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BioTelemetry Inc (NASDAQ:BEAT)
Q3 2020 Earnings Call
Oct 29, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentleman, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on hold. Thank you for your patience. Good afternoon. Thank you for joining us for the BioTelemetry third quarter 2020 earnings conference call. Certain statements during the conference call and question-and-answer period to follow may relate to future events and expectations as such constitute forward-looking statements within the meaning of the Private Securities and Litigation Act of 1995. Such statements involved are known and unknown risks, uncertainties and other factors, which may cause the actual results, performance and achievements of the company in the future to be materially different from the 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. Our 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 sector of the BioTelemetry website at gobio.com. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation.

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. With me for today's call is Heather Getz, our Chief Financial Officer. I hope you all remain in good health and spirits as we continue to navigate the significant challenges presented by the COVID-19 pandemic. Let me just say what a difference this quarter makes. During our last call, we like some of the other companies were reporting on an exceptionally challenging second quarter and although we rose to the challenge and the business had begun trending in the right direction, there was still a great deal of uncertainty about how much impact the pandemic will end up having on Q3 performance. As it turns out, we had a very strong rebound and it looks like we are in the midst of a much welcome V-shaped recovery. As a result, it is my pleasure to report on an exceptional third quarter during which we exceeded our expectations and recorded our highest quarterly revenue in the history of the company. Even more encouraging is that the business continues to trend upward into the current quarter.

Barring any widespread COVID-19 related pullback, we are bullish about our prospects for the remainder of the year and given the steps we have taken to dramatically increase the size of our addressable market and prepare for future growth, the prospects for the company have never been better. So on today's call, I will start with highlights from the quarter followed by details on the three major growth areas of the company. Healthcare services, clinical research and digital population health management. After my update, Heather will provide more details on our Q3 financial results. I will make closing comments and we will then open up the call for your questions. As a result of our organisation's focus and outstanding execution, we are pleased to report Q3 revenue of $115 million, well above expectations. This represents a slight increase over the same period last year, and more than a 28% sequential increase when you set aside the new $10 million of stimulus money received in Q2. During the period, we continue to work our way through the pandemic as efficiently as possible reporting adjusted EBITDA of over $30 million or 26.7% of revenue, up approximately $15 million sequentially, again adjusted for the stimulus. We generated $63 million of free cash flow year-to-date finishing the quarter with a cash balance of over $90 million net of one-time inflows and outflows. This represents an increase of approximately $28 million in cash year-to-date.

We made excellent progress advancing our various strategic initiatives and partnerships across the enterprise with a focus on integrating the recently acquired Roche and Centene assets. We also continue to evaluate other interesting corporate development opportunities with the intent of advancing our strategy. The multifaceted growth plan we have filed for the past several years has produced a diversified revenue mix, which was instrumental in mitigating the impact of the COVID-19 related downturn. With our team back to full strength and the business performing at pre-pandemic levels, we are poised for another record setting year in 2021 during which we anticipate top-line growth of over 15%. Our leadership position in the connected health market continues to create numerous exciting growth opportunities across all three parts of the company. We are also making investments in horizontal digital platforms for device management, big data processing and user engagement. These digital platforms standardize the core capabilities used by all of our business lines in order to support high growth and optimize our cost structure. During the quarter, we experienced an excellent resurgence and our Healthcare Services division. As you will recall, our primary growth being for this business over the years has been to continue to solidify our leadership position in the cardiac monitoring market to innovation and strategic investment.This approach has produced the most technologically advanced and expansive offering in the industry. It has also led the acquisition of complementary assets like the Geneva business, which increased our addressable market by over $1 billion and for the first time provided us with a meaningful recurring revenue business.

As such, we are now talking about this division in two broad areas, our traditional remote cardiac monitoring business driven primarily by MCOT and extended wear Holter and our continuous care, but we carry revenue business anchored by the Geneva platform. Our new remote cardiac monitoring business performed incredibly well, especially against the backdrop of the market at large. Our primary data for measuring market dynamics disposition office visits or more specifically cardiology office visits. During the third quarter, cardiology office visits were down on average 18% versus the same period last year. Additionally, access to offices remains somewhat inhibited due to COVID-19 related restrictions. Given these factors, we might expect demand for our cardiac monitoring services to track in a similar pattern. On the contrary, our volume in this business performed better than expected and was up over the prior year. What would cause MCT and extended wear Holter to perform so well. To appreciate this trend, I think it will be helpful for me to again explain the capabilities of and differences between these two modalities. As there seems to be some confusion and misinformation in the market around this topic. Both service lines present tremendous benefits to the cardiology market, but they are quite different. As a reminder among extended wear ECG analysis options Mobile Cardiac Outpatient Telemetry Systems also refer to as MCOT or MCT, are the only digitally connected, wireless near term remote monitoring options available today. The BioTelemetry MCOT has always been and remains the category leader in this market.

The proprietary algorithms embedded in our systems are second to none. As evidenced by numerous peer-reviewed studies, MCOT consistently produces levels of specificity and sensitivity that are unmatched by any other system. To our knowledge, MCOT remains the only remote monitor capable of detecting laser, but 30 seconds, with 100% specificity. When a physician needs the highest possible diagnostic yield and the fastest turnaround time, MCOT is the preeminent choice. Because MCOT is a digitally connected wireless platform, the monitoring is performed continuously and remotely, an ideal solution, especially in a COVID-19 environment which helps explain it's above market performance. Extended wear Holters while convenient and less expensive than MCT, do not encompass any of these features. Extended wear Holters are not digitally connected nor are they wireless monitors. Their ECG recorders, which must be returned and physically downloaded so the data can be analyzed. Because of the extended wear time of up two weeks, they are an ideal upgrade from a traditional 48-hour Holter and an excellent complement to MCOT, our longer-term digital monitor. The ePatch which is our extended wear Holter is FDA approved for 14 days and incorporates several competitive advantages.

For example, ePatch can be configured to record on up to three channels, by definition, making it clinically superior to competitive products limited to only one channel. The system includes detection classification for 18 arrhythmias as well as frequency, onset, duration, and burden. It is also the most flexible device in terms of wearability with both patch and lead wire configuration options. As many of them are aware, the proposed physician fee schedule for 2021 published in summer including great news for the extended wear Holter business. Specifically CMS proposed permanent code and national pricing for extended wear Holters. This action demonstrates that the parties involved in the process HRS, ACC, RUC, CMS, etc., clearly appreciate the value of this service provides to the cardiology market. We commend them for their efforts. Due to the unique and beneficial attributes of each, we expect both the connected MCOT and non-connected extendable wear Holter service lines to have a BOB market growth for the foreseeable future and we continue to invest in the infrastructure necessary to support this growth. Our horizontal digital platforms, in short, scalability, quality and efficiency across all service lines. For example, we recently launched a cloud platform for an Internet of medical things or IoMT and have been adding capabilities to our artificial intelligence data processing engine. The IoMT platform is hosted on Amazon Web Services and is currently managing all MCOT device connectivity and communications. The artificial intelligence engine has improved MCOT data processing speed by 45% since its launch.

In the continuous care portion of our Healthcare Services segment, we continue to add new accounts and active patients to the Geneva platform throughout the quarter and integrated the at-home INR testing service that we acquired from Roche in the second quarter. As a result, our continuous care revenue grew an impressive 126%. Our plan is to develop additional capabilities to the platform in order to further enhance our recurring revenue streams. Also, in the spirit of expanding our capabilities, we continue to work during the quarter in preparation for the launch of the recently announced collaboration with Boston Scientific. As a reminder, our role in this partnership is to help commercialize their recently FDA approved LUX system, which is an insertable cardiac monitor used for patients requiring long-term cardiac monitoring. We have long seen ICM's as complementary to our portfolio of shorter-term externally worn monitoring systems. In terms of the agreement, our cardiac organization will function as a sales agent as Boston's preferred remote monitoring partner. We look forward to the start of the collaboration in the fourth quarter. Moving into 2021, we are again expanding our sales organization by another 15% to 20% in order to support the myriad of growth opportunities already present and those being cultivated at the company. Turning to the Research Division. This is another part of the business where we continue to experience excellent progress.

On our last call, I highlighted margin improvement as a result of our ongoing investments in technology and our record high growth in bookings of over 30%, which is our best indicator of future growth. As a result, we had a better-than-expected third quarter in a poised to finish the year at an upswing. Additionally, the strength of our bookings and backlog will lead to at least 10% growth in 2021 short of any unexpected events. We're also poised on the business in the long term given the trend toward decentralized or virtual clinical trials, which play to our strength. As the name suggests, decentralized clinical trials make use of technology to monitor more and more study participants in remote settings requiring less in offices, this is where Telehealth meets Research and with COVID-19 as an accelerant, this far more efficient cost effective way to manage clinical trials is expected to grow rapidly over the next few years. One large CRO recently predicted that by 2025, 80% of all trials will include some amount of virtualization. As the leading provider of remote monitoring technology and services, we welcome and expect to benefit from such a transition. In our digital population health management segment, the outlook continues to brighten. During the third quarter, our focus was on integrating the care management assets recently acquired as part of the Centene partnership which we discussed on our last call. As a reminder, this multi-year partnership with Centene Corporation, a large health insurance company. As part of the agreement, we acquired Centene's population health management solution branded on demand which we are integrating into our current offering. On demand, there is a remote patient monitoring and coaching platform focused on diabetes, hypertension and chronic heart failure. We also become the exclusive provider of Centene Medicaid members currently utilizing or in the process of implementing this platform. In concert with Centene's sponsors, we will market the program to all Centene plans and the rest of their 12.5 million beneficiaries.

We have also spoken about additional sales personnel that were added earlier this year to focus on targeted market segments. This group is in the process of building a robust pipeline of opportunities and we are already on the brink of adding a second large anchor account with Centene like potential. We are in the initial phase of what could turn out to be a large commercial build up to compete in this multi-billion dollar domestic market. Clearly one of the lessons being learnt from the COVID-19 crisis is that we need to improve the Healthcare Systems capabilities for providing care to people remotely. With the growing prevalence of chronic diseases, remote monitoring will be essential to lower costs and improving care. As we start to see the returns and our investments materialize, we will add more resources as warranted. To sum up, despite the numerous challenges posed by the pandemic, we remained focused on Q3 executing our strategy and building capabilities across the enterprise. As a result, we surpassed all of our expectations. We are rebuilding momentum in the core business and in capabilities and increasing investments in all segments of the company. We expect the combination of these factors to further the growth of business for many years to come.

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

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Thank you, Joe and good afternoon everyone. As Joe just announced our recovery from the impact of COVID-19 continue in the third quarter with $114.7 million of total revenue, up 15.7% sequentially from the second quarter and 3% versus prior year. Excluding the $10 million of stimulus money received in the second quarter, sequential growth was 28%. Healthcare services revenue was $98.5 million, a 5% increase versus prior year driven by volume and MCOT extended Holter and continuous care. Our research revenue was $12.1, down 15% versus prior year due to the close out of large studies and the delay in new study starts. Lastly, revenue from corporate and other was $4.1 million, up 28% versus prior year, resulting from an increase in our digital population health business, partially offset by a decline in direct product sales. Moving to gross profit, our margin for the third quarter was 60.2% versus 62.3% in the prior year period. The lower margin is largely attributable to inefficiencies caused by lower fixed cost absorption and negative payor mix primarily in healthcare and the inclusion of the lower margin revenue from Centene and Continuous Care businesses.

This was partially offset by higher margins in our Research segment due to efficiencies created by automation put in place later in 2019. Our third quarter adjusted EBITDA was $30.6 million, a 26.7% return on revenue. Our EBITDA margin was supported by the flexibility in our business to adjust the cost structure to be appropriate level in response to the demand for our services. We struck a balance between removing excess cost and ensuring we were appropriately staffed as volume returned to pre-COVID levels. As for our tax rate, we have a year-to-date GAAP tax rate of 38%. This exceeds the statutory rate primarily as a result of permanent differences, largely due to stock comp that is not deductible or an expense. Ultimately, we will get a GAAP benefit when the related stock options are exercised. In terms of cash taxes, we were expecting to pay only about $3.5 to $4 million in state and local taxes in 2020 due to the use of our federal net operating loss carry-forward. Moving on to our balance sheet, we ended the quarter with $90.2 million in cash, an increase of $21.6 million versus year-end. As previously mentioned in the second quarter, we received a grant of $9.7 million that does not have to be repaid and in advance of $23.7 million for Medicare claims, which will be offset against future payments starting in 2021. Also in Q2, we paid back the $35 million we drew one the facility in the first quarter, plus an additional $35 million, leaving us with only $158 million of indebtedness and debt to EBITDA of less than one-time. Year-to-date, we generated $91.4 million in cash from operations and $28 million for capital expenditures.

These expenditures were driven by purchases of our MCOT and extended wear Holter patch devices as well as for capitalized software and hardware as we invest in our IT infrastructure. Free cash flow was $64 million, which includes both the grant and the Medicare advance. As a reminder, in January, we refinanced our term debt to an upsized five year $400 million revolver with more favorable terms, including lower pricing of about 50 basis points. The company would benefit from this additional capacity, most set amortization and the flexibility to pay down and draw on the revolver, while maintaining access to the capital. We currently have approximately $240 million of unused capacity and remain well positioned to fund our business and growth opportunities. As a result of this refinancing, we saved almost $1 million in interest and fees so far this year. Before commenting on our outlook, I wanted to touch base on accounts receivable. Consolidated DSO was about 69 days, this is higher than our previous averages for a number of reasons, some temporary and some permanent. The most significant factor is that in 2019, Medicare changed the requirements on the timing of billing. Previously, Medicare allowed us to bill for a patient after one day of service, now we are required to wait until the service is completed. This change added about ten days to our DSO. This will be a permanent increase, other factors impacting DSO are temporary.

The main drivers here are relating to on boarding new businesses that are growing fast, such as Geneva and Centene. These businesses added approximately eight days to our consolidated DSO. Through ongoing integration efforts, we will continue to work to bring down the DSO in these businesses as we have already begun to do. Shifting gears, I will now touch on the outlook for 2020 and 2021. At this point in the recovery, our results may still be affected by the pace in which states and localities are opening or reclosing part of their economies. That being said, we feel we can give directional guidance to the fourth quarter of 2020 and the full year 2021 assuming there are not drastic changes in access to care. MCOT and extended wear Holter exited the third quarter at above three COVID highs and in October, we are trending to a highest monthly volume ever. As a result, we expect our overall business to continue to grow sequentially into the fourth quarter to between $117 and $120 million. As Joe mentioned, in 2021, we are expecting 15% plus top line growth driven by several services including MCOT, extended wear Holter, Continuous Care and digital population health. Any rate headwind from the lower conversion factor in the physician fee schedule will be more than offset by the benefit of the proposed extended wear Holter pricing. In addition, we are investing heavily in sales and marketing resources in order to drive these top line results.

Please keep in mind, this guidance assumes the Medicare proposed rule goes into effect as it is currently written. As demonstrated during the pandemic, our business is flexible in terms of our ability to quickly adjust the cost structure to the appropriate level in response to the demand for our services. We believe we will continue to have plenty of cash to meet our operating needs along with the added insurance of our credit facility. We are successfully weathering the storm and we are confident we will emerge healthier than ever before.

I will now turn the call back to Joe.

Joseph H. Capper -- President and Chief Executive Officer

Thanks Heather. As you've just heard, we had an excellent third quarter. We are fortunate to be experiencing a recovery, that is more rapid than we originally anticipated. When the crisis hit, we made necessary adjustments to scale back our operating cost structure without dramatically changing our capabilities. This approach coupled with our flexible business model have allowed for the more V-shaped recovery we are experiencing, leading to a third quarter in which we recorded our highest quarterly revenue in the history of the company. We are expecting a strong close in the fourth quarter followed by a record setting year in 2021 with anticipated top line growth of 15 plus percent. To ensure our continued success, we are laser focused on managing our way through continued effects of a pandemic with employee and customer safety at the forefront of all activity. Expanding the healthcare services sales force by another 15% to 20% in order to drive sustained double-digit growth. Launching the Boston scientific collaboration, adding to the research backlog and setting the foundation necessary to capitalize on market trends toward decentralized clinical trials.

Expanded commercial activities and investments in our population health management business accelerating investments in our digital platforms in order to expand the IoMT to all devices across all business lines, add 3rd-party device connectivity, add additional machine learning to the AI engine, and extend user engagement with new reports and simplify workflows to improve the digital experience on our portals. And we will continue to manage the allocation of our resources in a highly efficient manner to which we have become accustomed leading to quality revenue growth and additional free cash generation. This to-do list exemplifies a company on the move with numerous current and future opportunities. We have transformed our top line, making it more diversified, including new recurring revenue streams. We offer current and future customers an unmatched array of solutions, which lends itself toward establishing deep loops within each account. And we continue to innovate to ensure we can address the market needs of today and well into the future. As a result, we have good reason to be extremely optimistic about the prospects for the company.

As I stated in the past, this crisis has necessitated rapid change in healthcare, much of which will be permanent. The post COVID healthcare environment will demand greater access to telehealth and remote monitoring solutions as one of the largest fastest growing and most profitable connected health companies in the market, we could not be better positioned to capitalize on these trends. As I close, I would like to thank the entire BioTelemetry team for your unwavering commitment to the many people who depend on your work to keep them healthy. Their dedication and deep spirit of caring, are just some of the qualities that make this such a great company.

With that, we will now pause and open the call to your questions. Operator, we are ready for our first question.

Questions and Answers:

Operator

We have our first question coming from the line of David Saxon with Needham. Your line is open.

David Saxon -- Needham -- Analyst

Good afternoon. Joe and Heather, and thanks for taking my questions. I guess I'll start on the 2021 commentary, I mean 15% growth that's pretty good. And you mentioned Research should grow at least 10%. So just wondering how should we think about healthcare with all the drivers you have there and then also on how significant do you think the population health management platform could be with Centene and then potentially this other customer you might sign on.

Joseph H. Capper -- President and Chief Executive Officer

So two parts really. To talk a little bit about the overall growth of 15%. We feel really good about that. This is typically the quarter because we're not going to talk until late in February, this is typically the quarter we give sort of some high level directional guidance for 2021 and then we'll refine it as we get into the new year. And obviously, we've done a lot of work with what 2021 is going to look like, given the trends of the business and given what we have in our pipeline, we feel pretty comfortable with that number in, I think you're a little newer to the story David, but some of your counterparts probably know our approaches tend to be a little bit conservative as we approach these types of projections, so I know it's as much color as I can give you and I feel pretty good about it. Unlike all the trends I see in the business, our research is an easier one to predict because it's more backlog oriented, so 10% profits, we're really comfortable with that and then you asked a little bit about pop health.

That's a small portion of our business, but it's our biggest TAM by a long shot and we've made a lot of progress in setting the foundation for growth, partnership with Centene and some of the other ones that we have on the brink could really help accelerate that growth. So I would think about that in terms of, yes, starting on low revenue, but that's revenue that should double year-over-year for the next couple of years. So you can start to see what you'll see, good growth in 2021. If my prediction is right, will double in 2022 will probably double in 2023, and you're going to start to see a real meaningful contribution. It's just a gigantic market, David.

David Saxon -- Needham -- Analyst

Yeah, yeah. Right, OK. And then I guess just sticking with the pop health. Can you talk about the level of success you've had so far with penetrating. I think it was the initial 3.7 million kind of Centene beneficiary pool?

Joseph H. Capper -- President and Chief Executive Officer

I don't think we have shared that number, it's in it's early stages, we just really started to just run with it this quarter. A lot of success, we like the way it's going. It's going according to plan.

David Saxon -- Needham -- Analyst

Okay, thanks so much for the questions.

Joseph H. Capper -- President and Chief Executive Officer

Thank you.

Operator

Our next question coming from Kaila Krum with Truist Securities. Your line is open.

David Rescott -- Truist Securities -- Analyst

Hey, this is David Rescott for Kaila. Thanks for taking my questions. So first I wanted to dive a little bit more into the dynamics on the guide for 2021. So what sort of visibility, I guess, do you have both in the Q4 and the 2021. Really as we kind of play kind of some of the factors that you mentioned going forward, with a lot of these popping up over the past three months or so such as the potential headwind from MCOT rate decline and the overall shift in the business from traditional Holters and the extended wear monitors, how did that rate increase in the extended wear business and now that you start to layer in some of the contribution from the recent acquisitions and the ICM distribution agreement.

Overall, I guess what kind of gives you that confidence in the 15% number with all these playing in? And then the second part to that question, how is the company really thinking about maintaining or gaining share as that conversation opens up around shifting the traditional Holters toward the extended wear monitors and is there a specific percentage of that traditional Holter business that the company expects to shift toward the extended wear market to ultimately drive that growth?

Joseph H. Capper -- President and Chief Executive Officer

Yes. So, David, I think you answered most of it for me. You highlighted the major drivers. We're seeing growth in MCOT. We're seeing substantial growth and extended wear help culture even without the duration of the permit CPT one code the national pricing. We're seeing huge growth with our pop health business. There is great visibility with it through our Research business, although the research is smaller, we have really good visibility into with access to account starting to reopen. We're starting to see more activity around Geneva. So remember, we're still early at that platform and that's a platform whose revenue we anticipated with double for the first couple of years as well and we were right on track to do that and we'll probably still be in close to that even with COVID for this current calendar year.

So all the things that you talked about are what's driving the business. I can't parse it out for you in detail in terms of how much is coming from each because there's a lot of different scenarios. But if we weigh the benefits and risks and we go through a variety of different potential scenarios, we're pretty darn comfortable with that number.

David Rescott -- Truist Securities -- Analyst

Okay, that's helpful. So yes, the second one from me, touching on some of the kind of recent announcement that came rate right around a report that second quarter call. So first on the on-demand. I was wondering if there is any updates around that pricing or go-to-market strategy for that business in that? And second within the ICM business. Are there any early indications around how that business can really contribute to growth in 2021 and 2022? And then when you think about that with the Geneva and the partnership you have with Boston, aAre there really any type of synergies between these two businesses that we should expect to impact of business over time just with both of those kind of being under Boston Scientific business?

Joseph H. Capper -- President and Chief Executive Officer

I talked about on demand again owning the first couple of months. So, I can't put numbers on it for you, but it's going pretty much as we anticipated. The ICM market, we haven't started that collaboration yet in terms of synergy, I do expect some because of the Geneva platform. I think once our organizations are working together and collaborate in the field, we'll see more pull-through of device monitoring onto the Geneva platform. So for me, that was one of the things that was most exciting about the collaboration. Yes, we think the device itself is very complementary to our current portfolio of products, we think, extending the offering in those accounts where we have had great access is a plus to those accounts, but for us we think it is going to be a significant pick up on the Geneva side.

David Rescott -- Truist Securities -- Analyst

Okay, thanks. Thanks for taking the questions and congrats on the quarter.

Joseph H. Capper -- President and Chief Executive Officer

Thanks. Thanks David.

Operator

Our next question coming from the line of Jayson Bedford with Raymond James. Your line is open.

Jayson Bedford -- Raymond James -- Analyst

Hi, good afternoon and congrats on the quarter. I had a few questions. So I guess first, Heather typically kind of give us a little idea as to the healthcare breakout between kind of event Holter, extended Holter Geneva. Do you care to do that for the third quarter here?

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Sure. So MCOT was about 62%, event was about 1, our total Holter was 14, and our reoccurring was 14 and that has a healthcare obviously.

Jayson Bedford -- Raymond James -- Analyst

Right, OK. And just on the recurring or Continuous Care, you mentioned 126% growth, I think, year-over-year. Can you just break out how fast Geneva grew?

Joseph H. Capper -- President and Chief Executive Officer

Well, I can't in the quarter. Let's take another look at that both contributed a lot, both grew. Obviously the INR portion grew because it was mostly in our business. But Geneva again, was on track to double year-over-year. It was not quite at that rate in the quarter obviously because of COVID and the slower new account activations, as a result. But we still had new account activations and we are still starting to see that accelerates. So I think both grew sequentially and nicely year-over-year.

Jayson Bedford -- Raymond James -- Analyst

Okay and then just a couple of other ones. Joe, in referring to the cardiac monitoring business earlier you mentioned that you'll have above-market growth for the foreseeable future. Just so we're all on the same page, what is market growth? because I have a difficult time sometimes capturing that number.

Joseph H. Capper -- President and Chief Executive Officer

Yeah, Jayson we did too. So Frost & Sullivan puts up data on market size data. There is other ways to kind of get out you can extrapolate through various sets of claims data and then we use-- we often use physician office visits as a proxy especially to tell us which direction the market is moving and believe it or not our business has trended kind of in that direction over time. This is the first time you're seeing a major departure from that. We have rebounded -- our cardiac monitoring business has rebounded at a pace much faster than we're seeing in the IQVIA data for cardiology office visits. I highlighted that in my talking points that on average cardiology office visits were down 18% and our business did very well. So you also noted that the market is going to grow naturally a certain amount and in the past that would be a couple of percent to 3% or 4%. And then historically, we have our business has grown anywhere from kind of 8%, 12% in that range.

And when I say our business I'm speaking primarily about MCOT, it is grown kind of in that in the round that 10% plus or minus a couple of points. You're going to see higher growth in that in the category, because if MCOT business maintains that type of growth which we anticipate it will, the extended wear Holter business is growing at a much, much higher rate. Of course, it's of a smaller base of volume, but now with national access to reimbursement, we think that that's going to grow even faster and we allocated a lot of resources to capitalize on that.

David Rescott -- Truist Securities -- Analyst

Okay. Okay, that's helpful and then just maybe my last one here. Appreciate the visibility into revenue in 4Q in 2021 just as it relates to 2021, you care to provide any brackets around EBITDA margins, and if not just any instruction on kind of spending levels as we look to 2021, you did mention the expansion of the sales force.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Good question. Yeah, yeah. So Jayson, we're not going to give specific guidelines to the process of going through our budget now, but as Joe has mentioned in the past and we talked about, we are investing pretty heavily in those sales and marketing resources, as well as our IT and R&D infrastructure, so you are going to see some investment there and so we, while in the past, we may have had some significant EBITDA margin accretion, it may be at a slower pace, but we're not in a position yet to provide that exact number.

David Rescott -- Truist Securities -- Analyst

Fair enough. Thank you.

Operator

We have our next question coming from the line of Eugene Mannheimer, Colliers Securities. Your line is open.

Eugene Mannheimer -- Colliers Securities -- Analyst

Thanks, good afternoon. Congrats on a great quarter. In light of the tough backdrop here, you cited Joe and Heather that you had strong MCOT orders despite cardiology visits that were down pretty meaningfully. So I'm assuming some of that's coming from virtual visits. So can you give us a sense of the split of MCOT prescriptions, to the extent you have it from Telehealth visits versus in office in-person visits?

Joseph H. Capper -- President and Chief Executive Officer

I don't Eugene. I will tell you kind of directionally, pre-COVID, it was probably 70% in office, 30%, this is a high level, 70-30 in favor of in-office that flip, the 70-30 in favor of kind of telehealth initiated visits and then it started to work its way back. In either case, it is seamless for us to procure at ordering and servicing a patient whether or not, whether the patient is initiated in an office visit or patient is initiated to the Telehealth visit, it doesn't matter to us, but we did see a trend back pretty quickly, which I was surprised about.

Eugene Mannheimer -- Colliers Securities -- Analyst

Yeah, that's impressive and if you think forward, if COVID begins to resurge and we see shutdowns, your business will be impacted, but you have the benefit of the Telehealth prescriptions to cushion you somewhat. Is that fair to say?

Joseph H. Capper -- President and Chief Executive Officer

It is.

Eugene Mannheimer -- Colliers Securities -- Analyst

Okay. And then next guys, if you could opine on your view of the likelihood that the final rule for extended Holter reimbursement plays out in line with the proposed rule, when we get that decision in early December. What is the likelihood of that?

Joseph H. Capper -- President and Chief Executive Officer

Oh Eugene. I can't opine on that and I can tell you, we're fingers crossed, we're hopeful, we think that there is a lot of work that went into it obviously and we like the fact that it's got permanent CPT coding structure. I think that is authenticating the fact that the product line is here to stay. So I know that there is some noise and chatter around where the price will ultimately end up, I don't have an opinion on that. We're hopeful that the proposed rates are adopted as proposed.

Eugene Mannheimer -- Colliers Securities -- Analyst

So the guidance or the general growth outlook, you gave for next year is predicated on the pricing being consistent with where the proposed rule came out.

Joseph H. Capper -- President and Chief Executive Officer

So I would say that we took into account all known factors and out of our own risk adjusted our own as well and you know how we approach these things. So things could move in different directions. There is some pressure to have the conversion factor on MCOT delay, which could be upside. So we have looked at it from several different angles risk adjusted it and we're comfortable with 15 plus percent.

Eugene Mannheimer -- Colliers Securities -- Analyst

Very good. Thank you.

Joseph H. Capper -- President and Chief Executive Officer

And I would not characterize that as a disproportionate amount of our growth coming as a result of any rate increase.

Eugene Mannheimer -- Colliers Securities -- Analyst

Okay, excellent. Thanks.

Operator

We have our next question coming from the line of Michael Polark with Baird. Your line is open.

Michael Polark -- Baird -- Analyst

Hey, good evening. Joe and Heather. Thanks for the question. Maybe some cleanups to the prior questions for the third quarter. I'll just ask more directly the contribution to revenue from these small acquisitions in the third quarter. Do you have a sense for what that was, Roche plus the small amount of Centene.

Joseph H. Capper -- President and Chief Executive Officer

No, I don't think that we think we brought them out.

Michael Polark -- Baird -- Analyst

Okay. And maybe a follow-up to Jayson's earlier question about framing margin for next year. I hear the comments about investing in sales force to support the growth in IT and R&D efforts, I hear all that, I guess, just as a comparator would you feel better if we anchored 2019 as kind of a normal rate of margin for your business or given that 2020 is an abnormal year and your margin will be down because of the pandemic disruption, but when we consider the glide path for margin, is it best still to anchor to 2019 as kind of the durable rate and then from there we can triangulate what a profitability level looks like in a 15% growth business or would you have us anchor to have 2020 might ultimately look.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Yeah, I would anchor the 2020 simply because, we introduced said Geneva became a higher percentage of our business. We introduced additional INR business and Centene all of which have lower growth and bottom line margin businesses. So that's actually incorporated to some extent into our Q3 numbers and that actually had a larger impact on our year-over-year decline in gross margin percentage relative to inefficiencies caused by lower fixed cost absorption.

Michael Polark -- Baird -- Analyst

Yeah. that's good helpful, Heather. Thank you. And maybe the last one for you as well. You mentioned in your prepared remark V holding these PFS reimbursement proposals constant assuming no change as a part of the final rule but holding a constant the headwind from the unfavorable adjustment to conversion factor is offset by the -- more than offset by the extended wear Holter rates. What is that, could you put a finer point on that math. How does it shake out on a net basis or maybe frame up each of the two parts, so that if and when December rolls around and there is some variance that we need to absorb, we'll have something to anchor to.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

At this point in time though because as Joe mentioned, we ran various scenarios and we're comfortable with that 15% if something changes and would increase or decrease that number in a significant way before January, we will of course talk about that. So if December cost out and it's just wildly different than anything we would have expected and we'll change that number, we will talk about it.

Joseph H. Capper -- President and Chief Executive Officer

Which is not in the historic practice of Medicare. I think it's important to stress that. The practice has not been to vary dramatically from the proposed schedule.

Michael Polark -- Baird -- Analyst

I appreciate that. Do you think there's a chance they punts and you know, take some more time to figure all this out.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

That's one of the possibilities, but we don't know.

Joseph H. Capper -- President and Chief Executive Officer

We don't know.

Michael Polark -- Baird -- Analyst

Okay. Last one actually. So I used to follow CRO, so I know the concept of bookings backlog and burn rate fairly well. What is the when you book a study, but sort of kind of average study duration of that project 12 months of revenue visibility, 24, how do you, how do you experience that historically?

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

It actually varies between the two segments, imaging tends to be longer so you'll get over 12 months and cardiac tends to be shorter so they tend to be in the 12 month and under range. So it actually depends but overall there are north of 12 months.

Michael Polark -- Baird -- Analyst

Thank you very much.

Operator

We have our next question coming from the line of Mitra Ramgopal with Sidoti. Your line is open.

Mitra Ramgopal -- Sidoti -- Analyst

Yes, hi, good afternoon. Thanks for taking the questions. Actually, just wanted to follow up on the sales force expansion, I know, Joe, you talked about 15% to 20% in 2021, just trying to get a sense of what love year ending 2020 with and also with the hiring we're going to focus on any particular area, just pretty broad based with Boston Scientific, INR, Centene, etc.

Joseph H. Capper -- President and Chief Executive Officer

Yeah, we definitely need more feet on street given the opportunities in the cardiac monitoring business. So that 15% to 20% is adjusted output and again I think now the expense of how we finished this year and if where our staffing level is at the end of this year, you'll see more growth. This is a process, it's already under way. So it's something that we knew was coming for a while. As we've talked about more opportunities for the team to capitalize on. So we're probably in 2021 at some point all in with account executives and then the people who are specialists in certain areas and probably north of 140, 150 people we ended 2019 with 115 to kind of give you that color on the amount of growth there. And that doesn't include people that we're adding on the pop health side so that's another area as Heather indicated, these are early years for some of these opportunities so we are funding.

Mitra Ramgopal -- Sidoti -- Analyst

No, that's great and then quickly, just, again, given the environment, is it any easier to be able to expand the sales force?

Joseph H. Capper -- President and Chief Executive Officer

I have not heard dramatic change from my team so I don't know if it's a whole lot easier or a whole lot harder.

Mitra Ramgopal -- Sidoti -- Analyst

Okay, that's fair. Again, well I know actually a great nice quarter. Thanks for taking the questions.

Operator

We have our last question coming from the line of Bill Sutherland with The Benchmark Company. Your line is open.

Bill Sutherland -- The Benchmark Company -- Analyst

Thanks so. Hey, guys Great work here in 3Q. On the rate change with MCOT, is that MCOT alone or does that also include Event and Holter, the conversion factor.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

So the conversion factor applies to everything on the physician fee schedule. So, yeah, but there's offsetting impacts of event and Holter with the RV use.

Bill Sutherland -- The Benchmark Company -- Analyst

So RV use on all of it right or MCOT?

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

On event, it went down.

Bill Sutherland -- The Benchmark Company -- Analyst

Okay, so RV use on MCOT and Holter went up?

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Yeah, that's right.

Bill Sutherland -- The Benchmark Company -- Analyst

Offset by the conversion factor, although RV use went up in advance as well or not?

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

No, they went up in MCOT and Holter and they were down slightly in event and what I was saying is the impact of the change in the RV use plus the conversion factor give us offsetting factors for Event and Holter, it's neutral there when you add the two together.

Bill Sutherland -- The Benchmark Company -- Analyst

Okay and the rates in MCOT to the other payers, kind of follow along with what Medicare is doing in a given year.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

No not necessarily. So we do when we forecast account for some type of halo effect, but now it's not so, it doesn't extrapolate to all of MCOT business.

Bill Sutherland -- The Benchmark Company -- Analyst

Okay. That's helpful. That was just a cleanup question. That's all I've got. Thanks.

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

Great. Thanks, Bill.

Operator

There are no further questions at this time, I will now turn the call back over to Mr. Joseph Capper.

Joseph H. Capper -- President and Chief Executive Officer

Thank you and thanks everybody, thanks for your continued support and interest in the company. We will speak to you, some time in February. Operator, that concludes today's call.

Operator

[Operator Closing Remarks].

Duration: 54 minutes

Call participants:

Joseph H. Capper -- President and Chief Executive Officer

Heather Getz, CPA -- Executive Vice-President, Chief Financial and Chief Administrative Officer.

David Saxon -- Needham -- Analyst

David Rescott -- Truist Securities -- Analyst

Jayson Bedford -- Raymond James -- Analyst

Eugene Mannheimer -- Colliers Securities -- Analyst

Michael Polark -- Baird -- Analyst

Mitra Ramgopal -- Sidoti -- Analyst

Bill Sutherland -- The Benchmark Company -- Analyst

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