Boston Scientific Corp (BSX) 2020 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon, and thank you for joining us for the BioTelemetry Second 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 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 the call, we will present both GAAP and non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is distributed and available to the public through the Investor Information section of the Biotelemetry website at gobio.com.

(Operator Instructions)

It is now my pleasure to turn the floor over to your host, Mr. Joseph Capper, President and CEO of BioTelemetry.

Sir, you may begin.

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.

When we last spoke in early May, we were about 6 to 7 weeks into the economic shutdown, and we were still trying to get a handle on its potential impact on our daily lives and on our business.

At that time, we stated that we had experienced a 30% year-over-year reduction in revenue for the month of April.

We also said that we expected it to be our worst-performing month, with anticipated sequential improvement coming in May and June.

That forecast proved to be quite accurate.

To provide you with an appreciation of how well we are weathering the current challenges, I will start with comments about our second quarter performance and then provide detail about how our strategy continues to drive growth and create new opportunities in our 3 major areas of focus: healthcare services, clinical research and population health management.

Our diversified structure has served us well in the downturn, with approximately 20% of our business largely unaffected by the events of the day.

After my update, Heather will provide more details on our Q2 financial results.

I will make closing comments, and we'll then open up the call for your questions.

Before providing further detail on the quarter, I would like to thank the many dedicated team members at Biotelemetry for the way you have seamlessly adapted while remaining steadfast in your commitment to the health and well-being of our customers and fellow employees.

Your devotion and resolve are nothing short of amazing.

As a result of our organization's teamwork, we are pleased to report the much better-than-expected $99.1 million of revenue for Q2.

The revenue contribution by month as a percentage of the total breakdown as follows: 30% in April, 34% in May and 36% in June, demonstrating consistent growth throughout the quarter.

Moreover, because we quickly implemented certain cost-containment steps at the outset of the crisis, we also were able to preserve much of our earnings power even at the reduced revenue level.

As a result, we are reporting $25.6 million of EBITDA or a 25.8% margin for Q2.

Importantly, we were able to keep our team largely intact throughout the quarter.

Only a small number of employees were furloughed during Q2, and I'm happy to report that they have all since been reactivated.

We are once again at full strength and poised for continued growth.

We also generated more cash in the quarter, ending with an $84 million balance after paying $70 million towards our credit facility.

As we anticipated, our remote cardiac monitoring business, which is driven by physician referrals, was the area of the company most impacted by the economic slowdown.

Office visit data showed the biggest dip in April, down as much as 60% in some areas with a gradual recovery throughout the quarter.

This was consistent with the flow of prescriptions for our monitoring service.

Most encouraging is that by the end of the quarter, both MCOT and extended wear Holter volumes were back to over 90% of pre-COVID levels, a positive indication for the second half of the year.

The revenue stemming from Geneva, research and pop health, which accounts for over 20% of the business, was much less impacted by the slowdown, providing some balance to help weather the downturn.

These diversified revenue streams are the product of our multifaceted growth strategy, which, as you will hear shortly, continue to advance even in the face of the current challenges.

Let me share a bit more detail on each of the 3 main segments of the business and how our leadership position in the connected health market continues to create numerous exciting growth opportunities across the company.

Naturally, our primary focus for the Healthcare Services segment during the quarter was to stabilize the business and adapt where needed.

Having accomplished that, it enabled us to post a solid and productive quarter.

The progression of the recovery is looking more and more like a V-shaped rebound, with MCT and extended wear Holter volume nearing pre-COVID highs.

This is occurring even in the wake of a continued low in doctor office visits and double-digit unemployment rates across the country.

Over the years, as many of you who have followed us know, our primary growth theme has been to continue to solidify our leadership position in the cardiac monitoring market through innovation and strategic investment.

This approach has produced the most technologically advanced and expansive offering in the industry.

It has also led to the acquisition of complementary assets, like the Geneva business, which we purchased in early 2019.

Geneva increased our addressable market by over $1 billion and, for the first time, provided us with a meaningful recurring revenue business.

Driven by the investments in additional sales resources, we continue to add new accounts and active patients to the Geneva platform throughout the quarter.

So far, Geneva has been everything we hoped for and more.

An important part of our growth plan is to add additional recurring or continuous care-related revenue streams to the platform where possible.

To that end, we recently took advantage of an attractive opportunity to augment our continuous care offering by expanding our at-home INR monitoring service, used to help remotely manage patients Coumadin therapy.

As you may recall, we began providing at-home INR testing several years ago as a natural extension to our cardiac monitoring business.

If a patient is not equipped to self-monitor from their home, they must be tested in a clinic or hospital setting, not an optimal solution, especially in the time of COVID.

Since the outbreak, many institutions have been directing patients to providers like us to monitor them remotely, causing an uptick in demand.

To bolster this capability, during the quarter, we acquired a service business from Roche Diagnostics for a modest future royalty, which they had in place to support the use of their at-home INR testing device.

By integrating INR results into our existing physician portal, we will create even greater workflow and data management efficiencies for the thousands of cardiology practices we service.

We will seek to enhance this continuous care offering in order to build on our recurring revenue business.

Also in the spirit of expanding our capabilities, we entered into an advantageous agreement with Boston Scientific to help commercialize their recently FDA-approved LUX system.

As you may be aware, LUX is an insertable cardiac monitor, used for patients requiring long-term cardiac monitoring.

We have long seen ICMs as complementary to our portfolio of short-term externally worn monitoring systems.

Under the terms of the agreement, our cardiac organization will function as a sales agent and is Boston's preferred remote-monitoring partner.

Training and preparation have been ongoing for some time and sales activities are scheduled to begin in the fall.

We view this partnership as an excellent opportunity to further enrich our cardiac offering, and we are honored to be selected by such a high-caliber organization as Boston Scientific to support LUX.

Turning to the research business.

Our commitment to expanding our service offerings and improving our competitive position in research led to a period of accelerated annual growth of over 20% from 2017 to 2019.

At the outset of 2020, we spoke about the research business in terms of a down cycle.

Remember, the revenue flow in this segment tends to be a bit choppy given the nature of deal flow.

Specifically, studies vary in size and length, which results in an inconsistent revenue stream from year-to-year.

As a result, we expected a dip for the full year 2020 and possibly into 2021.

We are now seeing signs of a more rapid resurgence, and all indications are that this period of softer sales may be much shorter than originally expected.

In fact, revenue for the first half of the year was above our expectations inspite of COVID.

And bookings, which are the leading indicator for sales, were a record high for the first half of 2020, up 34% year-over-year.

Another interesting leading indicator is the number of sites that are qualified for new potential studies.

In June, more sites were qualified than during any month in the previous 2 years, a strong indication of future sales growth.

We also continue to see margin expansion in this segment as a result of our ongoing investments in technology.

In the area of population health management, we have begun to step up our commercial efforts.

As you may recall, we first ventured into this business a few years ago with a small investment.

We then spent time upgrading our technology, building out the capabilities of our cloud-based platform improving our analytics and expanding our service capabilities from diabetes management to a more comprehensive solution.

Given the progress of our internal development efforts and the rapid growth in market demand for these types of connected health solutions, we are now entering the phase of more aggressive commercial activity.

Clearly, one of the lessons being learned in the COVID crisis is that we need to improve the healthcare system's capability for providing care to people remotely.

During the quarter, we deployed additional sales personnel focused on targeted market segments.

We expect these investments to generate results later this calendar year or early 2021.

As we start to see the returns on these investments materialize, we will add more resources as warranted.

In order to accelerate our commercial efforts, we also recently established a multiyear 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 will fully integrate into our current offering.

On.

Demand is a remote patient monitoring and coaching platform focused on diabetes, hypertension and chronic heart failure.

We also become the exclusive provider to Centene Medicaid members currently utilizing or in the process of implementing this platform.

In concert with Centene sponsors, we will market the program to all Centene plans and the rest of their 12.5 million beneficiaries in order to reduce costs and improve outcomes.

We are excited to add On.

Demand to our portfolio in time when connected health solutions are of increasing importance across the health care continuum.

We're also delighted to partner with an organization like Centene, which has demonstrated a clear commitment to improving the lives of so many people and communities.

As our planning progresses, we will share details on what we anticipate will be more substantial, but measured investments in this business.

To sum up, as you have heard today, we were as busy as ever in Q2, executing on our strategy despite managing through the numerous challenges posed by the pandemic.

This speaks to the quality and depth of our leadership team, which I could not be more proud of.

Short of any major setback associated with COVID-19, we expect our momentum to continue throughout the second half.

The additional capabilities we have developed in our cardiac monitoring and research businesses will pay dividends for years to come.

And as importantly, the increased investments we are making in the commercial efforts of our population health management business are designed to develop this segment into another meaningful contributor to our top line growth.

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

Heather?

Thank you, Joe, and good afternoon, everyone.

As Joe just announced, we reset 2020 in the second quarter with $99.1 million of total revenue, down 11.4% versus prior year.

As expected, April revenue was the most negatively impacted by COVID, and from there, we saw sequential growth in May and June.

Healthcare revenue was $84.4 million, driven by patient volume in MCOT and extended wear Holter as well as from a recurring monitoring revenue.

We also received a grant of [$9.7 million] (corrected by company after the call) for a portion of lost revenue due to COVID, which was included in the healthcare segment numbers.

Our research revenue was $11.5 million, benefiting from a higher proportion of longer duration imaging studies.

Lastly, revenue from our corporate and other segment was $3.3 million, resulting from a higher percentage of revenue coming from our digital population health business.

Moving to gross profit.

Our margin for the second quarter was 62.1% versus 62.8% in the prior year period.

The inclusion of the grant funding positively impacted margin by 420 basis points.

Excluding the grant, our gross margin was approximately 58%.

The lower margin is largely attributable to inefficiencies caused by the drop-off in volume in our healthcare segment.

This was partially offset by higher margins in our research segment due to efficiencies created by automation put in place later in 2019.

Our second quarter adjusted EBITDA was $25.6 million, a 25.8% return on revenue.

Excluding the stimulus, EBITDA was $15.9 million or a 17.8% return.

Our EBITDA margin was supported by the flexibility in our business to adjust the cost structure to the 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 returns to pre-COVID levels.

As for our tax rate.

In the second quarter, we had a GAAP tax rate of 22%.

Our year-to-date rate was 39%, which is more indicative of what we expect for the full year 2020.

This higher year-to-date tax rate exceeds the statutory rate, primarily as a result of permanent differences largely due to stock comp that is not deductible when expensed.

Ultimately, we will get a GAAP benefit when the related stock options are exercised.

In terms of cash taxes, we are expecting to only pay about $3.50 million to $4 million in state and local taxes in 2020 due to the use of our federal net operating loss carryforwards.

Moving to our balance sheet.

We ended the quarter with $84 million in cash, an increase of $15.4 million versus year-end.

As previously mentioned, in the 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.

Also in Q2, we paid back the $35 million we drew on the facility in the first quarter, plus an additional $35 million, leaving us with only $158 million of indebtedness, and a debt-to-EBITDA ratio of less than 1x.

Year-to-date, we generated $70 million in cash from operations and used $17 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 infrastructure.

Free cash flow was $52 million, which includes both the grant and Medicare advance.

As a reminder, in January 2020, we refinanced our term debt to an upsized 5-year $400 million revolver with more favorable terms, including lower pricing of about 50 basis points.

The company will benefit from this additional capacity, no set amortization payments and the flexibility to pay down and draw on the facility 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.

Shifting gears, I will now touch on the outlook for 2020.

On our last call, we withdrew our full year guidance and announced that we would be unable to provide specific guidance for Q2 due to the uncertainty surrounding the extent and impact of the pandemic.

At this point in the recovery, we are still unable to provide quarterly or full year guidance.

Our results are still being affected by the pace in which states and localities are opening or reclosing parts of their economies.

That being said, we ended Q2 with MCOT and extended wear Holter volumes at 90% of their Q1 high point and expect our overall business to continue to grow into the third and fourth quarters.

As demonstrated in Q2, 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 sufficient operating cash flow to meet our operating cash needs, along with the added insurance of our credit facility.

We are successfully weathering this storm, and we are confident that we will come out in a healthy position.

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

Thanks, Heather.

As you've just heard, we had a much-better-than-expected Q2, given the challenges posed by the COVID-19 outbreak.

We started 2020 strong out of the gate, poised to shatter expectations.

When the crisis hit, we made the necessary adjustments to scale back our operating cost structure without dramatically changing our capabilities.

These modifications, coupled with our flexible business model allowed us to generate excellent EBITDA margin in the quarter.

Naturally, our primary focus is to guide the company through this crisis as effectively as possible.

As you can see, however, we have not let the current conditions divert us from our growth plans.

On the contrary, we remain quite active on all fronts.

To recap, during the quarter, we generated better-than-expected Q2 revenue and earnings.

We paid $70 million for our credit facility.

We have been experiencing a V-shaped recovery with respect to MCT and extended wear Holter volumes.

We continue to grow Geneva activations.

We acquired Roche's INR service business, expanding the continuous care revenue in our cardiac business.

We partnered with Boston Scientific to help commercialize their new insertable cardiac monitor, broadening our already-comprehensive cardiac monitoring offering.

We experienced record high-growth in our research study backlog.

We added business development resources to the pop health team.

We acquired the on-demand assets from Centene Corporation and entered into a partnership to provide comprehensive pop health services to their members.

At the outset of the COVID-19 crisis, we made a conscious decision to remain as active as possible throughout the economic slowdown and recovery phase.

From today's commentary, it is clear we have done just that.

We now expect to grow into the third and fourth quarters, barring any major changes that would trigger another slowdown.

We also have reason to be extremely optimistic about the longer-term prospects for the company.

This crisis has necessitated rapid change in healthcare, much of which will be permanent.

Regulatory and reimbursement organizations, the traditional obstacles to change have adapted like never before.

The post corona healthcare environment will demand greater access and payment for telehealth and remote monitoring applications.

As one of the largest, fastest-growing and most profitable connected health companies in the market, we could not be better positioned.

With that, we'll now pause and open the call to your questions.

Operator, we are ready for our first question.

(Operator Instructions) Our first question comes from Kaila Krum with SunTrust.

Great.

So first, you guys called out just a grant from lost revenue of about $10 million in the quarter.

This may be just a simple question to start out.

But can you give us a little detail on what this is?

Should we view it as a onetime item going forward?

Just additional clarity there would be helpful.

It was part of CARES Act.

It was geared for Medicare providers.

It was a calculation based on previous year's business.

And it was designed to cover lost revenue in the quarter, which it did, not all of it, but it certainly helped, and it is a onetime event as far as we know.

Great.

Okay.

And then I want to talk about some of the announcements you've made over the last 48 hours and starting with On.

Demand.

Can you just give us a sense for how much revenue that the acquired business generated perhaps over the last 6 to 12 months or so and really how big this business could be for you guys over the next 2 to 3 years?

Just to be curious, if you could talk about that in a little bit more detail.

Yes, this is a really interesting one for us.

We had been dealing with this group for some time as a partner.

And I think between the 2 organizations -- we were partnering with them to help them build up their internal care management program.

I think between the 2 organizations, we came to the conclusion that it was better for us to take over full control for a lot of different reasons, which I won't go into.

But it was just a better setup for us to take over control of the platform.

And so we're in the process of fully integrating it.

We were early on in that.

It was probably a few million dollars worth of revenue so far.

I think the important thing is they had just signed several plans, and we're in early stages of ramping up those plans.

Now how much business could it potentially be?

The plans that are under contract already, I think, amounts to about 3.7 million lives.

And you could run a calculation on that, maybe 8% of them, 10% of them have diabetes.

What percentage we ultimately pull-through to the program is yet to be seen.

And then together, we'll market -- we'll continue to market to their other plans.

And I think in total, it was about 12.5 million lives.

But I think the important thing, though, Kaila, is think about this as probably our first meaningful commercial step.

A few years back, we had acquired technology in this space.

And we, for lack of a better term, sort of put it on the shelf for a year or 2. And then we started to upgrade the technology, build out the platform, add some resources to sales and marketing resources but really kind of incremental steps.

We had other things to focus on with the acquisition of Geneva and a few other initiatives we had in the company.

But we always saw this as a really important segment as the market kind of unfolds, right, and -- or develops.

And the market has developed a lot in the last couple of years, as evidenced by one of the big players out there who's running relatively unchallenged.

So we see it as -- so the cardiac monitoring business, our core business, is a great market, $3 billion, $4 billion worth of total available market.

When you start talking pop health and care management, you're talking hundreds of millions of dollars of potential market.

So this could be really big.

It's a commercial partnership to anchor customer that will help us get started a lot faster, and we anticipate continuing to invest much more aggressively in the commercial side of this business.

We think it can make a beautiful third leg to the stool.

Great.

No, that makes a lot of sense.

And then I want to touch just on the ICM partnership as well because, again, this is another item that we think could be augmented to grow.

So what is sort of the subset of customers?

I think you guys had said in your press release this morning that it would be a subset of your customers that you would act -- or subset of Boston's customer that you'd act as a sales agent for.

Can you just speak to how big sort of that group of customers is, or give us a sense for the size there?

That would be helpful.

I cannot give you an exact number how big that segment will be.

Again, I think if we back up, I think the important point to get across is we're forming a relationship with quality organizations to help them launch what looks like a competitively superior product in the marketplace, and we're happy to be part of that.

We don't have an ILR or ICM in our current monitoring portfolio.

We stop at 30 days.

These are the only products that go beyond 30 days.

So I think working together, we can help them extend the reach of their current sales organization.

They can leverage our relationships.

And frankly, as the relationship builds, more than likely, we'll be able to leverage their relationships.

So I think it's a pretty exciting opportunity.

Got it.

Okay.

And then just, I guess, one last question, and then I'll cut off.

But I -- just in terms of the growth profile of the business, I mean, looking at some of these recent partnerships and opportunities that you guys are investing in.

I mean, are these sort of opportunities, things that could potentially push the growth rate, significantly higher over time?

Just to be curious, how you're thinking about these being sort of additive to the long-term growth profile of the business.

We do.

Yes, Kaila, we do.

We see them as -- all of doing that.

As we've sort of messaged in the past, the business has been kind of a double-digit organic growth company, sometimes a little bit lower, sometimes a little bit higher pre-COVID.

And we were accelerating back to that earlier in the year, January, February, we're seeing those double-digit numbers, and we were kind of getting back into that phase.

We see all these things as accelerators.

Obviously, it will take us a little bit longer to build out the pop health business, but that's probably the biggest market opportunity.

But the other one certainly should help accelerate our growth.

Our next question comes from Brooks O'Neil with Lake Street Capital Markets.

Congratulations on a terrific performance.

I do want to focus first just a little bit on these new opportunities.

So obviously, you have the relationship with Centene, here at the pop health, and you talked about making investments to accelerate the commercialization of that effort.

I'm guessing, but I would like to hear from you guys your opportunity to go to other commercial health plans or friends with United Healthcare, some of the blues, whatever, and how you think about that opportunity developing?

And then maybe whether you see big opportunities in Medicaid and Medicare advantage as well?

Yes, we do.

So Brooks, we already had kind of portfolio of customers or a set of customers that was growing.

Our pop health revenue was increasing outside of the Centene relationship.

So we were starting to get traction.

It was really important for us, over the last few years, to make the service offering as competitive as possible.

So we spent time building out the program, building out the service capabilities.

Now Centene is probably one of our bigger customers, and the partnership has taken on a different type of relationship.

But there are other customers that we currently service and other customers that are growing.

We're having nice early success leveraging the remote patient monitoring codes that Medicare activated in early 2019 and among other, some other tactical activities with the team.

We plan to continue to market and probably market more aggressively within that Centene world and, certainly, without -- outside of the Centene world.

So you'll see us add more resources to this program.

All right.

That's great.

Let me just ask you a little bit about the BSX agreement.

Do you have any sense for why they picked you guys versus your neighbors at iRhythm or Preventice, which I think I remember, they might own 25% of?

I cannot speak to why, but I will just take it as another endorsement of the quality of our service as a best-in-class provider.

We're looking forward to working with them.

Yes.

They're a great company.

Congratulations and keep up all the great work.

Thank you.

Our next question comes from Bill Sutherland with The Benchmark Company.

And sorry about the printer noise, guys.

How's everybody doing out there?

Good.

Thanks.

We're doing good.

Thanks, Bill.

So the On.

Demand business, I'm kind of curious, so you're bringing your platform that you've developed, the BioTel platform to bear on their, on the 3.7 million lives, correct?

There's no -- or is there a technology on demand that you're assuming, and I guess, integrating into what you have?

There was some -- yes, there was some technology more in the coaching side on how they manage the patient base, and that will be easily integrated into our platform.

So -- but you've got the superior technology and analytics and so forth in your mind.

I mean you just have to -- like that's kind of the whole point of this?

Yes.

I think we had developed some nice capabilities together.

And it just -- I think the combination of the 2 was really becoming a formidable offering, but it just made more sense given their focus and our focus, it made more sense for us to take control of it.

Do you -- with what you guys have done, Joe, have you approached mostly other health plans?

Or are you focused more on the self-insured employer market?

I'm just curious where you have gotten traction.

A little bit of traction on a couple of different fronts.

But look, the effort has -- the commercial effort has been relatively limited because of the way we've resourced the business over the last few years.

We think there's opportunities to sell at multiple different levels that the employer helped self-insured market, the payer market -- within the payer market, the Medicaid, Medicare market but also the commercial market, leveraging the RPM codes at the provider level.

Especially if providers are at risk for cost of care, they become wonderful target customers.

So there's ample opportunity.

The important thing for us was to tighten up the offering before we started to really add a lot of commercial resources.

And so will this begin to impact as soon as the current quarter, the third quarter?

And does it begin immediately with monetizing 3.7 million lives with the enormous kind of metrics that these businesses have?

You'll start to see some impact immediately.

It will be small to start out with.

It will take time to pull through lives on those programs.

Okay.

Is the BDX deal an exclusive?

Or are there other sales agents involved?

No, just us.

It's exclusive to us in the U.S.

Okay.

And that will start -- and you said that starts this quarter as well?

Yes.

No, it will -- we probably won't start sales activities until a little bit later in the year, maybe a fall time frame.

Okay.

And then, Heather, would you mind breaking down the monitoring -- the cardiac monitoring components a little bit for us, whatever size that you'd like to provide or growth -- relative growth?

Yes.

It's -- the MCT -- the percentage of total healthcare revenue, MCT events, is that what you're asking for?

Yes.

Yes.

So MCT is about 66%; event was 11%; Holter was 14%; and what we're calling recurring with Geneva is 9%.

And Holter includes extended?

Correct.

Okay.

What else is in there except Geneva in that other category?

That's why we're including Geneva in our INR business.

So any of the recurring cardiac -- any of the recurring cardiac revenue has always been in that number.

Right.

And all those data points were going to go through the same portal, so we'll commercialize in the same way.

Our next question comes from Jayson Bedford with Raymond James.

Just maybe just to follow up on the last question.

Heather, the percent of healthcare, does that include the grant money?

Or is that backing that out?

That's backing that out.

Okay.

And then just similarly on that, you gave a breakdown of revenue by month percent.

Was that the whole company, or was that just health care ex the grant?

Yes, that was the whole company.

Okay.

When did you see the grant?

I hate to get granular, but...

Yes.

We just -- we spread it over.

We assumed it was spread evenly across the 3 months.

Okay, perfect.

And I apologize, but can you just walk through the math on the Centene agreement?

I was a little unclear as to how many folks are currently utilizing the On.

Demand platform.

We did not share that.

What we said was the current agreements that are in place to their plans amount to about 3.7 million covered lives.

And then from that, you'd have to estimate the number of people that are eligible for the program and then start to sell to those people to try to engage them, enroll them and ultimately retain them to show a good outcome.

Okay.

So it's a subsegment of that 3.7 million that you're targeting.

Correct.

Okay, okay.

And then, I guess, it -- what's the expected revenue contribution from the agreement with Boston?

We didn't put that out.

It's too early to tell.

Okay.

I don't think you mentioned the service business from Roche.

I guess, how big was your existing home INR business?

And then is there any way you can kind of bracket how big this could be for you?

Our own business was a few million dollars of revenue a year.

And I cannot give you that yet.

But give us some time to -- we just took the business over and we want to see what's really there and see what the patient base looks like, see what portion of the patient base is actually testing on a recurring basis.

So we'll have a better handle for it -- handle on it for you soon.

Our next question comes from Mitra Ramgopal with Sidoti.

Just a couple.

First, Joe, I know you mentioned, based on these new initiatives, you plan on aggressing -- investing aggressively.

And I just want to get a sense in terms of what some of these investments might look like as it relates to maybe expanding sales force or technology, et cetera.

Maybe if you can just give us some color on that.

So anything that you would typically see in a commercial plan, sales marketing, studies, technology enhancements, partnership agreements.

It's a business that -- we've come to the point in time where we've said as an organization that it makes sense, right?

We did some of the early investment.

We have all the infrastructure in place to scale the business.

We've made sure it's a scalable platform.

And now we need to start to take it to market.

So all of the above.

And look, I don't want you to think that all of a sudden, we're going to go crazy and make monumental investments.

They'll be measured investments.

But we are focused more on driving top line.

Right.

Yes, I know, for example, with Geneva, you committed the dedicated sales force.

I'm assuming now that digital population is starting to really take off, especially with these new agreements that you probably will have a dedicated sales force for that also.

So yes, just trying to get a sense on that.

But...

You got it.

I guess, yes, the focus will be on the top line.

Also, with the surge you were seeing with COVID in a number of states, based on your comments in terms of the second half, it certainly seems that it's not going to have anywhere close to the impact you probably saw back in April on the business.

I would say from your lips to God's ears, we have not seen it -- that we have not seen our business trend back down.

We were -- we kind of came up very quickly in May and June and July, we've seen some growth but, obviously, at a slower rate because we're starting to get back up to more normalized levels.

Unfortunately for us, from a business perspective, the state is going to be impacted, some of our large states, Florida, Texas, California or similar bigger states.

But so far, okay, right?

We don't know -- it's going to be hard to tell you, as we sit here today, what Q3 will actually look like.

At its current trends, it will look halfway decent.

But Q3 is usually a seasonally soft quarter for us, as you may recall.

With the dynamics of people taking vacation and starting back-to-school, all of that is up in the air, right?

So we're in an unusual seasonal cycle because of this as well.

So that's why we're not -- we're trying -- what we're trying to indicate to you today is that business is trending in a good direction.

We like where it is.

It came back better than we had anticipated.

If it continues along these trends, we'll have a good quarter.

Certainly, we anticipate third and fourth quarter to be better, right?

How much better is just hard to say at this point.

And we're not trying to be coy, we just don't know.

Right.

No, no, that's fair.

And then the cash flow from operations is really strong this quarter.

I was just wondering if there was anything in particular that drove that.

Well, yes, you have -- within the our cash from operations line, you have the advance on Medicare claims, which was $23.7 million.

And then we had the $9.7 million grant.

When you back those out, we still had very strong operating cash flow.

So about half of it was related to that stuff.

Which, going into the quarter, we did not anticipate once this happened.

We think the organization responded really well, and we're able to generate cash.

Right.

Okay.

No, that's great.

And then finally, I don't know if you could maybe give us an update in terms of the reimbursement environment.

No new news.

We're waiting.

The next question comes from Gene Mannheimer with Colliers.

It sounds like you guys have been busy.

Congrats on the quarter.

I wanted to ask if you can disclose how much your MCOT volume declined in Q2 on a year-over-year basis?

I know it was way down in April then bounced back some.

But how do we look at that?

On a quarter-over-quarter -- so versus Q1...

Year-over-year.

Year-over-year, it was about 17%.

Okay.

Good.

That's good.

And the Medicare advance payment that you talked about, why -- can you just tell me why you got that?

And what is the time line to repay that?

Yes.

So that was something that was offered to all companies who had prior billings with Medicare, and it was based on some formula that they used.

And it was just an advance on future claims.

So that is something that will get offset in the future.

We expect that it will start in Q3, or at least that's what they indicated when we received the money, but that could change.

And right now, it's sitting as a liability on our balance sheet.

Okay.

Good.

Great.

Helpful to understand that.

And just so I'm clear, on the business with Boston Scientific, what is their share of the ICM market today?

And are you going to leverage your IDTF to monitor patients that are wearing that LUX monitor?

And does this deal compromise anything that you're doing on the Geneva side with respect to monitoring Medtronic implantables and the like?

No, the Geneva platform is an impartial platform, hence the name.

We do not show a preference to one device over another.

And this is -- we do hope that we have preferential treatment with the LUX system moving into the Geneva platform, but we'll see.

And really, this was an opportunity to leverage our sales organization to help them get a more rapid launch of that product.

The product is just FDA approved.

So I believe their share is next to 0.

And our next question comes from Alex Silverman with AWM Investments.

So the vast majority of my questions have been asked and answered, with the exception of, we're seeing lots and lots of articles about cardiac damage related to COVID.

Wondering if those are some of the studies that you were alluding to, ramping up that you're being -- that your devices are being used for.

We are being used in some studies around COVID.

I don't know if it directly pertains to what you're talking about.

And we have seen those same studies about long-term impact -- the potential long-term impact cardiac-related to patients that had COVID.

But nothing significant that I could share with you other than our devices are participating in some of those studies.

Okay.

And are you seeing physicians at this point prescribing any of your devices to monitor post-COVID patients?

No, not post.

We saw kind of a spike up of utilization around COVID early on because MCOT has a specific FDA indication for use when trying to detect problems with the QT interval, which is one of the potential side effects of one of the medications.

But we haven't -- not that I'm aware of.

We haven't seen a whole lot of post-COVID monitoring yet.

And we have a follow-up from Brooks O'Neil with Lake Street Capital Markets.

Once again, we have a question from Brooks O'Neil from Lake Street Capital Markets.

Sorry, I was on mute guys.

I apologize.

I think Joe said, you guys expect to grow in the third and fourth quarter.

And I was just curious if you're talking about sequentially or year-over-year?

Yes.

I'm comfortable saying sequentially, not a big risk, but -- given what we're seeing.

But I would -- I was stopped short of saying year-over-year at this point.

Brooks, it may well be.

If we see the trends continue, we will.

But I'm not making that prediction at this point, given all the activity.

And I'm showing no further questions in the queue at this time.

I'd like to turn the call back to the speakers for any closing remarks.

Thanks, everybody, and thanks again for your continued support and interest in the company.

We will speak to you after our next quarter.

Operator, that concludes today's call.

Thank you.

Ladies and gentlemen, thank you for your participation on today's conference.

This does conclude your program, and you may now disconnect.