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BioTelemetry Inc (BEAT) Q1 2019 Earnings Call Transcript

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BioTelemetry Inc (NASDAQ: BEAT)
Q1 2019 Earnings Call
April 25, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. Thank you for joining us for the BioTelemetry First Quarter 2019 Earnings Conference Call. Certain statements during the conference call and question-and-answer period to follow may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities and Litigation Act of 1995.

Such statements involve known and unknown risk, 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 risk 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. (Operator Instructions)

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.

Joseph H. Capper -- President and Chief Executive Officer.

Thank you, operator, and good afternoon, everyone. I'm Joe Capper, President and CEO of BioTelemetry. I'm joined by Heather Getz, our Chief Financial Officer. I'll start with highlights about our first quarter performance and other key developments. Heather will take you through a more detailed review of our financial results. I will then provide commentary on how we see the business continuing to evolve throughout 2019. After our prepared remarks, we'll open up the call for questions.

I am pleased to report on another strong quarter during which we met or exceeded all of our expectations, setting a new all-time-high in quarterly revenue with EBITDA and EBITDA margin in line with expectations. Moreover, despite a strong comparison from the prior year period, we still grew the topline by 10% year-over-year, marking our 27th consecutive growth quarter. This sustained growth momentum is driven by our excellent competitive position.

Our products are second to none and are backed by talented sales and service teams, supporting a vast network of positions. Simply put, our strategy is well suited for our markets and we continue to execute it with near perfection. As a reminder, the primary tenets of this growth plan are to go deeper and wider in cardiac monitoring in order to expand our leadership position, to continue to build upon our leading research services business by expanding our service offerings and to identify other markets that would benefit from the application of our wireless platform and proprietary technology.

I mentioned these at the outset of every call to provide an understanding of how we are allocating our time and resources. All of our activities stem from these themes, providing a framework for the now more than 6.5 years of consecutive quarterly growth. Consistent with this plan, during the quarter we closed on the acquisition of Geneva. Our excitement over the potential Geneva brings to BioTelemetry continues to increase. We're seeing first-hand the utility of this software and service-based solution which will become a centerpiece of our long-term vision for the cardiology market.

I don't think it's an exaggeration to say this is a game-changing addition to our portfolio as it significantly broadens our presence in the physician practice and establishes a platform to integrate additional applications and revenue sources over time. I will spend more time later in my remarks discussing the enormous opportunity the addition of Geneva now affords us. Additionally, our research division continued to grow its pipeline and improve its market position and we advanced key strategic relationships in our digital population health business. Given the strength of BioTelemetry as one of the largest, fastest-growing and most profitable connected health companies in the market, we expect to continue to sustain this level of success well into the future.

Let's take a look at some of the quarterly highlights. During the period, revenue grew by 10% to $104 million, at the higher-end of our expectations, which if adjusted for the Medicare rate reduction, represents a 12% growth. Overall margins were in line with expectations as quarterly EBITDA grew by 22% to $29 million. We ended the quarter with $45 million cash after the $45 million payment to acquire Geneva. MCT volume was up 8% in the quarter and extended wear Holter was up 120%. Our Research Services team continued to outperform the market with revenue up 15%, and the continued efforts to build upon our new digital population health management business through key partnerships and internal investments.

Taking a closer look at the Healthcare Services business, you will see why we continue to be extremely bullish on this sector. During the quarter, we remained focused on expanding the market penetration of the new MCT and extended wear Holter products. The Healthcare sales team continued to execute incredibly well, posting impressive growth in our largest and most important accounts. Adjusted for the Medicare rate cut, Healthcare revenue would have been up approximately 11% in the quarter. This performance is even more noteworthy considering we were actually regulating the on-boarding of patients and practices as we transitioned some of our critical systems.

Based on demand for MCT, Q1 revenue could have been up approximately $1.5 million to $2 million higher in the quarter, which would've put us above the top end of our guidance. Extended wear Holter, which was not impacted, continued to grow a triple digit to the quarter. As I mentioned on our last call, we are in the process of growing Healthcare Services sales team by approximately 20%. We have completed more than half of this expansion, which we anticipate will begin to contribute in the second half of 2019 and beyond.

We believe adding resources to what is already far and away the most productive sales organization in our industry is a very wise investment. As previously mentioned, we completed the acquisition of Geneva during the quarter. In the past, we have been extremely successful at accelerating our growth plan by acquiring strategic assets. Given the tremendous success of the LifeWatch acquisition, it may surprise you to hear me say Geneva may be our most exciting and transformational investment to date. Not only does it provide us access to another $1 billion of revenue potential, the acquisition of Geneva repositions BioTelemetry as a much more progressive, data management and solutions-oriented company.

As a reminder, Geneva markets in innovative proprietary cloud-based platform that aggregates data from the leading cardiac devices, enabling the company to remotely monitor all of a physician's patients with implanted devices, such as pacemakers, defibrillators and loop recorders. The Geneva platform provides physicians a single portal to order patient monitoring, view monitoring results and request routine device checks, helping drive significant in-office efficiencies and patient compliance. This solution is transforming the way physician offices consolidate their managed data from the clinical cardiac devices, giving precious time back to the staff to focus on patient care.

Our immediate focus is on rapid market penetration, and we have taken several initial steps to ensure success. In 2018, Geneva was able to generate approximately $6 million of revenue with only 4 sales people. Of course, we are expanding this group to 12 dedicated sales professionals over the course of the year, who will manage the Geneva sales process. This step alone will dramatically improve the revenue ramp. To further accelerate growth, our entire Healthcare Services sales team, nearing 120 strong, has been trained on the Geneva solution and armed with appropriate marketing materials. They have been instructed to target our largest accounts, where early receptivity has been nothing short of spectacular. In fact, 50 of BioTelemetry's top 100 accounts are already active leads for the Geneva team.

In the first quarter alone, the team signed 12 new cardiology practices, a 20% increase from the previous quarter. Based on our current pipeline activity, we expect to repeat or exceed this level of new customer adds in each of the next 3 quarters. And remember, we're just getting started. Our challenges will not evolve around demand, but more likely keeping up with demand. As such, we are also allocating resources to ensure we are able to support the numerous implementations we anticipate.

In addition to the sales push and resource allocation, we have our software technical team working on further enhancements in the platform's capabilities. The most obvious next step is to merge BioTel Heart's user interface with the Geneva system, providing even greater workflow and data management efficiencies to the thousands of clients we serve. This will radically change the way we relate to customers in the cardiology market and will further solidify our leadership position in remote cardiac monitoring. We have also begun to evaluate other applications for potential interface into the Geneva platform. These applications will build more value into the solution and may create additional sources of revenue.

Switching to Research Services, we are happy to report on another excellent quarter, during which research revenue grew by over 15% and the pipeline grew to a new all-time high. As mentioned on previous calls, we're having more success incorporating our proprietary ePatch monitor as a critical element of new cardiac studies, trading cross segment, topline synergy and a distinct competitive advantage. We have already started several large studies who choose ePatch and have many more in our pipeline, representing over $13 million of revenue opportunity. BioTelemetry has also been working with innovative consumer tech companies as they seek to integrate heart health trackers into their popular wearable devices.

As reported in the media, these screening tools are designed to notify consumers of potential cardiac risk that may require medical monitoring, diagnosis and possible treatment. The good news for us is that these devices do not replace what we provide but rather increase the number of patients who will need monitoring services. During the quarter, the research team began supporting the next phase of the Apple Heart Study and started a similar project with another consumer device company. We are delighted to support this trend as it has the potential to substantially expand our market and closely aligns with our mission to improve human health.

In studies like these, BioTelemetry is uniquely positioned to leverage the strengths of our Research and Healthcare divisions. With Healthcare and Research, which account for over 95% of the company's revenue, growing at double digits, we have -- spending more time and resources developing additional opportunities for revenue growth.

Early last year, we introduced our latest generation wireless blood glucose monitor, powering our digital population health management service. Later in the year, we also acquired certain assets of a commercial partner in this business, expanding our reach into several key customers. As we move into 2019, we are allocating more business development resources to this segment and are starting to see positive results, having just landed a large new contract. Thus far, our primary call points for our care management solution have been commercial payers and other entities that are at risk for the cost of care to the patient.

We are now evaluating a potential new opportunity to use our platform as a remote monitoring system within the physician office. On January 1, 2019, Medicare activated 3 new CPT codes to be used for remote monitoring of chronically ill patients and have set national reimbursement for each code. Meaning that under the right conditions, physicians may now get paid for reviewing clinical data collected from their chronically ill patients in remote settings. We believe this has the potential to be a major breakthrough in the adoption of telehealth services.

Instead of disintermediating the caring physician, as is the case with many payer-sponsored programs, these new codes may in fact empower the doctor as the direct provider of specialized remote monitoring solutions, which we currently enable in the diabetes market. We are also developing additional opportunities through unique partnerships with companies looking to enter the Healthcare space, the Apple Heart Study being a prime sample. These are just a few of the many exciting prospects for the company. Expect BioTelemetry to continue to lead these market development efforts as no other company is as well positioned to capitalize on such opportunities.

To sum up, we are obviously very pleased with the company's performance in the first quarter. More importantly, we expect that the investments we're making across the company will support our continued growth well into the future.

With that, I'll now turn the call over to Heather for a detailed financial review of the quarter. Heather?

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Thank you, Joe, and good afternoon, everyone. As Joe just announced, we started out 2019 with a record first quarter where we achieved our 27th consecutive quarter of year-over-year revenue growth. Total revenue reached $104 million and met expectations. This represents 10% growth as compared to the first quarter of 2018 and resulted from higher revenue across all of our businesses and was only healed of impressive growth in 2018. Healthcare revenue increased $7.5 million or 9%, once again driven by volume growth in both MCT and extended wear Holter as well as the addition of Geneva.

These increases were partially offset by the $1.5 million impact from the reduction in Medicare pricing. As a reminder, on January 1, there was a 2 point reduction in Medicare, MCT pricing. This was as a result of CMS budget neutrality and nothing specific to the code. In recent years, the reimbursement has been relatively stable with some years experiencing slight increases and other slight declines. Excluding this reduction, Healthcare revenue growth would have been over 11%.

Our Research revenue increased 15% or $1.7 million, largely due to projects ramping up in imaging and new studies in cardiac, including studies utilizing our ePatch extended wear Holter device. Other revenue increased 11%, resulting from new partnerships in our digital population health business.

Moving to gross profit. Our margin for the first quarter of 2019 was 62.3% versus 61.4% in the prior year period. The increase in our margin was primarily due to volume-related efficiencies and synergies realized, partially offset by lower the Medicare price and higher consumable cost from our patch products. Our first quarter adjusted EBITDA was $28.8 million and represented a 27.7% return on revenue.

The increase in our adjusted EBITDA was primarily due to the same factors impacting our gross margins, partially offset by investments made in our sales and technology areas. Please keep in mind that the first quarter is typically our lowest quarter from a gross margin and EBITDA margin perspective. This is as a result of higher expenses related to the resetting of payroll taxes and meetings that only occur in Q1. This added approximately $2 million of incremental cost relative to other quarters.

As for our tax rate, for 2019, while we expect our GAAP tax rate to be approximately 20%, we anticipate that we will be able to continue to utilize our $160 million of federal net operating loss carryforward. As a result, we believe that we will pay approximately $2 million in cash taxes for 2019.

Moving on to our balance sheet. We ended the quarter with $45.5 million in cash and $199 million of indebtedness, putting our debt-to-EBITDA ratio at about 1.5x. Year-to-date, we generated $80 million in cash from operations. In addition, we used $5 million for capital expenditures. These expenditures were driven by purchases of our next-generation MCT and extended wear Holter devices as well as for capitalized software and hardware as we invest in our IT environment and infrastructure. Free cash flow was $12 million, and we used $45 million of our cash for upfront payment of the previously announced Geneva acquisition.

Shifting gears, I will touch on the outlook for the full year 2019 and the second quarter. Looking at 2019, we mentioned on our last call that we expected double-digit topline growth and EBITDA margin expansion. This guidance excluded Geneva, but reflected additional investments that we are making in our sales force on our information technology and for new product development as well as the slight headwind from the reduction in Medicare pricing. I am pleased to announce that we are raising our revenue guidance for $446 million to $450 million and adjusted EBITDA margin of approximately 28% for the full year 2019. Keep in mind, the addition of Geneva provides for incremental revenue, but is neutral from an adjusted EBITDA perspective as we invest in the growth of this business.

As a result, our EBITDA margin guidance reflects this dynamic with a 100 basis point reduction relative to our original guidance. For the second quarter specifically, we are projecting revenue of $110 million to $112 million or about 10% growth and adjusted EBITDA return of about 27%. To note, the second quarter will be our toughest comp. As a reminder, in Q2 2018, we grew 7.5% sequentially and 14% over the prior year in this quarter.

To summarize, the company remains in a strong financial position with modest leverage and additional capacity, if needed. We just capped off the year with our 27th consecutive quarter of year-over-year revenue growth and realized our highest quarterly revenue in the history of the company. These results and consistent growth have provided, and will continue to provide, the financial strength and flexibility to execute on our key growth initiatives.

And with that, I will now turn the call back over to Joe.

Joseph H. Capper -- President and Chief Executive Officer.

Thanks, Heather. As you have just heard, we had a strong start to the year, building on the momentum we have cultivated over the past several years. Our forward thinking strategy is yielding the results we envisioned as it is well suited for today's evolving Healthcare market. We continue to develop new opportunities and are in the early stages of several potentially significant drivers of future growth. The addition of Geneva will further broaden our cardiac offering, strengthen our leadership position and significantly accelerate our growth plan.

To ensure our continued success throughout 2019, we will focus on completing the Healthcare sales force expansion, to help drive further market penetration of our MCT and extended wear Holter systems, integrating and resourcing Geneva as rapidly as possible to take advantage of its wide market demand, continuing to grow our research business by making additional business development and, infrastructure-related investments, building out our digital population health management business by continuing our current market development efforts and potentially implementing a physician-driven solution and expanding on key partnerships we have developed.

Given our consistently strong performance and business momentum, we remain bullish on our prospects for 2019 and beyond. Based on Heather's comments about how we see things beginning to take shape, it is clear we are in store for another great year. We have all the key elements for continued success. Our proven and experienced management team, market-leading products, exceptional sales and service, a solid financial foundation and large market opportunities, many of which are still in early stages. In 2019, we will monitor over 1.1 billion people, one every 30 seconds.

Our revenue will grow by double-digits, with EBITDA margin in the high-20s and the company will generate a significant amount of free cash, allowing for accelerated investments into other connected health solutions. While we are pleased with the progress we have made in all parts of the company, we believe our best days are still ahead. Clearly, we are excited about the addition of Geneva to our portfolio of offering and believe it may one day become the gateway for delivering expanded monitoring services in the cardiology market.

As I close, I would again like to thank those of you who helped deliver our 27th consecutive growth quarter and I expect to report on #28 next quarter. With that, we'll now pause and open the call to your questions. Operator, we are ready for our first question.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of Brooks O'Neil of Lake Street Capital.

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

Good afternoon, guys and Congratulations on a good start to the year. I have a couple of questions. I was hoping you might talk about whether you see any evidence of slowing momentum in your MCOT business? Or any specific impact on your business related to the performance of any competitors?

Joseph H. Capper -- President and Chief Executive Officer.

Brooks, do you have something specific in mind?

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

No. I was just asking broadly because somebody suggested this. They think that's what's happening to your business and I just thought I'd check with you guys to see what you think.

Joseph H. Capper -- President and Chief Executive Officer.

No. I think what we've messaged is we anticipate the MCT growth out of your 10% and we're seeing that. In the first quarter, we had demand exceeded, as I mentioned in my remarks, we had to govern the intake a little bit because we're in kind of final stages of LifeWatch integration, which means some major system upgrades and overhauls. We had one that tipped a little bit longer than anticipated.

So if we would have met all the demand, we would have been more than 10%. Now that being said, direct competitors, I don't see major threats and I don't see -- you take them all serious, Brooks, I don't see anyone as a major threat to taking share. What I will say is the implantable loop recorder, as you may be aware, up until January 1, 2019, was required to be implanted in the hospital. That changed. And now, the LINQ can be and its competitive products can be implanted in a physician office. And from what we're hearing in the marketplace is there is some uptick associated with that for the reasons you would anticipate, it's a little bit easier and there's a financial incentive to do so.

And so that may have some short-time impact on us, especially in the ones that are not owned by hospitals but roughly 30% market is still kind of privately owned. So we might see some of that, Brooks, but, look, you know, part of that thinking went into the acquisition of Geneva, right? Because as more and more patients are LINQed, there's more opportunities for Geneva to do the monitoring, the monthly monitoring by the way, not quarterly, but monthly monitoring, of those patients which generates a significant amount of revenue over the life of the patient.

Let's just say the patient has the device installed for 3 years, we'll make more money off that patient than we would have if we sold them an MCOT. So I still think there's going to be plenty of opportunity. Again, we're not seeing it wane, but if there's an area that I would say could pose a little bit of near-term disruption, I think that's it. And again, for us, we're just going to get -- instead of getting paid with the left hand, we're going to get paid with the right hand.

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

That's great. Do you guys have any thoughts on the outlook for the temporary code related to extended wear Holter? I mean are you seeing any suggestions that CMS or Congress is considering many changes to that code?

Joseph H. Capper -- President and Chief Executive Officer.

Not Congress, it would be CMS that would take that action. Obviously, there was a lot of noise about that with the couple of reports that came out within the last few months. And as I -- I believe I've stated on these calls in the past, we would like to see it move to a permanent code, sooner rather than later, so there's more stability. I think there is mounting clinical evidence that the product will move to a clinical -- or to a permanent code it's being uptaken at the physician practices, there's clearly a sound usefulness for the product.

And -- so we would like to see if that happens again, sooner rather than later, so we move toward a more stable kind of reimbursement environment, a more wide-spread reimbursement. And I've been asked several times, so I might as well get this out. What do I think that price will be? I have no worthy idea. I pray it'll be at or higher than the price point it is today.

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

Cool. That makes sense. And just one little detailed question for Heather. In the adjustments to both EBITDA and EPS, I noticed the line item other expenses. Heather, would you mind explaining what those are? And maybe, if you would, what's your expectation for the level of those for the remainder of the year? If not, sort of why they move around from quarter-to-quarter?

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes. So the other expenses typically include nonoperating expenses that may be associated with acquisitions or litigation. So obviously, those numbers can pop up and down a little bit depending on the activity within the quarter.

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

Yes, OK, thank you very much. And Congratulations on the great start of the year.

Joseph H. Capper -- President and Chief Executive Officer.

Thanks, Brooks.

Operator

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

Bill Sutherland -- Benchmark Company. -- Analyst

Thanks. Thanks for taking the question guys.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yeah.

Bill Sutherland -- Benchmark Company. -- Analyst

I'm thinking about Geneva. And once you've got that more fully ramped and what you think the impact will be on your total company gross and EBITDA margins? Whether it'll be a positive mix impact?

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes. So, Bill, from a gross margin perspective, when it's ramped it will absolutely have a positive benefit on the gross margin, and we're expecting, at least at this point, the company has while to be able to continue to grow. Over time, we believe that we'll be able to contribute at about the same levels that we're seeing our current company contribute, so in those high-20% range for adjusted EBITDA margin.

Bill Sutherland -- Benchmark Company. -- Analyst

Okay. So it's...

Heather C. Getz -- Executive Vice President, Chief Financial Officer

It'll take time to...

Bill Sutherland -- Benchmark Company. -- Analyst

You'll at least sustain what you're having now, which is pretty close to 30%. On the sales force expansion, are you all putting in place -- with the realignment, everyone is carrying the entire range of products? Is that what's happening with the expansion? Or are you doing anything that's more oriented toward -- I know you're doing some business development efforts with BioTel. Just curious, if it's all related to the traditional Healthcare group of products?

Joseph H. Capper -- President and Chief Executive Officer.

As we started the year, we were careful to make sure -- we messaged that we were going to invest a lot more on the growth side of the business and the support side of business in 2019. We had an incredible growth year in '18. We started 2018 forecast in somewhere around $350 million to $360 million in revenue and $93 million or $94 million of EBITDA. And as you know, we finished at close to $400 million, and over $113 million. If you would've asked me at the outset of the year, if you do $400 million, would you do $113 million EBITDA, the answer would've been no because I would have had the resource at a higher level, right?

So we were lagging behind in kind of resource allocation necessary to support that level of business over time. So as we move into this year, our viewpoint is we need to get caught up, we need to pay down that debt in terms of resource allocation and we really want to invest in growth. So if -- the Healthcare services group, which we brand as BioTel Heart, that's the old CardioNet and LifeWatch business, we came into the year with roughly 100, what we call, account executives. The plan is to move that up to approximately 120. Now they might not all be full-fledged account executives, when they come into the company, they may come in as an associate executive and then we'll manage that, develop those people over time. That's the plan.

We also added a few resources to our strategic accounts team, our national accounts team. And I think that was important for us. On top of that, right now, we acquired Geneva, which started out 2018 with 3 sales folks and ended with 5, so you figure, on average, they had 4, we want to ramp that up to 12, right? So those folks will be "specialist" on the Geneva solution. It's a little bit different sales process and sales cycle. So we think it requires dedicated people. But we'll have 120 folks on the BioTel Heart side as this massive legion system. And then we'll figure out over time, whether or not it makes sense to more closely integrate those groups. Does that make sense?

Bill Sutherland -- Benchmark Company. -- Analyst

That makes sense, Joe. But what about the population health team?

Joseph H. Capper -- President and Chief Executive Officer.

Yes. Great question. A little bit there as well, remember that's a much smaller business. They are able to tap into the national accounts group to get some of their sales activity managed through them, but we did add some resources there. And then, we are also in conversation with a few potential strategic partners from a sales perspective as well.

Bill Sutherland -- Benchmark Company. -- Analyst

Okay. So do you think you'll have most of the positions filled by, say, midyear?

Joseph H. Capper -- President and Chief Executive Officer.

Which -- all across the board?

Bill Sutherland -- Benchmark Company. -- Analyst

Yes. The sales. All the sales and related...

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes. I mean, probably not all of the folks on the Geneva side. That takes a little bit longer. And you know -- and frankly, there we got to be careful because there's not just sales folks, there's a implementation team that's required once the sales process is complete. So that's another area that we're highly focused on making sure we get right.

Bill Sutherland -- Benchmark Company. -- Analyst

And finally, you ran pretty quick through some potential of integrating some BioTel interfaces. I think you're referring to Geneva, and you were going to evaluate other kinds of integrations, but you didn't sort of specify anything. Is there any color you want to add there?

Joseph H. Capper -- President and Chief Executive Officer.

Not at this time. But I think -- I think a really important message is if you think about down the road, right now, obviously, our focus is on kind of a land grab with that solution because we think it's that beneficial in a cardiac market and the feedback we're getting is really tremendous. So we want to get as much of that as possible. We want to get the BioTel Heart interface merged in with that. So now you're taking what was 4 distinct applications on the cardiac device side down to 1, and adding in BioTelemetry.

So you're really taking in 5 interfaces or user portals down to 1. Once you've established that platform, you can envision adding other capabilities into that platform with the thought process of making it even more efficient for the cardiologist. Cardiologists will tell you that the pay vesting they were -- likely so that the pay vesting they were several years ago, but they have to do more work. So our focus is, how do we partner with them to make their life easier? And clearly, there's revenue opportunity for us as well.

Operator

Our next question comes from the line of Bruce Nudell of SunTrust Robinson.

Bruce M. Nudell -- SunTrust Robinson Humphrey -- Analyst

My first question is a follow-up to Brooks'. Basically, have you got any sense of the competitiveness of the telemetrized version of Zio? How big a competitor do you think that is? And then I have follow up.

Joseph H. Capper -- President and Chief Executive Officer.

No. We have not seen any competitive activity for that product.

Bruce M. Nudell -- SunTrust Robinson Humphrey -- Analyst

Okay. And I guess my follow-up, Joe, is your comments on the ultimate price point for permanent code. You know, historically the company has been fearful that extended Holter will be a prisoner of the physician fee schedule and basically a model based on a multiple of the variable cost of traditional Holter, which would place it at $200 versus $300 or thereabouts. I guess the question is you know -- and it's not necessarily fair or right from a policy perspective, but has anything changed where you think that you know you have a better basis of optimism with regards to breaking that pricing paradigm?

Joseph H. Capper -- President and Chief Executive Officer.

I would say that I don't know. We then -- clearly, there was analysis that was put in place prior to the current pricing level being established. I don't think you can discard that. In the past, we said that we have concerns about where it might go, especially as it's still kind of under this temporary code. We have concerns of all of our products. We are in the third-party reimbursement environment. It has nothing to do with the laws of supply and demand, as you know. So we're at the whim of the government and we go through this exercise annually in terms of a new physician fee schedule being proposed in the summer and being finalized in the fall or in November.

So we live through this and it's a miserable way to tell you that they go through when they get it wrong. That's why we really like for this thing to be put under a permanent code. I've seen multiple different types of analysis that can show the price at rounded numbers. So you're talking about, a consumer price above where it is today. And I think the important thing is, clearly there is tremendous demand for it, right? So we're growing, other people are growing, it's our fastest-growing product and it's not really cannibalizing much of our more traditional business lines, like traditional Holter and event.

And so we think that there is -- if it's going to be established at some point, it's going to be established at A-rate. We just don't have any control of that. The more -- I think the more people involved in the -- get involved in the business, the more cost data can be collected by Medicare, which I think is important, especially for the folks are newer in the business. That helps in the analysis. But I mean, I would not speculate where it ends up going, if it ends up going anywhere.

Analyst -- -- Analyst

Thanks so much.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Thanks Chris.

Operator

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

Marco Rodriguez -- Stonegate Capital. -- Analyst

Good afternoon and thank you for taking my questions.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Hi Marco.

Operator

Our next question comes from the line of Marco Rodriguez of Stonegate Capital.

Marco Rodriguez -- Stonegate Capital. -- Analyst

As well. Hey, I was wondering if maybe you could spend a little bit more time on Geneva, specifically the sales cycle. If you could just maybe talk a little bit about what the sales cycle looks like? Time line? And then also if you could talk a little bit about the implementation aspects once -- when a physician's office decides to go forward with the product?

Joseph H. Capper -- President and Chief Executive Officer.

Marco, great question. It's the reason why we put a whole lot of detail on revenue and forecasting for that segment because we just don't know yet. We've owned the thing since March 1. We can tell you that the feedback in the marketplace is incredible and we're working through the sales cycles. I think that they were probably longer in the past, maybe 6-plus months, our goal is with our market presence and footprint, can we shrink that sales cycle? And can we put resources in place that can tighten up the implementation phase as well? But these are things that we're kind of still unpacking.

Marco Rodriguez -- Stonegate Capital. -- Analyst

Got you. With the implementation at least in the past, what sort of time line was that, where was that?

Joseph H. Capper -- President and Chief Executive Officer.

It varies by size of the practice, number of patients, the number of physicians, so -- whether or not there's a heart, EMR integration. So it varies.

Marco Rodriguez -- Stonegate Capital. -- Analyst

Got you. We're talking weeks or more months?

Joseph H. Capper -- President and Chief Executive Officer.

Again, more to follow. Give us a little bit more time to unpack.

Marco Rodriguez -- Stonegate Capital. -- Analyst

Got you. Okay. And then maybe if you could just talk a little bit about the opportunity there for Geneva, longer-term, I know I think I heard you say that at least in fiscal '19, you're expecting volume growth or client growth to go at about 20% a quarter. You've framed the TAM at about 1 billion, maybe if you can just kind of talk about long-term growth rate? Where you kind of expect that to kind of move?

Joseph H. Capper -- President and Chief Executive Officer.

Yes, so again, based on the activity and the people we have in place, as I mentioned the groups activated 12 new practices last quarter. We anticipate doing at least that over the next 3 quarters based on kind of where sales cycles are for active prospects. And how long you could sustain that? I don't know yet. It's a big market, again, I think there is increased activity because of the big increase in sales and implant, both are core, frankly, I think it's tied to that. There's -- those things throw off a lot of data, it's very difficult for physician practices to manage that amount of data.

This is a technology solution and service that really does a nice job of doing that for them. They can outsource a lot of that work to us and it allows them to focus on the implant and other things that generate big dollars for their practices. And frankly, they can take care of their patients in a more rapid fashion. So the market opportunity, we talk about of $1 billion, pretty simply, you take the total number of installed devices and you multiply that by the average current level of reimbursement for the services that we provide just using the technical fees for their services. It's simple math. And it's that big and we think it's going to get bigger for the reasons I've just talked about.

Marco Rodriguez -- Stonegate Capital. -- Analyst

And last quick question, I'll jump back in queue. I think I heard you say on -- answering one of the questions that the sales people that are at Geneva, the ones you're expecting to hire, they'll take a little bit longer to hire because there is maybe some specialization behind them or something of that nature? Can you kind of maybe compare and contrast the type of individual that you need to find on the sales side for Geneva versus the BioTel health?

Joseph H. Capper -- President and Chief Executive Officer.

I don't think it's a little bit of that, but I don't think it's so much that other than -- when we hire 5 to 12 new sales reps out there I can't feed them because I'm not going to be able to handle the implementations. So we got to make sure that the support side is there for technical installs, and then handles the volume of services that are going to come over. So part of it is, yes, it's slightly different type of folks. So people that we're hiring, but more importantly it's -- I can't put all those folks out there and then not be able to handle the sales.

Marco Rodriguez -- Stonegate Capital. -- Analyst

Got it. Thanks a lot. Appreciate your time.

Joseph H. Capper -- President and Chief Executive Officer.

Thanks, Marco.

Operator

Thank you. Our next question comes from Jayson Bedford of Raymond James, your question please.

Jayson Bedford -- Raymond James -- Analyst

Just a few, and I apologize I missed the first part of the quarter, so I apologize if these are redundant. But, Joe, I think you mentioned regulating the onboarding of patients in reference to MCOT and I think you mentioned you had a $1.5 million to $2 million impact. Can you just detail what exactly that was? I was a little unclear as to what went on there.

Joseph H. Capper -- President and Chief Executive Officer.

Yes. We're going through a process of upgrading certain critical systems we have. There's multiple -- there's not multiple, but there's a handful of systems that are integrated in order to process MCT volume. At least for some changes and upgrades in those systems took longer than we anticipated, right? So you're familiar with technology, and I think platforms, it doesn't always go as smoothly as you anticipate. That was the case. We had to delay the onboarding of certain new practices and the associated patient volume with those practices for a slightly longer period of time than we anticipated.

Jayson Bedford -- Raymond James -- Analyst

Okay. But that's behind you now?

Joseph H. Capper -- President and Chief Executive Officer.

Yes. Yes. Yes, we're -- those systems are -- have been upgraded.

Jayson Bedford -- Raymond James -- Analyst

Okay. And then just in terms of the sales team ex Geneva, you got from roughly 100 reps to 120 reps, is that right? Or do you still have positions yet to fill?

Joseph H. Capper -- President and Chief Executive Officer.

We still have positions yet to fill.

Jayson Bedford -- Raymond James -- Analyst

Okay. Did you see any type of disruption in the quarter from carving out some of these sales territories?

Joseph H. Capper -- President and Chief Executive Officer.

First quarter is usually the time of the year when you have most of your disruption. So we see a little bit more in the first quarter than we do in other quarters. But I don't think it was as a result of -- the feedback I have received is not as a result of territory expansions, or territory changes, I should say.

Jayson Bedford -- Raymond James -- Analyst

Okay, OK. And the MCOT patch, is that fully launched to your entire installed base?

Joseph H. Capper -- President and Chief Executive Officer.

It's fully launched. It's not in the hands of our entire installed base. And I know you're going to ask me what percent? I don't have it off the top of my head. And so the long-term plan is you go from legacy generation products that we still use on what was the CardioNet side of the house, and also there's legacy products on LifeWatch, which was the LifeWatch side of the house. All of those need to be upgraded over time. And we're in the process of doing it. Some of those -- our first steps were, we really needed to get the system work done so that we could merge some of these accounts.

Jayson Bedford -- Raymond James -- Analyst

Okay. And you still view the patch as -- your MCOT patch as a volume driver? Meaning, you see increased utilization with the patch versus other form factors?

Joseph H. Capper -- President and Chief Executive Officer.

We do. We actually see some uptick on that. I don't know if it's specifically the patch portion of this. Remember, let me remind you that when we launch this latest-generation product, it comes in both patch form factor and the sensor can be removed from the patch and put into a small shuttle attached to a lanyard that you can wear around your neck with lead wires. Patches on for everybody, right?

So the fact that we have that flexibility and in fact that could be adding to it as well. That's a really nice solution. But I would say overall, this latest-generation product, once installed, we do see some same-store growth. And I think, again, once we're able to -- have to overbeat this drum, but I'm going to, anyhow, once we have this product integrated into the Geneva platform, I believe it'll serve as a mechanism to crowd out competitors we may be sharing accounts with.

Jayson Bedford -- Raymond James -- Analyst

Okay. Okay. And then lastly for me, just on Geneva, you made some comments earlier in the quarter around the financial expectations for Geneva. Have those changed at all?

Joseph H. Capper -- President and Chief Executive Officer.

No, no. You know the tendency is to get real bullish on it, to be candid, when we see the type of activity we're seeing. And the -- my point was it's just a little too early to do that. I'd like to give you more color, but I mean we've had the thing for less than 2 months.

Analyst -- -- Analyst

Okay, thank you.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Mitra Ramgopal of Sidoti. Your line is open.

Mitra Ramgopal -- Sidoti. -- Analyst

Yes, hi, good afternoon. Joe, just a couple of questions. First, following up on Geneva. Maybe if you can give us a sense of the competitive marketplace there in terms of -- I know you said it's a $1 billion opportunity and Geneva, expected to do about $10 million. I was wondering if you could give us a sense of some of the other players out there?

Joseph H. Capper -- President and Chief Executive Officer.

There are, to our understanding, a couple of others relatively small competitors. Also to our knowledge, none of them -- I shouldn't say none of them, what -- I'm not sure if any of them offer everything that Geneva does in terms of the technology and the service component, the -- sort of the physicians don't have to do the service themselves they can outsource it to us. Most of our accounts like that solution.

We could sell it as software-as-a-service and enable the physician practice to do their own monitoring or they could outsource the monitoring to us, which, again, is the preferred mode of bringing this service on. So we don't know if anybody is really doing that in the way we are. And certainly, there is no other company that has -- at least, today, that we know of, that has access to the kind of sales resources and market footprint that we bring to bear.

Mitra Ramgopal -- Sidoti. -- Analyst

Okay. No, that's great. And just coming back on the sales force investments, it seems like there's quite of a step up this year, going 20% on the legacy Healthcare and, of course, on Geneva. Just wondering how you see that translating into next year? If we should expect that to moderate a little?

Joseph H. Capper -- President and Chief Executive Officer.

Yes. You know that's a pretty big step up, right? So if you think about it, what we did -- and I'm giving this color because it's not the first time we've done it actually. If you think about back in the summer of 2017, prior to the acquisition of LifeWatch, the few companies were competing, one probably had about 80, 85 sales reps and the other probably had somewhere around 45 to 50. So let's throw the number out of the 130. We brought that number down to approximately 100 FTEs in the field. But that was actually an increase of about 20 -- 15 to 20 in BioTelemetry.

So yes, it was a quick merger. We rationalized. It seems that we thought that's what we needed to drive the business, and we saw really nice growth throughout all of last year with MCT. But eventually, when you have such a large installed base, and you know -- and a 100 reps who are averaging close to $3.5 million in revenue per rep, that's exceptional. And there is a service component to this. So your sales people start spending more time supporting their large account, we really want to free them up to do more selling. And so we thought because we had such a great year last year, it makes sense to take a major step up and we're doing that this year.

Now, again, it takes some time for that group to become productive and start moving to these higher-level metrics that we had with 100 reps. So it's a process, and we'll evaluate that on a go-forward basis. It's actually easier to do an addition of 10 to 15 people versus kind of one at a time, because you do have to recut territory, we had to add some additional management to support this. So it actually is an easier thing when you can add kind of a 20% ramp up like we're doing.

Mitra Ramgopal -- Sidoti. -- Analyst

Okay. No, that's great, thanks for the color and thanks again for taking the questions.

Operator

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

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

Thanks, good afternoon. Thanks for taking the questions.Just on Geneva, once again. Can you -- did you or would you quantify the Geneva revenue in Q1?

Joseph H. Capper -- President and Chief Executive Officer.

I think it's a little bit more than $1 million.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes.

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

Okay. Okay. That's what I thought. So the $10 million outlook, just so I'm clear, that you gave is for this year, right? And that's not an annualized number, is it?

Joseph H. Capper -- President and Chief Executive Officer.

Yes. That's correct. And I want to advise you, March is usually our strongest month or one of our two strongest months in a year. So again, we're excited about it, but we're not ready to push the number.

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

No, that's fair. That's fair. And in terms of the MCOT numbers, what was the volume growth year-over-year? I think you kind of give us the revenue growth. But how is the volume?

Joseph H. Capper -- President and Chief Executive Officer.

Yes, I think it was -- I think I gave it at around 8%. Have we not had a little hiccup, it probably would have been around 10%. And if you think about it, Gene, our revenue in Healthcare was up 10% percent. If we didn't have the Medicare rate cuts, that would've been 12%. And if we were able to meet all the demand in the quarter for MCT, the Healthcare revenue would have been up 14%. So that's why -- Brooks asked about MCT demand, and we're still seeing really strong demand. Obviously, we're working off of a much larger base but we're still seeing pretty lofty demand for the product and growth.

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

All right, that's terrific. And in terms of margins, Joe or Heather, how do your extended Holter margins look at scale compared to your Holter and traditional event recorder business?

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes, they're more in line with our MCT margins than our traditional Holter or event margins. They're a bit higher.

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

Okay. Good. And just so I'm clear too, on the sales force expansion, you talked about 20-or-so adds, is that inclusive of the dedicated Geneva sales force adds of 7 or so? Or is that on top of that?

Joseph H. Capper -- President and Chief Executive Officer.

No. That's on top of that. And again, on the Geneva side, we want to manage -- we want to really drive growth there. We have to manage that in terms of our ability to service implementations. The nice thing about that platform is we see it as primarily self-funding. So as Heather talked about, for the forecast for the year, we see a nice pick up in revenue, but we're not forecasting any margin from that business for 2019, hence the 100 point -- 100 basis point decline in EBITDA margin.

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

Thanks for clarifying that. And then last for me, in terms of the research business, I think you did about $13 million or so in the quarter. Is some of that related to the Apple Heart Study? Is there some revenue in there? Could you quantify that?

Joseph H. Capper -- President and Chief Executive Officer.

A little bit, but it's really small in the quarter. The phase we were in, it sort of ramped down, we've entered a new phase with them. So not...

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

But certainly under $1 million?

Joseph H. Capper -- President and Chief Executive Officer.

Oh, yes. Yes.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Yes, yes, yes.

Operator

Our next question comes from the line of Brooks O'Neil, Lake Street.

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

Sorry to drop back in, but we haven't talked very much about your relationships with the consumer health products companies. I was hoping you might tell us whether it's Apple plus some others or just Apple? If you're mostly focused on the watch? Or whether there's some smartphone involvement? Whether it's all cardiac or cardiac plus diabetes or cardiac plus other things besides that?

Joseph H. Capper -- President and Chief Executive Officer.

Brooks, right now, it's Apple plus, unfortunately, there hasn't been press around it, neither we talk about it. They are primarily in cardiac right now, in fact, exclusively in cardiac right now. And we think there might be some opportunity and a little bit different slant in the diabetes area, but too early to talk about that.

Operator

At this time, I'd like to turn the call back over to Mr. Capper for any closing remarks. Sir?

Joseph H. Capper -- President and Chief Executive Officer.

Well, thanks, everybody. Thanks for your continued interest in the company, and we will talk to you at the end of next quarter. Operator, that concludes today's call.

Operator

Thank you, sir. If you joined the conference late today, you may listen to the conference call via the digital replay that will be available through the Investor Information section of the BioTelemetry website at gobio.com, until May 9, 2019. Thank you for your participation. This does conclude today's conference. You may disconnect your lines at this time.

Duration: 58 minutes

Call participants:

Joseph H. Capper -- President and Chief Executive Officer.

Heather C. Getz -- Executive Vice President, Chief Financial Officer

Brooks Gregory O'Neil -- Lake Street Capital Markets -- Analyst

Bill Sutherland -- Benchmark Company. -- Analyst

Bruce M. Nudell -- SunTrust Robinson Humphrey -- Analyst

Analyst -- -- Analyst

Marco Rodriguez -- Stonegate Capital. -- Analyst

Jayson Bedford -- Raymond James -- Analyst

Mitra Ramgopal -- Sidoti. -- Analyst

Eugene Mark Mannheimer -- Dougherty & Company LLC -- Analyst

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