iRhythm Holdings, Inc.

Hello and welcome to today's iRhythm Technologies Inc. Q3 2022 earnings conference call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to Stephanie Zadkovich, Director of Investor Relations. The floor is yours. Please go ahead.

Thank you all for participating in today's call. Earlier today, Iberdom released financial results for the third quarter ended September 30, 2022. 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 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. These are based upon our current estimates and various assumptions and reflects management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. These statements involve risks 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. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factor section of our most recent annual and quarterly reports on Form 10-K and Form 10-Q, respectively. filed with the Securities and Exchange Commission. Also during the call, we will discuss certain financial measures that have not been prepared in accordance with U.S. GAAP with respect to our non-GAAP and cash-based results, including adjusted EBITDA, adjusted operating expenses, and adjusted net loss. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional information should not be considered in isolation of, as a substitute for, or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release in 10-Q for reconciliation of these measures that are most directly comparable GAAP financial measures. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 1st, 2022. Either of them 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 Quinton Blackford, Arboretum's President and CEO.

Thank you, Stephanie. Good afternoon, and thank you all for joining us. Bryce Bodzien, our Chief Financial Officer, Doug Devine, our Chief Operating Officer, and Dan Wilson, our EVP of Corporate Strategy and Development, join me on today's call. My prepared remarks today cover progress we've made during the third quarter of 2022 and discuss the near-term growth initiatives for our business. I'll then turn the call over to Bryce to provide a detailed review of our third quarter financial results. Third quarter results demonstrated steady growth with revenues increasing 22% year over year and were up 2% on a sequential basis. As anticipated, typical seasonal slowdowns in the summer months and ongoing staffing challenges impacted registration volumes. Despite this, registration volumes were up 22% year over year, our strongest registration growth of the year, and were up 3% on a sequential basis. Soft volumes in the early part of the quarter lasted longer than anticipated into August, but we saw a nice pickup in September where daily registrations were the highest in the company's history. Despite the encouraging registration performance, we continue to experience ongoing staffing challenges and capacity issues at our customer accounts that impacted volumes. Furthermore, we saw a lower percentage of returned devices, which is what allows us to provide our services and recognize revenue. Within the quarter, our rate of received devices was one to two percentage points lower than our historical averages, primarily driven by staffing and capacity challenges resulting in patients leaving the office with the packaged device to be applied at home. We've seen that the received device rate trends back towards historic rates, but it continued to be lower than prior experience and drove softer revenue realization in the quarter. While we are disappointed that our third quarter results fell below our expectations, we remain encouraged by the health of the business and the demand for our ZO service as demonstrated by our healthy registration rates. On the pricing front, we anticipate the publication of the CMS Medicare position fee schedule for calendar year 2023 that could contain payment rates for the two main CPT code sets related to long-term continuous ECG monitoring and recording that we use to seek reimbursement for the ZOXC service. Following the proposed rule released in July 2022, there was a public comment period that ran through early September 2022 during which we fully participated in the rulemaking process to share relevant information as CMS potentially finalizes rates for calendar year 2023. We hope to be able to share news on this front very soon. Turning to the progress we've made in raising awareness and target international markets, in late August, we attended the European Society of Cardiology, or ESC, to support data presented on the AI awards evaluation with two internationally renowned UK institutions. This is the premier cardiology conference in Europe, and we were encouraged by the positive reception of these data points that effectively demonstrated the operational value of ZO in real-world settings. Data presented by clinicians from Liverpool Heart and Chest Hospital showed that ZOXT had an arrhythmia detection rate nearly three times greater than that of traditional HULTR monitoring. ZOXT also resulted in faster turnaround times, 25 fewer days compared to the traditional HULTR monitors. and was associated with dramatically reduced outpatient appointments by nearly 20%. Data presented by clinicians from BART's Health NHS Trust also showcased the efficiency and accuracy of the Xeo service, demonstrating improved clinical workflows to save them time during management of their stroke patients. Coupling this newly presented data with national guidance for Xeo at its first of its kind with NICE, we are confident that our services provide clinicians with the accuracy needed to diagnose patients more efficiently and effectively at scale. Xeo is an ideal solution for these hospitals to get results faster, improve patient management, and release resources for hospital systems in support of a more sustainable cardiac monitoring service. We look forward to receiving additional data from our other AI ward evaluation sites and sharing those in due course. Also, on the clinical innovation front, we presented at the Heart Rhythm Society for Digital Health, or HRX, in September which was a new meeting for us in alignment with our increasing focus on digital health and AI innovation. This allowed us to highlight our unique platform that represents a competitive advantage within the ambulatory cardiac monitoring marketplace. Data retrospectively analyzed from more than 10,000 patients with syncope indication demonstrated how artificial intelligence using our ZOAT monitor could identify clinically actionable arrhythmias in this patient population, including ACEV, pause in atrioventricular flocks that required physician notification. This study also identified the relationship between 8-bit burden and pause episodes. Patients with a lower 8-bit burden had fewer pauses but of longer duration. As patients with a history of syncope are at a high risk for sudden death and a reported one-year mortality rate of approximately 30%, identification of arrhythmias in this patient population is critical for timely diagnosis and potentially life-saving interventions. We are excited to be able to present data such as these as we continue to advance our AI and algorithms within the Xeo service platform. Lastly, we are excited to have a significant presence at this coming weekend's AHA conference in Chicago, Illinois, which has historically been one of our biggest clinical data meetings of the year. We look forward to sharing the data with you in the week ahead and sharing a steady cadence of data over the coming months in accordance with our dedication to bringing innovative solutions to our patients and our customers. Before turning to Bryce, I'd like to address the change in revenue guidance. While we were pleased with registration growth in the third quarter and expect that growth rate to remain steady into the fourth quarter, we did reduce the revenue outlook for the full year. We now expect revenue to range from $407 million to $411 million for growth of approximately 26% to 27% year over year, down from prior guidance of 29% to 30% growth. As noted earlier, our received device rate, which is what allows us to provide our services and recognize revenue, was lower than expected in the third quarter and continues to be a bit lower than historic averages, resulting in a reduction to our full year expectations. The ongoing reduced received device rate is primarily being driven by physician practices that are having patients leave the office with the device in the box to be applied at home to address capacity challenges. In addition, while registration volumes are expected to step up in Q4, staffing and capacity challenges in physician accounts are negatively impacting the rate of volume growth. Within the month of October, we saw several meaningful new accounts beginning to do business with iRhythm to further full onboarding efforts to late in the quarter as a result of staffing challenges. We continue to be bullish with respect to the momentum that we are making with key accounts in the marketplace, but these staffing challenges are impacting our pace of progress. Finally, coming into the fourth quarter, we voluntarily issued a customer advisory notice to our ZOAT customers. We have updated language related to the precautions in the ZOAT clinical reference manual and important information pamphlet as it relates to the ZOAT patient registration process and ZOAT patient and auto-trigger transmission limits. From experience, these types of customer notices are relatively common in the life sciences space for which we do not expect a long-term impact to the company. However, we have seen reduced growth with ZOAT within the fourth quarter to date. With the customer advisory notice and based on other considerations discussed, we have adjusted our ZOAT forecast for the quarter to grow closer to approximately 20%, which is a step down from the upper 40% growth we had seen through the first nine months of the year. While disappointed in reducing our full-year revenue outlook, we continue to be encouraged by the underlying momentum that is growing in our business, in our ability to overcome these headwinds. Our fourth quarter guidance implies strong year-over-year registration growth and revenue growth well north of 30%, our strongest quarter of the year. We remain confident in the long-term growth trajectory of the ACM market and our ability to capture share. We see significant runway for growth within our core market that we serve today as we continue to shift the standard of care to Zio. And we are committed to developing and implementing innovative solutions throughout all areas of the business, to capitalize on the sizable market opportunities ahead of us. As highlighted during Investor Day, we continue to invest in our mid- and long-term initiatives that will leverage our technology platform in new geographies and across new markets. We look forward to sharing more of our progress in the future. I'll now turn the call over to Bryce to discuss our financials.