iRhythm Holdings, Inc.

Good day and thank you for standing by. Welcome to the iRhythm Technologies Inc. Q2 2021 Earnings Conference Call. At this time, all participants 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 star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Lee Salvo. Please go ahead.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the second quarter ended June 30, 2021. A 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 recovery and processing clinical backlog, market opportunity, product performance, market expansion and penetration, productivity improvements, reimbursement, release of clinical data, operating trends, and our future financial expectations, including revenue, gross margin, profitability, and operating expenses, are based upon our current estimates and various assumptions. These statements involve materialists and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. In addition, we will refer to adjusted EBITDA which is defined as EBITDA excluding stock-based compensation expense. Adjusted EBITDA is a non-GAAP measure that is used to help investors understand iRhythm's ongoing business performance. 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, August 5, 2021. iRhythm disclaims any intention or obligation, except as 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 Doug Devine, Interim CEO and Chief Financial Officer. Doug?

Thanks, Leigh. Good afternoon, and thank you all for joining us. During our prepared remarks today, I'll start with a quick review of second quarter highlights and then update you on progress we are making on our key operating priorities. Dan Wilson, EVP of Strategy and Corporate Development, will cover reimbursement. And then I'd like to welcome Mark Day, our EVP of R&D, to the call to share some of our current Xeo platform advancements and initiatives. After that, I'll close with a more detailed review of Q2 results and our outlook for the remainder of the year. We'll then open up the call for your questions. Starting with Q2 highlights, our results reflected continued demand for our Xeo platform, as well as solid execution on our operating goals by the entire iRhythm team, who are working tirelessly to meet the needs of our physicians and patients. During the second quarter, revenue was 81.3 million, representing a year-on-year increase in revenue of 59.8% and sequential growth of 9.4% over the first quarter. ZOAT had a record quarter, reaching approximately 10% of overall company revenue for the first time. Registrations for our ZO services exceeded our capacity, particularly during the March, April, and May timeframe, which resulted in processing times extending by approximately a week. This led to a higher than usual number of units awaiting clinical processing at quarter end, which limited reported revenue growth in Q2 21 and increase some of our costs. We expect to be back to normal turnaround time by the end of third quarter. We also made continued progress in identifying and planning for cost efficiencies that will be implemented in the medium term. These were outlined in our last call, and I will cover them more a little later. We ended the second quarter with $255.7 million in cash and short-term investments, which highlights the financial strength of the company. Investing for long-term growth remains top of mind, and importantly, we have the financial resources to do so. Lastly, we had two new 510K clearances during the quarter for our next-generation hardware platform and our fourth-generation deep-learned AI algorithm, one for a new and improved design of our Xeo monitor and the second for updating artificial intelligence capabilities. Both are key building blocks for our scalability and operational efficiencies. The new Xeo Monitor is designed to significantly improve patient comfort, while the advancements to our AI capabilities are expected to further improve rhythm and beat diagnostic accuracy. Notably, our new AI algorithm release is already delivering benefits, including contributing to improvements in our unit processing times and our ability to return to more normalized report turnaround times. by the end of Q3. We are pleased with these highlights and also encouraged by the progress we're making on focus areas we discussed last quarter. As a reminder, these include driving continued demand for our Xeo service, leveraging our platform to expand both our market share and our addressable market, making adjustments to our business model that we believe will provide operating efficiencies that will deliver sustainable profitability and growth, and pursuing multiple paths toward reimbursement that are more in line with the benefits and underlying value of our technology. During the second quarter, we continued to see opportunity in the United Kingdom, which again outpaced overall company growth. As you may recall, last September, iRhythm was the recipient of NHS funding as the winner of its Artificial Intelligence and Health and Care Award. That award was recently disclosed to be 4.8 million pounds or approximately $6.8 million and has enabled us to commence trials of our ZEO service in selected sites across the UK. Combined with the NICE recommendation last December, we have seen very strong revenue growth in the first half of this year as we brought new grant sites online. As we move into the execution phase and bring fewer new sites online, we expect revenue growth in the UK to be more measured for the remainder of 2021. Further, we are in the process of building out our operational infrastructure within the UK that can support this future growth and take our learnings and successes from the UK to serve as a playbook to other countries in the future. We are also making progress on our new manufacturing facility, which will house all of our production capabilities starting in 2022 and enable increased scalability and enhanced operating efficiencies in the medium term. And on product development and innovation, as we've highlighted in the past, iRhythm has long established its ongoing commitment to improving the patient and provider experience demonstrated by our significant investments in next generation capabilities across our diagnostic platform. The two new 510 clearances we announced during the quarter are great examples of this work. Overall, we're very pleased with the financial and operating results in the second quarter and remain focused on continuing to make progress on our priorities over the remainder of 2021, including with regard to our priorities on reimbursement, which Dan will discuss. Dan?