iRhythm Holdings, Inc.

Hello and welcome to the iRhythm Technologies Inc Q3 2023 Earnings Conference Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. On our hand I open to your host, Stephanie Zadkovic, Director of Investor Relations. Please go ahead.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the third quarter ended September 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 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 factors section of our most recent annual and quarterly report 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 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, November 2nd, 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 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 third quarter of 2023 and progress 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. Third quarter 2023 results reflected continued execution across multiple channels, building on the solid momentum our teams drove in the first half of 2023. Revenue of $124.6 million in the third quarter of 2023 was in line with our expectations, representing growth of 20% year over year, and came from continued traction within the primary care space, market expansion within existing accounts, and sustained volume growth across all service lines. The strength of our core business continued as we realized another quarter of record registrations and volume from new accounts at near record levels. Within the quarter, we were excited to have launched our new Xeo Monitor platform, the largest launch in the history of our company. This included the eagerly anticipated Xeo Monitor patch that builds upon the already best-in-class product of Xeo XT, together with a new MyXeo 2.0 app and an enhanced onboarding experience for our patients and providers. I'm incredibly proud of our teams and the efforts that went into making this a reality, but we know that our work is just beginning. Adding to the excitement of this recent launch is the great momentum in the business, together with exiting the third quarter with our new account pipeline, the fullest it has ever been. Importantly, volume growth was well balanced across our specialty groups, but we were particularly encouraged by the strong contributions from the primary care channel. As a reminder, we have approached the opening of this channel in two manners, one of which is increasing the prescriber base in large enterprise health systems that already had robust cardiology and electrophysiology utilization, and the other is by partnering directly with large national primary care networks. The early effect of these efforts has resulted in registration growth from this channel moving faster than our other specialty channels and continues to confirm our belief that a tremendous opportunity exists to more broadly open the primary care space. Encouragingly, we have started to see examples within large national primary care networks where customers are beginning to proactively monitor their patient populations and patching appropriate patients who meet certain risk criteria, such as the end-stops criteria, and who may benefit from early identification of arrhythmias. In some cases, we have seen these large national primary care accounts begin to expand their initial inclusion criteria based upon the early success of their ZEO adoption and the high diagnostic yields within their targeted populations. In support of this, we are proud to announce that the results of the M-STOPS cost-effectiveness study have recently been published. This was an independent external investigator-led health economic analysis of AFib screening from the M-STOPS trial. The study was previously shown that two weeks of continuous monitoring with ZOXT led to the detection of more AFib and was associated with improved clinical outcomes at three years. This new analysis models the health economic value over the lifetime of the patient and found that proactive monitoring for AFib in individuals prescribed zeo patch monitors over the three-year period was associated with high economic value based on willingness to pay thresholds. Clinically, we believe that earlier detection of AFib or other undiagnosed arrhythmias could lead to earlier institution of AFib interventions. including ablation and rhythm control, not just stroke prevention, and avoidance of downstream adverse events such as progressive heart failure. We estimate that approximately 25% of the Medicare Advantage population may be at risk for asymptomatic AFib or other clinically actionable arrhythmias, and we believe that it is only a matter of time until monitoring initiatives such as our Know Your Rhythm program are more widely considered and adopted over time. Additionally, we continue to make meaningful progress with payers who continue to recognize the value of monitoring with Xeo for their patient populations. During the third quarter, we saw influential payer updates that were driven by Camelot data that has continued to highlight the clinical utility of long-term continuous monitoring as a modality in Xeo XT more specifically. In one example, a large national payer removed the need for event monitoring as a prerequisite for MCT coverage and instead identified long-term continuous monitoring as a step-through for MCT in the case of AFib. They also now allow for 14-day-long continuous monitoring as a step-through to implantable loop recorders. To date, payer updates that we believe have been influenced by Camelot could impact over 16 million covered lives in the U.S. going forward. and are an important recognition of the value that long-term continuous monitoring brings for patients and healthcare systems alike. Moving to product innovation, as previously mentioned, we achieved a significant commercial milestone in September with the launch of our next-generation Xeo Monitor Patch, our next-generation long-term continuous monitoring platform, and enhanced Xeo service. XeoMonitor is gradually replacing XeoXT through our ongoing phased rollout, and the platform continues to build upon the high-quality performance of XeoXT that our customers and their patients have come to expect from iRhythm. XeoMonitor is 23% thinner, 62% lighter, and 72% smaller compared to XeoXT. The updated form factor was designed with patient comfort in mind and has supported 99% patient compliance with prescribed wear times. This improved patient experience has translated to higher device return rates and lower patient complaint rates compared to Xeo XT. We have heard anecdotally that patients love the sleekness of the new monitor for ease of wear while accounts have enjoyed a streamlined registration process in their workflow. In combination with our advanced AI, efficient workflow for clinicians, updated patient and prescriber apps, and actionable clinical reports, we believe the new Xeo monitor launch has meant that the best just got better. As part of the launch of the upgraded Xeo Monitor, we also released the next version of the MyXeo patient app, MyXeo 2.0, which is focused on enhancing the patient experience. The updated app includes a refreshed user interface, as well as new features like easier symptom logging, educational videos and content, and a redesigned help center to better address patient questions. We know that patients who use the MyXeo app on average log two times more symptoms than patients who do not use MyXeo, and we believe that more symptoms logged means improved symptom rhythm correlation and better informed diagnosis. Patient digital engagement has also been associated with higher monitor return rates and operational efficiencies for iRhythm. Although the MyZio 2.0 launch is in the early days, we have already seen a substantial increase in the percentage of ZioMonitor patients downloading the app, and we believe this will continue to increase over the coming months. At iRhythm, the patient is at the center of everything that we do, and with that in mind, we also launched additional enhancements to our patient support processes to assist navigating insurance coverage questions and prior authorization requirements to ensure that they are able to get access to the care that they need. We continue to roll out XeoMonitor in accounts throughout the United States, with approximately half of all accounts having been transitioned to XeoMonitor thus far. As previously noted to the investment community, many new accounts deferred their onboarding during the third quarter while they waited for XeoMonitor. to be launched so that they did not have to be trained on ZOXT, only to require training on ZO Monitor a couple of months later. As a result, we ended September above our normal pipeline levels and are excited to bring these new accounts on board over the fourth quarter. Also on the innovation front, this past week we continued to improve our ZOAT product and its value proposition to customers through the commercial introduction of AFib burden estimates. into the daily reports for our current ZOAT service. AFib burden, or the proportion of time a patient spends in AFib over the analyzable wear period, has been associated with a higher risk of stroke as well as a higher prevalence of heart failure. While knowing that a patient has AFib is an important first step for their treatment journey, A physician knowing how long the patient is in AFib and how AFib is behaving can guide how to treat that patient more rapidly and more accurately. Thus, the addition of AFib burden estimates to the daily ZOAT reports is an important clinical feature that physicians can consider when altering patient treatment pathways during the wear period and when managing patient responses to medications and procedures. This dynamic clinical tool was long requested by our physician customers and demonstrates our continued commitment to physician-led innovation that drives value for our customers and the patients they serve. Turning to additional pillars for iRhythm's long-term sustainable growth, we continue to be excited about the upcoming entry into the second largest cardiac monitoring market in the world. Having received the High Medical Needs designation from the Japanese MHLW has created significant interest with potential commercial partners that we are currently evaluating as we settle on our plans to enter the market in early 2025. At this time, we continue to engage with the Japanese PMDA on our Shonan submission, are working collaboratively with the review team to address their questions, and plan to continue our engagement in person. Our application clearly has their attention and their focus, and we look forward to providing you with additional updates as our discussions progress. To eventually serve this growing global population, we are also thrilled to announce the formal opening of our Global Business Services Center in Manila that took place during the third quarter. In September, we hosted a ribbon-cutting ceremony to open our new permanent office space there, and our Manila team now includes almost 150 team members who are part of iRhythm's global clinical operations, customer care, finance, human resources, information technology, and revenue cycle management functions. Recruitment and onboarding have continued at a rapid pace, and we have been pleased thus far with the high quality of service that our newest team members have started to provide to patients, customers, and internal stakeholders. This has been a critical step in not only transforming our way of doing business of today, but also ensuring that we can scale efficiently into the business of the future that we aspire to be. we will continue to make progress in driving operational excellence throughout the organization, positioning the company to maintain patient satisfaction, scale globally, and perform more efficiently. Lastly, we would like to provide an update on the status of our interactions with the FDA following our receipt of a warning letter on May 25th, which focused on our ZOAT system and alleged nonconformities related to medical device reporting requirements and quality system requirements. Since receipt of the warning letter, we have submitted a thorough response to the FDA's concerns have had ongoing and collaborative engagement with the FDA and have previously agreed to make their requested labeling changes that allow us to continue to market ZOAT as a device for ambulatory MCT services. Additionally, we proposed enhanced design features to the product that further address areas of focus and have continued to work with the CDRH product review team regarding changes that occurred under Letters to File. Following a recent meeting with the FDA, we have aligned on a path forward which will include submitting a 510 as a catch-up for changes previously made to the ZUAT system as letter to file, as well as a 510 submission for the design features and labeling updates previously noted. We are currently working on the content of the 510 submissions and expect to submit the first 510 by the end of the year. While always subject to change until their review is completed, we are pleased with the progress with the FDA and will continue to work collaboratively with them to address their concerns. With that, I'll now turn the call over to Bryce to discuss our financial performance.