Q2 2020 iRhythm Technologies Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the I would've been technologies Q2, 2000, <unk> earnings Conference call.
At this time, obviously, the baseline callison only mode. After the speakers presentation they'll be a question answer session to ask the question on assessing wouldn't the press star one on your telephone.
Please be advised of today's topic is being recorded.
Fighting for the speakers please press star zero.
I kind of topics over to your speaker for today Leigh Salvo Investor Relations. Please go ahead.
Thank you all for participating in today's call.
Joining me are Kevin King CEO, Doug Divine CFO and then we'll send you the p. strategy corporate development and Investor Relations.
Earlier today I rhythm released financial results for the second quarter ended June 30, 2020, a copy of the press releases available on the company's website.
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, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Statements contained in this call, but are not statements of historical fact should be deemed to be forward looking statements.
All forward looking statements, including without limitation those statements related to the impact of called the 19 on our business expectations for economic recovery market expansion and penetration productivity improvements reimbursement Lilly clinical data operating trends and our future financial expectations, including revenue gross margins profitability and operating expense.
Those are based upon our current estimates in various assumptions. These statements involve material 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 risks and uncertainties associated with that 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 with the FCC.
This conference call contains time sensitive information and is accurate only as a glide broadcast today August.
2020.
Doesn't disclaims any intention or obligation except as required by law, the 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 Kevin.
Thanks, Lee good afternoon, and thank you for joining us on behalf of yard rhythm team, we hope you remaining safe and healthy.
I'd like to sort out call by recognizing the I rhythm team.
In the past few months I've observed for our team rallying to meet the challenges demonstrating incredible resilience and operating at the highest level all while adapting to a new work environment.
Despite the challenges we have continued to deliver our service without interruption to the physicians and patients that rely on it.
We recognize the need for high quality care has never been greater and the I rhythm team is intently focused on delivering mccarran needed in today's environment.
I'd also like to welcome Dr. going toward team.
I'm joined US journey exceptionally challenging an unusual time of our business.
But he was able to immediately step in to provide a very smooth transition and he has already demonstrated the impact of his leadership on or finance organization and input on our long term growth objectives.
In my prepared remarks today I'll discuss the key highlights of our second quarter provide our current views of the market environment.
Discuss our outlook and our strategic priorities for this environment.
Doug will go into more detail on or financials for the second quarter before we open the call up for questions.
As we entered the second quarter, we faced many uncertainties related to the impact of corporate 19, and that would have what that would have on our business.
Demand should this uncertainty we implemented three operating initiatives first to protect and support the health and wellbeing of our employees our communities and our customers.
Second to ensure on interrupted zeal service delivery.
And third to ensure continued financial strength by adjusting our operating plan.
Our team delivered on all three objectives in our financial and operating results for the second quarter demonstrate this.
We were encouraged by our second quarter results, despite the impact and challenges of cold at 19, which we felt especially early in the quarter.
Total revenue for the second quarter 2020 was $50.9 million a decrease of 3% compared to the same period in 2019.
And a decrease of 20% compared to the first quarter of 2020.
We saw steady recovery throughout the quarter and the pace of recovery exceeded our expectations and revised operating plans.
Average daily registration rates grew steadily through the quarter and compare to the average weekly registration rates prior to call that.
April represented the trough at 65% the pre coded levels in June was approximately 90% of pre covance levels.
Well cobot 19 suppress the overall market in the second quarter, we believe I rhythm increase that share with the market as measured by our success in three areas.
First compared to legacy Holter monitoring services are clinically superior digital platform was proven to be well suited to deliver services and a virtual environment.
Our single use zeal devices or patient friendly and eliminate the need for cleaning of equipment between uses.
Second our home enrollment service enabled by our digital platform was instrumental in maintaining the registration levels, we experienced in the quarter.
We expect it will remain an important component of many of our accounts workflows going forward.
As we shared in early May home enrollment represented over 50% of registrations for the month of April.
As hospitals and physicians began.
Resuming in office patient visits this percentage leveled out just below 30% as we exited the quarter.
We expect to remain at these levels for the foreseeable future and believe this will be a key factor in ensuring continuity of patient care in the event of a continued ramp and Copa cases that leads to reduced in office patient care.
As such we've been actively working on improving the efficiency of our home enrollment service and are prepared to support 100% of our volume if needed.
For example, we recently launched version 1.80 suite.
Which now tracks includes a tracking feature that provides us and our physician customers with patient end device visibility from registration to report delivery.
Deal suite as an important component of our service as we continue to scale, our operations and home enrollments service.
Lastly, zero Eightyt demonstrated continued strong traction and meaningful growth over the first quarter of 2021 of over 2020.
Our single platform solution continues to resonate with our customers as they put high value and streamlining workflows across their cardiac monitoring needs.
Experience at our customers have with X T and the high confidence unseemly already they have with our service and platform has benefited xeo 80 adoption.
Further zeal 80 has unique advantages over traditional MCT technologies that are being recognized by our physician customers.
Zero 18, UTAS utilizes the same form factor as you XT, resulting in high patient compliance and where time.
And is backed by the same detection algorithms and AI tools, we have developed for zero XT over the last several years.
Less than a year engine a full market launch Ensco 80, we're very pleased with the adoption to date. We are increasingly confident that we can continue to span expand into the emcp market and take meaningful share.
While we're pleased to see signs of market recovery the situation remains fluid.
But the level of recovery vary widely within accounts and within the regions.
So while we've continued to see slight improvement in July. We believe there are several market factors that may lead to suppress demand through the rest of 2020.
Feedback from our commercial team indicates that a number of accounts have effectively worked through their backlog.
And are now seeing a steady flow of new patients.
While encouraging we're not yet experiencing this trend consistently.
As patient willingness to enter the healthcare system remains very particularly in regions that have experienced a strong resurgence of cobot 19, and continued uncertainty as numbers escalate.
In addition, we're aware that hospitals, especially those in hotspot regions have limited or even ceased performing procedures deem deferrable or elective.
And nearly all healthcare facilities have adopted new highly stringent protocols and workflows, which are likely to impact patient volume.
And throughput while they remain in place.
Utilizing tele medicine solutions, including our home Inns Roman service will help offset these pressures, but the adoption of virtual Carol models has also been varied.
That said new account adoption of our Xeo service continues to be at lower than pre cobot 19 levels.
The impact to our third quarter into the second half the year remains unpredictable, particularly with the continuing rising daily New cases, a covert 19.
Up three X over many levels.
We remain cautious on steady rate so volume recovery as we progressed into the second half of the year. However, we do expect to return to year over year revenue growth in the third quarter.
If current trends continue we expect Q3 to be in line with pretty cold at levels with volumes growing slightly from June levels.
Offsetting this expected impact of summer seasonality and its effect on physician prescribing patterns.
Longer term, we have high confidence in our ability to change the standard of care and continued to gain market share.
As I noted earlier, we're focused on the long term and managing our business Accordingly, with the primary goal of continuity of service for physicians and their patients.
Next I want to spend a minute, providing an update on our operations and cost containment measures. Our priority remains on health and safety of our employees and maintaining stringent safety protocols for all in office functions and employees.
We've continued to maintain full organizational capacity through a combination of work from home capabilities wherever possible.
Daily on site operations for those groups most work from the office.
And the use of virtual online tools to facilitate group projects and to provide support to our physician customers and their patients.
Our field sales activity has remained primarily virtual in most regions through the country.
Regarding our cost containment measures with a noted increasing patient registration levels. During the quarter. We have now returned all previously furloughed employees.
Reinstated salary to pre cold at levels and resumed hiring for key roles.
We are maintaining certain other cost containment measures to preserve cash and liquidity.
What are making the required investments to continue the scalable business to meet the increased demand and pursue long term growth initiatives.
Turning to reimbursement as you likely know CMS published a much anticipated proposed Medicare physician fee schedule proposed rule.
2021 earlier this week.
Issuance of the proposed rule is now followed by a public comment period closes on October 520, 20, and will culminate in CMS is final rule expected on or around December onest for implementation on January one 2021.
We covered the details of this proposal and its impact on our business. During your conference call. This past Tuesday, which is our content available on our website. So I won't repeat all of that information today.
On August Fiveth, CMS published a correction to the relative value units and related information used to determine Medicare payments for the eight new codes associated with external extended SCG monitoring.
The correction increases the relative value units for technical codes nine three Xx too and nine three Xx six.
And decreases the RV use for the global codes 930, and nine three X X four.
The remaining for codes associated with the patient hookup activities and final interpretation or readout or revise downward by a small percentage.
This correction is incrementally more positive if applied to our 2019 revenues as described earlier in the week.
After several years of collaboratively working with the American Medical Association, a heart Rhythm Society, The American College of Cardiology, and the CMS staff. We're pleased with a very positive impact to propose outcome will have on our business.
And especially to have such a significant milestone successfully behind us.
Our long term strategy remains intact and this includes increasing market penetration with vizio platform.
Increased operating leverage through continued productivity and automation improvements.
And expanding the addressable market into new indications and geographies.
We expect to continue planned investments to drive long term growth and profitability for shareholders.
And our as confident as ever in the door ability of our business.
While we're cautious on the outlook for the remainder of 2020 and would be hesitant to predict the fast recovery. We believe the future of Ivan has never been brighter.
There was a considerable potential for structural changes to how healthcare is delivered.
And that will play to the strengths of our digital platform.
We're focused on positioning I rhythm to continue to drive the standard of care and how cardiac arrhythmias are diagnosed and manage and delivering our zeal service to the millions.
With that I'd like to turn the call over to Doug.
Thank you Kevin.
Before I jump into my comments on the quarter I'd first like to express how excited I am to join high rhythm. Thank Kevin in the board for operating maybe opportunity to contribute to the future growth for great company and a great team.
The second quarter 2000, 2020 undoubtedly goes down on the record books as one of the most challenging business environments all of us have ever experienced.
Hi, rhythm rose to the challenge rapidly and successfully shifting our business model to accommodate our physician customers on their patients.
We expanded home enrollments from a single digit percent to over 50% volume peak maintain traction onboarding, new accounts with evolving sales models.
And executed internally on many aspects of our operation in a remote environment.
At the same time, reducing expenses preserving liquidity and cash.
Moving on to the financial highlights for the second quarter 2020.
Revenue declined 3% year over year, and was kind of sequentially down 20% quarter on quarter.
Gross margins were 69.6% for the quarter.
We experienced can see continued traction and expansion of zero 18.
And cash and short term investments were 114.9 million at quarter end.
Taking a more detailed look at the second quarter financial results.
Revenue recovered throughout the quarter from a low point April followed by steady improvement through May and June exiting the quarter, approximately 10% below our pre covert run rates.
We saw that trend continue and gradually improve through July as well.
As we think about individual drivers within revenue, we saw continued strong quarter on quarter growth per Xeo 18.
The higher zero 80 mix combined with improvements in rental revenue cycle management led to ASP increases in the second quarter.
On an account and regional level second quarter volume showed material variances across regions and accounts.
50% of our accounts remains more than 10% off for Q1 run rates offset by continued onboarding of new accounts and growth of over 10% in run rate over Q1 run rates for 25% of our existing accounts.
The large number of accounts more than 10% off Q1 run rates indicates many accounts and regions are still well below full recovery.
As Kevin mentioned home enrollment peak that slightly over 50% of patient registrations early in the quarter before reducing.
End of the quarter and 36% of volume.
July home enrollment levels have continued to trend downwards into just below 30%.
Yes, Hi, rhythm team has demonstrated flexibility to support home enrollments and is well positioned moving forward to meet evolving conditions.
Turning our attention to the rest of the PML gross margin for the second quarter of 2020, 69.6%.
5.1% decrease compared to the gross margin of 74.7% in Q1 2020.
Second quarter gross margin was down due to lower volumes for absorption of labor and fixed costs.
And some higher costs associated with home enrollment, primarily outbound shipping and logistics costs and labor.
Gross margins improved from a low point in April as we move through the quarter.
Non adjusted operating expenses for the second quarter of 2020 were 55.6 million compared to 56.6 million for the prior quarter a decrease of 1.9%.
Excluding the 3 million milestone payment to virally, Opex was 52.6 million or a decrease of 7.2%.
Looking at cash Opex and adjusting out both the virally milestone and looking at the cash operating expenses were down 13.7 million compared to the first quarter or a decrease of 24.6% evidencing the company's strong actions to preserve cash.
A couple of other points to note on Opex, we partially reinstated stock compensation, resulting in a 9.5 million increase to non cash opex quarter on quarter.
So bad debt expense a metric that we've been watching very closely in the current environment improved 3.2 million versus the first quarter as payments trended stronger than forecasted.
Finally, the net loss for the second quarter of 2020 was 20.4 million.
Loss of 75 cents a share.
Paired to a net loss of 10.7 million.
Or 43 cents a share the same period in the prior year.
Turning our expectations for the remainder of 2020.
While the business stabilize somewhat in June and July compared to the preceding two and a half months.
Due to the current environment and heightened level of uncertainties surrounding the Coca 19 pandemic.
We remain unable to estimate the magnitude or duration of specific impacts on our business and for that reason, we will not be resuming financial guidance at this time.
We do however want to communicate to investors the following activities and steps, we're taking to ensure long term sustainability of the business.
First but our ability to rapidly transit from in clinic to Holman Ryan.
Operational line.
Remains key to maintaining meaningful registrations and revenue streams during this challenging period.
Second we took significant steps to decrease our spending run rate and preserve cash in the second quarter and we intend to continue to take appropriate measures going forward to preserve liquidity, while balancing growing in investing in the business as volumes return.
And finally with over 114 million in cash and short term investments on hand, we're in a strong position to whether any near term challenges.
Kevin Van I would now like to open up the call for questions operator.
Thank you.
Reminder, asked a question we need to press star one linger.
So Joe your question. Please press the pound key.
Please standby, we can kind of Q and investor.
And our first question comes from Robbie Marcus with JP Morgan You May proceed.
Hi, This is actually Lilly on for Robbie Thanks for taking the question and could you provide a bit of color on the use neo and acute settings in the quarter.
I understand you probably don't want to breakout specific numbers, but how big of a benefit I was the acceleration in adoption here and are these tailwind from thing that we can expect to continue to see in the back half, India or will this kind of slowdown.
Good day.
I believe this is Kevin.
The acute setting are you referring to zero eightys use in hospital.
Yes, that's right.
Import in patients.
That level has has decreased.
And the the uptick in Xeo 80 volume, we're talking about is.
The traditional ambulatory outpatient cases, where.
The likelihood or possible credible like critical rhythmia exists.
Many of the patients that were in the.
Corporate environment back Kim.
March April timeframe, when we gave that may reporting those numbers to were a little bit on the smaller side.
Vast majority here as ambulatory relate to traditional market.
And we're extremely confident in that in that adoption rate that we're seeing right. Now. This is this is that to core markets about where we're growing ourselves into.
Great. Thanks, and just one quick follow up.
As mentioned the current benefit to deal or their traditional hold there isn't that environment given a similar in nature of the Tonight. So what have you been hearing on docket and how this has impacted their adoption and do you think that this could have lasting impacts.
Longer term.
Mary Thank.
Yes.
In a similar way to how we're seeing.
Tele medicine become adopted.
Yes.
Due to the pandemic were also finding on the Holter side. This is this is much of an accelerant.
Corporate certain accelerant to adoption.
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In many cases patients are refusing to where medical devices.
That are reduced or have been worn by others.
Our staff constraints and then of course, just the ability to do holter monitoring and file home enrollment with the.
A device that has limited.
All.
Capacity or hospital or would have limited number of holder monitors.
When we have a single use wearable with essentially limitless inventory.
To provide two accounts for home enrollment Theres theres nature advantages here.
And then of course, all of the demonstrated clinical superiority of CEO.
This is is winning in here as well in a big way.
Great. Thank you.
You're welcome.
And our next question comes from David Lewis.
With Morgan Stanley.
You May proceed.
Hi, Thanks for taking my question. This is comment on for David.
Kind of related question could you comment on how resurgent has impacted our June or July results and sort of either direction in terms of both the underlying demand from regular way patients as well.
On to your point back in the context strain hospital capacity insurgent hotspot, resulting in increased demand for xeo through that that capacity. Thank you.
Sure Hi covenants Kevin.
Okay, I think I think this.
Sustained and rather spiky nature of Kogut 19, as created a really really heterogeneous markets.
With demand levels being buried in geographic locations and then accounts.
So within areas that are hot spots, we clearly see a high degree of variability in our Dalian week over week registrations.
I would say in even in recovered regions theres non uniformity and it's almost like a lingering effect.
From corporate 19.
And as we stated in my prepared remarks, many accounts so not returned to full growth yet.
So I think the effective covert 19 is really depressing.
Demand within the marketplace.
Overall.
That said to where there were there are opportunities we do things that we are ticking up a larger percentage local markets.
Through to the benefits of our single platform.
Wearable biosensor Thats clinically superior to other approaches such as much of this.
Lilly.
Our xeo suites.
Information system as having impact on workflows as it helps counts.
Especially those accounts that have reduced staffing levels due to lay offs.
And our ability to deploy home enrollment via Vizio suite application.
And so and the cases, where there is demand and patients are getting to the hospital and we're getting a disproportionate percentage of those.
That said.
Part of the market seems to be cut off if you will do to due to the increase of Spottiness and spikiness and the nature of the virus here.
I do I, probably made just may be just have one common there I do think that are accounts.
Our better prepared now than they were at March many of them have put in place staff and patient safety protocols.
They have limited access.
Two accounts for us.
But they have they have been able to deal with this feels qualitatively they have been able to deal with this in a better way than they were.
Back in the March April timeframe.
Emily accounts, just completely shut down I think that.
We hear less of that this is probably more about capacity constraints right.
Very helpful. Thanks, so much.
And our next question comes from migrate 'cause Award with William Blair You May proceed.
Thanks for taking the question.
Firstly, just wanted to see if we could talk a little bit more about the comments on on kind of gradual increases or a gradual improvements.
As you went into July I was wondering if you could quantify that all at all a little bit was trying to trying to understand I. Appreciate you going to return back to year over year growth, but what does that look what kind of its on a sequential basis.
How much above 90% of pre Tobin levels might we be yet.
Got you want to do you want to comment on them.
Sure.
In July was a slight uptick from June.
And then I think as we've highlighted with given the covert situation and given that.
We're seeing great variability between our accounts.
It's it's a.
It's difficult to per.
To predict where September is going to go in this model and were August may go so.
I think I think weve legit directionally that.
Trending slightly up from 90% and.
And that we're viewing Q1 levels as being a reasonable level of expectation but.
We're not in a position to be more specific amount at this point in time.
Okay.
Helpful.
And then also on.
I was curious the adoption of zero suite and that sounds great and it sounds like it's creating getting a lot of traction.
I was curious if there's any difference in utilization or growth rates in accounts that have adopted video any noticeable trends either positive or negative already I would guess positive that you've seen in those accounts.
Yes, so we've spoken in the past about our innovation stack you know the four or five layers of the information system stack.
Was most recently re architected and launched as under the brand Xeo suites.
We now have all of our accounts or nearly all of our accounts migrated to seal suite.
This is the benefit of having a digital information system platform.
Thats cloud based and so forth. So all of our customers smart nearly all of our customers. The best to my knowledge has migrated physio suite and we're getting really really strong feedback.
On the benefits of Seo sweet relative to staff productivity.
And as I mentioned earlier, a lot of our accounts have had staff lay offs and so they are as being asked to do more with less than the Geo suite is helping them.
When it comes to ordering monitoring devices tracking where patients are getting reporting and things of that nature, plus it's a great productivity boost for physicians, if they're working from home because of the ability to use your tablet at your desktop your cell phone and so forth, Brazil. So I would say that it's been a great success.
And it's fully deployed and what's happening is having an impact.
Compared to what we had called Youll reports previously.
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Great and then one last one on my end any update on kind of the high risk market. I think we were originally thinking of Richie some stocking screening update in 2020, that's still the case or any other uptick there. Thank you.
Sure Dan dish that can take that will correct.
Yes, Hi, Brandon it's Dan so.
Maybe a couple to call out for you there. So in stops we still expect the three year outcomes data.
Basically at A.J. in November this year.
So excited about that.
Screen.
If you recall that was.
On deck to be presented.
At a conference earlier this year and the May timeframe, which that conference got postponed so I'm unclear when that data will be presented.
Think the investigators are trying to find the right venue or or journal.
Present that data.
And then the third one I'd call out for you as got a EPS, which.
Kicked off late last year that trial was paused in March due to co bid.
But its since then restarted last month and like our commercial business. The trial has now adapted adopted our home enrollment service as well as some other virtual feature so that one is just getting back back up and running.
After getting started late last year so.
Too early to give any potential timelines around that one but like in stops that does have its gross outcomes data so were.
Excited about both of those.
Great. Thank you.
And our next question comes from Teva Kieron Julie you May proceed.
Hey, guys. Thanks for taking your questions and welcome died at the conference call and the team.
You guys mentioned in the press release, I think that lower volumes in that credit were in part offset by a higher ASP can you give us the split between volume and price if it was meaningful in the quarter and then what contributed to that price benefit is it just standard business next with X T.
Or is that tied to 18 I'm trying to understand eighties big enough today to be a meaningful contributor at that point.
Yes, I can make it typically.
SP Nick's question and maybe to take the second half or Doug if you'd like to take a little thing.
Go ahead.
Hi.
Right.
Yes.
So first first on the front first on ASP.
It was a healthy ASP.
Kind of.
Mid single digits type of uptick in ASP now as far as you're aware 80 hasn't meaningfully higher ASP, then XT does and so half of that increase was driven by the change in the mix, where we saw 80 units increasing quarter on quarter, and we saw XT and as Steve.
Accretion on quarter quarter on quarter, so that kind of magnified the impact you were seeing from them.
Hey.
And then the second piece of it is that.
We are seeing some more general improvements in our revenue cycle management.
Which led to the remainder of most of the increase.
Hi, taking the second part of your question on the impact of 80.
The impact of 80 is growing it is still well below 10% of our revenue and we'd say directionally as it continues to grow which we expected to and have strong confidence that it's going to we will provide steadily greater detail on the breakouts of 18 in the future.
Great. Okay that makes sense and then it sounds like you guys are or have been sort of looking at your long term growth vision.
Mentioned that Doug has already been able that provides an input there. So I imagine that's something you guys evaluating reevaluate over time, but are there any initiatives that you now feel maybe more confident implants that you may not have otherwise just given the reimbursement update unexpected rate increase.
Hey line to I think we've always been confident in the reimbursement outlook.
You even prior to.
What was required to this tuesday, or Monday, or Tuesday, so announcements or information out there.
We've not altered our strategy.
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Because of the reimbursement favorable reimbursement or.
Essentially favorable reimbursement here.
And our conflicts has remained the same.
Driving new indications driving geographical expansion.
Driving new forms of clinical evidence that could open up to markets like the silence atrial fibrillation markets.
Platform investments.
Absolutely.
Modernized or re architected three fifths of our technology platform.
The last you know 18 months and similar to what I. Just described devoted Xeo 80. These things are being invested rolled out in having incremental impact.
Keeping our platform fresh and car into and highly competitive.
We're just continuing to do but we're not pick your firm up the gas here at all nor are we really changing our strategy.
Great. Thanks.
Yes, because of the covenants you focus.
And our next question consistency of for along with Canaccord Genuity you May proceed.
Hey, Thanks for taking my question I guess I wanted to follow up on first on M. stops as well as screen asked.
But just how you think about the rollout of this and the impact in 2021 early specifically your thoughts around how screening in high risk patients plays into post coded Ur cobot altered where world.
And really the ability to shift practice.
Yes, hi, familiar it's Dan I would I guess I would just start by saying we.
As we've looked at what's going on in the healthcare environment today are our conclusion that that theres potentially more.
Asymptomatic or undiagnosed, a app and the population than there ever has been so.
Yes, I think thats, the first quite that way.
We're even more confident that there's a market that we should be going after and investing investing again.
On in stops yes that is it is an important trial given the outcomes data and really to first opportunity to show that targeted detection of asymptomatic JF can potentially lead to improved outcomes, including.
Hopefully a reduction of strokes.
Thats been our I've talked all along and we have had favorable day. That's at this point, suggesting we are on the right track, but this will really be the first opportunity they need to see that that data come together and we know that that is important data from a market development standpoint, whether it be with payers physician.
Funds or or even clinical guidelines.
The U.S. PS Tee up.
Prevention screening past course, so we're really looking forward to that data later this year screen, a AFE is important as well.
We're excited for that data come out and then as I mentioned earlier regarding yes.
In stops will have.
Broke outcomes data as well so.
We really believe things are lining up well for for us in this initiative.
We'll take time as the clinical data comes out.
And was.
With that data looking to change behavior. So we're excited about engines and believe we're on the right path I think it's too early that they will see anything from a commercial standpoint next year, but.
We're absolutely moving into right direction.
Great. Thank you and if I could just ask on just any update on your collaboration with fairly ability to really start hiring people into that program again, and then just kind of timelines and.
Relative share kind of pre code that expectations. Thank you.
Yes.
Kevin I can I can take that one.
I think we mentioned on our first call.
I'm sorry for first quarter earnings call back in May that we had surpassed.
The development milestone.
In may so that was an important milestone and.
As we've talked about before we're developing and end to end solution combining technologies from from both parties with Merrill Please.
Study watch study you watch one potential component of that solution.
The collaboration has done quite well to this point and we continue to tick through milestones relatively on schedule, albeit with minor delays.
Due to product development, specifically hardware development work being more difficult to.
To do on a remote and environment, but overall were.
On schedule Gibbs.
Give or give or take a quarter or too.
So no nothing specifically to call out in terms of next steps other than continues to to move forward. There's decent chance we'll hit another milestone later this year early next year.
And similarly Tonight comments.
On the Simon they up market in general I think it's too early to point to any kind of commercial impact from that but again it is moving in the right direction.
Great. Thank you Dan.
You're welcome thank you.
And our next question comes from some large calia quick Oppenheimer.
You May proceed.
Yeah right.
Hi crush.
So.
First question, Kevin for you or Doug and don't forget forgive me I did not fully your commentary exactly so there was a net 5% increasing speed.
Zili steep price was down quarter over quarter, but he was up quarter over quarter.
I guess within the context of the of the codes can be used how sustainable are these price increases for Zili TNF am I right that the 80 price increase was in double digits in the quarter, maybe I'd I Didnt connect the dots me.
So the first.
Yes.
Correcting a couple of points. So first I said it was at the mid mid single digit I don't want to be as specific as putting a number two it on the pricing now.
Zeal 80 prices were very consistent quarter on quarter. So what changed is that zeal 18 became a much greater fraction of our mix in my script. It Xeo 80 units grew quarter on quarter zeal XT units declined quarter on quarter zeal.
He has a significantly higher ASP, then xeo XT and so that is accounting for half of the overall.
ASP per unit basis on the quarter.
And then as men as you as you look at the other side. The other parts of revenue cycle management. We do believe those are sustainable some some of it was negotiation some of it was just doing a better continuously improving.
The reimbursement processes.
Got it okay, no clarity and Kevin Knight.
One last and I'll hop back in queue I presume you all will be supplying the.
Invoices for various components to CMS for the flattened before the final.
The reimbursement roof comes out thank you for taking my questions.
Sure.
As I said on as I sit on the call was yesterday.
We provided to CMS over 500000 invoices for our service across contract to non contracted Medicare So a client bill.
The full access so all.
All various and sundry types of payments.
Over an extended period of time.
And they haven't they have everything they can get from us.
The questions.
And our next question comes from me the book.
T E.
We're looking quite good to know you.
I wanted to ask a question about the market share commentary you gave its definitely encouraging and it makes a lot of that is there anyway to sort of quantify what you're seeing in terms of that share shift I understand very difficult environment and then secondly, you believe some of those underlying factors sound like they are part of that larger social trendy believe that.
Sustainable that help you maintain some of that market share shift.
Sure.
So we.
The data that we have is.
Rhythm company specific data that we gather from our customers very.
Good intelligence on.
Prescribers prescribing patterns prescribing mix relative to traditional holders in event monitors and traditional MCT devices across you know the thousands of accounts that we have.
And we can trend those over time.
And through our sales operations calls that we have on a monthly basis, we got a good good feeling for how things are trending.
And when we see increases in volumes and accounts were off and asking on these volumes coming from new prescribers existing prescribers and what is the mix on the data is is gathered internally it's consistent it's reliable.
I would also say compared to other companies that have reported in the category we were down.
3% year over year, and I think other companies have recorded were closer to 20% to 25% down.
A year over year, so that would imply to us in a market thats decreased.
Oh, we have taken a bigger piece of it.
So our next loved ones.
And then I guess my follow up question would be on your sales rep counts in the quarter and whether you're hiring plans I think you'd hope for a 160 or so by the end of the year whether that.
Being maintained or if there any changes there. Thanks.
Yes, obviously, we didn't do much hiring here in in the second quarter, we only recently restored.
Hiring of key positions, so really really nothing meaningful in the second quarter per se.
A lot.
You shaped by what happens in Q3.
Oh I don't don't have a number off the top my head, but my guess is it's probably going to end up being less than 960, just given given the delay in the hiring pipeline and leading to restart that pipeline look again.
Thank you for taking my question.
Okay.
Your next question comes from Gene Mannheimer, but collier.
You May proceed.
Afternoon, Congrats on the great progress here I just had a couple of follow ups on the reimbursement.
Kevin you'd said yesterday, you said that yesterday CMS published a modifications to the RV use that that go into the payment kelk.
Where you will derive a small benefit I'm just wondering if you can quantify that for us.
Sure. So on August 15.
CMS published a I guess should call it a correction.
And I don't think any particularly.
Codes.
Sure equal a global code value and initially as reported they did not.
So the some of the hookup.
Interpretation and the technical code should equal the global coded.
In that first pass release, it Didnt and then within the data was corrected and they now do.
And when that happens the technical code went up.
On the global code went down.
By almost the same amount.
Then the hookup and interpretation were sort of in that.
Fractional percentage movement downward.
We reported to if we calculated 2019 revenues.
You know mix and all of the other things that the impact would have been low single digits and now we believe it would be high single digit.
Impact year over year to the positive.
Well thats great Okay.
Thanks for that Kevin and another question on I guess, how things can change between now and December historically this the reimbursement tend to change from the proposed rule to the final rule and if so has it veered very much from that proposed rule.
I think I think the to gauge the b.
Factor here with us.
Is the conversion factor.
That that all of the RV use and the physician payment system get multiplied by two to arrive at a price point.
And what was proposed in the rule here was about a 10.6% decrease in conversion factor across all categories not just the concept that we use but for everything.
My My guess is that that is going to be heavily debated hi, it's a fairly large decrease and I think in prior years, it spend nowhere near that level.
There is a reason for that and it's my understanding and I'm, hoping on correct, but.
Physician payment or codes that are called evaluation and management the E and M codes.
Went up substantially.
And.
CMS is required to operate balanced budget format. So they can't just pile on more more expensive happen when something goes up something else has to go down.
And that seems like the best way that they were able to facilitate that was to just drain more water out of the pool through the conversion factor.
So my suspicion is in the budgeting process thats going to be.
Debated.
As far as on the cost structure side I.
The process was so thoroughly so complete I'm, hoping that hoping that are side.
Not much to change but of course, there's the common period and.
We'll see what happens.
Oh.
Great color. Thanks, So last one from me then just in terms of.
Your home enrollment trends, so, let's say that volumes did return to near normal pre coded level call it 95% to 100%, what where does home enrollment registration plateau in your view.
You know as we said it's a good question we serve their prepared remarks gene that we think our you know this 30% level slightly plus minus appointed to around 30%.
Sales right to us a lot of accounts or.
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Loving if you will the the ability to order things remotely without having patients come into the office.
Particularly patients that have already had prior studies were exams.
Tighter ration follow up to ablation.
Subsequent Seo patches and so then nature, plus even even new cases, which are being seen today.
So I think that that's here to stay and it's probably going to get built off the box of what we hear about telemedicine being here to stay as well.
So you know tele medicine have done on the.
Kind of on the sidelines for a long time within that got pushed to the forefront.
As many physicians really liking it many physicians are fueling thats Antonio Gary good job and seeing their patients remotely.
And probably won't go back.
What I'd call about a third of our business 30, what sort of each of our business is probably looks like to that way.
We're hoping for.
We're able to do 100% or very close very soon to be able to 100% Sophie.
Kogut pandemic your spikes up.
God, we hope not but if it were.
We would be able to sustain our operations all the way of 200 person.
Fantastic. Thank you.
You're welcome.
And ladies and gentlemen. This concludes that you had a question on today's conference and then I'll turn the call back over to Mr., Kevin can for any closing remarks.
Great. Thank you operator, thank you everyone for joining our call today on our Q2 2020.
Earnings call updates. We appreciate your continued interest in support of the company and continue to wish you a great health and great. So great safety throughout this period of time, we'll look forward to talk into later, thank you bye bye.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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