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BioTelemetry Inc (BEAT)
Q2Â 2019 Earnings Call
Jul 30, 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 Second 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 risks, 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 risks 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 on the BioTelemetry website at gobio.com.
[Operator Instructions]. The floor will be open for questions and comments following the presentation. [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 -- Chief Executive Officer and President
Thank you, operator, and good afternoon, everyone. I'm Joseph Capper, President and CEO of BioTelemetry. I'm joined by Heather Getz, our Chief Financial Officer. I'll start with highlights about our second 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 will open up the call for questions.
I am pleased to report on another excellent quarter during which we again met or exceeded all of our expectations, setting new all time highs in quarterly revenue and EBITDA. Moreover, despite a strong comparison from the prior year period, we still grew the top line by 10%, marking our 28th consecutive quarter with year-over-year revenue growth.
This remarkable consistency is a result of several factors, which we have spent years developing and are very difficult to replicate. Specifically, we possess a multifaceted product portfolio encompassing gold standard technology. Our deep understanding of the cardiac monitoring market has allowed us to forge an effective strategy and grow market share.
As you will hear today, we are implementing our plan with great discipline and the results speak for themselves. Another important part of our success is our industry leading sales and service infrastructure, which supports an ever growing physician network. These and other competitive advantages have fueled this seven-year run, over which time our business has grown fourfold. We are clearly not resting on this success. In fact, we are using our position of strength, chart a course of dynamic growth for many more years to come. As is my custom on these calls, let me again remind you of the three primary tenets of the plan that dictate our resource allocation and continue to drive our unparalleled performance. First, we have been and remain committed to investing in our core cardiac monitoring business to expand our capabilities.
Most recently evidenced by the acquisition of Geneva Healthcare. This acquisition alone has increased our addressable market by $1 billion and that estimate may very well prove conservative. Additionally, this expansion of our data management and aggregation solutions may provide new sources of revenue at some point down the road. We have strong IP and an impressive internal R&D capability, which has allowed us to introduce several new products and service enhancements.
In addition to product R&D, we continue to invest in ways to apply AI and system automation to improve performance and gain efficiencies. We've recently expanded our sales and marketing organization to accelerate the growth of our product monitoring and Geneva data management and workflow solutions. As you know, prior to Geneva, we completed several other highly beneficial acquisitions, providing scale and additional capabilities.
You can expect us to continue funding a myriad of investments designed to further expand our addressable market within and beyond traditional cardiac monitoring. We see vast opportunities that are well suited to the core strengths of this company. BioTelemetry's technology is extremely well tailored to address the current and importantly the future needs of payers and providers.
The second pillar of our strategy is to look for ways to expand the capabilities of our leading research services business. This focus led to key acquisitions, providing us with revenue diversification and impressive growth. We have also invested in numerous system enhancements to improve service performance and we have continued to evaluate additional capabilities to further strengthen our research services, offering and competitive position.
Third, we've allocated time and resources exploring new ways to leverage our platform and connected technology in adjacent markets. Among other projects, these efforts have led to the incubation of our digital population health management solution. As I have said before, this segment has the potential to one day far exceed our patient monitoring business.
We believe population health will play a critical role in the way healthcare is managed and delivered, employing technology to more effective effectively manage large numbers of people living with chronic conditions. As you will recall, our initial top health focus is in the multi-billion dollar diabetes market, whereby we use a cellular enabled blood glucose monitor and a cloud-based analytical platform to power a care management program designed to modify behavior and ultimately improve the health of people living with diabetes.
Over the past few years, we have focused primarily on upgrading our technology with minimal resources allocated to expanding our go to market efforts. The more we learn about the population health business, the more convinced we are that the demand for these services is real and sustainable. And Wall Street seems to agree. The huge market potential for these solutions became quite evident last week with the IPO of a company that commercialize as a similar diabetes care management solution.
The initial offer was well received by the market and the company was rewarded with an extremely high valuation. While we are not professing an equivalent capability at this time, this development certainly further validates that our efforts in this field are warranted. We will continue to assess the most appropriate way for us to invest in and grow this business.
I reiterate these three things quarterly to provide you an understanding of how we allocate our time and resources. It's also important to stress our comprehensive approach to growing this connected health platform versus a focus on any single product. Further, we think it's worthwhile to understand the framework that drove the seven years of consecutive quarterly growth.
Some may call seven years of growth a heck of a run. We consider it a pretty good start. As you've heard, we have more opportunities for growth today than ever before. Our challenge is how to address them effectively using both our human and financial capital. We are confident we will continue to find the right balance. Let's take a look at some of the quarterly highlights.
During the period, revenue grew by 10% to nearly $112 million, at the higher end of expectations and a new high for the company. Adjusted for the Medicare rate reduction, this represents 12% growth. Overall margins were above expectations as growing EBITDA grew to $31.6 million, again, setting a new all time high. We ended the quarter with $51.7 million in cash, up $6.2 million in period.
We spent time integrating Geneva into the healthcare business. We completed the recently announced acquisition of ADEA, an early stage Swedish medical technology company that delivers remote health services in the Nordics. Our research services team continue to outperform the market with revenue up 11% and we 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 Business you will see why we remain extremely optimistic about the prospects for this sector, especially in light of recent developments. During the quarter, we remain focused on expanding the market penetration for the new MCT and extended-wear Holter patch products and the Geneva application. The healthcare sales teams continue to execute incredibly well, posting impressive growth in new and existing accounts.
Our healthcare revenue up approximately 10% in the quarter. As I mentioned on previous calls, we are in the process of growing the healthcare services sales team by approximately 20%. We have completed most of this expansion, which we anticipate will begin to contribute in the second half of 2019 and beyond, expanding the size of the sales organization, which is by far the most productive in our industry.
We'll support continued growth in patient monitoring and a more rapid penetration for the Geneva platform. Speaking of Geneva, we are delighted to have added this capability to our cardiac solutions portfolio and trust, we're beginning to appreciate the massive potential this asset adds to the business. As a reminder, Geneva is an innovative, proprietary, cloud-based platform that aggregates data from the leading cardiac devices, enabling the company to remotely monitor all the physicians, 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 and manage data from implantable cardiac devices, giving precious time back to the staff to focus on patient care.
The acquisition of Geneva repositions BioTelemetry as a much more progressive data consolidation and solutions-oriented company, and hedges against any potential shift in favor of implanted monitoring devices. We are initially focused on the rapid introduction of Geneva into the thousands of accounts, for which we currently provide cardiac monitoring services.
Our healthcare services sales team, nearing a 125 strong has been trained on the Geneva solution and armed with appropriate marketing materials. They have been instructed to target our largest accounts for early receptivity has been nothing short of amazing. We are obviously very pleased with a wide acceptance of the Geneva solution.
Based on our current pipeline activity, we expect its impressive performance to continue throughout 2019 and beyond. With such strong demand, our challenge is to quickly add support staff adequate to maintain a high level of service to the many new customers coming on board. In addition to the sales push and resource allocation, we have our software Technical team working on further enhancements to the platform's capabilities. We are close to having the BioTel Heart user interface merged into the Geneva portal, providing even greater workflow and data management efficiencies. This will radically change the way we relate to customers in a cardiology market and it 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 grew by 11%, hitting new all time highs in both revenue and pipeline. As mentioned on previous calls, we are having more success incorporating our proprietary ePatch monitor as a critical element of new cardiac studies, creating cross-segment top line synergy and a distinct competitive advantage. We have a few large scale ePatch studies now under way and several more in the pipeline. During the quarter, we invested in a new, faster and more efficient image analysis software system, which will create greater efficiency and scalability. BioTelemetry has also been working with innovative consumer tech companies, as they seek to integrate heart health trackers into the popular wearable devices.
As reported in the media, these screening tools are designed to notify consumers of potential cardiac risks 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, that research team continued our support of a few of these studies, which have the potential to substantially expand our market and closely align 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. In terms of new business opportunities, we continue to work during the quarter on our digital population health initiative. This project is taking on a whole new level of excitement given the recent IPO mentioned earlier.
We have excellent technology and a comprehensive cloud-based analytical platform, providing a foundation from which to build upon. This gives us a potential fast follower opportunity in a very large and growing market. As we moved into 2019, we began allocating more business development resources to the payer in at-risk segment and are starting to see positive results.
On our last call, I spoke about the potential for developing an additional physician-driven sales channel through the use of a new remote patient monitoring CPT codes, which CMS activated at the beginning of the year. We now have several pilots under way testing the application of these codes And are optimistic that this may develop into a viable alternative to bring this care management service to markets. While we're making good headway with our pop health initiative, I don't want to leave you thinking, we are where we need to be in order to compete effectively on a large scale at this point. However, we are currently analyzing our options for moving more aggressively in that direction in order to take advantage of this sizable opportunity.
We are also developing additional opportunities for unique partnerships with companies looking to enter the healthcare space, the Apple Heart Study being a prime example. 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 extremely pleased with the company's second quarter performance. More importantly, we expect that the investments we are 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 detailed financial review of the quarter. Heather?
Heather Getz -- Chief Financial Officer and Executive Vice President
Thank you, Joe and good afternoon, everyone. As Joe just announced, we continued our record setting performance in the second quarter with our 28th consecutive quarter of year-over-year revenue growth. Total revenue grew 10% year-over-year, reaching a $112 million and exceeding our expectations. This growth resulted from revenue increases in all of our business lines.
Healthcare revenue increased $8.3 million or 10% to $95 million, once again driven by patient volume growth in both our MCT and extended-wear Holter service lines, as well as the addition of Geneva's revenue from the monitoring of implantable cardiac devices. These increases were partially offset by the $1.5 million impact from a slight reduction in the Medicare pricing, which went into effect January 1.
Excluding the production, our healthcare revenue growth would have been over 11%. Our research revenue also increased up 11% or $1.3 million to $13.9 million, benefiting from new studies utilizing our ePatch, extended-wear Holter service. And all other revenue increased 40% to $2.9 million, resulting from new partnerships in our digital population health business.
Moving to gross profit, our margins for the second quarter of 2019 was 62.8% versus 64.9% in the prior year period. The decrease in our margin was primarily due to an above average margin in Q2 of 2018, when our patient volume was growing rapidly, but our hiring did not keep pace. Also, impacting the margin comparison is the lower MCT Medicare price. We've use 62% to 63% In more normal range for our gross margin at this point. Our second quarter adjusted EBITDA was $31.6 million, a new high for us and representing a 28.4% return on revenue. This increase in our adjusted EBITDA was primarily due to the increased revenue, partially offset by the impact of the investments we are making in our sales and technology areas. As for our tax rate, for 2019, while we expect our GAAP tax rate to be approximately 21%, we anticipate that we will continue to be able to utilize our $160 million of federal net operating loss carry-forward and as a result, we believe that we will pay approximately $2 million in cash taxes for 2019.
Moving to our balance sheet, we ended the quarter with $51.7 million in cash and a $198 million of indebtedness, putting our debt-to-EBITDA ratio lower than one-and-a-half times. Year-to-date, we generated $36 million in cash from operations and used about $16 million for capital expenditures. These expenditures were driven by purchases of our MCT and extended-wear Holter patch devices as well as for capitalized software and hardware as we invest in our IT environment and infrastructure. Free cash flow was $20 million, and we used $45 million of our cash in the first quarter to the upfront payment for the Geneva acquisition.
Shifting gears, I will now touch on the outlook for the third quarter. We are projecting revenue of approximately $111 million or about 11% growth with an adjusted EBITDA return of about 28%. As many on the call may know, we typically experience a slowdown in volume during the summer months, mainly in the healthcare segment, which we've reflected in this guidance. That being said, with the continued penetration in the extended-wear holder market as well as increased contribution from the monitoring of implantable devices, we believe there is a potential upside to this number.
To summarize, the company remains in a strong financial position with modest leverage and additional capacity if needed. We are pleased to have delivered another great quarter with our highest quarterly revenue in EBITDA 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 -- Chief Executive Officer and President
Thanks, Heather.
As you have just heard, we had another great quarter, continuing to build upon our long-standing momentum. A forward-thinking strategy is yielding the results we had envisioned when we developed it, and it has positioned us well to compete with in 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 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 services, integrating and resourcing Geneva as rapidly as possible to take advantage of its wide market demand. Continuing to grow our search business by making additional business development and infrastructure related investments. Building out our digital population health management business by continuing our current marketing development efforts and expanding on key partnerships we have developed.
Given our consistently strong performance and business momentum, we remain bullish on our prospects for the remainder of 2019 and beyond. Based on Heather's comments, about how we anticipate things taking shape for the second half of 2019, 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.
For the full year 2019, we will monitor over 1.3 million people. Our revenue will grow by double digits, with an 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.
As I close, I would again like to thank those of you who helped deliver our 28th consecutive growth quarter. Your efforts continue to improve our ability to help save more and more lives everyday.
With that, we'll now pause and open the call for your questions. Operator, we're ready for our first question.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Our first question comes from the line of Brooks O'Neil with Lake Street Capital. Your line is now open.
Brooks O'Neil -- Lake Street Capital -- Analyst
Good afternoon and congratulations on the terrific quarter. I personally appreciated the expanded commentary today, guys. So thank you very much. I have a couple questions first, I think there has been some commentary in recent weeks about the reimbursement outlook, particularly related to Medicare. Would you guys just summarize what you've seen and then give us your perspective on the impact any reimbursement changes might have on BioTelemetry?
Joseph H. Capper -- Chief Executive Officer and President
So Brooks, what What products are you referring to, all of them, MCT in particular?
Brooks O'Neil -- Lake Street Capital -- Analyst
I'm thinking mostly about Holter and MCT.
Joseph H. Capper -- Chief Executive Officer and President
So MCT, as you know, we're in fairly stable position. We have some ups and downs over the years, part of the physician fee schedule, the preliminary physician fee schedule was published literally yesterday. Upon initial review, it looks like there is no real movement in one direction or another and that will cover all products, event, Holter, and MCT, a sort of net out neutral from what we can tell, which only leaves extended-wear Holter, as you know, is still under a temporary code. There has been movement in that area. We believe ACC made a recommendation to AMA to move into a permanent code status. So that has to go through the approval process with AMA and eventually a pricing with the rock. So that process is unfolding as we speak.
Brooks O'Neil -- Lake Street Capital -- Analyst
And would you say if there was a change, the temporary code to a permanent code and the extended-wear Holter, would it have much impact on BioTelemetry and the revenue you would expect in 2020 or beyond?
Joseph H. Capper -- Chief Executive Officer and President
My understanding is that the impact would likely not -- if any impact, will likely not happen until 2021 at the earliest. So nothing in 2020, that's a product category that, as you know, is growing rapidly for us. So, fingers crossed as we move into a permanent code status, they take in a cost information from all the players in the industry and we can make a good case that we're driving a favorable result with that product and it gets adequate coverage.
Brooks O'Neil -- Lake Street Capital -- Analyst
Okay. That makes sense to me. Second question I have is you talked a little bit more today than you have recently about the potential of the population health business. Obviously potentially stimulated by the recent IPO, but do you think that this has the potential to impact the company's results, I mean, specifically revenue and earnings in the next year or two? Or do you think that's more something that's likely to potentially have an impact further out in the future?
Joseph H. Capper -- Chief Executive Officer and President
I think it depends on how much we're willing to invest in the development of the business. And as you know, we're a publicly traded company, whose shareholders have become accustomed to us generating a decent return on our revenue. So you don't have -- you don't have the luxury of doing In a start-up capacity. But I do think there's a lot we can do. And we can do it in a reasonable way. So we're going through kind of an assessment phase and we would like to be more aggressive in that area. I don't want to put a timeframe, I'm going to punt that in terms of -- when we expect significant impact, because -- we've really just incubated, we've picked up some assets late '16, early '17 and then, as you know, we did the LifeWatch acquisition integration in '17, '18 and Geneva this year. So we've had some great opportunities to expand our footprint in cardiac monitoring. We would like to put it back and spend a little more time on this and some other opportunities that we're looking at. But we do think it's a big -- big market potential and it's wide open space right now. So I think we should be spending more time on it. Yes, we have to be prudent about the way we approach it.
Brooks O'Neil -- Lake Street Capital -- Analyst
I'm particularly excited about the opportunities in that area myself. So I applaud you for looking at it and I understand the pressures you face as a public company. Let me ask just one more. Obviously, we're all excited about that addition of Geneva to the mix and your comments were well taken. But there again, do you think Geneva is the kind of an add set in the business opportunities that might drive the accelerated what we might call organic growth from BioTelemetry in the relatively near term? Or how do you think about that, the impact of Geneva going forward?
Joseph H. Capper -- Chief Executive Officer and President
I do think it will drive organic growth. I think it's going to be a big part of our growth, as we move into 2020 and beyond. We're shifting more to kind of a data aggravations and solutions provider. Obviously, our core remote cardiac monitoring business will be a big part of that, but now we're able to bring a wider array of solutions into the cardiology practice and it is a really solid solution.
It's a great product and it's one that really drives workflow efficiency, a lot of benefits within the Cardiology practice. So it's incredibly well received. It is a tech-enabled service. And as you know, tech-enabled services require infrastructure support people. So our challenge is let's not overheat it. Let's make sure we're grabbing as much of that market as we can.
But at the same time, research into properties, so people keep asking me how much margin will that contribute. And right now, I'm saying I think, I could pay its own rate and I don't expect a lot of margin contribution from it in the near term, I'd rather feel growth and drive that top line and so I think it's going to be a big contributor.
Brooks O'Neil -- Lake Street Capital -- Analyst
Well that makes total sense. Congratulations. Keep it up. Thank you very much for taking my questions.
Heather Getz -- Chief Financial Officer and Executive Vice President
Thanks, Brooks.
Joseph H. Capper -- Chief Executive Officer and President
Thanks, Brooks.
Operator
Thank you. Our next question comes from the line of Jayson Bedford with Raymond James. Your line is now open.
Jayson Bedford -- Raymond James -- Analyst
Hi, good afternoon. Thanks for taking the question. Just a few, you called out the strength in MCT and extended Holter. Do you care to put numbers on it in terms of the growth contribution here in the quarter?
Heather Getz -- Chief Financial Officer and Executive Vice President
So, on the MCT side, the volume growth was about 7% in the quarter over last year.
Joseph H. Capper -- Chief Executive Officer and President
The last few quarters we've been averaging at 7% to 8% range in MCT and extended-wear Holter is much higher. I do not think we put that number.
Heather Getz -- Chief Financial Officer and Executive Vice President
Yeah. We haven't put the actual growth number on that.
Joseph H. Capper -- Chief Executive Officer and President
It's a smaller base. You can imagine it's a much higher growth number and revenue on a combined basis for that positive is up 10%.
Jayson Bedford -- Raymond James -- Analyst
Okay. And -- I'm sorry if I missed this, but did you give a Geneva contribution in the quarter?
Joseph H. Capper -- Chief Executive Officer and President
We did. We didn't break it down. It's rolled up into our healthcare revenue.
Heather Getz -- Chief Financial Officer and Executive Vice President
Yes. So, if you look at overall healthcare revenue, MCT was about 69%, event was 14, Holter was just north of 11, and Geneva was about 6% in healthcare revenue.
Jayson Bedford -- Raymond James -- Analyst
Okay. Great. And then, Joe, I think you mentioned the more aggressive move in the population health and it's a little unclear as to whether that was internally driven or externally in terms of M&A.
Joseph H. Capper -- Chief Executive Officer and President
Right now, we're focusing on our capabilities and our options to internal investment. Obviously, Jayson, if we can find ways to accelerate that plan with partnerships or some M&A activity, we would look at it. But really what we're focused on is what we -- we already have a big part of the puzzle solved, we already have the technology developed, we already have the cloud-based platform in place. We have customers. We have distribution. We have growth. So for us, it's kind of like how do we develop a more all encompassing, robust go to market strategy? And then how do we resource that effort, so that we can start to grab more market share?
Jayson Bedford -- Raymond James -- Analyst
Okay. And maybe just the last one for me, as you put your your core cardiac monitoring software and technology on the Geneva platform, what does that do to the business? Is that a bad loan or a revenue generator or is it just facilitate more accelerated access to new accounts?
Joseph H. Capper -- Chief Executive Officer and President
So first, it's going to provide far more workflow efficiency Within the Cardiology practice. So imaging combining, five user interfaces into one. So that is tremendous workflow efficiency, which means greater patient compliance, which means better outcomes within the practice. It also makes you a lot stickier within the practice, right. So that's, part of it is a more comprehensive software solution and the next phase, obviously would be integrate with EMR is more appropriate. So, it just makes you a whole lot stickier.
Jayson Bedford -- Raymond James -- Analyst
Okay. Great. Thank you.
Joseph H. Capper -- Chief Executive Officer and President
Sure.
Operator
Thank you. Our next question comes from the line of Eugene Mannheimer with Sidoti and Company. Your line is now open.
Eugene Mannheimer -- Sidoti & Company
Thanks. Good afternoon. Nice quarter. Just a few form me. If you could just discuss your rationale for for buying ADEA, I think it is, your Nordic partner, looks like they use your product overseas. You seem to be struggling a bit. I'm just wondering why exercise your right to buy them and what type of revenue and EBITDA contribution could we expect from that this year?
Joseph H. Capper -- Chief Executive Officer and President
So we already had an investment in the company. They were a partner of ours that we made an investment in some time ago. We had rights under that agreement to acquire the rest of it. We thought it was the best way to realize the potential within the regions they were in and give them opportunities to expand into other regions. Really good sales and marketing, focused in a really good sales and marketing effort in the regions that they're in. We started to see growth, but we really want to free them up to focus on just that. In terms of revenue and EBITDA contribution, it is immaterial at this point. So we're not breaking that out.
Eugene Mannheimer -- Sidoti & Company
Okay. Thank you. And Joe, regarding the change to the CPT code on the temporaries patches, what does your guider or intuition tell you about how that might -- how the rate might change on that and when would be the time frame.
Joseph H. Capper -- Chief Executive Officer and President
You're out of mind, you think I'm going to give you my gut response? That's a -- that's an over-a-beer conversation. The only thing I can tell you is we're doing everything we can to support the movement from -- into the permanent code, into the proper categories, step number one. And then everything we can do to help support keeping that reimbursement as appropriately priced as possible.
Eugene Mannheimer -- Sidoti & Company
Okay. Fair assessment. And Joe, last for me then. Your expectations for MCT this year? Certainly, I think it's natural that growth would decline some following a 14 % year, last year in that segment. But is that Is that -- is it tough comps that just are challenging here or is there any new competition that you would characterize around the slowing of this segment?
Joseph H. Capper -- Chief Executive Officer and President
Eugene, always hard to tell right, exactly what's happening. I think you hit on a couple, number one tough comps, high growth last year coming out of the acquisition integration of a LifeWatch business. The -- if you look the -- since we do not really have market growth data, I think we've mentioned in the past we use doctor office visits as a proxy for market size and market growth.
Doctor office visits this time versus last year are actually flat. Right. So, there's no real growth in the market itself. We suspect there, there might be a little bit of movement back and forth because the size service for the implantable loop recorder moved from the hospital into the physician office. Short-term, we believe that will be the case, as it kind of cycled through.
But again, I think it's important for us to -- first of all, it is a strong grower in the high single digits, right. And I think it's really important for us to stress that we don't go to market saying, hey, buy MCT from us. What we do is we say, we have the most comprehensive cardiac monitoring data management solutions portfolio in the marketplace. Here's what we can do for you.
If you have a practice whose patients are more appropriate for an extended-wear Holter for an event because of insurance reasons, we provide that. And we again, we don't push one product. So you're going to see ups and downs from year-to-year in the portfolio. And what we have communicated continually is we still think we can grow our share of this, at an above market rate and we used the number -- you know, approximately 10%.
Geneva will feed into that. It will help us. Geneva is a nice hedge against potential movement from one product category to another. So, I do want to stress the fact that think of it as a portfolio of products, not just a product, and hold us accountable to hit those high double digit -- high double digit -- high single digits and low double digit numbers. And we think, we can manage the business in that way.
And obviously where we can, we'll augment that with acquisitions.
Eugene Mannheimer -- Sidoti & Company
Very good. Thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of Mitra Ramgopal with Sidoti. Your line is now open.
Mitra Ramgopal -- Sidoti -- Analyst
Yes. Hi. Good afternoon. Heather, I was just wondering, given the guidance 3Q, it seems like, it will require quite a bit of a step up in the fourth quarter to get to even to midpoint of the annual range. I was just wondering what you're looking for in terms of getting that step up from 3Q to 4Q if it's investments being made in sales or anything else?
Heather Getz -- Chief Financial Officer and Executive Vice President
Yes. So, we were expecting a step up from Q3 to Q4. We normally do get that. But as you know, in my guidance, I also mentioned the fact that there was some upside in Q3. So, I think that you kind of have to look at the two quarters together, the 111 that we guided to along with the full-year guidance and it'll give us a little bit of leeway there from the standpoint of what Q4 is going to look like, based on what we ultimately are able to achieve in Q3.
Mitra Ramgopal -- Sidoti -- Analyst
Okay. No, that's great. And were there any one-time expenses aside from the one I think you'd pointed out in the release, the integration expense with Geneva.
Heather Getz -- Chief Financial Officer and Executive Vice President
So, are there any, any --
Joseph H. Capper -- Chief Executive Officer and President
Any other one time.
Mitra Ramgopal -- Sidoti -- Analyst
Other one time. Yeah.
Heather Getz -- Chief Financial Officer and Executive Vice President
Yes. So those Geneva related one times, but then there's also some effects related to the LifeWatch acquisition as well, that's being pulled out, it is also being offset by a pension reversal. But it's all related to LifeWatch, Geneva and then obviously the income tax effect of those adjustments.
Mitra Ramgopal -- Sidoti -- Analyst
Okay and I believe you said the normalized tax rate would have been closer to like 20%, 21%?
Heather Getz -- Chief Financial Officer and Executive Vice President
No, to the GAAP tax rate. Yes. If you look at the year, we're expecting a GAAP tax rate of about 20% -- 21%. But that's being, we're actually utilizing our NOLs to offset that. So, we're looking at more like $2 million in cash taxes.
Mitra Ramgopal -- Sidoti -- Analyst
Okay. That's great. And then finally, Joe, you did talk about the expansion of the sales force 20% and I'm just wondering how far along you are there, if you're almost done?
Joseph H. Capper -- Chief Executive Officer and President
Almost finished.
Mitra Ramgopal -- Sidoti -- Analyst
Almost finished. Okay. That's it for me. Great quarter. Thanks again.
Joseph H. Capper -- Chief Executive Officer and President
Thank you.
Operator
Thank you. Our next question comes from the line of Bill Sutherland with Benchmark Company. Your line is now open.
Bill Sutherland -- Benchmark Company -- Analyst
Hey, guys. Heather, you ran through the percentage of revenue pretty quick, at least I didn't keep up. You said Geneva was, what percent?
Heather Getz -- Chief Financial Officer and Executive Vice President
It was about 6% of healthcare.
Bill Sutherland -- Benchmark Company -- Analyst
Healthcare. Okay.
Heather Getz -- Chief Financial Officer and Executive Vice President
At about $4 million in the quarter.
Bill Sutherland -- Benchmark Company -- Analyst
So it's growing very nicely. And And in total, Holter was a 11, including extended?
Heather Getz -- Chief Financial Officer and Executive Vice President
So if you pro form it for the Medicare reduction, it was north of 11%.
Bill Sutherland -- Benchmark Company -- Analyst
With the extended.
Heather Getz -- Chief Financial Officer and Executive Vice President
No, no, no. Overall, I'm sorry, I thought you said for healthcare. Extended, we didn't give a number.
Bill Sutherland -- Benchmark Company -- Analyst
Okay. No, I know you did. You said Holter was 11% of healthcare.
Heather Getz -- Chief Financial Officer and Executive Vice President
Total Holter. Yes, total Holter which includes extended wear.
Bill Sutherland -- Benchmark Company -- Analyst
Including and that, total that Holter includes extended.
Heather Getz -- Chief Financial Officer and Executive Vice President
Correct.
Bill Sutherland -- Benchmark Company -- Analyst
Okay. That's all I was trying to get straight on. In the research revenue area, you guys have talked about, just because of the projects cycle -- ends and starts just timing that there might be a slowdown there. Is that part of what's going on in third quarter?
Joseph H. Capper -- Chief Executive Officer and President
It could be. I mean, look, third quarter is a tough quarter to forecast, because you don't know how long summer's going to last. If the summer months do slowdown and in years past, we've had a decent slowdown and kind of pushed late in the third quarter. So we're usually, you know, we try to be a little bit conservative there. And then compounding that is, you know, cycling some of these research studies.
Bill Sutherland -- Benchmark Company -- Analyst
Okay. And last one for me is on, Joe, you had mentioned in the early comments about some investments you're making in the research service area, that would yield some potential, any color you want to get into there, or is it all skunkworks at this point?
Joseph H. Capper -- Chief Executive Officer and President
No. We're actually investing a decent amount of money in infrastructure system enhancements trying to drive more efficiency and its opening will provide more margin down the road. But it's important for us to do that from a capability's perspective and then obviously we're constantly looking for potential add ons for that business to round off the service offline.
Bill Sutherland -- Benchmark Company -- Analyst
Oh, I see, expand the testing areas?
Joseph H. Capper -- Chief Executive Officer and President
Yes.
Bill Sutherland -- Benchmark Company -- Analyst
Okay. I think that's it for me. Thanks. Thank you.
Heather Getz -- Chief Financial Officer and Executive Vice President
Thanks, Bill.
Joseph H. Capper -- Chief Executive Officer and President
Thanks, Bill. Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to Mr. Joseph Capper for any further remarks. Thanks, operator. And thank you, everybody, for your continued support and interest in the company. We will speak to you next quarter.
Operator, that concludes today's call. Thank you very much.
Operator
If you join today's conference late, you may listen to the conference call via digital replay, which will be available through the Investor Information section of the BioTelemetry website at gobio.com until August 13, 2019. Thank you and have a good day.
Duration: 45 minutes
Call participants:
Joseph H. Capper -- Chief Executive Officer and President
Heather Getz -- Chief Financial Officer and Executive Vice President
Brooks O'Neil -- Lake Street Capital -- Analyst
Jayson Bedford -- Raymond James -- Analyst
Eugene Mannheimer -- Sidoti & Company
Mitra Ramgopal -- Sidoti -- Analyst
Bill Sutherland -- Benchmark Company -- Analyst
