Q3 2020 BioTelemetry Inc Earnings Call
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Good afternoon. Thank you for joining us border Biotelemetry third quarter 2020 earnings conference call certain statements. During the conference call and question and answer period to follow may relate to future events and expectations as such constitutes forward looking statements within the meaning of the private securities everybody.
<unk> Act of 90 95.
Such statements involve known and unknown risks uncertainties and other factors.
Which may cause the actual results performance and achievements of the company in the future to be materially different from the statement that the company's executive with me today.
These risks and others are described in detail in our public filings with the Securities and Exchange Commission.
Including our latest periodic reports on form 10-K, or 10-Q, we assume no duty to update these statements.
During this call Bill will present, both GAAP and non-GAAP financial measures reconciliations of GAAP to non-GAAP measures is included in todays earnings press release.
Which is this your beauty and available to the public and through the Investor information sector.
You'll telemetry website at <unk> Dot com.
At this time, all participants have been placed on a listen only mode.
The floor will be open for questions and comments following me to presentation. It is now my pleasure to turn the floor over to your host Mr., Joseph Kapur, President and CEO of Biotelemetry, Sir you may begin.
Thank you operator, and good afternoon, everyone I'm, Joe cap were president and CEO bio telemetry.
With me for today's call is how to get our Chief Financial Officer.
Well remain in good health and spirits as we continue to navigate the significant challenges presented by the cobot unlikely pandemic.
Let me just say what a difference quarter next door in our last call. We like so many other companies reporting on an exceptionally challenging second quarter.
And although rose to the challenge and the business had begun traveling in the right direction. There is still a great deal of uncertainty about how much impact the pandemic endoscopy on Q3 performance.
As it turns out we had a very strong rebound.
Looks like we are in the midst of a much welcome V shaped recovery.
As a result, it is my pleasure to report on an exceptional third quarter during which we exceeded our expectations and.
We recorded our highest quarterly revenue in the history of the company even.
Even more encouraging is that the business continues to trend upward into the current quarter.
Barring any widespread coded when they pull back we are bullish about our prospects for the remainder of the year.
Cash year to date.
We made excellent progress advancing are various strategic initiatives and partnerships across the enterprise with a focus on integrating the recently acquired Roche and <unk> assets.
He also continue to evaluate other interesting corporate development opportunities with the intent of advancing our strategy.
The multifaceted growth plan, we have followed for the past several years has produced a diversified revenue mix, which was instrumental in mitigating the impact of the covid related downturn.
With our team back to full strength and the business performing at pre pandemic levels were poised for another record setting year in 2021 door, which we anticipate top line growth of over 15%.
Our leadership position interconnected health market continues to create numerous exciting growth opportunities across all three parts of the company. We are also making investments and horizontal digital platforms for device management big data processing and user engagement.
These digital platforms standardized a core capabilities used by all of our business lives in order to support high growth and to optimize our cost structure.
During the quarter, we experienced an excellent resurgence in our health care services Division.
As you will recall or primary growth thing for this business over the years has been to continue to solidify our leadership position and the cardiac monitoring market to innovation and strategic investments.
This approach has produced the most technologically advanced and expansive offering any industry.
It has also led the acquisition of complementary assets like the Geneva business, which increased our addressable market by over $1 billion.
And for the first time provided us with a meaningful recurring revenue business.
As such we are now talking about this division in two broad areas are traditional remote cardiac monitoring business, driven primarily by and caught an extended wear halter.
And our continuous care for recurring revenue business anchored are the Geneva platform.
A remote cardiac monitoring business performed incredibly well, especially against the backdrop of the market at large.
Our primary data for measuring market dynamics disposition office visits or.
Or more specifically cardiology office visits.
During the third quarter Cardiology office business, we're down on average 18% versus the same period last year.
Additionally, access to offices remains somewhat inhibited due to covid related restrictions.
Given these factors we might expect demand for a cardiac monitoring services to track in a similar pattern on.
On the contrary our volume in this business perform better than expected and was up over the prior year.
What would cause NCT, an extended where holford to perform so well.
To appreciate this trend I think it would be helpful. For me to again explain the capabilities of and differences between these two modality.
As there seems to be some confusion and misinformation in the market around this topic.
Both service Myers present tremendous benefits to the cardiology market.
They are quite different.
As a reminder, among external reward ECG analysis options mobile cardiac outpatients telemetry systems also refer to as <unk> or MTP are the only digitally connected wireless near term remote monitoring options available today.
The biotelemetry and cut has always been and remains the category leader in this market.
The proprietary algorithms embedded in our systems are second to none.
As evidenced by numerous peer reviewed studies and cut consistently produces levels of specificity and sensitivity that are unmatched by any other system.
To our knowledge M. Cop remains the only promote monitor capable of detecting Asa about 30 seconds with 100% specificity.
When a physician needs the highest possible diagnostic yield in the fastest turnaround time and caught is the preeminent choice.
Because <unk> is a digitally connected wireless platform. The monitoring is perform continuously and remotely an ideal solution, especially in a covid environment, which helps explain it's above market performance.
Extended where holders while convenient and less expensive than MCT do not encompass any of these features.
Extended we're hopeless are not digitally connected nor are they wireless monitors that are ECG recorders, which must be returned and physically downloaded.
So the data can be analyzed.
Because of the extended where time of two weeks. They are an ideal upgrade from a traditional 48 hour hoelter and an excellent complement to and cut our longer term digital monitor.
The patch, which is our extended wear halter is FDA approved for 14 days and incorporate several competitive advantages.
For example, a patch can be configured to record on up to three channels by definition, making it clinically superior to competitive products limited to only one channel.
The system includes detection classification for 18, arrhythmias as well as frequency onset duration and birds.
It is also the most flexible device in terms of where ability.
With both patched and lead wire configuration options.
As many of you were aware the proposed physician fee schedule for 2021 published in the summer include a great news for the extended where hold your business specifically.
Specifically CMS proposed permanent codes and national pricing for extended where holders.
This action demonstrates at the parties involved in the process HRS ACC the rugs CMS et cetera, clearly appreciate the value. This service provides to the cardiology market, we commend them for their efforts.
Due to the unique and beneficial attributes of each we expect both the connected and caught and non connected extended where hold for service lines to have above market growth for the foreseeable future and we continue to invest in the infrastructure necessary to support this growth.
Our horizontal digital platforms, and short scalability quality and efficiency across all service lines.
For example, we recently launched a cloud platform for an internet a medical things or Iom's.
And have been adding capabilities to our artificial intelligence data processing entered.
The Io empty platform is hosted on Amazon Web services and is currently managing all epcot device connectivity and communications.
Artificial intelligence agents engine.
Has improved and pop data processing speed by 45% since its launch.
And the continuous care portion of our health care services segment, we continue to add new accounts and active patients to the Geneva platform throughout the quarter and integrated the at home INR testing service that required from Roche in the second quarter.
As a result of continuous care revenue grew an impressive 126%.
Our plan is to develop additional capabilities to the platform in order to further enhance a recurring revenue streams.
Also has the spirit of expanding our capabilities. We continued work during the quarter in preparation for the launch of the recently announced collaboration with Boston scientific.
As a reminder, a role in this partnership is to help commercialize their recently FDA approved luck system, which is an incredible cardiac monitor used for patients requiring long term cardiac monitoring.
We have long seen icm's is complementary to our portfolio of shorter term extra only worn monitoring system.
In terms of the agreement or cardiac organization or function as a sales agent as Boston is preferred remote monitoring partner.
We look forward to started the collaboration in the fourth quarter.
Moving into 2021, we are again, expanding our sales organization by another 15% to 20% in order to support the myriad of growth opportunities already present, and those being cultivated at the company.
Turning to the research physician. This is another part of the business, where we continue to experience excellent progress when our last call highlighted margin improvement as a result of our ongoing investments in technology and a record high growth and bookings of over 30%, which is our best indicator of future growth.
As a result, we had a better than expected third quarter and are poised to finish the year on an upswing.
Additionally, the strength of our bookings backlog will lead to at least 10% growth in 2021 short of any unexpected events.
We're also on the business in the long term give the trend toward decentralized a virtual clinical trials, which play to our strengths.
Is the main suggest decentralized clinical trials make use of technology to monitor more and more study participants and remote settings, requiring less an office business.
This is where telehealth meets research and with Covid as an accent.
Far more efficient cost effective way to manage clinical trials is expected to grow rapidly.
Over the next few years.
One large tierro recently predicted that by 2025, 80% of all trials. We'll include some amount of virtualization.
As the leading provider of remote monitoring technology and services, we welcome unexpected benefit from such a transition.
In our digital population health management segments, the outlook continues to breaking.
During the third quarter, our focus was on integrating the care management assets recently acquired as part of the <unk> partnership, which we discussed on our last call.
As a reminder, this multi year partnership with since incorporation a large health insurance company.
As part of the agreement we acquired sent teams population health management solution branded on demand.
Which we are integrating into our current offerings on demand as a remote patient monitoring of coaching platform focused on diabetes hypertension and chronic heart failure.
We also become the exclusive provider <unk> Medicaid members currently utilizing or in the process of implementing this platform.
In concert with 17 sponsors we will market the program all Scenting plans and the rest of their 12.5 million beneficiaries.
We have also spoken about additional sales person out there were added earlier this year to focus on targeted market segments.
This group is in the process of building a robust pipeline of opportunities and we were already on the brink, adding a second large anchor account with <unk> like potential.
We are in the initial phase of what could turn out to be a large commercial built up to compete in this multibillion dollar domestic market clear.
Clearly one of the lessons being learned from the Covid prices is that we need to improve the health care systems capabilities prefer I didn't care to people remotely.
With the growing prevalence of chronic diseases remote monitoring will be essential to lower costs and improving care.
As we start to see a return on our investments materialized, we will add more resources as market.
The summer despite the numerous challenges posed by the pandemic. We've remained focused on Q3 executing our strategy and building capabilities across the enterprise as a result, we surpassed all of our expectations.
We are rebuilding momentum in the core business and and capabilities and increasing investments and all segments of the company.
We expect a combination of these factors.
To further the growth of business and many years to come.
I'll now turn the call over to Heather for a detailed financial review the quarter Heather.
Thank you and good afternoon, everyone as Joe just announced.
A recovery from the impact of Covid continued in the third quarter with $114.7 million a total revenue.
15.7% sequentially from the second quarter, and 3% versus prior year, excluding a $10 million a stimulus money received in the second quarter sequential growth was 28%.
Health care services revenue was $98.5 million, a 5% increase versus prior year, driven by volume and I'm caught extended holter and continue of care.
Ah research revenue was $12 1 million down 15% versus prior year due to the close out of large studies and a delay in new study start.
Lastly, revenue from corporate and other was $4.1 million up 28% versus prior year, resulting from an increase in our digital population health.
Partially offset by a decline indirect products have.
Moving to gross profit.
Margin for the third quarter with 62% versus 62.3% in the prior year period.
Lower margin is largely attributable to any patient faced caused by lower fixed cost absorption and negative payer Max primarily in health care and the inclusion of the lower margin revenue from 10 team and continuous care businesses.
This was partially offset by higher margins and our research stagnant due to efficiencies created by automation putting place later in 2019.
Our third quarter adjusted EBITDA was $36 million, 826.7% return on revenue are EBITDA margin was supported by the flexibility in our big ass to adjust the cost structure to the appropriate level in response to the demand for our services.
Struck a balance between removing excess access costs and ensuring we were appropriately staffed as volume returned to free covid levels.
Actual attack free we have a year to date gap tax rate of 38%. This exceeds the statutory rape, primarily as a result of permanent differences largely due to stop that is not deductible when expect.
And that way, we will get a gap benefit when the related stock options are exercise.
In terms of cash taxes, when you're expecting to pay only about three and a half to $4 million and state and local taxes in 2020 due to the use of our federal net operating loss carry forward.
Moving onto a balance sheet.
We ended the quarter with $92 million in cash and increase of 20 $169 worth taking around as previously mentioned in the second quarter. We received a grant of 9.7 million that does not have to be repaid and in advance of 23.7 million for Medicare claims, which will be offset against future pain.
Starting in 2021.
Also and she too we paid back the $35 million, we drove on the facility in the first quarter cloth, an additional 35 million, leaving us with only $158 million of indebtedness amdek EBITDA of less than one time.
Year to date, we generated $91.4 million in cash from operation and is 28 million for capital expenditures. These expenditures were driven by purchases of her and caught an extended where culture patch devices as well as her capitalized software and hardware as we invest in our I T infrastructure.
Free cash flow was $64 million, which includes both the grant and the Medicare advance.
As a reminder, in January we refinanced our term that to an upside five year 400 million dollar revolver with more favorable time, including lower pricing of about 50 basis points. The company will benefit from this additional capacity no set amortization and the flexibility to pay down and drawn a revolver wow.
Maintaining access to the capital. We currently have approximately $240 million of unused capacity and remained well positioned to fund our business and growth opportunities as a result of this refinancing we saved almost $1 million in interest and fees. So far this year.
Before commenting on our outlook I wanted to touch base on accounts receivable consolidated D. S. L was about 69 days is is higher than our previous averages for a number of reasons. Some temporary some permanent the most significant factor is that in 2019 Medicare change the requirements on the timing of billing.
Previously Medicare allowed us to bill for a patient after one day of service now we are required to wait until the service is completed this change added about 10 days to our D. S L.
Will be a permanent increase.
Other factors impacting D S L or temporary the main drivers here are relating to onboarding, new businesses that are growing fast such as Geneva and Centene. These businesses added approximately eight days to our consolidated D. S. L.
Andre selling integration effort, we will continue to work to bring down the D. S. L and these businesses as we have already begun to do.
Shifting gears I will now touch on the outlook for 2020 and 2021.
At this point in the recovery are results may still be affected by the pace and which state and localities are opening or closing parts of their economies that being said, we feel we can give directional guidance for the fourth quarter of 2020 and the full here of 2021.
Getting there are not drastic changes and access to care.
Mm caught an extended wear halter exited the third quarter at above pre covid highs and in October we are trending to our highest monthly volume ever as a result, we.
We expect our overall business to continue to grow sequentially into the fourth quarter to between 117 at $120 million.
As Joe mentioned in 2021, when you're expecting 15% plus top line growth driven by several services, including M pot extended where hoelter continuous care and digital population health.
Any rate headwind from the lower conversion factor in the physician fee schedule will be more than offset by the benefit of the proposed extended wear halter pricing.
In addition, we are investing heavily in sales and marketing resources in order to drive. These topline results. Please keep in mind. This guidance assumes the Medicare proposal goes into effect Eddie as it is currently written.
As demonstrated during the pandemic our business is flexible in terms of our ability to quickly adjust the cost structure to the appropriate level in response to the demand for our services. We believe we will continue to have plenty of cash to meet our operating needs along with the added insurance of our credit facility.
Are successfully weathering the storm and we are confident we will emerge healthier than ever before I will now turn the call back to Jeff.
Thanks Heather.
You have just heard we had an excellent third quarter.
We are fortunate to be experiencing a recovery that is more rapid than we originally anticipated.
When the crisis hit we made the necessary adjustments to scale back our operating cost structure without dramatically change in our capabilities.
This approach coupled with our flexible business model of allowed for the more V shaped recovery, we are experiencing leading to the third quarter in which we recorded our highest quarterly revenue in the history of the company.
We are expecting expecting a strong clothes in the fourth quarter, followed by a record setting year of 2021 with Anticipant top line growth of.
15, plus per cent to ensure our continued success.
<unk> laser focus on.
Managing our way through continued effects of the pandemic with employee customer safety at the forefront of all activity.
Expanding to health care services Salesforce by another 15% to 20% in order to drive sustained double digit growth launching defined Boston scientific collaboration adding to the research backlog in setting the foundation necessary to capitalize on market trends toward decentralized clinical trials.
Expanded commercial activities and assessments population health management business.
Accelerating investments in our digital platforms in order to expand expand C. I O N T to all devices across all business minds at third party device connectivity at additional machine learning to the AI engine and extend user engagement with new reports and simplify workflows to improve the digital.
Experienced on our portals.
And we will continue to manage the allocation of our resources and highly efficient manner to which we have become accustomed leading to quality revenue growth and additional free cash generation.
This to do list exemplifies accompany on the move with numerous current and future opportunities we.
We have transformed our top line, making it more diversified <unk>.
Including new recurring revenue streams.
We offer current or future customers and unmatched array of solutions, which lends itself towards establishes deep groups groups within each account.
And we continue to innovate to ensure we can address the market needs of today and well into the future.
As a result.
We have good reason to be extremely optimistic about the prospects for the company.
As I stated in the past.
This crisis has necessitated rapid change in health care much of which will be permanent.
The post Covid health care environment will demand greater access to telehealth and remote monitoring solutions as one of the largest fastest growing and most profitable connected health companies in the market, we could not be better position to capitalize on these trends.
As I close I would like to thank the entire biotelemetry team for your unwavering commitment to the many people who depend on your work to keep them healthy.
Your dedication and deep spirit of Karen are just some of the qualities that make this such a great company.
With that we will now pause and open to call to your questions. Operator, we were ready for our first question.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Yeah. Our first question coming from the lineup David Saxon we'd need him. Your line is open.
Yeah, Good afternoon, Joan Heather and thanks for taking my questions.
I guess I'll start on the 20th Yeah, Hi, I'll I'll start on the 20th 21 commentary.
I mean, 50% gross.
That's pretty good and and you mentioned research should grow at least 10%. So just wondering how should we think about health care with you know all of the drivers you out there and then also how significant do you think the population health management platform could be with 17, and then Ah, particularly this other.
Customer you might you might sign off.
So two parts really talk a little bit about the overall growth 15%.
We feel really good about that this is typically the quarter because we're not gonna talk to you until late in February. This is typically the quarter, we give sort of some high level directional guidance for 21, and then we'll refine it as we get into the new year and obviously, we've done a lot of work with 2021 is going to look like given.
Given the trends of the business and give them what we have pipeline, we feel pretty comfortable with was that number and.
I think you're a little newer pier stores, David but some of your counterparts, probably know approaches tended to be a little bit conservative as we approach these types of predictions.
So.
You know, which was much color is I can give you a feel pretty good about it I like all the trends I see in a business Ah researches an easier one to predict because it's more backlog oriented so ah 10% pluses.
Comfortable with that and then you ask a little bit about pop Hell, that's a small portion of our business, but it's our biggest Pam by a long shot.
And we've made a lot of progress in setting the foundation for growth partnership 17, and some of the other ones that we have on.
On the brink could really help accelerate that goes so I would think about that in terms of Ah, yes, starting out low revenue, but that's revenue that should double year over year.
For the next couple of years.
So he could start to see one of those too good growth in 2021.
My prediction is right will double in 22 will probably stolen twice a week and you're going to start to see a real meaningful contribution.
It's just a gigantic market David.
Yeah, Yeah right okay.
And then I guess, just sticking with the pop health can you talk about the level of of success you've had so far with penetrating I think it was the initial 3.7 million kind of some team finish beneficiary.
Cool.
I don't think we're we have sure that number it's it's in it's early stages. It was just really started to to run with it. This this quarter a lot of success, we liked the way, it's goin' running into a <unk>.
It's it's.
It's going according to plan.
Okay. Thanks, so much for their questions. Thank you.
You have our next question coming from a crib.
True Securities Your line is open.
Hello. This is David rest of them for Kayla. Thanks for taking my questions. So first I wanted to die of a little bit more into the dynamics and the guy for 2021.
So what what sort of visibility I guess you have both in the queue for them to 2021 really as we kind of play kind of doctors that you imagine going forward you know with a lot of these popping up over the past three months or so such as the potential hudwon from any heart rate decline you know the overall shift in the business from traditional holders in the extended where monitors third would that right into.
<unk> and the extent of our business and then as you you start to layer in some of the contribution from the recent acquisitions in the ICM distribution agreement overall, I guess, what what kind of gives you that confidence under the 15% number with all these playing them and then the second part of that question. How is the company really thinking about maintaining a R gaming chair as that conversate or shunned that opens up or.
Around shifting nutritional hold first order extending where monitors and is there a specific percentage of that traditional holter business.
The company expects to shift toward extended where market to ultimately drive that growth.
Yeah. So David I think you answered most of it for me [laughter].
That you highlighted the major drivers.
Seeing growth and M Cocker seeing.
Cancel growth, an extended where he'll culture, even without the patient of the the permits CPB when covid national pricing.
We're seeing huge growth.
With.
Our pop health business, great visibility with a research business. All the research is smaller we have really good visibility into it.
With.
Access to account starting to reopen worse, we're starting to see more activity around Geneva. So remember we're still early with that platform. That's.
That's.
That's a platform whose revenue we anticipated with double for the first couple of years as well and we were right on track to do that and we'll probably still be close to that.
With Covid Ah for.
For this current calendar here so all the things that you talked about.
Driving the business I can't parse it out for you in detail in terms of how much is coming from each cause there's a lot of different scenarios, but if we.
Weigh the benefits and risks.
And we go through a variety of different potential scenarios.
Dawn comfortable with that number.
Oh, Okay. That's that's helpful. Sorry after the second one for me you know touching on some of the the kind of recent now since it came right right around to report that second quarter call. So first on the on demand you know I was wondering if there's any any updates around that pricing or go to market strategy for that business in that second within the icmp.
Are there any early indications around how the biggest seem really contribute to grow up in 2021 and 2022 and then when you think about that where the Geneva.
The partnership you have at Boston are there are there really any type of synergies between the two business with it we should expect to impact the business overtime, just with both of those kind of being under and about business.
I I talked about on demand again only in the first couple of months, so I cant put numbers on it for you, but it's going.
Pretty much as we anticipated.
The the ICM market, we haven't started that collaboration.
In terms of synergy I do expect some because of the because of the Geneva platform I think once or organizations are or can deliver together and collaborating the field, we'll see more pull through of device management device monitoring onto the Geneva plus or so.
For me that was one of the things that was most excited about the collaboration yes. We think is the device itself is very complimentary to our current portfolio products that we think extending the offering and those accounts, where we have have great access.
To those to those accounts, but for US we think there's going to be a significant pick up on the on the city decide.
Okay. Thanks, Thanks for taking my questions I mean, congrats on the corner.
Okay.
Yeah. Our next question coming from the line of Jason Bedford.
With Raymond James Your line is open.
Hi, good afternoon, and congrats on the quarter I had a few questions. So I I guess first Heather typically kind of give us a little ideas to the health care break out between kind of events Coulter extended holter Geneva do you care to do that for the third quarter here.
Sure So and caught was about 62%.
And that was about 10 or a turtle holter with 14 and Ah reoccurring was 14.
Okay and that type of healthcare.
Right, Okay, and just on the recurring or continuous care, you mentioned, 126% growth I think year over year can you just break out how fast Geneva group.
Well.
And a quarter.
Let's take another look at that both contributed a lot.
Both grew obviously.
INR portion group because it was mostly your business.
Geneva again was on track to double year over year. It was not quite at that rate in the quarter obviously.
Obviously, covid and the slower new account Activations as a result, but it did we still had the account activation and they're still and we're starting to see that accelerates. So I think I think both through.
Nicely sequentially and nicely year over year.
Okay.
And then just a couple of other ones Joey and referring to the cardiac monitoring business.
Earlier, you mentioned that you'll you'll have above market growth for the foreseeable future. Just so we're on the same page what is market growth because I have a difficult time, sometimes capturing that number.
It's a really too so you know for us to solve it puts up data on it market size data, there's other ways to to kind of get out of it you can extrapolate through various sets of claims data.
And then we used we often use physician office visits as a proxy, especially the sales which direction the market's moving.
And believe it or not our business has trended kind of in that direction over time. This was the first time, you're seeing a major departure from that we have rebounded are cardiac monitoring business has rebounded pace much faster than we're seeing in the activity of data for cardiology office visits highlights that in my talking.
Points.
On average.
The office visits were down 18%.
And our business.
The very well so.
No.
He also noted that the market is gonna grow naturally a certain amount.
And used in the past that would be a couple of percent, 234% and then historically we have.
Our business has grown anywhere from 8% to 12% in that range.
Say, our business I'm speaking, primarily about and cut is grown kind of in that in around that 10% plus or minus a couple of points.
You're gonna see higher growth than that in the category, because if extent if cardio if them cut business.
Maintains that type of growth, which we anticipate it will extend it where hold for business is growing at a much much higher way of course this off of a a small or based on volume but.
Now with national access to.
Can person that we think that that's gonna grow even faster.
Allocated a lot of resources to capitalize on that.
Okay. Okay. That's helpful. And then just maybe my last one here I appreciate the visibility into revenue in four Q and 21.
It relates to 21.
Care to provide any brackets around EBITDA margins in and if not just any instruction on I'm kind of spending levels. As we look to 21. It had mentioned the expansion of the sales force Yeah. Good question, Yeah, Yeah. So Jason we're not gonna give specific time.
The process of going through our our budget now, but and Joe's mentioned in the past and we talked about we are investing pretty heavily in those sales and marketing.
Resources as well as our I T and R&D infrastructure say you are going to see some investment there.
<unk> Wow on the path you may have had some significant EBITDA margin accretion.
It may be at a slower pace, but we're not in a position yet to provide that exact number.
Sure enough. Thank you [noise].
We have our next question coming from the line of Gene Manheimer Vitaly. Your security is your line is open.
Thanks, Good afternoon, congrats on a great quarter and in light of the the tough backdrop here.
Can you you cited Joe and Heather that you're you have strong M can't orders. Despite cardiology visits that were down pretty meaningfully so.
I'm, assuming some of that is coming from virtual visit so can you give us a sense of the split of M card prescriptions to the extent you have it.
From telehealth visits versus an office in person visits.
I doesn't Jean I will tell you kind of Directionally pre covid it was probably.
70% in office, 30% this is a high level.
70, 30 in favor of in office that flip the 17 30.
Sarah kind of telehealth.
Initiated visits and then it started to work its way back.
But it's in either case it is seamless for us to fulfill.
In order in and serve as a patient whether or not.
Whether the patient is initiated during an office visit or the patient has initiated the hotel because it doesn't matter to us, but we did see a trend back pretty pretty quickly.
And so I was surprised about.
Yeah, well, that's impressive and and if you think forward if it's covid begins to you know research.
And we see shutdowns.
Your business will be impacted but you have the benefit of the telehealth prescriptions too cushion you somewhat is that fair to say.
It is.
Okay, and then next guys. If you could opine on your view of the likelihood that the final rule for extended Hoelter reimbursement plays out.
In line with the proposed rule when we get that decision in early December what is your the likelihood of that.
Oh, Jean I can't opine on that and I.
I can tell you where fingers crossed we're hopeful we.
We think that there was a lot of work that went into it obviously.
And and we liked the fact that it's got a permanent CPT coding structure.
I think that is.
Authenticating, the fact that the product line is here to stay.
So I know that there's some noise and chatter around where the price will ultimately end up I I don't have an opinion on that I. Just you know we're hopeful that <unk>.
Proposed rates are adopted.
As proposed.
Yeah. So the so the guidance or the the general growth outlook. You gave for next year is predicated on the pricing.
Being consistent with where the proposed rule came out so I would say that we took into account.
All known factors and added our own risk adjusted on our own as well and you know how we approach these things so.
There's things could move in different directions.
There's there's some some pressure to have.
Conversion factor in Epcot delayed which could be upside.
So we have looked at it from several different angles risk adjusted it and we're comfortable with 15 plus per cent.
Very good thank you.
And I would not characterize that as a disproportionate amount of our growth coming as a result of any rate increase.
Okay excellent. Thanks.
We have our next question coming from the line of my account pulled work with Bird Your line is open.
Hey, good evening, Joe and other thanks for the question, maybe some cleanups prior questions for the third quarter I'll, just ask or directly.
The contribution to revenue from the small acquisitions in the third quarter do you have a sense for what that was Roche plus the small amount of 17.
No. We don't think I don't think we broke amount nasty.
Okay, and maybe a follow up to Jason's earlier question about framing margin for next year here the comments about investing in sales forced.
Support the grow some I T and R&D efforts hear all that I guess just as a.
As a comparator.
He would you would you.
Feel better if we anchored to 2019 is kind of a normal rate of margin for your business or.
Given the 2020 is an abnormal year in your margin will be down because of the pandemic disruption, but when when we consider the.
Glidepath for margin is at best still the anchor to 2019 is kind of the durable right and then from there we can triangulate what are what.
Or the profitability level looks like in a in a 15% growth business or would you have us anchor to you know how 2020 might ultimately look yeah, I I would anchored of 2020 simply because we introduced.
Give me that became a higher percentage of our business. We introduced additional INR business and Centene all of which have are are lower growth and bottomline margin businesses. So that's actually incorporated to some extent into our queue three numbers and that actually had a larger impact on our here.
Here decline and burst margin percentage relative to inefficiencies caused by.
Our fixed costs absorption yep.
Yeah. That's good helpful. Other thank you and maybe the last one for you as well.
[noise] mentioned in your prepared remarks V holding these.
PFS reimbursement proposals constant assuming no change is it part of the final rule, but holding a constant b headwind from the unfavorable adjustment to conversion factor is offset by the more than offset by the proposed extended wear halter rates, but what is that could you put a finer point on there.
Math, how does how does it shake out on on that basis or maybe frame of each of the two parts so that.
If anyone in December rolls around and there's some variance that we need to absorb and we'll have a we'll have something to anchor too yeah.
Yeah at this point in time now because as Joe Joe mentioned he ran various scenarios.
And more comfortable with that 15%, if something changes and would increase or decrease that number in a significant way before January we will of course talk about that.
<unk> comes out and it's just.
The different than anything we would have expected and will change that number we will we will talk about it.
Has not been the historic practice of a Medicare I think it's important to stress that.
The practice has not been to vary dramatically from the proposed scheduled.
I appreciate that do you think there's a chance they punch and.
No.
Some more time to to figure all this out or [laughter]. That's one of the possibility we don't but we don't.
Now we don't know.
Last one actually so I used to follow Cro's. So I know the concept of bookings backlog and then burn rate fairly well what what is the.
When you book a study what's the kind of average.
[noise] duration of of that project, you know 12 months of of revenue visibility 24, you know how how do you have you experienced that historically it actually varies between the two segments imaging tends to be longer.
You'll get over 12 months.
And cardiac tends to be shorter than they tend to be in the 12 months in under range. So it actually depends but overall there north of 12 months.
Thank you very much mhm.
We have our next question coming from the lineup Maitre something goes wrong with Sydney. Your line is open.
Yes, hi, good afternoon, thanks for taking the questions actually I just wanted to follow up on the yard sales force expansion I know, Joe you talked about 15% to 20% in 2021, just trying to get a sense of what lovely you're ending 2020 with and also with the hiring is it gonna be folks in any particular area just pretty broad base.
Boston shy and Diana are 17 et cetera.
Yeah, we definitely need more more feasible street, given the opportunities in Kodiak long term business. So that 15, 20% is just to that group.
And then again I think it now depends on how we finish this year and if there are staffing level of it at the end of this year, you'll see more growth digenesis process. That's all it anyway. So it's something that we knew was coming for awhile. There's there's.
As we talked about more opportunities.
For the team to capitalize on.
So we're probably.
In 2021 at some point.
All in with the account executives and then the people who are specialists in certain areas.
Probably.
North of 140, 150 50 people.
We ended 2019 with 115 to kind of give you that.
Some color on the amount of growth there and that doesn't include.
People that we're adding on the side.
So that's another area that has.
Heather indicated this was your early years for some of these opportunities. So we are finding themselves.
Okay, No that's great and then quickly just again give any environment.
Is it any easier to be able to expand a sales force.
I haven't heard.
Dramatic change.
From my teams. So I don't know if it's a whole lot easier a whole lot harder.
Okay noted [laughter], okay, well no.
[laughter] no after it great so nice quota and again, thanks for taking the questions. Thanks.
Thanks anyway.
Yeah, if our last question coming from the line of Bill Southerland, what benchmark companies to your line is open.
Thanks, So hey, guys, great great Great work here three cute.
On the right change.
With them can't does that are caught alone does that also include events Coulter the conversion factor.
So the conversion factor applies to everything on the physician fee schedule.
So yeah, but that there's offsetting impossibly baton Hoelter Ave.
R B U.
Are you, having a <unk> on it all set up right and.
Okay, So I'll use them and cut.
And hold through went up.
That's right offset by the conversion factor.
Uh-huh.
The our views went up to.
An advantage squirrel or not.
No. They went up in and taught and hold her and they were down slightly in a bank and what I was saying is the impact of the change in the RV use plus the conversion factor give us offsetting factors for event and halter.
Neutral or when your attitude together.
Okay and the.
The rates.
To the other players trying to follow you know along with what medicare's doing in a given year.
No no not necessarily so we do when we currently forecast account for some type of Halo effect, but now it's not so it's not it doesn't extrapolate to all of them.
That's helpful.
That was just a cleanup question, that's all I've got great.
Great. Thanks, Mhm, thanks, though.
There are no further question at this time I will now turn to call back over to Mister Joseph Kathryn.
Thank you and thanks, everybody. Thanks for your continued support and interest in the company will speak to you sometime in February upgraded that concludes today's call.
This concludes today's conference calls you may now disconnect.
If you joined the conference late today, you may listen to the conference calls by a digital replay, which will be available for the investor in information section of that by a tell him that your website at there'll be O dotcom until November 12th 2020. Thank you.
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