iRhythm Holdings, Inc.

Hello and welcome to today's iRhythm Technologies Inc Q2 2023 earnings conference call. My name is Bailey and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Stephanie Zadovich. Please go ahead.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the second quarter ended June 30th, 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 include 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 Factors 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 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 10Q for reconciliation of these measures to their most directly comparable GAAP financial measures. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 3, 2023. IREM 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 Quintin Blackford, Iberdom's president and CEO.

Thank you, Stephanie. Good afternoon, and thank you all for joining us. Bryce Bobzien, 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 business updates during the second quarter of 2023 and progress we've made against our growth and operational initiatives. I'll then turn the call over to Bryce to provide a detailed review of our financial results and updated guidance. In the second quarter of 2023, we realized continued growth across multiple channels and built on the solid momentum we saw in the first quarter of 2023. We recognized record quarterly revenue of $124.1 million in the second quarter, which was ahead of our expectations and represented 22% growth compared to the prior year. These results were driven by continued strong volume from both ZOXT and ZOAT as we continued to see near record levels of new account openings, opened additional large national accounts, continued to gain traction within the primary care space, and increased our market penetration within existing accounts. Fueling this growth was a continued market shift away from the short-term halter usage towards long-term continuous monitoring, as well as ZOXT outpacing the growth of an expanding ACM market. The second quarter was also the first full quarter that Camelot data was available for our commercial teams to use in the field. The clinical value of ZOXT versus other modalities and brands is resonating with our customers, driving account wins, and impacting account retention. While early, payers are also responding positively to Camelot data and it is influencing payer policies, including recent successes where previous utilization of halters or prior authorization requirements for long-term ECG are now updating their policies and removing these requirements. Full manuscript publication of the Camelot data in a peer-reviewed journal is in process. We are also beginning to expand into additional analyses of these real-world data to further demonstrate the clinical value of the Xeo services to patients, physicians, payers, and healthcare systems. We are also making meaningful inroads with driving EHR integrations, which are intended to allow for an administratively simpler process and integrate Xeo into existing workflows of our customers and their staff. Through incredible cross-functional efforts by our internal teams and great collaboration with our customers, we achieved a significant milestone this past April with one million all-time registrations for the Xeo services received through EHR-integrated accounts. We believe this has translated to an estimated 175,000 hours of time back to our customers' staff to support patient care, in which we project may have saved health systems an estimated $4 million in staff time cost. The pace of EHR integration at both new and existing accounts has only accelerated throughout 2023, with the total volume of registrations through EHR integration up more than 60% year over year. We are very excited to continue this progress and to continue developing innovative solutions for our customers as we strive to serve millions more patients within the coming years. As we move into the back half of 2023, we also are eagerly awaiting the upcoming Xeo Monitor launch later this quarter to provide our next-generation device for our best-in-class long-term continuous monitoring service. We believe that, compared to Xeo XT, this thinner, smaller, lighter, more breathable device can improve patient compliance and diagnostic yield as a result of extended wear times. Initial real-world data from the first 673 patients who wore XeoMonitor were presented at ACC this past March, and the first market evaluation phase was concluded in May, with the XeoMonitor being used by 6,000-plus patients over a 12-month period. The market evaluation data confirmed the findings from ACC and showed that, when compared to XeoXT, XeoMonitor showed an increase in patient compliance and diagnostic yield, as well as delivering the same high-quality service. As we move into full commercial launch, we are planning a purposeful rollout strategy designed to support our customers and patients with the best-in-class service they have come to expect from iRhythm. To do this, we are implementing a phased rollout that allows us to bring availability of XeoMonitor to patients as quickly as possible while making sure that we transition away from XeoXT in a measured fashion. We look forward to sharing additional details with you in the months ahead. Turning to additional pillars for iRhythm's long-term sustainable growth, we've recently hit several milestones essential to strengthening our international presence. In Japan, we are thrilled to announce that we were granted High Medical Needs designation by the Japanese Ministry of Health and Welfare, or the MHLW, in early July. Worth noting, this designation is specific to Zio, giving us a differentiated position in this large market. As a reminder, Japan is the second largest ACM market in the world with 1.5 million ACM tests prescribed annually. Japan still utilizes the Holter monitor as a standard of care with very limited adoption of patch-based technologies, resulting in a very attractive point of entry for Xeo as a disruptive, innovative technology and service. By working closely with the Japanese Heart Rhythm Society, our teams did an exceptional job using Xeo's extensive clinical trial evidence and differentiated AI to help the MHLW appreciate Xeo's clinical value when compared to the existing Holter standard of care. Following this designation, we submitted our Shonin application for regulatory review in July. Importantly, the designation enables priority review for marketing authorization by the Japanese Pharmaceutical and Medical Device Agency, or the PMDA, and it also paves the way for potential premium pricing specifically for Xeo in Japan. We will continue to work closely with the PMDA during the review of our Shonin submission and look forward to updating you on the progress in future quarters. In Europe, we were also pleased to announce that we have opened our first market evaluation engagement in Switzerland with early onboarding of one of the country's five university hospitals. This initial engagement will allow targeted healthcare providers to experience the Xeo service in preparation for a broader commercial launch in the future. As shared in our strategic plan at our investor day last September, this market priming phase represents the initial steps of our international growth plan to accelerate access to long-term cardiac monitoring to more patients worldwide as we gain experience with regional reimbursement dynamics in parallel. While we are hyper-focused on execution within our growth pillars, I've also been pleased with the progress made to drive operational excellence throughout the organization. enhancing our financial profile and preparing to scale the business for future growth. We achieved a significant milestone in our Global Business Services Center in Manila during the quarter as we welcomed the first wave of full-time employees. We've been very pleased with the progress made in our ongoing business transformation activities as is being demonstrated by the nice improvements in our financial profile this quarter. Lastly, as previously disclosed, we received a warning letter from the FDA on May 25th, which focused on our ZOAT system and the alleged nonconformities related to medical device reporting requirements and quality system requirements. Since receipt of the warning letter in late May, we have engaged with the FDA and submitted a thorough response. We have been encouraged by the collaborative engagement with them and believe we have now clarified with the agency the labeling modifications that are needed to improve the user's understanding of the ZOAT system and how the device is used for the provision of ambulatory mobile cardiac telemetry services. In addition, we have proposed enhanced design features to the product that further address areas of focus while also following the FDA's direction to work with the CDRH product review team regarding changes that occurred under Letters to File and the potential need to submit a 510 as a catch-up for changes to the ZOAT system. While we understand the FDA continues to review our responses, we are pleased with the progress and will continue to work collaboratively with them to address their concerns. While always subject to change until the review is completed, we've agreed to make the requested labeling changes that will allow us to continue to market ZOAT as a device for ambulatory MCT services. We remain committed to our customers, patient safety, quality, and compliance, and we will continue to work diligently and collaboratively to resolve the warning letter to the FDA's satisfaction. Considering the proposed design enhancements and other commitments related to the ZOAT system, we do expect our original timeline for the submission of our next-generation ZOMCT system to be impacted. Based on current estimates, we anticipate ZOMCT to be delayed by approximately 12 months as we work through the product modifications for ZOAT and potential regulatory filing requirements, resulting in a 2025 market introduction of our next-gen ZOMCT system. Given the additional time, our strategy regarding the ZOMCT system enhancements has shifted such that we intend to move directly to ZOMCT 2.0 by pulling additional product design features into our initial submission that we had previously planned for a later generation. We will continue to evaluate options to expedite our product timelines and ensure that we can bring innovative technologies to market as quickly as possible. In closing, I could not be prouder of the iRhythm team. The teams have remained focused and committed to the goals that we laid out at the beginning of the year despite the potential of being easily distracted and have achieved outstanding results to date. We delivered tremendous growth in the first half of 2023 and are making the necessary investments into the business to continue driving growth through multiple levers in an operationally efficient manner. We continue to believe that the global ambulatory cardiac monitoring market will grow significantly in the coming years, and we are well positioned to capture our share of this sizable opportunity ahead. We've never been more excited about the future of our company. With that, I'll now turn the call over to Bryce to discuss our financial performance.