iRhythm Holdings, Inc.

Hello and welcome to the iRhythm Technologies Inc Q1 2023 Earnings Conference Call. My name is Lauren and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I will now have you over to host Stephanie Sadkovich, Director of Investor Relations to begin. Stephanie, please go ahead.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the first quarter ended March 31, 2023. 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 reflect 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 US 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 and 10-Q for reconciliation of these measures, the most directly comparable GAAP financial measures. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 4th, 2023. 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 Quinton Blackford, iRhythm's President and CEO.

Thank you, Stephanie. Good afternoon and thank you all for joining us. Bryce Bobdeen, our Chief Financial Officer, and Dan Wilson, our EVP of Corporate Development and Investor Relations, join me on today's call. My prepared remarks today cover progress we've made during the first quarter of 2023 and discuss the growth initiatives for our business. I'll then turn the call over to Bryce to provide a detailed review of our financial results and updated guidance. In the first quarter of 2023, we continue to build upon the solid momentum we had exiting last year, recognizing revenue of $111.4 million, or 21% growth year over year. Our commercial team did a terrific job building upon the discipline and rigor introduced in the back half of last year to capture key strategic wins, driven by a continued push into primary care, as well as increasing penetration into large and national accounts. The outperformance in the quarter was driven by the strength of our ZOXC business, fueled by better than expected volume and another record quarter of new account openings. Additionally, we were pleased with the performance of a return device rate for the quarter, as well as the performance of our ZOAT business, which grew 21% year over year on a revenue basis, both in line with our expectations. Encouragingly, growth during the first quarter came from across the business as we saw strong contributions from all regions, deeper penetration in our existing accounts, and a record number of both new accounts and new prescribers. Volume from cardiologist prescribers grew nicely during the quarter, while contributions from primary care continued to outpace overall company growth. The interest in veal from primary care physicians continues to grow, evidenced by the significant and growing interest from large national primary care networks. We continue to believe that the primary care channel will be a nice lever for growth as we are in the very early stages of a significant market expansion opportunity. And lastly, we saw continued growth from our large blue chip accounts as our differentiated commercial strategies to drive further penetration into these valuable partners continues to deliver. Our ability to deliver value across the continuum of care by quickly and accurately detecting arrhythmias for benefit of patients by enabling better clinical outcomes and even more important in today's environment by improving healthcare resource utilization has resonated with our various stakeholders as we aim to deliver on our mission. Supporting this continued growth is a steady drumbeat of positive clinical data that continues to demonstrate Zio's value proposition and competitive differentiation in the marketplace. The Camelot data released at ACC in March was truly game-changing for patients, customers, and ZioXT in particular. This was the largest and most contemporary world-world comparative effectiveness analysis of ambulatory cardiac monitoring, retrospectively analyzing the ACM experience of nearly 290,000 diagnostic-naive patients. Compared to all other ambulatory cardiac monitors, Camelot demonstrated that long-term continuous monitoring with ZOXT was associated with the highest diagnostic yield and the fastest time to clinical diagnosis, the lowest likelihood of retesting, and the lowest acute care healthcare resource utilization. With the data now in the hands of our commercial teams and the payer relations team, we are excited to further demonstrate how consequential it can be to choose the right monitoring service the first time. As one example of the impact we are starting to see from Camelot, the Value-Based Care Council, or VBCC, of the National Association of Managed Care Physicians, or NAMCP, has validated through an independent third-party review of evidence that ZOXD contributes value to health systems and payers. The NAMCP offers educational materials, evidence-based tools and resources to help medical directors from purchasers, plans and provider systems to make effective and informed decisions. The Value-Based Care Council is composed of medical directors and chief medical officers from around the country who have experience and knowledge about value-based care, along with corporate members from the industry who share these interests. In their final report, after an objective review of ZOXT claims and evidence, they showed that the value proposition for ZOXT is credible and objective related to diagnostic yield, analyzable wear time, detection of many types of arrhythmias, lower likelihood of retesting compared with other monitoring types, improved clinical out times, and decreased time to diagnosis. Additional details and full results of this important collaboration will be announced at a later date. We believe Camelot data demonstrates that ZOHD should be the gold standard for long-term continuous monitoring. But we also believe that the commercial release of our ZO monitor represents an improvement to the already high bar we've set for ourselves. In addition to its inconspicuous profile, the pliability of the new Xeo Monitor allows for comfortable wear and is designed to improve patient compliance and satisfaction. Initial real-world and clinical experience data with Xeo Monitor, also presented at ACC, demonstrated high patient compliance with the potential to extend wear times in the future. Fourteen-day data from 673 patients wearing Xeo Monitors demonstrated higher compliance, and higher-quality ECG compared to ZOXT, while 30-day extended-wear monitoring yielded additional clinical findings beyond 14 days. Post-clearance evaluations of ZO Monitor showed consistent and even improved performance compared to ZOXT, with potential to greatly improving monitoring and decision-making for more complex patients. We continue to expect the full launch of ZO Monitor later this year, with the new platform providing significant product optionality into the future. As we continue to drive towards realization of opportunities for future growth, we are just as committed to driving growth in a scalable, sustainable manner. As mentioned on our last earnings call, we established a global business services center, and we are working toward ongoing business transformation activities to position the company to maintain patient satisfaction, scale globally, and perform more efficiently. We have hired a dedicated GBS leader along with a team that is now in place and anticipate opening our Manila office during the second quarter. During the first quarter, we also announced internal restructuring to better align the organization to pursue our strategic objectives and to drive operational efficiency, alignment, and focus. This allows us to increase the pace of organizational execution by realigning many functions in the business to create synergy, enabling our groups to work more efficiently, and to scale more quickly. We look forward to how this will continue to elevate our ability to serve millions more patients as we continue our rapid growth. Furthermore, our commitment to operating as responsible corporate stewards was highlighted in a recently refreshed ESG report released in April. This report and the excellent work by so many around the company that it represents reflects the elevated focus our organization has on ESG matters and reconfirms our commitment to growing responsibly and sustainably for the benefit of patients, customers, communities, employees, and the environment. Our company profile and the nature of our products dovetails nicely with ESG initiatives, be it the reusable, recyclable profile of our Xeo device, our continued emphasis on equitable access to care, or our unwavering commitment to patients in the communities which we serve. But this report is also a nice example of the governance mechanisms we've put in place over the past year to embed ESG policies and initiatives into our operations as we continue to transform the company. We look forward to communicating progress against our roadmap in the future as a continued driver of long-term value creation for our stakeholders. Before turning to Bryce, there's one final item on which I'd like to comment. As we will disclose in our 10-Q file today, after the quarter closed on April 4th, we received an inquiry from the Civil Division of the U.S. Department of Justice seeking information and documents regarding the company's products and services. Our teams are working on responding to the DOJ's inquiry and we will fully cooperate with the department's request. At this point, we are very early in this process of engaging with them and it's too early to speculate on the precise motivations behind their inquiry or any anticipated duration of the engagement. As we have more information, we will be sure to provide the necessary updates. In closing, we remain bullish on the business for 2023 and beyond. Continuing on the solid momentum of late 2022, we have begun the new year in a very strong position to drive continued growth in our core business and making the investments necessary to transform the company. We believe that we are well positioned to capture the opportunities ahead while efficiently scaling our operations and have never been more excited by the future that we see in front of us. With that, I will now turn the call over to Bryce to discuss our financial performance.