iRhythm Holdings, Inc.

Hello everyone and welcome to iRhythm's third quarter 2024 earnings call. My name is Lydia and I'll be your operator today. After the prepared remarks, you'll have the opportunity to participate in the Q&A with the management team. To queue for questions, please press star followed by one on your telephone keypad. I'll now hand you over to Stephanie Zadkiewicz, Director of Investor Relations at iRhythm to begin. Please go ahead, Stephanie.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the third quarter ended September 30, 2024. 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 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 to the most directly comparable GAAP financial measures. Unless otherwise indicated, all references to financial measures in this call, other than revenue, refer to non-GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, October 30, 2024. 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 Quintin Blackford, iRhythm's President and CEO.

Thank you, Stephanie. Good afternoon, and thank you all for joining us. Dan Wilson, our Chief Financial Officer, is joining me on today's call. My prepared remarks today cover business updates during the third quarter of 2024, as well as our annual outlook. I'll then turn the call over to Dan to provide a detailed review of our third quarter financial results and updated 2024 guidance. Before diving into the specifics of the third quarter, I'd like to address what I know is top of investors' minds regarding headwinds on our share price, especially regarding the status of iRhythm's remediation efforts in response to a 2023 warning letter from the FDA in their more recent 483 observations. As many of you know, iRhythm is in the midst of a company transformation, maturing our U.S.-focused business beyond a single product, single market company into a profitable, scalable, global growth company with a multi-sensing platform addressing multiple large end markets. Our accomplishments of the past 24 months are reflective of these ongoing transformational changes within our organization to foster a commitment to excellence, and we have made significant strides towards our stated long-range goals to create value for multiple stakeholders and continue to foster innovation for the benefit of patient outcomes. I'll provide some specific examples of recent accomplishments a bit later on in my remarks. While we have made significant progress, we acknowledge that addressing ongoing and legacy quality and regulatory issues remain a significant challenge for our organization. First and foremost, iRhythm is committed to a culture of quality and sustainability from the top down, and remediation of these quality and regulatory matters have been and will continue to be iRhythm's top corporate priority from the board and executive level and to every layer of our organization. Our current remediation efforts extend beyond addressing the focus of the warning letter from last year and the 483 observations from the July of this year. we are rebuilding our entire quality management system, touching every aspect of it, including areas that have not been part of the FDA's recent inspections, with the intent of making our quality system truly best in class. iRhythm is committed to going above and beyond with our efforts and intends to exceed the expectations of the FDA as we seek to rapidly accelerate the maturation of the quality organization in a broader culture of quality within our company. As one example, we have made significant resource investments in our regulatory and quality organizations from roughly 20 people two years ago to more than 100 individuals today. Further, within the past month, we have hired a new leader of our quality function, which is now reporting directly into myself, who brings significant experience of having led companies through warning letter and 483 remediation efforts. Additionally, beyond the expert consultants already in place, we have engaged a highly reputable industry-recognized consulting firm that is known as a leader in navigating regulatory compliance matters to conduct periodic internal audits for progress against remediation efforts. They will also be performing a full audit at the conclusion of our planned efforts around our entire quality management system, the scope of which will go beyond what the FDA commented on in last year's warning letter and the most recent 483 observations. As we hope is abundantly clear, we are taking these regulatory and quality matters very seriously and will allocate the necessary resources to ensure that we are best in class from a quality perspective and that the FDA's observations are remedied to their complete satisfaction. As a clear indication of progress in addressing the concerns expressed in the FDA warning letter, we have recently received FDA clearance for the first of two 510Ks related to our ZOAT system. The first clearance is a catch-up for changes previously made to the ZOAT system as a letter to file. Regarding the second 510-K, the agency specifically requested that the first 510-K clearance be obtained before they perform final review of our second 510-K submission, which contains design modifications to our ZOAT system. We are unaware of any further technical questions from the agency at this time. At this time, we have submitted the recently received 510-K clearance letter to the FDA and are awaiting a response from the agency regarding the clearance of our second 510-K submission. We look forward to updating the investment community as soon as this milestone is reached. Considering the substantial efforts to accelerate the transformation of the quality organization while undertaking the remediation efforts and redefining the standards with which we engage the FDA, we will be voluntarily delaying our regulatory submissions for the ZOMCT system, which were intended to support the company's next generation of our mobile cardiac telemetry product. Following the company's receipt of the recent 483 observations and our acceptance of the FDA's position regarding the inclusion of certain activities performed by the company's technicians as part of our system, we will take the time to ensure that our next-generation MCT-510K filing encompasses all the necessary impacts of including the technicians as part of the system and expect to be on file with the agency in the third quarter of 2025. We're taking this proactive, voluntary approach to continue to demonstrate our commitment to addressing the most recent questions and concerns of the FDA following their July inspection. This approach will result in our voluntary efforts to perform additional testing and documentation ahead of time in anticipation of questions that the agency may ask and demonstrate to the FDA the rigor with which we plan to approach product submissions in the future. While we understand that this may be disappointing, we believe that this is what is required to ensure thoroughness and completeness of our FDA 510K application to the agency and the best approach to ensure we set iRhythm up in a way to continue to lead the field in innovation for years to come. Shifting to iRhythm's core business performance, we were pleased with the third quarter results as we achieved $147.5 million in revenue, representing 18.4% growth year-over-year. This solid quarter of execution was driven by record demand from existing accounts, combined with another record quarter of new account openings. Our teams continue to drive traction within primary care channels, penetrating deeper into large integrated delivery networks, and also expanding within our large national value-based care accounts during the third quarter that should drive substantial cost-efficient top-line growth in future quarters. Both pilot programs mentioned in prior quarters are now beginning to expand beyond pilot phase into early commercial launch. Importantly, overall volume growth came not only from our ZOXT business, but also from our ZOAT business, where momentum has accelerated in recent months. The third quarter of 2024 represented the largest quarter of ZOAT registrations ever, fueled by a record number of new ZOAT account openings, something that we are on pace to top once again in the fourth quarter. Overall, it is extremely exciting that one out of every 200 people in the U.S. will wear a ZO this year, and there is a ZO going on a patient every 15 seconds. Exemplary of these efforts, we celebrated a number of milestones during the third quarter and also had a number of exciting developments to better support our customers and better serve our patients. First, we celebrated our one millionth patient registered for XeoMonitor, our newest generation long-term continuous monitor, and unveiled data at HRX 2024, which we believe demonstrates XeoMonitor's superior real-world performance. XeoMonitor has demonstrated fewer early wear terminations, longer wear duration, longer analyzable time, and fewer patient complaints compared to our legacy ZOXT device. Additionally, this longer wear duration, which generally leads to greater analyzable time, may further improve diagnostic yield, building upon ZOXT's superior yield among ACM devices, as demonstrated by Camelot findings. Additionally, we also celebrated that our teams have crossed the milestone of 2 million registrations through EHR integrated accounts and have launched our first health system on Aura, Epic's network to exchange orders and results across their community. iRhythm is the first medical device company to join the Epic community on their Aura platform. And through our collaboration with Epic, we estimate that organizations can save up to 75% of the time it typically takes to integrate Xeo services into their local instance of Epic. By streamlining access to Xeo services via EHR integration, Clinicians and healthcare systems can improve operational efficiency, which we believe can reduce cost to serve and allow healthcare providers to devote more time to what matters most, patient care. Furthermore, we believe that this collaboration can expand access to Xeo services across the continuum of patient care within integrated delivery networks from cardiology to primary care to emergency departments and beyond. We are very excited to begin offering this solution more broadly to existing and new Xeo customers starting in early 2025. Lastly, during the third quarter, our digital product development team celebrated the milestone of more than 1 million patients having used the MyZio Patient app and also released the latest iteration of ZioSuite for our customers. This latest software platform features an enhanced user experience relative to the legacy system. This has been a highly requested feature for the past few years from our commercial field team. For our customers, the latest ZioSuite update includes navigation updates and user management enhancements to improve workflow and experience. These milestones and developments are some of the latest examples of how iRhythm continues to lead through innovation and ingenuity, and I am incredibly proud of the collaboration of our internal teams as we achieve these important milestones. Turning the progress against our levers for long-term sustainable growth, we also made meaningful strides this past quarter in our international expansion efforts, as well as our product innovation initiatives. In the United Kingdom, our teams garnered more than 10,000 registrations in a single quarter for the first time ever, and we also enabled the introduction of the MyZio app to our UK patients. allowing them to log symptoms and access educational content digitally. The clinical significance around MyZio usage and overall impact on symptom rhythm correlation is very clear. Patients using the MyZio app were four times more likely to record at least one symptom during an arrhythmia compared to patients using a paper log booklet. We have been thrilled with this expansion in our UK market and are excited to bring Zio to more patients there. Also in Europe, we reached a critical company milestone during the third quarter with commercial launch in Austria, the Netherlands, Switzerland, and Spain, highlighting our continued commitment to bring our innovative digital healthcare solutions to millions of people worldwide. We're in the very early stages and have started to receive physician orders and will continue to ramp our commercial efforts, contracting with local hospitals, engaging key opinion leaders at leading academic centers, and generating clinical evidence to help physicians in these markets appreciate the value that Xeo services can drive for their practices. In Japan, We were also extremely excited to have received the Japanese PMDA regulatory approval for Xeo Monitor in September. Xeo is the first product in Japan to deliver arrhythmia monitoring services utilizing artificial intelligence and the only 14-day cardiac monitoring service in its category to receive Japanese regulatory approval as an improved device without a clinical trial. Our Japanese reimbursement dossier was submitted following regulatory approval, and we have already fielded a few questions from the MHLW regarding our application. As we navigate these negotiations, we continue to work with our planned distributor in Japan to get them ready for launch. We continue to anticipate commercial launch in 2025, representing our foray into the second largest ambulatory cardiac monitoring market in the world. On the innovation front, we could not be more excited to have entered a technology licensing agreement with BioNTeleSense to incorporate medical-grade connected multi-sensor capabilities into our ACM products, positioning us to significantly expand the capabilities of our product platform over the next several years. While this is a long-term strategic play, we believe that incorporation of BioIntellisense's proprietary technology into future iterations of the Xeo platform could not only enable iRhythm to maintain premium positioning within our core ACM market, but also broaden our product platform capabilities to potentially serve additional channels and indications over time. Patch-based pulse oximetry, accelerometry-based heart rate and respiratory rate, and noninvasive blood pressure and capabilities represent natural complements to iRhythm's best-in-class ambulatory cardiac monitoring services and ECG data as these additional vitals provide a more holistic view into patient health, uncover risk factors in patients, and optimize workflow efficiencies for overloaded hospital systems and physicians. But we also believe that these platform capabilities will be necessary to ensure long-term positioning as we believe the ACM market may further develop to have progressively more multi-parameter sensing capabilities and deliver broader clinical insights. These naturally expanded capabilities may then enable us to enter other adjacent indications, such as obstructive sleep apnea, over the next several years in disease states where multi-parametric vitals are important for clinical diagnosis. By utilizing our balance sheet to fund this type of technology development and partnering with an exceptional team of Biointellisense I'm very excited to collaborate and accelerate the next chapter of Connected Patient Care. Finally, I am so thrilled that our recent accomplishments are being recognized externally by a variety of third parties for our innovative technologies and population health improvements that our teams are committed to every day. In May, iRhythm was recognized on Newsweek's list of the world's best digital health companies for 2024, its inaugural list that ranks the top 400 companies from over 35 different countries and evaluates companies' impact, financial performance, and online engagement. More recently, Newsweek also named iRhythm as one of America's greenest companies. a list that recognizes the top 500 companies in the U.S. based on environmental sustainability and which scores companies on more than 25 parameters based on greenhouse gas emissions, water usage, waste generation, and data sustainability disclosure and commitments. Additionally, we are very happy to announce that we have been named one of the top four finalists for the 2024 Fierce Life Sciences Innovation Awards in the categories of Digital Health Solutions and Population Health Management and Patient Engagement Solutions. This is a major achievement in a highly competitive field, with winners to be announced in December. As these recent accolades demonstrate, iRhythm is committed to driving significant growth in a responsible, sustainable, and profitable way for the benefit of all of our stakeholders. With that, I'll now turn the call over to Dan to discuss our recent financial performance.