iRhythm Holdings, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the iRhythm Technologies, Inc. Q1 2020 Earnings Conference Call. At this time, all participants' lines are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press PAR and then the number 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require further assistance, please press star and then the number zero. I would like to hand the conference over to one of your speakers, Ms. Lee Salvo of Investor Relations. Thank you. You may begin your conference.

Thank you all for participating in today's call. Joining me are Kevin King, CEO, Matthew Garrett, CEO, and Dan Wilson, EVP Strategy, Corporate Development, and Investor Relations. Earlier today, iRhythm released financial results for the first quarter ended March 31, 2020. The copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, those statements related to the impact of COVID-19 on our business, expectations for economic recovery, market expansion and penetration, productivity improvements, reimbursement, release of clinical data, operating trends, and our future financial expectations, including revenue, gross margins, profitability, and operating expenses, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events and materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent annual and quarterly reports on Form 10-K and Form 10-Q, respectively, with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 7, 2020. Irithin disclaims any intention or obligation, except it's required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Kevin.

Thank you, Leigh. Good afternoon, and thanks for joining us. Before we begin the discussion of our results and outlook, I'd like to take a minute to express our deep appreciation to frontline healthcare professionals that have been working tirelessly to fight the COVID-19 battle. We are truly grateful for their dedication and compassion. They give us high confidence that when we get through this pandemic, we will be even stronger. I would also like to thank the entire iRhythm team. I am impressed by their enduring spirit and commitment to our customers and their patience. It's a testament to the resiliency of our team that we were able to quickly transition to a remote operating environment while continuing to deliver our ZO service without disruption. It's an honor to work alongside such a great team. Over the course of our prepared remarks, I'll cover Q1 highlights, provide our observations on current market dynamics, and recap our priorities in the face of the COVID-19 pandemic. I will also provide commentary on what we are experiencing so far this quarter, how we are managing our business today, and positioning for recovery long-term. Matt will cover our financial results for the first quarter in more detail before opening up to questions. Starting with our first quarter results, we had an exceptionally strong start to the year. Strong adoption of our single ZO platform was ahead of our own expectations by almost all measures through the beginning of March. A strong ramp of ZOAT and our focus on large systems drove sustained high Salesforce productivity. We saw continued pull-through of XT in accounts that launched AT, and we had strong growth from both new and existing accounts. The components of our near-term and mid-term strategy remain sound, and we expect these to continue to drive expansion of our business as the recovery takes hold and in the longer-term post-recovery environment. Beginning in March, we began to see a significant impact on our patient registration patterns. As we are all highly aware, unprecedented changes emerged in the healthcare landscape that made it necessary to prioritize treatment for critically ill patients and limit the spread of COVID-19. Patients were encouraged to avoid hospitals and stay at home except in most extreme circumstances. Elective nonessential procedures were canceled or deferred and diagnostic tests outside of those related to severe respiratory illnesses were largely unavailable. Most physician offices closed or reduced to minimal hours for essential procedures. These factors began to significantly impact our patient registration patterns starting the week of October 16th. Total revenue for the first quarter of 2020 was $63.5 million, an increase of 31% compared to the same period in 2019, and 8% sequential growth over the fourth quarter of 2019. As Matt will detail further in his comments, we estimate the impact of COVID-19 on our first quarter revenue was approximately $2 million. Revenue for the quarter would have been $65.5 million, representing a 36% growth compared to the same period in 2019. We're extremely pleased with our quarterly results and the momentum we have in the marketplace. At the onset of COVID-19 pandemic in mid-March, iRealm began implementing initiatives that were focused on three key priorities. Our first priority is focused on protecting and supporting the health and well-being of our employees, our communities, and our customers by limiting the potential transmission of COVID-19. Following recommendations from federal and local governments and health agencies, we quickly transitioned all employees to a remote working environment. For a small number of our employees who continue to support essential operations at our facilities, have instituted social distancing and other measures to ensure their safety. As mentioned earlier, the iRhythm team was able to transition to this new work environment without disruption to our Xeo service. We continue to follow local and national guidelines to determine the appropriate time to resume in-office functions. Our second priority is ensuring uninterrupted patient care for both Xeo XT and AT and supporting efforts to monitor COVID-19 patients. COVID-19 has been associated with significant atrial and ventricular arrhythmias, and COVID-19 infected patients with underlying heart conditions are at high risk for complications. Our digital service platform enables physicians to remotely monitor both of these patient populations' heart health. Our single-use and patient-friendly Xeopatch is ideal for virtual model, and eliminates the need for clinical staff to clean and reuse traditional Holter and event monitors, which may lead to exposure to viruses and other pathogens. Another component of our second priority was to support health systems efforts to monitor COVID-19 patients. ZOAT is now deployed in both inpatient and outpatient settings to monitor real-time health of COVID-19 patients. And finally, our third priority is to ensure continued financial strength by adjusting our operating plan. Given the disruption in demand and an uncertain length of time of recovery, we have adjusted our operating plan by taking steps to reduce our operating spend. These steps include eliminating or delaying project spend for non-essential programs, reducing spend on travel and consulting, implementing a hiring freeze, furloughing a select number of employees and implementing varying rates of temporary pay reductions for our salaried sales force. We are confident these initiatives, while not easy, will ensure the company continues to have appropriate liquidity while continuing to invest in the core drivers of our business and our future growth. I'd like to now provide some insights on the trends we're observing thus far. In the last two weeks of March, we saw a significant decrease in patient registrations as shelter-in-place orders took hold and patient visits were canceled or postponed. We began to see a modest recovery in late April and early May, but continued to see suppressed levels of patient registrations. In total, for the month of April, weekly registration rates were approximately 65% of our average weekly registration rates in the first quarter, prior to the impact of COVID-19. While we have seen signs of stabilization and would like to believe the worst may be behind us, it is our belief that we will be at suppressed levels of demand through the second quarter and potentially the remainder of the year. I will share more about our views on the market recovery momentarily. Home enrollment is one component of our complete platform that allows physicians to prescribe ZIO, register patients, view preliminary ZIO data, and post-final reports independent of location and without the need for direct patient contact. During this period, home enrollment has grown to be more than half of our current patient registration volume. We expect home enrollment to remain a relatively high percentage of our total patient registrations well into the recovery period. Home enrollment with Xeo is more than mailing a device to a patient's home. The home enrollment process is extensive It takes slightly longer to complete than Xeo services prescribed in clinic because of the need for iRhythm to remotely take on activities normally performed by our accounts. Our increased responsibilities include confirmation of the accuracy of patient registration information, confirming the application and activation of the Xeo patch by the patient, providing 24 by 7 support services, and ensuring the patient follows the appropriate steps to return the device upon completion of testing, generally after 14 days of wear. In general, the number of days to complete the service is slightly longer for home enrollment. Turning back to ZOAT, we've seen an increased COVID-19 related demand for ZOAT. Hospitals are using ZOAT as patients transfer to outpatient status. freeing up inpatient hospital beds while safely monitoring patients that are at an increased risk of lethal arrhythmias caused by the coronavirus. Hospitals are also using ZOAT in inpatient settings for QT monitoring in instances where there is a lack of available telemetry beds. As it relates to market recovery, we've been doing a tremendous amount of work with our customers to understand the choices they are experiencing. and their expectation for full return of patient demand. The prevailing consensus amongst customers we've interviewed is that they expect to be operating in this COVID-like state for their foreseeable future at least 12 months. Most have formed dedicated recovery teams to shape their plans. All are tethered to state and local guidelines and are in close collaboration with medical societies and related healthcare entities. The main focus for all is on staff and patient safety. New workflows are being developed that require prioritizing patient types and deferrals, establishing procedures for exam room and equipment cleaning after every patient visit and spreading outpatient appointments. Together, these actions are expected to create near-term capacity constraints. To offset these constraints, many are planning to extend hours and add weekend services. We believe the continued use of home enrollment service combined with the benefits of a single-use wearable Xeo sensor will be more favorable alternative than office visits and equipment that requires cleaning between patient visits. In the event of a resurgence in new cases, accounts are planning to use telehealth and virtual workflows to sustain patient care for various levels of acuity. Before closing, I want to provide a quick update on our market expansion initiatives as well as our CPT process. We expect our market expansion efforts to continue with little or no impact on timing. In our collaboration with Verily, our teams continue to make progress on the development of an end-to-end solution, and we recently passed a development milestone that will trigger a milestone payment in the second quarter. While we have paused hiring for roles that were originally planned for the collaboration, the overall timing of the project remains on track. In regards to our silent AF efforts, we continue to expect important clinical data this year from both Screen AF and MSTOPS. And the GARD AF study, which we started with DMS Pfizer late last year, is temporarily on hold, but is expected to restart in the coming weeks. We will also now utilize a home enrollment option. And finally, on our CPT process, we continue to look forward to the July publication of the Medicare Physician Fee Schedule by CMS, which will include the proposed fee for the new permanent code sets. Our expectations on timing and our confidence and views of the ultimate outcome remain unchanged in the current environment. To close, the timing for what would seem like what would be likely a new normal remains unknown. We're closely watching the patterns in the states that have opened up healthcare facilities for deferred procedures and other non-emergency visits. While these are challenging times for all, we recognize the need for high-quality patient care is greater than at any point in our history. Our digital platform enables physicians and patients to access all the capabilities of our proven and complete platform in a virtual environment whether they are using a mobile device, a tablet, a laptop, or a desktop computer. Our single-use Xeo devices are patient friendly and eliminate the need for cleaning traditional equipment. We are highly confident that the strength of our Xeo platform in being clinically proven and operationally complete position us for further market penetration. Our strong start to 2020, our ability to quickly adapt to a predominantly virtual sales and service model and our adjusted operating plan to maintain our long-term growth objectives delivers confidence that we are in the best position possible to continue to gain share for our Xeo service. Moreover, the strategic initiatives that are key to our growth strategy remain unchanged. Increased market penetration with our single Xeo platform, increased operating leverage through continued productivity and automation improvements and expanding our addressable market into new indications and geographies. And with that, I'd like to turn it over to Matt Garrett, our CFO, for a more detailed review of our Q1 2020 financial results. Matt?