we think about.
So the guidance in fourth quarter since her skills, you know a lot of uncertainty due should we think it this is a pretty conservative starting point.
Look I think for today's call. We're gonna say that this was 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 there is dramatically different than what we put up today, we will update you.
Okay.
And then last Joe are you all are you hearing in the marketplace about yeah.
You know this reimbursement change for the physician implant Todd.
Teachers, and whether it's changing anything as far as there.
Utilization of monitoring.
Are you talking about the 60 James.
Uh huh.
Lars.
Yeah, but I'm sure you're talking about the find a surface change that took place and begin to your.
Yeah, I'm just wondering is any penalty.
He trend developing that's all we saw what did we saw in the first part of the year, but it doesn't sorted it's sort of tapered a bit and I think we're back to kind of.
Normal growth would that well that product I don't want to speak for someone else is product, but it's.
Yeah, I think over into your we thought we saw a little bit impact on our MCT growth rate.
That's that's what it has kinda Duane 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 FCC growth rate ticked up to 11% in the quarter, which we thought it was really positive sign.
Yeah, Okay. That's good to hear thanks, Joe like southern.
Sure.
Thank you.
Your next question comes from Marco Rodriguez from Stonegate capital markets. Your line is an open.
Oh good afternoon. Thank you for taking my questions.
I wanted to Ah, Hey, I want to see kind of follow up just a little bit here on the malware attack.
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 I'm wanted to confirm that and then also the guidance for your I wanted to get from the year, including what might be an estimate of the insurance recoveries in there as well.
No. We're we're telling you what we.
As we sit here today our best.
Estimate for a range of revenue.
Whatever we recover.
Yes, so so that the on the revenue side, it's our best estimate there will be no impact from the insurance recovery on revenue right from an expense perspective, we're expecting the majority of those incremental offensive to be covered so that was put into the 28% EBITDA return from UBS.
Bottom line perspective, but there should be no impact on the top line regarding the insurance recovery.
Got it okay and I'm a can you maybe talk a little bit about how the kind of conversation is kind of went when you. Obviously discussed this this issue with the end customers.
Oh surprisingly well.
Unfortunately for all of US this was not an uncommon event in health care companies tend to get hit, especially large hospital. So oh are larger counts were very understanding then quite grateful that we appreciate that we took the steps that we did as rapidly as we get to protect patient information that client information.
Got it is helpful. And then in terms of the Salesforce expansion <unk>. The additional 60 people that you're looking to add to the Geneva dedicated sales force can you kind of give us a sense is is there more specialisation there that would require a little bit longer lead time to get that person trained up for or is it pretty similar to your.
Your current structure.
[laughter], it's more specialize in a different kind of Sal.
And then the current remote monitoring sales process. So it's a little bit longer sales time in terms of.
Background necessary to sell.
Very similar grades for the most settlement and think sales channel.
Just a different different product different solution a different sales approach.
Got it okay, and just confirming as well that they did it is there an additional salesforce expansion or did you already complete that that we had kind of discussed earlier in the year. We're just about finish the health care sales expansion and then as I mentioned, we're going to add more resources to to the Ginnie himself in which we still need it.
Yeah.
Okay perfect I appreciate your time guys.
Sure.
[laughter].
Thank you and our next question comes from Gene made them from Dougherty and company. Your line is now open.
Thanks, Good afternoon, and congrats on the good quarter.
<unk> 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 and he potential price changes would take place 2021.
Right, Okay, yeah. So.
You will provide us with.
With any update to that as you get an update saying in mid next year is that correct.
Yes, as a as we understand the process now.
Since the code structure has been accepted it now needs to go through a 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 comment period, the followers and into permanent codes, usually go into effect sometime around now.
For a use starting January 1st.
And we just back we just saw the the publish waits for Emcp. That's why we know that there's there's no real change moving into 2020.
Gotcha Gotcha, Okay very good thanks, Joe.
And you don't want the Geneva margins I know, you're reinvesting in the business now but at scale.
Assuming there is more of a software component in that business, what would the Geneva margins be above the corporate average overtime.
You know it I hate to speculate right now I think you hit now when they had it's it's not a capital intensive.
Product it is a service intensive offering.
And we think that there's 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.
Anything else is 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 and this thing by accident.
Okay, Alright, very good and then just to to just clarify or what you said earlier on the 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've basically would have reiterated the.
The year right.
I don't know that we would have been usually we have a better look at the quarter about a time, we have this call because usually october's on biggest month for the year, obviously that changed quite a bit for us. So I mean, there may have been a a chance that we're bringing down guidance a little bit anyhow, because we had a pretty big number to hit for coupons that to be just to be honest.
But but this is the this is the bulk of it.
Okay perfect. Thank you.
Thank you and our next question comes from Mitra Ramgopal from Sidoti and company. Your line is now open.
Yes, yeah. Good afternoon, I'm just wondering.
If you are seeing any change any competitive environment I noticed turnover small firms are increasingly advertising into remote or.
Cardiac monitoring space and I was just wondering if you're noticing any impact on your business.
I'm not going then I would say has oh, you know anything dramatically different there's obviously a.
A wide array of competitors in the marketplace.
Some as direct competitors some as we mentioned earlier a big computing, you know maybe niches of our market.
But nothing it's dramatically changed in the last couple of quarters, we've got pretty strong competitors in the marketplace. We think we compete this is good as any of them.
And those who I will continue to do so.
Okay No. Thanks, and then I know, it's one point the.
We were both markets seem like a nice opportunity for you obviously you have the.
Relationship with Apple and I notice of 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 up opportunities for you still.
Personal opinion is it's still early we'll see where it ends up being you know do you mentioned two companies that we have worked with in our research Division.
And in helping them get there.
Products to a point, where there are higher functioning products more usable obviously not 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 and I couldn't I couldn't tell you how big that consumer segment is gonna be.
Okay, No that's great and then finally, obviously on the acquisitions, that's always a part of the story here and I just wondering if.
We look out over the next I don't know whats your potential pipeline is better are you seeing some opportunities out there.
You think you know could really be a nice fits at a company and to grow even faster.
We do we see opportunities to invest in.
Technology, and future technology, and its 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 a pop health.
We see it across the board obviously, you know some are more valuable than others and has to do with things like valuation, but most importantly does it doesn't 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 in the.
There's a fair and we have a again a very active from a robust.
A portfolio of of assets. If you 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 Caper, President and CEO Biotelemetry Sir.
Thanks, operator.
So again everybody for your continued support and interest in the company. We will stick you. After next quarter operator that concludes today's call. Thanks, everybody.
If you joining the conference late today, you may listen to the conference call via digital replay, which will be available to the investor information section of the Biotelemetry website at <unk> go bio Dot com until November 19th 2019.