BEAT is one company i tracked but did not consider due to the lack of a proper base on the weekly chart. Still, it has strong fundamentals and strong breakouts recently out of key changing developments.
BioTelemetry, Inc. provides cardiac monitoring, cardiac monitoring device manufacturing, and centralized cardiac core laboratory services. It operates in three segments: Healthcare, Technology, and Research. The Healthcare segment focuses on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm disorders.
Three Prong Stategy – For Growth
- 1)Solidify our leadership position in cardiac monitoring,
- Establish a leading research services business around the cardio core platform
- Look to identify markets that would benefit from the application of a wireless platform and proprietary technology
Recent Quarter Earnings Winner
Q1 was another record breaking quarter with revenue coming in ahead of our expectations at $48.6 million. Healthcare revenue was strong with an increase of $6.1 million or 18% growth over the prior year. Our research revenue was essentially flat and technology revenue declined $900,000.
EPS increased from 0.06 in the prior year, to 0.20. At the same timing beating analyst estimates by 100%, (estimate at 0.10)
Increase in Sales Volume (mainly for healthcare service)
In our healthcare services division, we continue to generate greater market penetration, with record highs in all three major service types, MCT, event and Holter. As I mentioned a moment ago, overall volume was up 10%, with MCT up an incredible 19% in the quarter.
Reason : Increase in productivity
Another factor driving our growth is the overall productivity improvement of our sales organization. We have the best equipped, best trained and best led sales team in our industry. We have had relatively low turnover amongst our highest performing sales team member. As a result, we are realizing increases in nearly all of our key sales metrics.
Reason : MEDICARE Medicare Telehealth Parity Act of 2015 was introduced in Congress in July.
Medicare approved increased prices for their patient reimbursement rates for BEAT services. The company estimates this will increase their bottom line by $5 million or $.17. This boosts the 2016 estimate to $.72 or 75% higher than the 2015 estimate with 2016 sales to $205 million. Future Medicaid approvals will continue to expand the size and scope of BEAT’s potential as Telehealth takes a larger and larger share of the medical pie.
Huge Market potential for telehealth
U.S. telehealth market is expected to reach USD 2.8 billion by 2022, according to a new report by Grand View Research Inc. Increasing access to basic healthcare is the major aim of telehealth along with improved healthcare quality and patient safety by early detection and diagnosis.
Also, rising geriatric population requires round-the-clock monitoring in homes as they are prone to various chronic ailments. Telehealth system reduces hospital visits and re-hospitalization of patients, along with round-the-clock remote monitoring and allows patients to recover within the comforts of their own home. Telehealth and tele-monitoring devices tender numerous benefits to cater to these demands and hence propel market growth.
source: https://www.grandviewresearch.com/press-release/us-telehealth-market-analysis
Unique Product to drive growth (GREAT THEME)
Cardiac monitoring
MCOT (The MCOT system, developed by CardioNet®(BEAT’s previous name), is like Hospital Telemetry outside the hospital, monitoring patients in real-time during normal daily activities, using built-in detection algorithms and cellular technology. With 96 hours worth of memory, the system allows doctors to capture significant arrhythmic events, even when no symptoms are experienced.)
The company’s remote cardiac monitoring telemetry systems transmit heart beats , heart rates and cardiac events looking for irregular heart beats- arrhythmias to receiving centers that diagnose heart problems and potentially fatal episodes like irregular heartbeats.
“Given that numerous studies have shown MCOT to have a diagnostic yield approximately five times greater than that of Medtronic’s (Rival) device at 21 days, the most appropriate standard of care is MCOT, prior to an implantable loop recorder, 100% of the time for cryptogenic stroke patients. In fact, we have yet to see another device that approaches MCOT’s sensitivity and specificity in the tech in AFib.”
Acquisition of Delta Technology (04/16)- provides potential future catalyst and cost savings.
“Consistent with our strategic intent to strengthen our leadership position in remote cardiac monitoring, we recently completed the acquisition of ePatch division of DELTA Technology, a Denmark-based independent technology company”
“DELTA have been one of our longstanding partners working on the development of our next-generation MCT platform, currently in FDA review. As we move closer to the commercial introduction of this system, we thought it was important to take control of the critical components DELTA had developed and capture the associated cost savings that will come with integration.’.
EPatch device, an extended-wear cardiac monitor, utilizing proprietary patch and sensor technology. The ePatch device will be integrated into BioTelemetry’s suite of Healthcare products and will provide international growth opportunities for the Company’s Technology division.
Operating leverage and Increasing Margins
“Moving to gross profit. Our margin was 63%, which was 500 basis points higher than the prior-year quarter. This margin improvement comes from favorable pricing dynamics in the healthcare segment as well as operational and volume efficiencies”
With a look at the 10Q 
While revenue for healthcare increased from 34981 to 41149 (thousands), cost of revenue actually fell by around 15000.
“These positive benefits were partially offset by lower margins in our research segment due to investments made in the business during 2015 and slightly lower technology margin stemming from the lower revenue and product mix.”.
“We generated adjusted EBITDA of $10.8 million for the first quarter of 2016, a 68% increase, as compared to our Q1 2015 adjusted EBITDA of $6.4 million and a 22% return on revenue. This is our eighth consecutive quarter of EBITDA margin expansion.”.
Annual ROE is also at a respectable 19%
William O’Neil ” It will improve your batting average if the latest quarter’s after tax profit margins for your stock selections are at or near a new high and among the very best in the company’s industry”
Mark Minervini” The ideal situation is when a company has higher sales volume with new and current products in new and existing markets as well as a higher prices and reduced costs. That’s a winning combination”.
Conservative Management
Well this is my own inference from questions from the analysts.
Question from Jan Wald
Jan Wald – Analyst
I guess in terms of EBITDA, I guess, given the guidance for the second quarter, I’m surprised that EBITDA guidance is sort of flat with the first quarter.
Alex Silverman – Analyst
Really great quarter, 22% EBITDA margins, pretty shocking. Wondering your prior 2016 guidance was for low double-digit revenue growth with patient reps growth rate sort of continuing at these levels, product sales looking positive in the second half, research services turning positive in the second half, that former guidance seems low, am I wrong?
Joseph Capper – President and Chief Executive Officer
No. I think the low double-digit got you to the midpoint of $195 million to $200 million, we’re probably a little bit more bullish on the upper end of that, but it’s only one quarter, so we basically have a year or so to unfold.
IBSS “Superstock management teams never predict big things. They consistently under-promise and over-deliver and let their results speak for themselves” .
It must be noted that the recent quarter is a seasonally the lowest performing quarter.
Beat has been consistently beating analyst estimates. And it will be interesting to look at the next earnings.
Research and Technology revenue likely to increase.
While revenue for for research was flat for the quarter, there was increase in the backlog
“I think the good news is we continue fill the backlog at an accelerated rate and we’re making some progress obviously with some of the strategic initiatives that we spoke about. So it’s a good healthy business, nice margin, nice return, it complements our healthcare services business”.
Future catalyst
“During the quarter we took an extremely important strategic step, when we reached an agreement to acquire Rochester, New York based VirtualScopics. As a leading provider of clinical trial imaging solutions.
“As we have discussed on numerous occasions, expanding our research services offering has been one of our high priority initiatives aimed at improving the long-term competitiveness of this division. The imaging market is growing between 6% to 7% annually and is expected to be approximately $1 billion per year in the next few years”
“In our technology segment, the softness experienced in the second half of 2015 continued into Q1 2016, as customers have delayed purchases pending the release of our 3G devices to the market. We expect this buying pattern to reverse in the second half of 2016.”
BEAT has a staircase chart on the daily chart. It is currently consolidating tightly.
Might make a good swing trade by entering on the next 3-4% breakout from this consolidation.
Things i do not like
High valuation.
Low Analyst estimate for year 2017.
Entry Criteria:
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