Q1 2022 iRhythm Technologies Inc Earnings Call

May 5, 2022

We 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.

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.

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 reports on Form 10-K, and Form 10-Q, respectively.

Filed with the SEC.

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 adjusted net loss unless otherwise noted all references to financial metrics are presented on a non-GAAP basis.

The presentation of this additional information should not be considered in isolation of as a substitute for or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and 10-Q for a 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 may 1st 2022.

Our rhythm 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 Quentin Blackford, our rhythms president and CEO.

[music].

Yeah.

Thank you Leigh good afternoon, and thank you all for joining us Doug Devine, our Chief operating Officer, and Chief Financial Officer, and Jon Wilson, Our EVP of corporate strategy and development joining me on today's call. My prepared remarks today ill cover progress we've made throughout the first portion of 2022 and discuss the near and long term growth initiatives for our business I will then.

Turn the call over to Doug to provide a detailed review of our first quarter financial results as well as our updated guidance for 2022.

Our first quarter results came in ahead of expectations across the board and demonstrate the value of an increased focus and discipline that we're driving into the business.

We were pleased with our first quarter revenue performance growing by 24% year over year to $92 million fueled by strong unit volume growth as well as the benefit of the improved <unk> pricing that went into effect January one.

Furthermore, we were pleased with the improved operational discipline and efficient management of costs, resulting in improved gross margin and lower than anticipated spending.

As a result, we are providing favorable updates to both our revenue and profitability expectations for the year, which Doug will share in a bit.

We continue to make progress on the reimbursement front as we realized another positive step forward in GFS. The Mac that serves our suburban Chicago area and we're one of our primary independent diagnostic testing facilities, Brian Etfs is located they updated their payment rates of approximately $329 and $342 for the two main CPT codes that we use.

Our business effective April one.

We are pleased with this most recent update provided by NDS, which continues to demonstrate that the cost associated with delivering the <unk> service and the value that it provides are being better understood. We will continue to engage with the other regional macs on their internal review processes, and we will provide updates as appropriate.

As it relates to national pricing, we expect that CMS will release, its 2023, Medicare physician fee schedule proposed rule in or around July of this year.

This will be followed by an open comment period and final rulings, which have historically been communicated in the November timeframe and will then be effective January one 2023.

We are continuing to fully participate and coordinate with our industry partners stakeholders customers and medical societies on this process to establish fair and stable national CMS pricing for <unk> moving forward.

Which we are confident can lead to increased access and improving care for all.

We believe <unk> offers the most complete ambulatory cardiac monitoring solution backed by the most advanced AI into space, so that providers can accurately diagnose patients more quickly and efficiently.

We also took additional steps forward in building our leadership team announcing last week that Dr. <unk> will be joining I rhythm in the newly created role of Chief Medical Officer, and Chief Scientific Officer.

<unk> was one of the early adopters of deal and performed one of the first ever silent AF studies with deal.

In addition to his clinical work mid two was the co founder of the Stanford Center for digital Health and is a seasoned operator, who has led the development of virtual care and remote patient monitoring.

Software for clinical trials academic research and commercialized health care products.

<unk> will be responsible for guiding our innovation efforts and leading our research and evidence generation I'm personally thrilled to have mid to on board and look forward to having and hit the ground running.

Coming back to the business performance within our core U S market, we saw strong unit volumes and pricing performance during the quarter.

Registrations rebounded nicely to record levels in March after a slow start to January due to the impact of the omicron variant.

We also saw continued momentum with the new accounts as the number of new account openings were up 15% from the fourth quarter of 2021.

And while we were very pleased with the strength that we saw exiting March we believe some of that strength may have been attributable to patient backlogs from December and January.

We continue to believe that <unk> should be the gold standard ambulatory cardiac monitoring and the opportunity ahead of us in this core market alone is immense.

Approximately $5 6 million ambulatory cardiac monitoring tests are prescribed annually in the U S. But we estimate that less than 25% of those are for a clinically superior extended wear monitors.

Our data driven AI and deep learned algorithms are a significant differentiator from competitors and we see ourselves increasingly as a provider of insights to our patients and customers within the larger digital health ecosystem.

As part of this we believe that our core market will only expand over time as we create new opportunities to impact prediction and prevention of disease move deeper into primary care and expand into additional use cases.

The clinical superiority of <unk> remains a key reason, we continue to increase our market share and we are pleased to see the mounting clinical evidence continue to growth and further demonstrate how our innovative technology can be leveraged for the benefit of patients clinicians and patient care networks at the recent ACC meeting in Washington D C as well as the HRS.

[music].

In San Francisco This past weekend, we saw important clinical data presented highlighting <unk> USD and Youll watch.

Brazil research presented at ACC highlighted that monitoring with post haver discharge can identify afib high degree <unk> blocked and Super ventricular tachycardia in patients who are at risk for Arrhythmic disorders.

<unk> found the presence of Afib and nearly 25% of the study population, including the younger cohort within the study.

Separately data was also presented that demonstrated <unk> was safely able to monitor and aid in the diagnosis of patients upon discharge from the ER, thus avoiding a hospital stay.

This study estimated that the use of save this healthcare system approximately 136 inpatient hospitalization days.

While we were very pleased with the strength that we saw exiting March we believe some of that strength may have been attributable to patient backlogs from December and January .

With <unk>, we recently presented additional data that further supports movement into the asymptomatic and undiagnosed state that market.

We continue to believe that should be the gold standard ambulatory cardiac monitoring and the opportunity ahead of us in this core market alone is a mess.

Topline data from the guard AF study showed that the <unk> service is a viable solution for the early detection and diagnosis of silent atrial fibrillation and moderate risk populations.

Approximately $5 6 million ambulatory cardiac monitoring tests are prescribed annually in the U S. But we estimate that less than 25% of those are for clinically superior extended wear monitors.

Within the study nearly 5% of the population had afib detected within two weeks of monitoring this.

This further highlights the need to help them diagnose populations effectively seek treatment for four more serious problems can occur therefore, improving patient outcomes.

Our data driven AI and deep learned algorithms are a significant differentiator from our competitors and we see ourselves increasingly as a provider of insights to our patients and customers within the larger digital health ecosystem.

And finally at the recent HRS conference. This past weekend, we announced exciting data on the deal watch demonstrating our ability to detect arrhythmia is using non patch based technology.

The findings from our first prospective study were designed to evaluate the performance of the deal watches PPG sensor and Afib context engine algorithm and detecting irregular rhythms and those at risk with having afib.

The clinical superiority of <unk> remains a key reason, we continue to increase our market share and we are pleased to see the mounting clinical evidence continue to grow and further demonstrate our innovative technology can be leveraged for the benefit of patients clinicians and patient care networks at.

The data revealed that integral level of sensitivity and specificity of our proprietary algorithm where comparable to our <unk> XT patch.

Moreover, PPG derive the afib burden from the zeal walked with an accurate measure when compared to the <unk> as a reference.

At the recent ACC meeting in Washington, D C as well as the HRS conference in San Francisco. This past weekend, we saw important clinical data presented highlighting.

The <unk> and the AI algorithms that use our currently under five 10-K reviewed by the FDA and pending clearance.

<unk> equity and Youll watch.

For.

Research presented at ACC highlighted monitoring with post haven't discharged can identify eythor high degree <unk> block and Super particular tachycardia in patients who are at risk for Arrhythmic disorders.

In addition to the further pursuit of clinical evidence demonstrating the value of zero. We are also committed to innovation.

Underscoring that commitment we are very pleased to announce that we have shipped the first batch of our next generation biosensor zeal monitor for first patient use following regulatory clearance. This.

Results found the presence of Afib and nearly 25% a study population, including the younger cohort within the study.

This monitor will eventually replace <unk>, while providing a platform that delivers a dramatically smaller form factor, resulting in an improved patient experience and a reduced cost profile with greater efficiencies for manufacture ability and scalability without sacrificing our quality of service.

Separately data was also presented that demonstrated <unk> was safely able to monitor and aid in the diagnosis of patients upon discharge from the ER, thus avoiding the hospital stay.

The study estimated that the use of <unk> saved this healthcare system approximately 136 inpatient hospitalization days.

Full scale commercialization and conversion of this next generation device is anticipated in 2023.

With <unk>, we recently presented additional data that further supports movement into the asymptomatic and diagnosed afib market.

Shifting to our strategy of international expansion. Our goal is to establish <unk> as the standard of care in international markets. Much as we are doing in the U S.

Topline data from the guard AF study showed that the <unk> service is a viable solution for the early detection and diagnosis of silent atrial fibrillation and moderate risk populations.

We've been working on a strategic pathway towards continued commercial expansion in the U K and introduction into other countries over the next two to three years.

Within the study nearly 5% of the population had afib detected within two weeks of monitoring.

Within the U K, we continue to execute against the NHS AI Award and select NHS sites as well as grow our business within the private payer market.

This further highlights the need to help undiagnosed population effectively seek treatment before more serious problems can occur therefore, improving patient outcomes.

We expect to use the remaining portion of the AI Award within 2022 and are working with individual NHS sites to secure local funding and ensure continued access to <unk>, while we continue our efforts to secure sustainable reimbursement within the NHS.

And finally at the recent HRS conference. This past weekend, we announced exciting data on the deal watch demonstrating our ability to detect arrhythmia is using non tax base technology.

In the meantime, we expect our U K business to grow more moderately.

Beyond the U K, we are excited to announce that we will be commencing market access initiatives in Germany, France, the Netherlands, and Sweden in the coming months.

The data revealed that integral level sensitivity and specificity of our proprietary algorithm where comparable to our <unk> XT patch.

Roughly $1 7 million ambulatory cardiac monitoring test to our addressable market.

I mentioned previously we are also excited about the Japanese market, where there are more than $1 5 million ambulatory cardiac monitoring tests prescribed annually.

Moreover, PPG derived afib burden from the deal walked with an accurate measure when compared to the <unk> as a reference.

We anticipate initiating the reimbursement and regulatory pathways within the next few months, which would put us on a timeline for commercial launch by the first half of 2024.

The <unk> and the AI algorithm that uses are currently under five 10-K reviewed by the FDA and pending clearance.

In addition to the further pursuit of clinical evidence demonstrating the value we.

We continue to believe there's a large opportunity to bring <unk> into international markets and are accelerating our efforts to initiate market access and commercial introduction, we look forward to sharing our milestones as these efforts progress.

We are also committed to innovation.

Their scoring that commitment we are very pleased to announce that we have shipped the first batch of our next generation biosensor. The deal monitor for first patient use following regulatory clearance.

Turning to our strategy of expansion into adjacent markets. As noted earlier, we saw additional clinical data presented that further supports the move into the asymptomatic and undiagnosed APM market.

This monitor will eventually replace deal equity, while providing a platform that delivers a dramatically smaller form factor, resulting in an improved patient experience and reduce cost profile with greater efficiencies for manufacture ability and scalability without sacrificing our quality of service.

To capture this opportunity we are building a targeted detection program and capabilities that will allow us to deliver a compelling product to payers as well as an engaging experience and diagnose and underserved patient populations.

Full scale commercialization and conversion of this next generation device is anticipated in 2023.

We are fully committed to providing access to valuable digital health tools to all patients who could benefit from them and by harnessing the power of data driven deep learned AI. We believe we can redefine the standard of care with earlier insights that predict and prevent disease.

Shifting to our strategy of international expansion. Our goal is to establish <unk> as the standard of care in international markets. Much as we are doing in the U S.

We've been working on a strategic pathway towards continued commercial expansion in the U K and introduction into other countries over the next two to three years.

Our efforts with the silent AF aligned well with these goals and we look forward to sharing more details on these initiatives and other growth strategies at an Investor day later this year.

Within the U K, we continue to execute against the NHS AI Award and select NHS site as well as grow our business within the private payer market.

In closing we have started 2022 very strong and are very confident in the sizable opportunities ahead of us to serve millions more patients we.

We expect to use the remaining portion of the AI Award within 2022 and are working with individual sites to secure local funding and ensure continued access to <unk>, while we continue our efforts to secure sustainable reimbursement within the NHS.

We see tremendous runway for growth within the core market that we serve today as we continue to ship the standard of care to deal the gold standard in this space and we continue.

In the meantime, we expect our U K business to grow more moderately.

To invest in our mid and long term growth initiatives that will leverage our technology platform into new geographies and new markets.

Beyond the U K, we are excited to announce that we will be commencing market access initiatives in Germany, France, the Netherlands, and Sweden in the coming months at roughly $1 7 million ambulatory cardiac monitoring test to our addressable market.

I have never been more excited about the future that I see it algorithm and we are intently focused on realizing our vision.

I'll now turn the call over to Doug.

Thanks Clinton.

Our first quarter 2022 financial results demonstrated the strength of our business as revenue grew 24% year on year, 13% quarter on quarter.

As I mentioned previously we are also excited about the Japanese market, where there are more than one 5 million ambulatory cardiac monitoring test prescribed annually.

We anticipate initiating the reimbursement and regulatory pathways within the next few months.

Registrations in new account Onboarding continued solid growth and new account sales again contributed strongly to our growth.

It would put us on a timeline for commercial launch by the first half of 2024.

We continue to believe there is a large opportunity to bring deal into international markets and are accelerating our efforts to initiate market access and commercial introduction, we look forward to sharing our milestones as these efforts progress.

Although the economic environment remains uncertain. We are pleased with the way in 2022 has started.

Taking a more detailed look at our first quarter financial results on a sequential basis revenue increased 13% quarter on quarter from $82 million to $92 million.

Turning to our strategy of expansion into adjacent markets. As noted earlier, we saw additional clinical data presented that further supports the move into the asymptomatic and diagnosed afib market.

Growth in our average daily registrations were strong increasing by about 13% during the first quarter as compared to 7% during the fourth quarter.

We had strong growth in the number of new accounts onboarding, increasing by 15% from Q4 2021 to Q1 2022.

Looking at new store same store mix, new store defined as accounts that have been open for less than 12 months accounted for 55% of our year over year unit growth up from 46% in the fourth quarter of 2021.

Our efforts with the silent AF aligned well with these goals and we look forward to sharing more details on these initiatives and other growth strategies at an Investor day later this year.

Home enrollment was at 21% in the first quarter flat from Q4 2021 levels.

In closing we have started 2022 very strong and are very confident in the sizable opportunities ahead of us to serve millions more patients with <unk>.

Turning our attention to the rest of the P&L gross margin for the first quarter was 66, 9%.

Four 2% increase from a gross margin of 62, 7% in Q4 of 2021.

See tremendous runway for growth within the core market that we serve today as we continue to ship the standard of care to deal the gold standard in this space.

Increases in volume and average selling prices coupled with a reduction in average unit cost all contributed to the increased gross margin during Q1 2022 versus Q4 of 2021.

And we continue to invest in our mid and long term growth initiatives that will leverage our technology platform into new geographies and new markets.

I have never been more excited about the future that I see it I rhythm and we are intently focused on realizing our vision.

Yes.

I'll now turn the call over to Doug.

For the first quarter operating expenses, excluding restructuring were $83 7 million flat compared to Q4 of 2021 and up 7% year over year.

Thanks Quentin.

Our first quarter 2022 financial results demonstrated the strength of our business as revenue grew 24% year on year, 13% quarter on quarter.

Sequentially hiring and compensation expenses during the quarter were offset by milestone expenses to verily that did not reoccur in Q1.

Registrations in new account Onboarding continued solid growth in new account sales again contributed strongly to our growth.

We expect the next verily milestone to occur in 2023.

While the economic environment remains uncertain. We are pleased with the way in 2022 has started.

During Q1, we incurred $26 6 million in restructuring charges, primarily associated with a reduction in size of our San Francisco facility to better align the company to the new remote working environment.

Taking a more detailed look at our first quarter financial results on a sequential basis revenue increased 13% quarter on quarter from $42 million to $92 million.

Adjusted EBITDA of negative $4 8 million in Q1 2022.

Growth in our average daily registrations were strong increasing by about 13% during the first quarter as compared to 7% during the fourth quarter.

It was up $12 5 million compared to Q4, 'twenty, one adjusted EBITDA of negative $17 3 million.

We had strong growth in the number of new accounts onboard an increasing by 15% from Q4 2021 for Q1 2022.

Yes.

Cash and short term investments declined $33 million from the fourth quarter of 2021 to $208 8 million.

Looking at new store same store mix, new store defined as accounts that have been open for less than 12 months accounted for 55% of our year over year unit growth from 46% in the fourth quarter of 2021.

2021 bonus payment payroll taxes, 401, K contribution working capital and adjusted EBITDA losses consumed cash in the first quarter, partially offset by the initial loan drawdown with Silicon Valley Bank on our amended debt facility.

Home enrollment was at 21% in the first quarter flat from Q4 2021 levels.

Accounts receivable increased by $8 9 million to $55 3 million from $46 4 million in Q4, 2021, primarily driven by quarter on quarter increase in revenue.

Turning our attention to the rest of the P&L gross margin for the first quarter was 66, 9%.

Adjusted net loss, which excludes restructuring related expenses was negative $23 7 million or a loss of <unk> 80 per share compared with a net loss of negative $27 8 million or <unk> 95 per share for the same period of the prior year.

Four 2% increase from a gross margin of 62, 7% in Q4 of 2021.

Increases in volume and average selling prices coupled with a reduction in average unit cost all contributed to the increased gross margin during Q1 2022.

Finally, we amended our existing debt facility with Silicon Valley bank to improve upon the pricing in terms of our prior facility.

<unk> Q4 of 2021.

For the first quarter operating expenses, excluding restructuring were $83 7 million flat compared to Q4, 2021 and up 7% year over year.

The amended credit facility is non dilutive and consists of a term loan of up to $75 million revolving credit facility of up to $25 million.

Sequentially hiring and compensation expenses during the quarter were offset by milestone expenses to verily that did not reoccur in Q1.

$35 million on the term loan was drawn down at closing to pay in full the approximately $18 5 million outstanding.

On the term loan under the prior credit facility.

We expect the next verily milestone to occur in 2023.

And to fund working capital.

Remaining $40 million of the term loan will remain available for us to draw through December 31, 2023 subject to applicable conditions.

Our revolving credit line availability is subject to a borrowing base comprised of our accounts receivable the.

Adjusted EBITDA of negative $4 8 million in Q1 2022.

The amended credit facility will mature March one 2027.

Was up $12 5 million compared to Q4, 'twenty, one adjusted EBITDA of negative $17 3 million.

Turning to guidance for 2022, we are increasing our expectation for full year revenue to range between $410 million and $420 million, reflecting year over year growth of 27% to 30%.

Cash and short term investments declined $30 3 million from the fourth quarter of 2021 to $208 8 million.

The increase in our guidance reflects our performance in the first quarter of 2022 as well as a positive impact from the updated NGL pricing.

2021 bonus payment payroll taxes, 401, K contribution working capital and adjusted EBITDA losses consumed cash in the first quarter.

As we currently have an idea in suburban Chicago, we expect to see a small positive impact to revenue starting in the second quarter and increasing into the second half of the year.

Actually offset by the initial loan drawdown in the Silicon Valley Bank on our amended debt facility.

Accounts receivable increased by $8 9 million to $55 3 million from $46 4 million in Q4, 2021, primarily driven by quarter on quarter increase in revenue.

We expect gross margin to be between 68% and 69% for the full year 2022.

We expect adjusted operating expenses in the range of $375 million and 385 million flat to our prior guidance and.

And we expect adjusted EBITDA to range between negative $15 million and negative $25 million.

Our adjusted EBITDA for 2022 will exclude restructuring costs and stock compensation.

Finally, we amended our existing debt facility with Silicon Valley bank to improve upon the pricing in terms of our prior facility.

And with that Clinton, Dan and I would like to now open the call for questions operator.

Thank you we will now begin our question and answer session. If you have a question. Please press zero then one on your Touchtone phone if you wish to be removed from the queue. Please press zero then too.

The amended credit facility is non dilutive and consists of a term loan of up to $75 million revolving credit facility of up to $25 million.

$35 million on the term loan was drawn down at closing to pay in full the approximately $18 5 million outstanding.

If youre using a speakerphone please pick up the handset first before pressing the numbers. Once again, if you have a question. Please press zero then one on your Touchtone phone and we have our first question from Allen Gong with J P. Morgan.

On the term loan under the prior credit facility.

And to fund working capital.

The remaining $40 million of the term loan will remain available for us to draw through December 31, 2023 subject to applicable conditions.

Okay.

Hey, guys. This is Alan congrats on the good quarter.

The revolving credit line availability is subject to a borrowing base comprised of our accounts receivable the.

I guess first question I really had is on the reimbursement change.

Definitely welcome to see but with in theory, a proposed rule and potentially a national rate decision from CMS.

The amended credit facility will mature March one 2020.

Turning to guidance for 2022, we are increasing our expectation for full year revenue to range between $410 million and $420 million, reflecting year over year growth of 27% to 30%.

Expected in a couple of months.

Why would they I guess go ahead and make this kind of change in I guess what were their reimbursement rates previously.

Hey, Alan this is Quentin here.

The increase in our guidance reflects our performance in the first quarter of 2022 as well as a positive impact from the updated mgs pricing.

I think we've been working with the Macs from really in the mid part of last year and this is a continuation of that process and it's not just Ngls, it's all of the maxon.

As we currently have an idea in suburban Chicago, we expect to see a small positive impact to revenue starting in the second quarter and increasing into the second half of the year.

We've been pretty deliberate around the fact that we need to continue to work with them from a strategic perspective being that.

We believe there will be a final rule and we're hoping for a final rule, we want the final rule as it increases access to care for all.

We expect gross margin to be between 68%, 69% for the full year 2022.

But in the case that there is not a final rule, we need to continue to articulate and demonstrate the value that we can deliver through our offering to each one of these maps and so not only does our work continue with Ngls as it did and we saw a nice rate, but it continues with all of the Max at this point.

We expect adjusted operating expenses in the range of $375 million and $385 million flat to our prior guidance and.

And we expect adjusted EBITDA to range between negative $15 million and negative $25 million.

Continuing just to put ourselves in a position, where we're ready really no matter what the alternative is with the final rule. So this is much more of a strategic pathway forward an incredibly pleased to see the outcome with it I think it continues to demonstrate that when the <unk>.

Our adjusted EBITDA for 2022 will exclude restructuring costs and stock compensation.

And with that Clinton, Dan and I would like to now open the call for questions.

Party to get to the table and get around.

Operator.

Thank you we will now begin our question and answer session. If you have a question. Please press zero then one on your Touchtone phone.

Around the information the cost data that is being presented they see very clearly what it takes to put this sort of technology and capability into the marketplace and that gets recognized that gets valued and so incredibly pleased with them, obviously a rate of $3 40.

You wish to be removed from the queue. Please press zero then too.

Using a speaker phone please pick up the handset first before pressing the numbers. Once again, if you have a question. Please press zero then one on your Touchtone phone and we have our first question from Allen Gong with J P. Morgan.

Continuing to step north of the $2 30 rate that know the task with that and they all were looking at similar data sets. So continuing to to sort of look at the overall cost profile of it but it was a meaningful step up from where they had been historically and I think for us. What's most encouraging is it's put.

Hey, guys. This is Alan congrats on the good quarter.

Right within our jurisdiction, where we already have an <unk> that lets us become much more efficient and effective with how we utilize our resources to serve this marketplace. So from many different angles on the strategic asset of aspects of what we're trying to achieve so incredibly pleased.

I guess first question I really had is on the reimbursement change.

It's definitely welcome to see but with in theory, a proposed rule and potentially a national rate decision from CMS.

Expected in a couple of months.

Okay.

Got it and then that obviously didn't contribute to the upfront as you saw in the quarter.

Why would they go ahead and make this kind of change in I guess what were their reimbursement rates previously.

Unfortunately, I think the webcast and the call might have been having some issues in the first five to 10 minutes. So apologies. If you went over this but just what really drove that outperformance in the first quarter and then when we think about the fact that your guidance is a step above that some of that to reflect the <unk> not.

Hey, Alan this is quint.

I think we've been working with the Macs from really in the mid part of last year and this is a continuation of that process and it's not just didn't yes, it's all of the Max.

Not the same as the Mac reimbursement rate increase on some of that to reflect hopefully that momentum continuing if you could give us a little bit of a breakdown there. Thank you very much.

We've been pretty deliberate around the fact that we need to continue to work with them from a strategic perspective.

Being that.

We believe there will be a final rule and we're hoping for a final rule once the final rule as it increases access to care for all but in the case that there is not a final rule, we need to continue to articulate and demonstrate the value that we can deliver through our offerings to each one of these macs and so not only does our work continue with Ngls as it did and we saw a nice.

Sure and apologies for the first part of the call we weren't getting that on our side, but for those of you who missed out on that apologies and we'll make sure that they are the transcript is out there and youre able to get it.

When you look at the first quarter.

The back end of the quarter was incredibly strong we touched on the fact that March were record daily registrations for us in the prepared remarks.

Right, but it continues with all of the Max at this point.

As a significant rebound coming off of the slow start in January early February as a result of the omicron variant.

<unk> just to put ourself in a position, where we're ready really no matter what the alternative is with the final rule. So this is much more of a strategic pathway forward, an incredibly pleased that to see the outcome with it I think it continues to demonstrate that when the parties get to the table and get.

How much of of March was pent up demand versus true underlying strength is.

As yet to be decided we continue to be encouraged by the results that we saw into April.

Around the information the cost data that is being presented they see very clearly what it takes to put this sort of technology and capability into the marketplace and it gets recognized that gets valued and so incredibly pleased with them obviously a rate of $3 40 is.

So we're pleased from that perspective, but from a guidance perspective, we didn't want to get ahead of ourselves. So how we thought about that was more or less passing through the beat of the first quarter, which call it roughly $3 million or so and then increasing for the impact that we believe we can get from the NGL reimbursement over the the remainder of the year, which is really going to be in the back half by the time, we're able to.

Continuing to step north of the $2 30 rate that know the task was that and they all we're looking at similar data set so continuing to just sort of look at the overall cost profile of it but it was a meaningful step up from where they had been historically and I think for us. What's most encouraging is it's put.

To get the resources utilized the way, we want to and that had the other call it roughly $7 million or so of benefit that gets you to the full $10 million range on both the low and high end.

Right within our jurisdiction, where we already have in <unk>.

That's become much more efficient and effective with how we utilize our resources to serve this marketplace. So from many different angles. It hits on the strategic asset of aspects of what we're trying to achieve so incredibly pleased.

Thank you. Our next question is from Joanne Wuensch with Citi.

Good afternoon. This is Anthony on for Joanne. Thank you for taking our questions and congrats on a really good quarter.

Got it and then that obviously didn't contribute to the outperformance you saw in the quarter.

Just on gross margins.

Press year over year, which I think was expected, but just given that you've raised guidance for them. Then you have some new products coming on with Washington sensor can you just talk about how youre thinking about margins for the rest of the year.

Yes, Doug why don't you jump on them.

Sure. Thanks Clinton.

So.

Same as the Mac reimbursement rate increase on some of that to reflect hopefully that momentum continuing if you could give us a little bit of a breakdown there. Thank you very much.

First when you look at the kind of the depressed slight compression on the gross margins.

We've added a lot of capacity, particularly on the clinical side.

Sure apologies for the first part of the call we weren't getting that on our side for those of you who missed out on that apologies and we'll make sure that through the transcript is out there and youre able to get it.

And that that added capacity is still coming up to production coming up to full productivity.

As you look forward.

And this is consistent with the message. We gave you in Q1 that we're going to build throughout the year that we're expecting Q4 gross margins to be north of 70% and you'll see a gradual step one step function move up in gross margin as we move throughout the year. Some of that's going to be volume some of that is going to be.

When you look at the first quarter.

The back into the quarter was incredibly strong we touched on the fact that March were record daily registrations for us in the prepared remarks, which is a significant rebound coming off of the slow start in January early February as a result of the omicron variant.

How much of March was pent up demand versus true underlying strength is as.

Digesting the capacity increases that we've put into the company and Youre going to see the same thing on the EBIT side, where again, we're expecting to be at breakeven or slightly positive on adjusted EBITDA in the fourth quarter, and making steady progress as we move throughout the year.

He has yet to be decided we continue to be encouraged by the results that we saw into April .

So we're pleased from that perspective, but from a guidance perspective, we didn't want to get ahead of ourselves. So how we thought about that was more or less passing through the beat of the first quarter, which call it roughly $3 million or so and then increasing for the impact that we believe we can get from the <unk> reimbursement over the the remainder of the year, which is really going to be in the back half by the time, we're able to.

In regards to the new monitor.

That's not correct first that's not going to launch in larger commercial volumes until 2023 and the second.

Wouldn't expect that one to be a big mover on the gross margin.

To get the resources utilized the way, we want to and that had the other call it roughly $7 million or so of benefit that gets you to the full $10 million range on both the low and high end.

That's helpful and then if I could just ask one more what is your outlook on private reimbursement do you expect it to sort of stay stable or down low single digits with just I would like to know your thoughts. Thanks.

We continue to be encouraged with what we see in the private slash commercial reimbursement space.

Thank you. Our next question is from Joanne Wuensch with Citi.

I think that those payers tend to take a bit of a different perspective and different look at how the value of this technology and I think they understand that having a better capability to diagnose earlier in the care pathway and reduce downstream cost when they can see that clearly they're willing to pay for it.

Good afternoon. This is Anthony on for Joanne. Thank you for taking our questions and congrats on a really good quarter.

Just on gross margins compressed.

Press year over year, which I think was expected, but just given that you've raised guidance for them. Then you have some new products coming on with Washington sensor can you just talk about how you are thinking about margins for the rest of the year.

And we've seen that reflected in our negotiations with the payers I think the continual move with the Max the recent Ngls right. For example, I think it is just another good data point to put out there that when you get into the data and understand the value that this delivers.

Yes, Doug why don't you jump on them.

Sure. Thanks Clinton.

So when you first when you look at the kind of the depressed slight compression on the gross margins.

We've added a lot of capacity, particularly on the clinical side and that that added capacity is still coming up to production coming up to full productivity.

The reimburse value is reflected in that and so we were encouraged with Ngls and I think that plays well with us in terms of the discussions with the commercial payers, but I will say, there's not been anything in those commercial discussions that give us concern around commercial rates at this point in time and those conversations have been pretty steady for the last nine months or so.

As you look forward and this is consistent with the message. We gave you in Q1 that we're going to build throughout the year that we're expecting Q4 gross margins to be north of 70% in <unk>.

Step one step function move up in gross margin as we move throughout the year. Some of that's going to be volume some of that is going to be.

We have our next question from Margaret cancer with William Blair.

Hey, guys. This is Maggie on for Margaret Thanks for taking our questions.

I wanted to ask one on <unk>.

And the DIY.

So I heard you guys say that it's pending <unk> approval. So just wanted to see if you could provide any updates on that pathway to approval and then any more updates on that business model.

In regards to the new monitor.

That's not correct first that's not going to launch in larger commercial volumes until 2023 and the second.

Yes, Dan do you want to jump in and take this one on the what.

Yes, sure I'd be happy too so thanks for the question Maggie.

I wouldn't expect that one to be a big mover on the gross margin.

It is still with the FDA. So we're as we've noted previously FDA timelines are a bit harder to predict at the moment due to COVID-19, but it is with the FDA and we're hoping for clearance here in the near term and we'll certainly update folks once we hit that milestone.

That's helpful and then if I could just ask.

One more what is your outlook on private reimbursement do you expect it to sort of stay stable or down low single digits would just like to know your thoughts. Thanks.

We continue to be encouraged with what we see in the private slash commercial reimbursement space.

From there we.

We'll be entering.

<unk>.

Evaluation phase and the early part of next year, assuming we get clearance.

This year.

And we will be exploring that business model and various use cases, so I would say more to share once we get certainly to the milestone of clearance and then as we're getting into next year and launching into that market evaluation phase will be will be sharing with everyone.

Got it thank you.

And then I just wanted to ask a more high level question here. So you guys have had.

Several years of strong growth and Eric headed towards your next slide of the adoption curve. So.

What's the Green space Lastly, you guys here, obviously, there's a lot left to capture and then what are you targeting in 2022 and 2023 to drive the next cycle.

Yes.

Yeah terrific questions and excited to answer that because I think there are so many different growth pathways that sits in front of the company, but one of the most significant opportunities in near term opportunities continues to be the awareness and the adoption of the technology in this core market that we serve right here in the states.

We have our next question from Margaret cancer with William Blair.

Less than 25% of the market utilizes extended wear a patch technology and for the most part continues to utilize that the older.

Hey, guys. This is Maggie on for Margaret Thanks for taking our questions.

I wanted to ask one on membership.

Traditional holter monitor, which we know is just not a very good solution and theres such an improvement out there with with the yield that we believe it should be the standard of care in the gold standard in this space and that ultimately we're going to see market adoption move to that 75% 80% of volumes over time, and so that gives you a lot of runway in this core.

And what.

So I heard you guys say that it's pending <unk> approval. So just wanted to see if you could provide any updates on that pathway to approval and then any more updates on that business model.

Yes, Dan do you want to jump in and take this one on the walk.

Market alone, which has US excited I think you then think about being able to move into the primary care space, which we know even more folks than the $5 6 million ACM tests that are prescribed every year call. It closer to 8 million people show up in the primary care space with palpitations and with the ease of use around the product.

Yeah sure I'd be happy too so thanks for the question Maggie.

It is still with the FDA. So we're as we've noted previously the FDA timelines are a bit harder to predict at the moment due to COVID-19, but it is with the FDA and we're hoping for clearance here in the near term and we'll certainly update folks once we hit that milestone.

It's easy to believe that we ought to see the market being able to expand so I get encouraged from that perspective, and you're going to see us really focus in on and getting after those opportunities but.

From there we.

We'll be entering.

<unk>.

Evaluation phase and the early part of next year, assuming we get clearance.

This year.

And we will be exploring that business model and various use cases, so I would say more to share once we get.

Even within the core market just an interesting data point, we call them less than 50% of the cardiologists and EP accounts in the states today.

To the milestone of clearance and then as we're getting into next year.

One thing into that market evaluation phase will be will be sharing with everyone.

There is still a lot of greenfield opportunity just in the specialist.

Area.

Got it thank you.

The U S core market, but then you have got the primary care that coming behind it. So I think for the next couple of years, you're going to hear US talk a lot about just really refining our focus our discipline of calling on those accounts, increasing visibility into it and really creating awareness and education to convert what sits in front of us in the core market.

And then I just wanted to ask a more high level question here. So you guys have had.

Several years of strong growth and are headed towards your next slide the adoption curve. So.

What's the Green space Lastly, you guys here, obviously, there's a lot left to capture and then what are you targeting in 2022 and 2023 to drive the next cycle.

Beyond that and we've talked about this.

The opportunity to take this technology into the international space is real there is there is no reason why the international markets arent enjoying the same sort of benefit that this product and technology can deliver.

Yes.

Yes, terrific question and excited to answer that because I think there are so many different growth pathways that sit in front of the company.

But one of the most significant opportunities and near term opportunities continues to be the awareness and the adoption of the technology in this core market that we serve right here in the states.

Like we're seeing right here in the states and so we're excited to announce that we've identified kind of the next four key countries within the European region, being Germany, France, Netherlands, and Sweden, which add another $1 $7 million of addressable market for us.

Less than 25% of the market utilizes extended wear patch technology and for the most part continues to utilize that the older traditional holter monitor which we know is just not a very good solution and theres such an improvement out there with with the yield that we believe it should be the standard of care in the gold standard in this space.

We're excited about so there's a lot of a lot of growth sitting in front of US just in this core markets and the international sort of symptomatic market that I think will deliver very nice growth results for us.

And in the meantime, we will continue to explore some of the adjacent opportunities that can only add to the addressable market over time, but our focus is in this core market right now.

And that ultimately, we're going to see market adoption move to that 75% to 80% of volumes over time, and so that gives you a lot of runway in this core market alone, which has US excited I think you then think about being able to move into the primary care space, which we know even more folks than the $5 6 million ACM tests.

Great. Thanks, so much.

We have our next question from David Ross, Scott with <unk> Securities.

Hey, guys. Thanks for taking the question and congrats on a good start to the year.

That are prescribed every year call it closer to 8 million people show up in the primary care space with palpitations and with the ease of use around the product. It's easy to believe that we ought to see the market being able to expand so I get encouraged from that perspective, youre going to see us really focus in on getting after those opt.

I wanted to start first on the updated rate would be Chicago.

Chicago Mac I, just want to make sure im understanding that correctly as you mentioned a little bit how you're able to maybe optimize some of the services here. I mean is this something that you can do in a sense kind of reroute, maybe the patient that you otherwise our CMS patients that otherwise may have gone through the Houston Mac now potentially going through this higher rate Mac in Chicago since you do have a night.

<unk>.

Even within the core market just an interesting data point, we call on less than 50% of the cardiologists and EP accounts in the states today.

ETF there.

And just a second part to that how does this at all impact the way that you're thinking about the NCD for clinical story.

There's still a lot of greenfield opportunity just in the specialist.

Area.

I did can you repeat the second part of that question David.

The U S core market, but then you have got the primary care that comes behind it. So I think for the next couple of years, you're going to hear US talk a lot about just really refining our focus our discipline of calling on those accounts, increasing visibility into it and really creating awareness and education to convert what sits in front of us in the core market.

Yes, just how if at all this does or does not impact the way that you are thinking about the NCD for 2023.

Got it.

Look I think for US one of the most exciting aspects of getting the right adjusted with the Mac, where we have an ETF is the better ability to utilize our resources. We've been somewhat constrained in terms of just how we can drive the efficient use of those resources historically as CMS has been the Medicare claims would be.

Beyond that and we've talked about this.

The opportunity to take this technology into the international space is real there is there is no reason why the international markets aren't enjoying the same sort of benefit that this product and technology can deliver.

In process through the Houston, Mac, so absolutely there becomes at opportunity to become much more efficient overnight.

We've got to get the resources.

In place and the systems in place to make sure. We do this right and it's a good experience for the patients but at the same time the opportunity sits there too.

And in the meantime, we will continue to explore some of the adjacent opportunities that can only add to the addressable market over time, but our focus is in this core market right now.

So really think about resource utilization and the best way possible. The most efficient way possible for the company and we can get that CMS final rate put in place at a reasonable rate and then we feel very good about being most efficient with our resources. So I do think it leads into an opportunity for us as we think about 2023 just to be the most efficient.

Great. Thanks, so much.

We have our next question from David <unk> with <unk> Securities.

Hey, guys. Thanks for taking the question and congrats on that could start to the year.

I wanted to start first on the updated rate would be.

Operation that we can be.

Argo Mac I, just want to make sure im understanding that correctly as you mentioned a little bit how you're able to maybe optimize some of the services here. I mean is this something that you can do in a sense kind of reroute maybe the patients that you otherwise our CMS patients that otherwise may have gone through the Houston Mac now potentially going through this higher rate Mac in Chicago since you do have in IGT.

Okay. That's helpful.

Kind of a quick follow up to that but also a second question.

<unk>.

The guidance or the prior guidance for the year you had mentioned in Q1 would be around 20%, 22% of revenue. If you think about that relative to the guide now that.

Implies that you're at the upper end of the range. If we think about Q1 being this 22% of revenue for the full year. So.

Up there.

And just in the second part of that.

Does this at all impact whether you are thinking about the NCD for clinically III.

So I guess one is.

The raise here I'm just trying to get some color on what the rate was driven by here I mean is this in part volume or does the Chicago right.

I did can you repeat the second part of that question David.

Yes, just how if at all this does or does not impact the way that you are thinking about the NCD for 2023.

Impact that at all and if so how soon.

Do you think that you'd be able to kind of optimize this.

Chicago had ETF on the higher rate.

Got it.

Doug do you want to jump on that question.

Yes sure.

Second piece of it.

<unk> said, we need to get our systems configured we need to make sure the patient experience is correct. So.

At this point.

We have sent a couple hundred claims over two mgs.

Medicare claims are being processed through the Houston Mac, so absolutely there becomes that opportunity to become much more efficient overnight.

One of them has adjudicated yet.

We do have a substantial patch of our clinical technician population that is located in that mid western in the Chicago area and so once we know the claims are successfully adjudicating than we will.

We've got to get the resources in.

In place and the systems in place to make sure. We do this right and it's a good experience for the patient but at the same time the opportunity sits there.

To be more efficient and then youre going to get the benefit of the higher rates. So the way you described it is the right way to think about it that is how we will get that benefit in terms of 2023, yes, I think it gives us the opportunity to really think about resource utilization and the best way possible. The most efficient way possible for the company and we can.

Start to bring more of the clinical technicians that are already in that area.

Basically process the Medicare records that would have naturally flowing through that area through that area, but really.

It's going to be a second half impact it's going to be.

More minor.

Get that CMS final rate put in place at a reasonable rate and then we feel very good about being most efficient with our resources. So I do think it leads into an opportunity for us as we think about 2023 just to be the most efficient.

The first half or first part of your question was more on the on the revenue as Quintin said.

The updated guidance is a component of passing through the.

The Q1 beat and then and then this mgs impact that we're going to have in the second half of the year.

Operation that we can be.

So you should you should look at this as we now think that the first quarter represents a higher fraction.

Okay. That's helpful.

I guess kind of a quick follow up to that but also the second question.

Thank you.

Full year revenue than we were thinking before and I think the thing. We would highlight is that January and February were noticeably slower because of Amazon. We saw a stronger pickup in March as Quintin mentioned than we were expecting a decline in the February call, which was what changed our view on what fraction of the year Q1.

The guidance or the prior guidance for the year you had mentioned maybe Q1 would be around 2022% of revenue. If you think about that relative to the guide now that.

<unk> implies that you're at the upper end of the range. If we think about Q1 being this 22% of revenue for the full year. So.

So I guess one is.

The raise here I'm just trying to get some color on what the rate was driven by here I mean is this.

Hey.

David I would just okay.

In part volume or does the Chicago right.

While we're talking about seasonality.

As we think about the second quarter.

Impact that at all and if so how soon I think do you think that you'd be able to kind of optimize this.

Keep in mind.

Yes benefit to Doug's point is likely to come in the back part of the year.

Chicago, Ietf with a higher rate.

Doug do you want to jump on that question.

I think sequentially, you're going to see a consistent step up in the business that.

Yes sure.

We've historically seen around that 8% to 9% step up and so that's sort of how we're thinking about Q1 into Q2 first half of the year and back half of the year.

Second piece of it is.

As Quintin said, we need to get our systems configured we need to make sure the patient experience is correct. So.

At this point.

Okay very helpful. Thanks again.

We have sent a couple hundred claims over two mgs.

We have our next question from Bill <unk> with Canaccord.

None of them have adjudicated yet.

Great. Thanks, Good evening can you hear me okay.

We do have a substantial patch of our clinical technician population that is located in that Midwestern and Chicago area and so once we know the claims are successfully adjudicating than we will.

We got you.

Excellent.

So a couple of questions here first just wanted a little clarification. If we could just I think I heard in the prepared remarks that you.

Revenue was up 13% sequentially and unit volume was up 13% sequentially.

Start to bring more of the clinical technicians that are already in that area.

Basically process the Medicare records that would have naturally flowing through that area through that area, but really.

Did I hear that correctly.

No Thats a little off Bill revenue was up 13% sequentially. There is about a 10 point benefit in there.

It's going to be a second half impact it's going to be.

More minor.

And I think the first half or first part of your question was more on the revenue as Quintin said.

From the Nova costs increased rates effective January one so volumes were up closer to that 335% range sequentially.

The updated guidance is a component of passing through the.

Okay. Thanks for the clarification, sorry, I just heard that wrong, just wanted to clarify and then.

Q1 beat and then and then this mgs impact that we're going to have in the second half of the year. So you should you should look at this as we now think that the first quarter represents a higher fraction of the whole.

On X T mix.

Thank you.

Doug Your comments were that it's becoming a larger piece of the business.

Year revenue than we were thinking before and I think the thing. We would highlight is that January and February were noticeably slower because of Amazon. We saw a stronger pickup in March as Quintin mentioned than we were expecting.

I think it was running somewhere around 10% ish as you exited the year.

That become a bigger piece of the business is at like 11, or 12 or as a percent of revenues does it is it holding in.

<unk> of the time on the February call, which was what changed our view on what fraction of the year Q1.

Yes.

It's certainly went up a couple of attempts.

David I would just okay.

Yes.

So.

That's why we're talking about seasonality.

But really above 10% for Q1.

As we think about the second quarter, just would keep in mind, the NDS benefit to Doug's point is likely to come in the back part of the year.

Okay, and then if I can expand.

Okay. Just last question real quick is just on supply a lot of <unk>.

People, especially on the tech side are having some challenges just wanted to ask you in terms of inventory circuit boards, although electronic components youre required considering youre putting on.

I think sequentially, you're going to see a consistent step up in the business.

That we've historically seen around that 8% to 9% step up and so that's sort of how we're thinking about Q1 into Q2 first half of the year back half of the year.

Youre high growth and if you need a lot more than you're launching a new product just any.

Okay very helpful. Thanks again.

Any thoughts or commentary you could add on that and thanks for taking my questions.

We have our next question from Bill <unk> with Canaccord.

Yes, Bill I'll tell you.

Doug and team have done a terrific job of being out in front of that particular issue for the company and this is something they started the tackle many many months ago.

Great. Thanks, Good evening can you hear me okay.

Got you.

Excellent.

And so we feel very good with respect to supply and access to the critical components ships for example.

So a couple of questions here first just wanted a little clarification. If we could just I think I heard in the prepared remarks that you.

Throughout the remainder of the year and being able to supply and support the guidance that we've put out there and continue to drive even beyond that and as hard as we can.

Revenue was up 13% sequentially and unit volume was up 13% sequentially.

Did I hear that correctly.

I think the team's done a wonderful job here.

No.

I feel pretty good about where we're at Doug I don't know if theres anything you'd like to add feel free.

Bill revenue was up 13% sequentially, there's about a 10 point benefit in there from that.

No I'll just reiterate what to what Quintin said, we're very comfortable in our position.

No the costs increased rates effective January one so volumes were up closer to that 335% range.

And I would certainly say when you when you look at our balance sheet the other.

Other assets, which is where the printed circuit boards are covered in the inventory.

<unk>.

Okay. Thanks for the clarification sorry.

You'll see that we are increasing those faster than we are increasing sales and it is very much that we are working to manage risk in this environment and.

Heard that Ron just wanted to clarify and then on.

X P mix I. Thank you.

Doug Your comments were that it's becoming a larger piece of the business. So I think it was running somewhere around 10% ish as you exited the year is that.

Bolstering up on.

The balance sheet assets here.

Tend to make sure we're in a good position to be able to fully service our customers without concern.

Become a bigger piece of the business is it like 11% or 12 or as a percent of revenues does it is it holding in.

Excellent thanks for taking my questions.

Thank you we have our next question from Marie Thibault with BTG.

Yes.

It certainly went up a couple of tenants.

Hi, Thank you good afternoon. Thanks for taking my questions Congrats on a very nice quarter.

So it's.

It's comfortably above 10% for Q1.

I wanted to ask just one direct one here on the reimbursement.

Okay, and then if I can envisage.

Okay.

Is national CMS aware of the updated MBS rates have you had any conversations with them on a national level.

Last question real quick is just on supply a lot of people, especially on the tech side are having some challenges just wanted to ask in terms of inventory circuit boards, although electronic components, you're required considering youre putting on.

Yes.

I'm certain that they are aware of it one of the interesting things that we've sort of picked up on in the last.

Probably four months or so and we've spoken about this earlier is that whereas historically.

Youre high growth and if you need a lot more than you're launching a new product just any thoughts or commentary you could add on that and thanks for taking my questions.

We're never sure if CMS and the Max we're communicating together or not it does seem like they have been communicating over the last several months here.

Yes, Bill I'll tell you.

Doug and team have done a terrific job of being out in front of that particular issue for the company and this is something they started to tackle many many months ago.

What to read into that we won't speculate, but we know that CMS is trying to get their arms around this and really learn as much as they can they were actively interested in looking through the same sort of cost model that an independent third party pulled together from the industry and took all of the Mac.

And so we feel very good with respect to supply and access to the critical components ships. For example throughout the remainder of the year and being able to supply and support the guidance that we've put out there and continue to drive even beyond that and as hard as we can so.

The Max through and so we're encouraged by all of those things obviously, we we won't speculate on where it goes we can't speculate.

I think the team's done a wonderful job here.

I feel pretty good about where we're at Doug I don't know, if there's anything you'd like to add feel free.

And so we'll wait and see what that proposed rule comes out at but it does seem like there is communication going on there and I am certain there are aware of that and yesterday.

No I'll just reiterate what.

Clinton said, we're very comfortable in our position and I would certainly say when you when you look at our balance sheet. The other other assets, which is where the printed circuit boards are covered in the inventory you'll see that we are increasing those faster than we are increasing sales and it is very much that we are working to manage risk in this.

Okay, very good and I'll ask my follow ups are sort of on the core business. We've certainly been hearing across the med tech landscape that labor shortages within our staffing shortages within doctors' offices physicians offices.

Maybe leading to less adoption of technology than ideal. So I'm wondering if you've seen any of that any extent clearly a very strong quarter and I know you had been home enrollment.

Environment and.

Bolstering up on.

The balance sheet assets here.

To make sure we're in a good position to be able to fully service our customers without concern.

Im trying to get a sense of your.

Where things are with that would be electricity on that.

Excellent thanks for taking my questions.

Yes, we continue to hear that noise in the field for sure you go out and spend time with the physician. That's the number one issue that you hear them Express concern around is just staffing challenges.

Thank you we have our next question from Marie Thibault with BTG.

Hi, Thank you good afternoon. Thanks for taking my questions Congrats on a very nice quarter.

I do believe and that's been around for several months now.

I wanted to ask just one direct one here on the reimbursement.

Really back into the fourth quarter I believe we are learning how to navigate through that environment and that we.

Is national CMS aware of the updated MBS rates have you had any conversations with them on a national level.

We've reflected that in our guidance expectations. We do have the home enrollment model that that I think we can continue to refine and get even better with and make it a real differentiating capability of the company, but it is something that we can lean on and honestly even back in the early part of January when when omicron sort of spike.

Yes.

We saw home enrollment spike a bit so I think there is an awareness of that that opportunity out there in the marketplace, but we can drive it in a bigger way, which I think helps us navigate through some of the staffing challenges and the noise that we hear there, but yes. It continues to be there I do think we understand how to navigate through it at this point and feel like we've captured that in our guidance pretty appropriately.

Alright, very good thank you for taking the question.

And our next question is from Suraj, Kelly with Oppenheimer <unk> company.

Good afternoon, everyone. Quintin can you hear me all right.

Got you perfect.

First and foremost congrats on a great quarter.

Let me start talk broader picture Quentin since that time, you have joined I rhythm Clinton.

What are the average report delivery times.

And.

[noise] labor shortages within our staffing shortages within doctors' offices physicians offices, maybe leading to less adoption of technology. Then ideal. So wondering if you've seen any of that to any extent currently a very strong quarter and I know you have an <unk> home enrollment, but tried to get a sense of your.

What are the average technician reviews done per report now.

Yes.

The average turnaround times are sitting down around two to two five days on average our stated objective is to turn those reports around in less than four business days and as you understand in the rest of the audience you probably understand we ran into some challenges there back through the mid part of last year, but the team did a nice job of getting back ahead of that.

Where where things are with <unk> with you on that.

Yeah, you know, we we continue to hear that noise in the field for sure you go out and you spend time with the physician. That's the number one issue that you hear them expressed concern around is just stepping challenges.

And now we have the metrics in place that gives us very clear visibility into how we're monitoring and managing that and so not only do we monitor average turnaround times, but we pay very close attention to the number of reports that fall outside that that four day turnaround time and it's minimal at this point and it's been that way now for <unk>.

I do believe that's been around for several months now really back into the fourth quarter.

Believe we're learning how to navigate through that environment and you know that we've reflected that in our guidance expectations. We do have the home enrollment model that that I think we can continue to refine and get even better with and make it a real differentiating capability of the company, but it is something that we can lean on and and honestly even back in the.

Nearly five months getting back into the fourth quarter. So.

We feel great about the turnaround time issue and the ability to manage that control that and have the right number of resources here too.

To be able to ensure that we continue to deliver a terrific experience for the patient in terms of the number of technician reviews or oversight, that's something that we can't really answer specifically because it depends on the sort of complications within the report that comes in and so we group our reports in different tiers and depending on the tiers.

Early part of January when when omicron sort of spiked a bit we solve them enrollments bike a bit. So I think there's an awareness of that that opportunity out there in the marketplace, but but we can drive it in a bigger way, which I think helps us navigate through some of the stabbing challenges in the noise that we hear there, but yeah. It continues to be there I do think we understand how to navigate through it at this point.

<unk> impacted the amount of review that goes into that so every tier just a little bit different.

And feel like we've captured that in our day, that's pretty appropriately.

Fair enough and Quintin and I'll, just ask one more I'll, let others.

Alright, very good. Thank you for taking my question.

Pick up the baton off to this.

<unk>.

So quintin look CMS has to know about Hudson now in GFS right. It is almost inconceivable that they don't talk at least that's what our field checks suggest.

And our next question is from Suraj, Kelly with Oppenheimer and company.

Good afternoon, everyone Clinton can you hear me all right.

Correct me, if I'm wrong. So <unk> went from about give or take 200 to let's say pre 2009, whatever it is.

I Gotcha Yep perfect.

First and foremost congrats on a great quarter Clinton.

Let me start out broader picture acquaintance.

<unk> went from $1 15 to $2 33.

You have joined Irhythm acquaintance.

If no new information was provided.

What are the average report delivery times and.

I'd love to understand you.

And what are the average technician reviews done per report now.

Your expectations about national rates being higher would.

Would you still contend that should be higher than <unk> or would you contend that it tends to be higher in GFS now. Thank you for taking my questions and congrats again.

Yeah.

The average turnaround times are sitting down around two to two and a half days on average are stated objective is to turn those reports around in less than four business days and as you understand and the rest of the audience, you're probably understands we ran into some challenges their back through the mid part of last year, but the team did a nice job of getting back ahead of that.

Thanks Suraj.

Look we continue to work with CMS and we won't speculate on where theyre going to go I will tell you. There has been a lot of work done across the entire industry not just I rhythm.

And now we have the metrics in place that gives us a very clear visibility into how we're monitoring and managing that and so not only do we monitor average turnaround times, but we pay very close attention to the number of reports that fall outside that that four day turnaround time and it's minimal at this point and it's been that way now for.

Industry partners.

Come together to articulate the cost the investment that goes into delivering the sort of <unk>.

Product service value that we're able to offer here. So it's not just an independent biased perspective of Avaya rhythm.

And we know in many cases the data that got presented or has come together and that model was was higher than IRA them submission. So we know that we're we're not alone here in terms of the cost to provide this sort of service what CMS does with that.

Nearly five months getting back into the fourth quarter. So we feel great about the turnaround time issue and the ability to manage that control that and have the right number of resources here too.

To be able to ensure that we continue to deliver a terrific experience for the patient in terms of the number of technicians reviews or oversight that that's something that we can't really answer specifically because it depends on the sort of complications within the report that comes in and so we grew up our reports and different tiers and depending on the tears.

We're not going to speculate on what that would be is there an argument that the value could be above even where ngls is that there is.

But we will continue to work with CMS and respect their process answer their questions and we'll let them arrive at the position they're going to ride that but we continue to feel good about where this is where this is that and I think we understand very clearly the sort of value, we can deliver and they could support a higher rate.

The impact that the amount of review that goes into that so every tears just a little bit different.

Fair enough and Quintan I'll, just have one more I'll, let others I pick up the baton after this so acquaintance.

Thank you.

Well.

Has to know about toss in now and she is right. It is almost inconceivable that they don't talk at least that's what our field Trek suggest please correct me if I'm wrong.

We have no further questions in queue I will now turn the call over to Quentin Blackford for closing remarks.

Well. Thank you all for your time. This evening. We appreciate the interest that you continue to demonstrate an eye rhythm and incredibly excited by the progress that we continue to make here at the company and I want to take the opportunity just to thank all of our fellow employees here at I rhythm or all of the hard work and the great work that has come together over the course of the first quarter and I think.

Went from about give or take 200 to let's see 329, whatever it is.

Nobody toss went from 115 to 33.

If no new information was provided.

I'd love to understand you know.

Your expectations about napster rates being higher.

Sure this across the entire company, we couldnt be more excited about the future that sits in front of this organization not only in the core markets that we serve where we know there is a significant runway of opportunity in a greenfield to continue to get after but the adjacent markets have us excited as well and so thanks, so much and look forward to having a conversation that next time take care.

Would you still contend it should be higher than Nova to us or would you contend that it has to be hired that N. G. S. Now. Thank you for taking my questions and congrats again.

Oh, thanks for us but.

We continue to work with CMS and we won't speculate on where they're Gonna go I will tell you. There has been a lot of work done across the entire industry not just irhythm.

Thank you ladies and gentlemen. This concludes today's conference. We thank you for participating you may now disconnect.

Industry partners, who have come together to articulate the cost of the investment that goes into delivering the sort of <unk>.

Product service value that we're able to offer here. So it's not just an independent biased perspective of I rhythm.

And we know in many cases the data that got presented or has come together in that model was was higher than I rhythms submission. So we know that we're we're not alone here in terms of the cost to provide this sort of service what CMS does with that.

We're not going to speculate on what that would be is there an argument that the value can be above even where N. G. S is that there is.

But will continue to work with CMS and respect their their process answer their questions and we'll let them arrive at the position they're gonna arrive that but we continue to feel good about where this is where this is that and I think we understand very clearly the sort of value, we can deliver and they could support a higher rate.

Thank you.

Wow.

We have no further questions in queue.

Now turn the call over to Clinton Blackford for closing remarks.

Well. Thank you all for your time. This evening. We appreciate the interest that you continue to demonstrate than I rhythm an incredibly excited by the progress that we continue to make here is the company and I want to take the opportunity to thank all of our fellow employees here die rhythm or all of the hard work and.

Great work does come together over the course of the first quarter and I think I share. This across the entire company we couldn't be more excited about the future that sits in front of this organization not only in the core markets that we serve where we know there is a significant runway of opportunity and a greenfield to continue to get after but the adjacent markets have as excited as well and so thanks, so much and look for.

To having a conversation the next time take care.

Thank you ladies and gentlemen. This concludes today's conference. We thank you for participating you may now disconnect.

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Okay.

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Q1 2022 iRhythm Technologies Inc Earnings Call

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