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BioTelemetry Is Unstoppable, More Growth Is Coming

|About:BioTelemetry, Inc. (BEAT)

Who Is BioTelemetry

BioTelemetry Inc. (NASDAQ:BEAT), once named CardioNet Inc., is the leading wireless medical technology company. BioTelemetry is focused on the delivery of health-based information, as well as improving the quality of life for its clients. The company takes a strong focus for reducing cost for its clients, which is very important for building long-term clients and business relationships.

Third Quarter Summary

The third quarter resulted in very good news for Biotelemetry, as revenues have increased to $31.9 million, which is an increase of 17.9% when compared to $27.0 million from the third quarter in 2012. Revenues increased a total of $4.9 million; the primary source of growth is research services, earning $3.8 million from the acquisition of Cardiocore in August of 2012. Patient services also helped BioTelemetry increase its quarterly revenue by contributing an increase of $1.0 million, as a result of overall patient volume growth.

BioTelemetry's gross profits for Q3 increased to $19.2 million, or 60.3% of revenue, which is $3.2 million more than the Q3 of 2012. Though the overall contribution of gross profits to revenue was decreased by .03%, this is thought to be in relation to BioTelemetry's lower margin research services segment.

Operating expenses for the Q3 were $22.1 million, which is an increase of 13.0% from 2012. The increase in operating expenses was primarly driven by the addition of BioTelemetry's 2012 acquisition of Cardiocore. BioTelemetry has also had an increase in development costs for their "next generation" device, and has been partially offset by a reduction in bad debt expenses. Net losses for Q3 2013 were $3.0 Million, or a loss of $0.12 per diluted share, which is about the same as Q3 2012.

Overall Operational Highlights

  1. 18% revenue growth compared to year-ago report
  2. Profitable on an adjusted basis for two consecutive quarters
  3. Positive EBITDA of $3.6 million, highest in four years
  4. Reduced consolidated DSO to 51 days, which is a 10 day improvement from the year-ago report
  5. No debt as of end of Q2, and currently holding $21.0 million in cash
  6. Exclusive agreement with Kaiser Permanente, this will contribute to 6 million patients/lives
  7. Received FDA approval of CardioKey, currently low cost 14 day Holter
  8. Finalized current holding structure of BioTelemetry, effective Aug. 1, 2013.

CEO Joe Capper, as well as Heather Getz had nothing but positive things to state on a conference call for earnings. Joe Capper stated,

"I'm delighted to be with you this afternoon to report on another highly productive quarter and which we made considerable progress executing against our strategic objectives and delivering solid financial results now under new corporate identity Biotelemetry. Attesting my practice and especially for those of you who are newer to the company I would like to remind you that we continue to manage the business in pursuit of three broad strategic objectives."

The three main pursuits for BioTelemetry's broad strategic objectives include:

  1. Solidify the company's leadership position in cardiac monitoring
  2. Developing its leading research services business around "Cardiocore" brand and platform
  3. Identify possible diagnostic markets, A.K.A increase product line, market span, as well as consistent annual revenue growth through proprietary products and wireless medical platforms.

CEO Joe Capper also stated:

"Now let me tell you why this direction is such a positive one. We just reported another strong quarter of financial performance; for the fifth consecutive quarter we experienced year-over-year revenue growth up 18% over the prior year quarter to $32 million. EBITDA was $3.6 million, the highest quarterly EBITDA in four years. Total volume was up 7% compared to last year, MCOT volume up a remarkable 13% and we ended the quarter with $21 million in cash and no debt.

In addition to excellent financials, the quarter was filled with considerable operational success. In the patient services business the comprehensive sale approach we implemented at the outset of the year continues to be the catalyst thriving renewed focus on the benefits of remote monitoring. As we once again saw, year-over-year growth in all three service lines: MCOT, Event and Holter.

As you may recall the implementation of the United Healthcare agreement began in earnest in the month of July and we are pleased with the early results. As we indicated in the past, the third quarter has historically been our toughest from a seasonal perspective. As expected, however, the rollout of the United Healthcare agreement did help dampen this phenomenon, in fact during the third quarter MCOT volume was up 3% sequentially."

Examining the path for BioTelemetry is somewhat difficult at the current time, though I think a heavy amount of speculation by investors needs to be looked upon.

Speculating Joe Capper

The BioTelemetry CEO has provided quite a robust statement, which included the company's stated three-step strategy. If you look through the Joe Capper conversation during the Q3 earnings call, you can definitely speculate some upcoming events that BioTelemetry will be incurring. Here is the section that he had communicated about the three strategies, as well as some of his "hind-sight".

Joe Capper Stated:

"First, we seek to solidify our leadership position in cardiac monitoring. Second, we are building a leading research services business around the Cardiocore brand and platform; and third, we look to identify diagnostic markets that would benefit from the application of our wireless platform and proprietary technology. I'm sure you'll agree the Biotelemetry name is much better suited for company with this broad strategic focus and direction."

First off, Capper stated that the company will be making sure that BioTelemetry stays number one for cardiac monitoring. This is what BioTelemetry is known for, and this is their origin, and he promises investors to stay consistent and update the brand and client volume.

Secondly, Cardiocore has been an essential acquisition for BioTelemetry. We cannot stress how helpful it was during this third quarter earnings report as well as the United Healthcare Agreement. Biotelemetry had a 13.0% increase in operating expenses from Cardiocore, and revenues increased a total of 17.9%, of which $3.8 million of the growth was from research services that are linked to Cardiocore. Now remember, Biotelemetry acquired Cardiocore in August of 2012, and it is already seeing profits from the acquisition, as well as a growth in overall business. The best part is, BioTelemetry has no debt, which is essential considering its net profits result in direct cash on hand, which has increased to $21.0 million.

The last part of their broad business strategy consists of diagnostics and proprietary technology, as well as wireless platforms for untapped markets. This is a pretty big statement for BioTelemetry; in this part of the strategy, he has divulged that BioTelemetry is currently working on new products, which hit new wireless technologies that will proprietary to the healthcare sector.

Joe Capper had stated that the Q3 is always BioTelemetry's roughest quarter from year-over-year historical data, which explains a lot of the price flux between September and October, as it had floated from $8.36-$11.21 per share. This company isn't a very well-researched company-in fact, it is quite under the radar, and therefore shares are highly volatile and price movements often occur without cause, except for entry and exit. Anyone who trades companies based on historical or recent movement, or scalps consistently, uses BioTelemetry as a product of profit, rather than staying long in a company who has an immense amount of room for growth.

Possible Upcoming Catalyst and Trends

What will BioTelemetry bring to the table next? Also, what current occurrences will cause BioTelemetry's Q4 as well as 2014 yearly performance to increase, and possibly even double in EPS?

  1. Revision of its current products, allowing for platform and wireless tools to stay current and keep competition opportunities limited.
  2. Adding wireless products for different focus areas. Currently, BioTelemetry is most known for the chronic disease remote management, as well as wireless cardiac monitoring. The addition of other progressive diseases to its remote and wireless product line will give BioTelemetry additional revenue sources. Here are some possible choices for disease management systems:
  3. Diabetes
  4. Cancer care
  5. Alzheimer's (alert) prevention care
  6. Epilepsy
  7. Due to the United Healthcare Agreement, BioTelemetry is seeing a lot of positive effects from the U.S. incentive purchasing programs. Now that facilitated costs are higher than ever, remote monitoring and wireless capabilities are in demand. Hospitals, as well as insurance and LTC facilities, are encouraging the use of these products to prevent hospital trips and visits. Over the next few years, BioTelemetry is going to see an increase in consumers for their current products, not to mention any emerging products to come.
  8. Upgraded and added platform diagnostics for not only in-home but hospital based monitoring. BioTelemetry has more on-hand cash than ever before, which could lead to it developing remote, wireless and software products for facilities and clients for many niche healthcare areas.

The Wrap Up and Recommendation

BioTelemetry is a fantastic company to add to your portfolio, although when purchasing shares or options, you should be ready to expect large bouts of volatility. BioTelemetry often moves up and down, without news release or volume level changes. The company currently has a 386.25% performance for this year, as well as a 411.84% YTD performance. The most recent recommendation from The Benchmark Company rates BioTelemetry $15.00 per share.

I personally feel that BioTelemetry will double in 2014, due to the massive opportunities available to this company for growth in emerging healthcare markets. The company has four consecutive positive earnings reports, and expects a fifth at the end of the fourth quarter. I recommend going long, preferably with a covered call, though traditional shares will do the job. This company is highly underrated, and is rarely explored by authors or media.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: BEAT