Q4 2023 iRhythm Technologies Inc Earnings Call

Good afternoon, and thank you for joining the IRA them Technologies Q4, 2023 earnings conference call. At this time all lines are in a listen only mode and will be until the question and answer session. At the end I would now like to turn the call over to Stephanie Zagged Kovich director of Investor Relations I rhythm.

Operator: Good afternoon, and thank you for joining the Irhythm Technologies 2.4 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode and will remain so until the question-and-answer session at the end.

Operator: I would now like to turn the call over to Stephanie Zagkiewicz, Director of Investor Relations at Irhythm. Please proceed. Thank you all for participating in today's call. Earlier today, Irhythm released financial results for the fourth quarter and full year ended December 31, 2023. To begin, I'd like to remind you that management will make statements during this call that are 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. Therefore, 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, marketing plans, and performance. These statements involve risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Speaker Change: You May proceed.

Thank you all for participating in today's call.

Speaker Change: Earlier today, our rhythm released financial results for the fourth quarter and full year ended December 31 2023.

Speaker Change: Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Speaker Change: Statements contained in this call that are not statements of historical fact should be deemed to be forward looking statements. These.

Speaker Change: 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.

Speaker Change: 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.

Stephanie Zagkiewicz: 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-T, respectively, filed with the Securities and Exchange Commission. Also, during the call, we will discuss certain financial measures that have not been prepared in accordance with U.S. GAAP with respect to our non-GAAP and cash-based results, including Adjusted EBITDA, Adjusted Operating Expenses, and Adjusted Net Loss. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis.

Speaker Change: For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our most recent annual and quarterly reports on Form 10-K, and Form 10-Q, respectively filed with the Securities and Exchange Commission.

Speaker Change: Also during the call we will discuss certain financial measures that have not been prepared in accordance with U S. GAAP with respect to our non-GAAP and cash based results, including adjusted EBITDA adjusted operating expenses and adjusted net loss.

Speaker Change: Oh, they're right noted all references to financial metrics are presented on a non-GAAP basis. Our presentation of this additional information should not be considered in isolation or as a substitute for or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and 10-K for a reconciliation of these measures to their most directly comparable GAAP financial measure.

Stephanie Zagkiewicz: 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-K for a reconciliation of these measures to their most directly comparable GAAP financial measures. Unless otherwise noted, all references to financial measures in this call, other than revenue, refer to non-GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 22, 2024. Irhythm disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Quentin Blackford, Irhythm's President and CEO. Thank you, Stephanie. Good afternoon, and thank you all for joining us.

Speaker Change: Unless otherwise noted all references to financial measures in this call other than revenue referred to non-GAAP results.

Speaker Change: This conference call contains time sensitive information and is accurate only as of the live broadcast today February 22024 hour 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.

Speaker Change: Over to Quentin Blackford, I rhythms, president and CEO.

Quentin S. Blackford: Stephanie good afternoon, and thank you all for joining US right, Bob <unk>, Our Chief Financial Officer, and Dan Wilson EVP of corporate development and Investor Relations. Joining me on today's call. My prepared remarks today will cover business updates during the fourth quarter of 2023 as well as a 2020 for outlook and initiatives. I'll, then turn the call over to Bryce to provide a detail.

Quentin S. Blackford: Bryce Bobzien, our Chief Financial Officer, and Dan Wilson, our EVP of Corporate Development and Investor Relations, join me on today's call. My prepared remarks today cover business updates during the fourth quarter of 2023, as well as the 2024 outlook and initiatives. I'll then turn the call over to Bryce to provide a detailed review of our fourth quarter financial results and 2024 guidance. You heard from us in January that 2023 was a transformational year for Irhythm on multiple fronts, of a banner year, re-accelerating our unit volume growth with a record number of new accounts, advanced our penetration into the primary care channel, introduced groundbreaking clinical evidence of superiority, continued market access traction, and opened our Global Business Services Center in the Philippines, all while introducing greater operational discipline across the organization and launching the most successful product in the history of our company in the Xeo Monitor.

Quentin Blackford: A review of our fourth quarter financial results and 2020 for guidance.

Quentin Blackford: You heard from US in January that 2023 was a transformational year for IRA them on multiple fronts.

Quentin Blackford: The banner year re accelerating our unit volume growth with a record number of new accounts advanced our penetration into the primary care channel introduced groundbreaking clinical evidence of superiority.

Quentin Blackford: <unk> market access traction and opened our global business services center in the Philippines, all while introducing greater operational discipline across the organization and launching the most successful product in the history of our company and the zeal monitor this fueled our performance in the fourth quarter that led to full year revenue of $493 million or growth of 20%.

Quentin S. Blackford: This fueled our performance in the fourth quarter, leading to full-year revenue of $493 million, or growth of 20% versus the prior year, in line with our long-range plan, exceeding the high end of our guidance range, and reflecting momentum across multiple channels. In the fourth quarter, we continued building upon the solid execution of the first nine months of 2023. We were pleased to see strong volume contributions from both new and existing accounts ending the year.

Quentin Blackford: Versus the prior year in line with their long range plan exceeding the high end of our guidance range and reflecting momentum across multiple channels in the fourth quarter. We continued building upon the solid execution of the first nine months of 2023, we were pleased to see strong volume contributions from both new and existing accounts exiting the year, while nearly 70.

Quentin S. Blackford: While nearly 70% of registration growth came from existing accounts, the fourth quarter was the second strongest quarter of new account openings in our history, setting up nicely as we move into 2024. The ease of use, accuracy, and simple workflow of Xeo Monitor and Xeo Suite digital products is resonating within the primary care channel, which represented approximately 21% of total U.S. Xeo XT registrations during 2023, a figure that has grown consistently over the past few years and was driven by innovative PCP network account activations as well as continued emphasis on our land and expand strategy within integrated health networks. Xeo Monitor, which launched last September, has also progressed faster than planned, now representing nearly 70% of registrations for our long-term continuous monitoring services.

Quentin Blackford: Percent of registration growth came from existing accounts. The fourth quarter was the second strongest quarter of new account openings in our history setting up nicely as we move into 2024.

Quentin Blackford: He's of use accuracy and simple workflow of zeal monitor and Z O suite digital products is resonating within the primary care channel, which represented approximately 21% of total U S zero XD registrations during 2000 and twenty-three a figure that has grown consistently over the past few years and was driven by innovative PCP now.

Quentin Blackford: It worked account activations as well as continued emphasis on our land and expand strategy within integrated health networks zeal.

Quentin Blackford: Zeal monitor which launched last September has also progressed faster than planned now representing nearly 70% of registrations for our long term continuous monitoring services. We believe the combination of the zeal monitor form factor with a smaller profile and high rate of patient compliance as well as our refreshed <unk> app.

Quentin S. Blackford: We believe the combination of the Xeo Monitor form factor, with its smaller profile and high rate of patient compliance, as well as our refreshed MyXeo app, continue to contribute to an improved device return rate of approximately half a percent thus far in our product launch cycle. Additionally, while in the early stages, ZioMonitor has also improved the patient journey, resulting in fewer calls into our customer care teams from patients. In addition, we have seen that patients who are digitally engaged via the MyZio app have a much higher compliance rate, especially for home enrollment patients.

Quentin Blackford: So you need to contribute to an improved device return rate of approximately half a percent thus far in our product one cycle.

Quentin Blackford: While in the early stages zero monitor has also improved the patient journey, resulting in fewer calls into our customer care teams from patients. In addition, we have seen that patients who are digitally engage via the <unk> app have a much higher compliance rate, especially for home enrollment patients as we continue to transition all in clinic accounts the zeal monitor throughout the first half of two.

Quentin S. Blackford: As we continue to transition all in-clinic accounts to Xeo Monitor throughout the first half of 2024, we are excited to see how the largest launch in the history of our company could catalyze additional momentum for the business. To further improve clinician workflow efficiencies, to streamline access to Xeo services, and to enable healthcare provider access to patients' electronic health information, we also remain committed to investing in the service aspects of our systems, such as electronic health record integration offerings. During 2023, we implemented new bi-directional EHR integrations across nearly 950 customer locations and have now received more than 1.5 million all-time registrations for Xeo services through EHR-integrated accounts. EHR integrations are intended to allow for an administratively simpler process and integrate Xeo into existing workflows of our customers and their staff. By embedding the Xeo experience into the native EHR platform of a health system or practice, these integrations allow streamlined access to ordering, document review, and billing, thereby enabling our customers and their staff to spend more time with patients throughout the care pathway.

Quentin Blackford: 24, we are excited to see how the largest launch in the history of our company could catalyze additional momentum in the business.

Quentin Blackford: To further improve clinician workflow efficiencies to streamline access to <unk> services and to enable health care provider access to patients electronic health information. We also remain committed to investments in the service aspects of our systems, such as electronic health record integration offerings during 2000, and twenty-three we implemented new bidirectional EHR integrations across nearly <unk>.

Quentin Blackford: 150 customer locations and have now received more than one and a half million all time registrations, Brazil services through EHR integrated accounts EHR integrations are intended to allow for it administratively simpler processes and integrate Zealand to existing workflows of our customers and their staff.

Quentin Blackford: By embedding the zeal experience into the native EHR platform of a health system or practice. These integrations allow streamlined access for ordering document review and billing, thereby enabling our customers and their staff to spend more time with patients throughout the care pathway. Moreover, we know from experience that EHR integration accelerate same store growth.

Quentin S. Blackford: Moreover, we know from experience that EHR integration accelerates same-store growth, such as making Xeo directly available to primary care and non-cardiology specialists. The efficiencies we can drive for our customers are a clear differentiator, and we expect to have more exciting announcements on this front as we move through 2024 and beyond. As a ZOAT business, we continue to work diligently and collaboratively with the FDA to remediate concerns noted in their warning letter to us last year. We have now submitted two 510K applications.

Quentin Blackford: Such as making Z O directly available to primary care and non cardiology specialists.

Quentin Blackford: Efficiencies, we can drive for our customers is a clear differentiator as we expect to have more exciting announcements on this front as we move through 2024 and beyond.

Quentin Blackford: Oh, a tea business, we continue to work diligently and collaboratively with the F. D. A to remediate concerns noted in their warning letter to us last year.

Quentin Blackford: We have now submitted two five 10-K applications one as a catch up for changes previously made his letter to file to the Z O. A T system before a receipt of the warning letter and a second five 10-K to capture changes to design features and labeling updates following our interaction with the F. D. A while we believe that our next generation Z O M. C. T device will further strengthen our competitive position.

Quentin S. Blackford: One is a catch-up for changes previously made as letters to file to the ZOAT system before our receipt of the warning letter, and a second 510K to capture changes to design features and labeling updates following our interaction with the FDA. While we believe that our next-generation ZOMCT device will further strengthen our competitive positioning in this space, we still believe that there are meaningful market share gains to be made with our ZOAT product compared to the approximate 7% penetration that we currently hold in the mobile cardiac telemetry category. In the MCT category, we estimate that every 10 points of share gain represents roughly $80 million to $100 million of incremental revenue for Irhythm. This is a significant opportunity for growth as we aim to deliver on our $1 billion revenue target in our long-range plan.

In this space, we still believe that there are meaningful market share gains to be made with their Z O a T product compared to the approximate 7% penetration that we currently hold in the mobile cardiac telemetry category in the M. C. T category. We estimate that every 10 points of share gain represents roughly 80 million to $100 million of incremental revenue to iridium are significant.

Quentin Blackford: Opportunity for growth as we aim to deliver on our 1 billion dollar revenue target and our long range plan as.

Quentin S. Blackford: As we continue to progress our product innovation roadmap, we have also continued to build upon our substantial body of clinical evidence with strong fourth-quarter publication output in top-tier medical journals and at conferences. The INSTOPS cost-effectiveness data was published in November 2023 and demonstrated that proactive monitoring for atrial fibrillation in an at-risk population with the Irhythm ZOXT patch provided high value from a health economic perspective. The Camelot study, which has been part of our commercial narrative for much of 2023, was published in the American Heart Journal in December. The manuscript, with independent statistical analysis, extends the initial findings in several ways.

Quentin Blackford: As we continue to progress our product innovation roadmap. We have also continued to build upon our substantial body of clinical evidence with strong fourth quarter publication output and top tier medical journals and at conferences. The in stops cost effectiveness data was published in November 2023, and demonstrated that proactive monitoring for atrial fibrillation and an at risk.

Quentin Blackford: With the IRA them zero XT patch provided high value from a health economic perspective, the Camelot study, which has been part of our commercial narrative for much of 2023 was published in the American Heart Journal in December the manuscript with independent Statistical analysis extends the initial findings in several ways one it shows deals.

Quentin S. Blackford: One, it shows Zio's long-term cardiac monitor superiority for the highest odds of arrhythmia encounter diagnosis and lowest odds of retesting not only across different categories of monitoring, such as Holter and event recorders, but directly against specific competitor products and services. And two, it showcases Zio's long-term cardiac monitor performance and clinical superiority for specific critical arrhythmias, such as heart block and ventricular tachycardi This peer-reviewed publication continues the long history of evidence that the Xeo Long-Term Continuous Monitoring Service provides high value and performance with the highest diagnostic yield and lowest likelihood of retesting across a wide range of ambulatory cardiac monitoring services.

Quentin Blackford: Long term cardiac monitor superiority for highest odds of arrhythmia encountered diagnosis and lowest odds of retesting not only across different categories of monitoring such as holter and event recorders, but directly against specific competitor products and services and to his showcases <unk> long term cardiac monitor performance and clinical superiority.

Quentin Blackford: For specific critical arrhythmias, such as heart block and ventricular tachycardia, which can have major clinical consequences. If missed this peer reviewed publication continues the long history of evidence that the zeal long term continuous monitoring service provides high value and performance with the highest diagnostic yield and lowest likelihood of retest.

Quentin Blackford: Across a wide range of ambulatory cardiac monitoring services. We also continue to make strides in AI. The December publication in nature Digital medicine by the Scripps Research Translational Institute in collaboration with our team demonstrated the performance of developed AI to identify patients at risk of near term Afib based on patients who had no afib.

Quentin S. Blackford: We also continue to make strides in AI. A December publication in Nature, Digital Medicine by the Scripps Research Translational Institute, in collaboration with our team, demonstrated the performance of developed AI to identify patients at risk of near-term AFib based on patients who had no AFib on their initial ZO pack. Early work could help identify which patients should have repeat testing. Additionally, research from our collaboration with the Duke Clinical Research Institute presented at November's American Heart Association meeting demonstrated the ability to more robustly predict heart failure hospitalization when adding ZEO ECG features to existing clinical risk models. Both studies advance our thesis that 14 days of continuous, uninterrupted ZEO monitoring has valuable biometric information that can classify and predict conditions or risks well beyond the arrhythmias we diagnose with ECG monitoring today.

Quentin Blackford: On their initial Z O patch. This early work could help identify which patients should have repeat testing. Additionally research from our collaboration with the Duke Clinical Research Institute presented at November's American Heart Association meeting demonstrated the ability to more robustly predict heart failure hospitalization, when adding Z O E. C. G features to existing clinical risk.

Quentin Blackford: Models, both studies advance our thesis that 14 days of continuous uninterrupted zeal monitoring has valuable biometric information that can classify and predict conditions or risks well beyond the arrhythmia as we diagnose with E. C. G monitoring today.

Quentin S. Blackford: These insights demonstrate the feasibility of adjacent market opportunities and validate our ability to provide novel insights through our platform for future value creation. These are also being proven from a business model perspective by our teams. We were excited to see our first Know Your Rhythm pilot launch this quarter aimed at identifying arrhythmias in asymptomatic populations, and while early, we are seeing very encouraging data supportive of the value proposition. Similarly, we are seeing several national primary care networks employing proactive screening approaches with targeted populations aimed at finding arrhythmias sooner and avoiding the devastating downstream cost of care that come from patients unaware of existing arrhythmias. Irhythm is uniquely well-positioned to address the macro shift in health care towards value-based care for an aging population, as cardiac monitoring with Xeo adds value to all five objectives of the quintuple aim of health care.

Quentin Blackford: These insights demonstrate feasibility of adjacent market opportunities and validate our ability to provide novel insights through our platform for future value creation. These are also being proven from a business model perspective by our teams. We were excited to see our first no. Your rhythm pilot launch this quarter aimed at identifying arrhythmias in asymptomatic populations and while Earth.

Quentin Blackford: Early we are seeing very encouraging data supportive of the value proposition. Similarly, we are seeing several national primary care networks, employing proactive screening approaches with targeted populations aimed at finding arrhythmia sooner and avoiding the devastating downstream cost of care that come from patients unaware of existing arrhythmias.

Quentin Blackford: Hi, rhythm is uniquely well positioned to address the macro shift in health care towards value based care for an aging population as cardiac monitoring with <unk> adds value to all five objectives that the quintuple aim of health care.

Quentin S. Blackford: We look forward to sharing more details on these initiatives as they progress. We also expect to be launching our very first pilot into the sleep space in the coming months. With deep relationships with cardiologists, electrophysiologists, and primary care physicians, as well as our experience with remote diagnostic services, Irhythm is well-positioned to validate our belief that there is a need for a streamlined diagnostic pathway into what we have heard can feel like a fragmented and disjointed sleep diagnostic journey for both patients and clinicians, the process of referring a patient to a sleep specialist, prescribing a sleep lab, or All the way through to a formal diagnosis can be a cumbersome experience.

Quentin Blackford: We look forward to sharing more details on these initiatives as they progress.

Quentin Blackford: We also expect to be launching our very first pilot into the sleep space in the coming months with deep relationships with cardiologist Electrophysiologist and primary care physicians as well as our experience with remote diagnostic services I rhythm is well positioned to validate our belief that there is a need for a streamline diagnostic pathway into what we have heard can feel like a fragmented.

Quentin Blackford: And destroying it sleep diagnostic journey for both patients and clinicians today the process of referring a patient to a sleep specialist prescribing a sleep lab or a home sleep test.

Quentin Blackford: Way through to a formal diagnosis can be a cumbersome experience. Our initial pilot will be aimed at exploring the value of our process from the ordering of a sleep test to the delivery of the interpreted results and diagnostic report to the prescribing physician via streamlined integration with a single portal such as our Z O suite platform we.

Quentin S. Blackford: Our initial pilot will be aimed at exploring the value of a process from the ordering of a sleep test to the delivery of the interpreted results and diagnostic report to the prescribing physician via a streamlined integration with a single portal, such as our XeoSuite platform. We see sleep as an important adjacent market and have multiple initiatives in place to explore how we can bring our innovative capabilities into this space for the benefit of clinicians and patients. Turning towards our international efforts, we were thrilled to have received the CE Mark under the European Union Medical Device Regulation, or EUMDR, for XeoMonitor and the Zeus system at the end of 2023. That marks the jumping off point to introduce our innovative technology into more European markets and enable further global expansion. Importantly, the EUMDR is arguably one of the most stringent regulatory frameworks for product approvals globally, and receipt of this certification demonstrates our commitment to providing the highest quality products and services.

Quentin Blackford: We see sleep as an important adjacent market and have multiple initiatives in place to explore how we can bring our innovative capabilities into this space for the benefit of clinicians and patients.

Quentin Blackford: Turning towards our international efforts, we were thrilled to have received CE Mark under European Union Medical device regulation or E. U N D. R Brasil monitor and the zoo system at the end of 2000 and twenty-three dismore.

Quentin Blackford: This marks the jumping off point to introduce our innovative technology into more European markets and enable further global expansion importantly, the E. M. D. R is arguably one of the most stringent regulatory frameworks for product approvals globally and receipt of this certification demonstrates our commitment to providing the highest quality products and services with CE Mark in hand.

Quentin S. Blackford: With the CE Mark in hand, we are continuing market access evaluation and market expansion efforts in prioritized countries across Europe, including four countries targeted for entry in 2024, where there are approximately 800,000 ambulatory cardiac monitoring tests performed annually. In preparation for these launches, our market access teams have been hard at work with various countries on our roadmap, and, encouragingly, Switzerland has just released an updated national reimbursement decision for long-term ECG examinations in excess of 1,000 Swiss francs. We have also continued to pursue national reimbursement in the UK. As we continue to progress with the public health systems while we await a decision on national reimbursement by the National Health System, we continue to advance our efforts within the UK private payer sector, which demonstrated significant growth in 2023. Through the AI in Health and Care Award from the NHS England in September 2020, real-world evaluation of ZOXT at scale across NHS Trusts has shown that ZO service has an overwhelmingly positive impact on patient waiting times, hospital resource utilization, clinical diagnostic yield, and pathway cost savings.

Quentin Blackford: We are continuing market access evaluation and market expansion efforts and prioritize countries across Europe, including four countries targeted for entry in 2024, where there are approximately 800000 ambulatory cardiac monitoring tests performed annually in preparation for these launches our market access teams have been hard at work with various countries on her.

Quentin Blackford: Roadmap and Encouragingly, Switzerland has just released an updated national reimbursement decision for long term E. C. G examinations in excess of 1000 Swiss francs.

Quentin Blackford: We have also continued to pursue national reimbursement in the U K as we continue to progress with the public health systems, while we await a decision on national reimbursement by the National Health system. We continue to advance our efforts within the U K private payer sector that demonstrated significant growth in 2023 through the artificial intelligence in health and care award from the NHS, England.

Quentin Blackford: In September 2020, real World evaluation of Z O S. T at scale across the NHS Trust has shown that Z O service has an overwhelmingly positive impact on patient waiting times hospital resource utilization clinical diagnostic yield and pathway cost savings. We will continue to work through contracting at private U K sites, where this message is.

Quentin S. Blackford: We will continue to work through contracting at private UK sites where this message is clearly responding. In Japan, we continue to be excited about the upcoming entry into the second largest cardiac monitoring market in the world, with approximately 1.5 million ACM tests being prescribed per year. Recall that we received a high medical needs designation from the Japanese MHLW last year, and it is important to note that this designation is not specific to long-term patching but is instead specific to ZIO. This designation, on the recommendation of the Japanese Heart Rhythm Society, has created significant interest with potential commercial partners, and we are pleased that, after a thorough search, we have identified our distribution partner for ZIO in Japan.

Quentin Blackford: Clearly resonating in.

Quentin Blackford: In Japan, we continue to be excited about the upcoming entry into the second largest cardiac monitoring market in the world with approximately one and a half million E. C. M tests being prescribed per year recall that we received a high medical need designation from the Japanese MH L. W. Last year and it is important to note that this designation is not specific the longterm patching, but is instead specific to <unk>.

Quentin Blackford: This designation at the recommendation of the Japanese Heart Rhythm Society has created significant interest with potential commercial partners and we are pleased that after a thorough search we have identified our distribution partner for <unk> in Japan, we are actively collaborating with them to prepare for the launch in early 2025, while we continue to engage with the Japanese P. M D E on.

Quentin S. Blackford: We are actively collaborating with them to prepare for the launch in early 2025, while we continue to engage with the Japanese PMDA on a regulatory dossier in parallel. Lastly, but very importantly, we are committed to continue driving operational efficiency and financial sustainability through an intense focus on organizational discipline as we work towards achieving our adjusted EBITDA targets stated in our long-range plan. While there is still work to do to achieve the 15% adjusted EBITDA margin goal we set for ourselves for 2027, I have been pleased by our ability to drive 1,000 basis points of improvement over the past two years. The performance of the newly minted Global Business Services Center in Manila has exceeded our expectations thus far, and the process excellence this group has driven will be a key enabler for the global growth towards which we are striving in the years to come. Additionally, within the first half of 2024, we anticipate implementing automation in our production lines for Xeo Monitor that will drive scale, reduce our cost to manufacture, and serve as the basis for our next generation Xeo MCT platform.

Quentin Blackford: Our regulatory dossier in parallel.

Quentin Blackford: Lastly, but very importantly, we are committed to continue driving operational efficiency and financial sustainability through an intense focus on organizational discipline as we work towards achieving our adjusted EBITDA targets stated in our long range plan. While there is still work to do to achieve that 15% adjusted EBITDA margin goal, we set for ourselves for 2027 I have.

Quentin Blackford: Been pleased by our ability to drive 1000 basis points of improvement over the past two years the performance of the newly minted global business Services Center in Manila has exceeded our expectations. Thus far in the process Excellence. This group has driven will be a key enabler for the global growth towards which we are striving in the years to come. Additionally, within the first half of 2024, we.

Quentin Blackford: Spade implementing automation in our production lines for zeal monitor that will drive scale reduce our cost of manufacturer and serve as the basis for our next generation Z O N C. T platform. We're excited about these initiatives and others that continue to create leverage throughout our P&L.

Quentin S. Blackford: We are excited about these initiatives and others that continue to create leverage throughout our P&L to drive programs that will allow us to serve more patients, more efficiently, around the world. I'll now turn the call over to Bryce to discuss our recent financial performance. Thanks, Quentin.

Quentin Blackford: To drive programs that will allow us to serve more patients more efficiently around the globe with that I'll now turn the call over to Brian to discuss our recent financial performance.

Brian: Thanks, Quinn as a reminder, unless otherwise noted the financial metrics that I discussed today will be presented on a non-GAAP basis reconciliations to GAAP can be found in today's earnings release and on our IR website.

Bryce Bobzien: As a reminder, unless otherwise noted, the financial metrics that I discussed today will be presented on a non-GAAP basis. Reconciliations to GAAP can be found in today's earnings release and on our IR website. Fourth quarter 2023 results demonstrated continued strength in our core markets, as revenue grew to $132.5 million, representing 6% sequential and 18% year-over-year growth. As Quentin mentioned, this was driven by strong volumes from new accounts opened in the prior 12 months, continued penetration of existing accounts, and new store-same store mix, with new store defined as accounts that have been open for less than 12 months, accounted for approximately 34% of our year Home enrollment for Xeo Services was approximately 21% of volume in the fourth quarter. Average selling prices during the fourth quarter were down approximately 400 basis points year-over-year and down slightly quarter-over-quarter.

Brian: Fourth quarter 2023 results demonstrated continued strength in our core markets as revenue grew to 132.5 million, representing 6% sequential and 18% year over year growth as Quintin mentioned this was driven by strong volumes from new accounts opened in the prior 12 months continued penetration of existing accounts and reduced account churn new store same store.

Brian: <unk> with new store defined as accounts have been opened for less than 12 months accounted for approximately 34% of our year over year volume growth home enrollment for Z O services was approximately 21% of volume in the fourth quarter average selling prices during the fourth quarter were down approximately 400 basis points year over year and down slightly quarter over quarter.

Bryce Bobzien: Moving down the rest of the P&L, gross margin for the fourth quarter was 66%, and for the full year 2023 it was 67.3%. As previously discussed, we expected temporary gross margin pressure in the back half of 2023, primarily driven by costs associated with the transition from Xeo XT to the new Xeo Monitor. We continue to see positive marketplace reaction to Xeo Monitor. This has resulted in a faster-than-anticipated transition from Xeo XT and has created near-term pressure on the gross margin due to the accelerated recognition of costs of our legacy XT components. This accelerated transition does not yet have the benefit of automation and scale, which results in an increased cost per unit. We believe that this will be mitigated once automation lines for XeoMonitor are implemented.

Brian: Moving down the rest of the P&L gross margin for the fourth quarter was 66% and for the full year 2023 was 67, 3% as previously discussed we expected temporary gross margin pressure in the back half of 'twenty twenty-three, primarily driven by costs associated with the transition from Z O S. T to the Newseum monitor we continued to see positive marketplace reaction.

Brian: Z O monitor this has resulted in a faster than anticipated transition from Z O S. T and has created near term pressure on our gross margin due to the accelerated recognition of costs of our legacy XT components.

Brian: This accelerated transition does not yet have the benefit of automation and scale, which resulted in an increased cost per unit. We believe that this will be mitigated once automation lines for Z O monitor implemented finally, we completed the current phase of building our center of excellence in our San Francisco at ETF in the fourth quarter, we've incurred costs related to scaling and training newly on boarded clinical car T.

Bryce Bobzien: Finally, we completed the current phase of building our center of excellence in our San Francisco IDTF in the fourth quarter. We've incurred costs related to scaling and training newly onboarded clinical cardiac technicians that have resulted in inefficiencies in the short term. These investments were important to ensure the quality of our services provided to our patients, and we expect the associated costs to abate as the team comes up to speed over the next couple of quarters. Fourth quarter adjusted operating expenses were $113.8 million, up 6.2% sequentially and 17.2% year-over-year. Full-year adjusted operating expenses were $430 million, up 18.2% compared to 2022.

Brian: Our technicians that resulted in inefficiencies in the short term. These investments were important to ensure the quality of our services provided to our patients and we expect the associated costs to abate as the team come up to speed over the next couple of quarters fourth quarter. Adjusted operating expenses were $113 8 million up 6.2% sequentially and 17 point too.

Brian: Percent year over year full year, adjusted operating expenses were $430 million up 18, 2% compared to 2022 sequentially. The increase spend was driven by legal regulatory and professional fees compared to the fourth quarter 'twenty 'twenty. Two this increase in adjusted operating expenses was primarily due to increased personnel to scale operations as well as the previously.

Bryce Bobzien: sequentially, the increased spend was driven by legal, regulatory, and professional fees. Compared to the fourth quarter of 2022, this increase in adjusted operating expenses was primarily due to increased personnel to scale operations as well as the previously mentioned professional fees. During 2023, we incurred approximately $9 million in legal and consulting fees, as well as other company expenses related to the FDA warning letter and DOJ subpoena. Despite these temporary expenses and rolling out the most significant product launch in the company's history, we were able to drive a 120 basis point improvement in adjusted operating expenses as a percentage of revenue. Adjusted net loss in the fourth quarter was approximately $25.8 million, or a loss of $0.84 per share, compared to an adjusted net loss of $17.9 million, or an adjusted net loss of $0.59 per share, in the fourth quarter of 2022.

[noise] mentioned professional fees during 2023 we incurred approximately 9 million of legal and consulting fees as well as other company expenses related to the FDA warning letter and Doj subpoena. Despite these temporary expenses and rolling out the most significant product launching the company's history, we were able to drive a 120 basis point improvement in adjusted operating expenses as a percentage of <unk>.

Brian: Revenue.

Brian: Adjusted net loss in the fourth quarter was approximately $25 8 million or a loss of 84 cents per share compared to an adjusted net loss of $17 9 million or an adjusted net loss of 59 cents per share in the fourth quarter of 2022, adjusted net loss for the full year 'twenty twenty-three was approximately $96 5 million or $3.16 per share compared to an <unk>.

Brian: And net loss of $84 5 million or a loss of $2.82 per share during 2022.

Brian: <unk> fourth quarter 2023 business transformation costs were 1.8 million, bringing full year 'twenty twenty-three business transformation cost of $15 9 million in line with guidance as we finalize the transition to our global business Services Center. Additionally, we recorded an impairment charge of $11 1 million related to the capitalized value of our San Francisco office as a.

Bryce Bobzien: Adjusted net loss for the full year 2023 was approximately $96.5 million, or $3.16 per share, compared to an adjusted net loss of $84.5 million, or a loss of $2.82 per share, during 2022. Fourth quarter 2023 business transformation costs were $1.8 million, bringing full year 2023 business transformation costs to $15.9 million, in line with guidance as we finalize the transition to our Global Business Services Center. Additionally, we recorded an impairment charge of $11.1 million related to the capitalized value of our San Francisco office as a result of the continued declining commercial real estate market conditions in San Francisco.

Out of the continued decline in commercial real estate market conditions within San Francisco adjusted EBIT in the fourth quarter 'twenty twenty-three was 2.4 million, reflecting an increase of 2 million sequentially and an increase of 1.3 million year over year adjusted EBITDA for the full year 'twenty twenty-three was minus 4.9 million, representing a 180 basis point improvement to adjusted EBITDA.

Brian: Compared to 2022 absent the expenses related to legal and advisory fees as well as other company expenses associated with the FDA warning letter and Doj subpoena adjusted EBITDA margin would've been approximately <unk>, 8%.

Brian: Turning to guidance, we are reiterating our 'twenty 'twenty four outlook as presented earlier this year and anticipate full year revenue of approximately $575 million to $585 million driven predominantly by volume growth in our core markets. As we think about the first quarter. We did see weather related impacts in January however, we've seen registrations rebound nicely thus far in February.

Bryce Bobzien: Adjusted EBIT in the fourth quarter 2023 was $2.4 million, reflecting an increase of $2 million sequentially and an increase of $1.3 million year-over-year. Adjusted EBIT for the full year 2023 was minus $4.9 million, representing a 180 basis point improvement to adjusted EBIT as a margin compared to 2022. Absent the expenses related to legal and advisory fees, as well as other company expenses associated with the FDA warning letter and DOJ subpoena, adjusted EBIT would have been approximately 0.8%. Turning to guidance, we are reiterating our 2024 outlook as presented earlier this year and anticipate full-year revenue of approximately $575 to $585 million, driven predominantly by volume growth in our core markets. As we think about the first quarter, we did see weather-related impacts in January.

Brian: We believe that the first quarter revenue trend will be closer to 22% of full year revenues considering weather related impacts from January of approximately $1 million to $2 million. Excluding this we would have expected see first quarter 'twenty 'twenty four inline with historical averages at approximately 22.5% turning to gross margin, we are providing full year 'twenty 'twenty.

Brian: For gross margin guidance in the range of 68% to 69% an improvement of approximately 120 basis points at midpoint. During the first half of 'twenty 'twenty four we anticipate continued direct and indirect costs from the transition to Z O monitor natural inefficiencies from the implementation of automation to produce youll monitor at scale and the optimization of our center.

Brian: Excellence in San Francisco, we expect the first half to be relatively consistent with the 20th twenty-three gross margin exit rate in the back half of the year. However, we anticipate an improvement in gross margin due to the majority of our business being transitioned to the new Z. A monitor platform initial ramp of automation lines to produce your monitor and our clinical operations team in San Francisco.

Bryce Bobzien: However, we've seen registrations rebound nicely thus far in February. We believe that the first-quarter revenue trend will be closer to 22% of full-year revenues, considering weather-related impacts in January of approximately $1 to $2 million. Excluding this, we would have expected to see first-quarter 2024 in line with historical averages at approximately 22.5%. Turning to gross margin, we are providing full-year 2024 gross margin guidance in the range of 68% to 69%, an improvement of approximately 120 basis points at the midpoint. During the first half of 2024, we anticipate continued direct and indirect costs from the transition to XeoMonitor, natural inefficiencies from the implementation of automation to produce XeoMonitor at scale, and the optimization of our Center of Excellence in San Francisco. We expect the first half to be relatively consistent with the 2023 gross margin exit rate.

Operating at full capacity for 'twenty 'twenty four we anticipate adjusted EBITDA margin to range between three and 4% of revenues, which would represent a 400 to 500 basis point improvement compared to 2023 in line with our slated path to adjusted EBITDA targets in 2027, and driven by our focus on sustainable operating leverage improvements throughout the P&L.

Brian: As a reminder, adjusted EBITDA will continue to exclude impairment and restructuring cost is this transformation cost and stock based compensation expenses.

Brian: We have contemplated in our adjusted EBITDA guidance of approximately $8 million to $10 million of legal consulting and other company expenses in 'twenty 'twenty four as we continue to remediate findings associated with the FDA warning letter and navigate responses to the Doj subpoena as we make progress on these two issues. The vast majority of these costs will come out of the P&L in the future finally, we.

Brian: Ended 2023 in a strong financial position with approximately $133 8 million of cash and short term investments as Youre aware, we improved our capital position at the beginning of 'twenty 'twenty four with the introduction of financing with grade well to mature our capital structure ahead of our next phase of growth as a reminder, you're in cash and short term investments balance does.

Bryce Bobzien: In the back half of the year, however, we anticipate an improvement in gross margin due to the majority of our business being transitioned to the new XeoMonitor platform, the initial ramp of automation lines to produce XeoMonitor, and our clinical operations team in San Francisco operating at full capacity. For 2024, we anticipate adjusted EBITDA margin to range between 3 and 4 percent of revenues, which would represent a 400 to 500 basis point improvement compared to 2023, in line with our slated path to adjusted EBITDA targets in 2027 and driven by our focus on sustainable operating leverage improvements throughout the P&L. As a reminder, adjusted EBITDA will continue to exclude impairment and restructuring costs, business transformation costs, and stock-based compensation expenses.

Brian: Include the repayment of $35 million to Silicon Valley Bank, where the 75 million term loan drawn down from grade well at the beginning of 'twenty 'twenty four as we continued to grow and mature we will evaluate our capital structure to ensure financial flexibility and alignment with shareholder interests with that I'd like to turn it back to Quintin before we open it up for questions.

Quintin: Thanks, Bryce looking into 2024, we couldn't be more excited about the position that we're in we have multiple levers for revenue growth as we continue to go deeper and broader within our existing accounts with our land and expand strategy capitalize on the significant pipeline of new accounts waiting to come on board and rapidly expanding in the primary care channel. Furthermore.

Quintin: We're in the early innings with our international business, which we expect will contribute nearly a point of growth in 2024 were in the very early stages of the value being realized and proactive screening of at risk patients and the significant workflow efficiencies that can be enabled by our products and services, which has the potential to multiply the current market. We serve as a reminder, nearly 15 million.

Quentin S. Blackford: We have contemplated in our adjusted EBITDA guidance approximately $8 to $10 million of legal, consulting, and other company expenses in 2024 as we continue to remediate findings associated with the FDA warning letter and navigate responses to the DOJ subpoena. As we make progress on these two issues, the vast majority of these costs will come out of the P&L in the future. Finally, we ended 2023 in a strong financial position with approximately $133.8 million of cash in short-term investments. We are aware we improved our capital position at the beginning of 2024 with the introduction of financing with Braidwell to mature our capital structure ahead of our next phase of growth. As a reminder, your cash and short-term investments balance does not include the repayment of $35 million to Silicon Valley Bank or the $75 million term loan drawn down from Braid As we continue to grow and mature, we will evaluate our capital structure to ensure financial flexibility in alignment with shareholder interests. With that, I'd like to turn it back to Quentin before we open it up for questions.

Quintin: Patients show up in their primary care physician offices, each year with heart Palpitations noted in their medical records zero has the potential to provide the right answer the first time for those patients and better inform the care pathways for those individuals' potentially reducing downstream clinical events, while lowering the future cost of care and addressing the growing capacity challenges with.

Quintin: The health networks, we serve and importantly, we see a clear line of sight to deliver an increase of 400 to 500 basis points and our adjusted EBITDA margin a meaningful improvement in our profitability profile long term, we are building the cardiac monitoring product and services portfolio of the future and we are uniquely positioned to address the quintuple aim of health care within.

Quintin: See them with.

Quintin: With significant accomplishments in 2023, there's so many opportunities in the months and years ahead.

Speaker Change: Could not be more excited for our future at IRA them with that Bryce, Dan and I would like to now open the call for questions operator.

Quentin S. Blackford: Thanks, Bryce. Looking into 2024, we couldn't be more excited about the position that we are in. We have multiple levers for revenue growth as we continue to go deeper and broader within our existing accounts with our land and expand strategy, capitalize on the significant pipeline of new accounts waiting to come on board, and rapidly expand in the primary care channel. Furthermore, we're in the early innings with our international business, which we expect will contribute nearly a point of growth in 2024. We're in the very early stages of value being realized in proactive screening of at-risk patients and the significant workflow efficiencies that can be enabled by our products and services, which has the potential to multiply the current market we serve. As a reminder, nearly 15 million patients show up in their primary care physician offices each year with heart palpitations noted in their medical records.

Thank you.

Speaker Change: We will now begin the question and answer session.

Speaker Change: Like to ask a question you may do so by pressing star followed by a one on your telephone keypad and the interest of time, we do ask that you limit yourself to one question and rejoin the queue. If you have any additional questions.

Speaker Change: Again to ask a question. It is star followed by a one on your telephone keypad.

Speaker Change: We're using a speaker phone please remember to pick up your handset before asking your question. The first question will come from the line of Allen Gong with J P. Morgan. Your line is now open.

Speaker Change: Yeah.

Allen Gong: Thanks for the question.

Allen Gong: To start off I had one on the guidance for the year, you're reiterating the full year, but you are talking to some weather related headwinds in the first quarter. So when I think about the fact that you're taking a couple of one to 2 million out of first quarter by reiterating the guide should we think about that as you know our recapture dynamic with those sales being pushed out here maybe.

Quentin S. Blackford: Zio has the potential to provide the right answer the first time for those patients and better inform the care pathways for those individuals, potentially reducing downstream clinical events while lowering the future cost of care and addressing the growing capacity challenges within the health networks we serve. And importantly, we see a clear line of sight to deliver an increase of 400 to 500 basis points in our adjusted EBITDA margin, a meaningful improvement in our profitability profile. Long term, we are building the cardiac monitoring product and services portfolio of the future, and we are uniquely positioned to address the quintuple aim of health care within ACM. With significant accomplishments in 2023 and so many opportunities in the months and years ahead, I could not be more excited for our future at Irhythm. With that, Bryce, Dan, and I would like to now open the call for questions. Operator.

Allen Gong: Quarter or are you just seeing stronger momentum in February so far they expect it to continue through the balance of the year.

Speaker Change: Hey, Alan Good question Yeah.

We did see a bit of pressure in the month of January However, recovery has been incredibly nice in February and so we're thinking more of it as a recapture as we get into the later periods of the year and for US There's no reason to adjust for those.

Speaker Change: The related impact, especially with the beat we had in Q4. So we felt like reiterating was the appropriate.

Speaker Change: Appropriate result in this situation.

Speaker Change: And keep in mind Allen is those registration volumes.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, you may do so by pressing the star, followed by a one on your telephone keypad.

Speaker Change: Improved really nicely over the course of February and.

Speaker Change: That's come together well with our revenue recognition model those devices go out they've got to come back to us before we can recognize that revenue as we process. The report so they're just there ends up being a bit of timing there.

Operator: In the interest of time, we do ask that you limit yourself to one question and rejoin the queue if you have any additional questions. Again, to ask a question, it is star followed by a one on your telephone keypad. If you are using a speakerphone, please remember to pick up your handset before asking your question. The first question will come from the line for Allen Gong with J.P. Morgan. Your line is now open.

Speaker Change: And the strength that we saw back in February.

Speaker Change: Got it and then just as a quick follow up gross margins this quarter I think.

Speaker Change: Relative to your expectations came in a little bit disappointing as youre transitioning to zero monitor and continuing to invest back into the business. When we think about not just 2024, but also 2025 with international coming onto the stage how should we think about international impact on gross margin what should we think about that as you know maybe adding a little bit of a firm.

Allen Gong: Thanks for the question. Just to start off, I had one on the guidance for the year, you're reiterating for the full year, but you're talking about some weather-related headwinds in the first quarter. So when I think about the fact that, you know, you're taking a couple of, you know, one to 2 million out of the first quarter but reiterating the guide, should we think about that as, you know, a recapture dynamic with those sales being pushed out to, you know, maybe the second quarter? Or are you just seeing stronger momentum in February so far that you expect to continue into the balance of the year? Hey, Allen, good question. Um, yeah, you know, we did see a bit of pressure in during the month of January. However, recovery has been incredibly nice in February, and so we're thinking more of it as a recapture as we get into the, you know, later periods of the year. And for us, there's no reason to adjust for those weather-related impacts, especially with the beat we had in Q4.

Speaker Change: Their pressure potentially offset by MCT coming onto the same platform.

Speaker Change: Just how to think about your gross margin progression.

Speaker Change: And 2024, thank you.

Speaker Change: Yes.

Speaker Change: This is quentin here, but when we think about the pressure in the fourth quarter and Bryan can speak a bit more to it obviously you had a bit of pressure coming from the transition from XT onto monitor which is moving faster than what we had anticipated and ultimately a good thing for us because we don't monitor has a better gross margin profile, particularly after we get automation put in place, but we also had tremendous.

Speaker Change: Progress made in the fourth quarter with our hiring efforts to build out our center of excellence in San Francisco.

Bryce Bobzien: So we felt like reiterating was the appropriate, you know, appropriate result in this situation. And keep in mind, Allen, as those registration volumes have improved really nicely over the course of February and have come together well with our revenue recognition model, those devices go out; they've got to come back to us before we can recognize that revenue as we process the report. So it ends up being a bit of timing there and in the strength that we saw back in February. Got it.

Bryan: Hiring well over 100 people in the fourth quarter, which is far in excess of the pace, we had been able to achieve through the first nine months of the year and so when we saw that opportunity in the fourth quarter with the hiring momentum we didn't want to relent on that because that opens up the ability into the future to continue to build out the center of excellence in San Francisco, which has a nice benefit to it so.

Bryan: The right investment decision certainly being made within the fourth quarter longer term, though to your to your point on international I actually think with the countries that we have on the roadmap they should be accretive to the gross margin profile. Obviously it depends on where reimbursement comes in but you think about Switzerland, which just approved reimbursement at north of 1000 Swiss francs, which is more than 1000 U S. Dollar.

Quentin S. Blackford: And then just as a quick follow-up, gross margins this quarter, I think, relative to your expectations, came in a little bit disappointing as you're transitioning to Xeo Monitor and continuing to invest back into the business. Now, when we think about not just 2024 but also 2025, with international coming onto the stage, how should we think about international's impact on gross margin? Should we think about that as, you know, maybe adding a little bit of further pressure, potentially offset by NCT coming on to the same platform? How should we think about your gross margin progression, you know, beyond 2024? Thank you.

Bryan: Per per ACM test, that's going to contribute a nice gross margin profile for us Japan pricing has yet to be set but we know they generally use a reference pricing model with the U K and the U S.

Bryan: Other countries, so that ought to be a pretty attractive price point as well that that we're looking forward to so I think that it can be accretive over the planning horizon.

Bryce Bobzien: Yeah, Allen, and this is Quentin here, but when we think about the pressure in the fourth quarter, and Bryce can speak a bit more about it, obviously, you had a bit of pressure coming from the transition from XT to Monitor, which is moving faster than we had anticipated and, ultimately, a good thing for us because we know Monitor has a better gross margin profile, particularly after we get automation put in place. But we also made tremendous progress in the fourth quarter with our hiring efforts to build out our center of excellence in San Francisco, hiring well over 100 people in the fourth quarter, which is far in excess of the pace we had been able to achieve through the first nine months of the year.

Bryan: We will continue to evaluate that and as we go broader in the other markets will have to look at each one on a one off basis, but I do think that international can contribute nicely to the gross margin profile over time.

Bryan: To your point zero MCT, when we get it onto the monitor platform is going to bring with it some nice benefits that we're realizing today. So again feel good about where the gross margin is progressing towards in the line of sight, we have to get into that low to mid seventies profile that we put out there with the long range plan.

Bryce Bobzien: And so when we saw that opportunity in the fourth quarter with the hiring momentum, we didn't want to relent on that because that opens up the ability in the future to continue to build out the center of excellence in San Francisco, which has a nice benefit to it. So the right investment decision certainly was made in the fourth quarter. Longer term, though, to your point on international, I actually think the countries that we have on the roadmap should be accretive to the gross margin profile. Obviously, it depends on where reimbursement comes in, but you think about Switzerland, which just approved reimbursement at north of 1,000 Swiss francs, which is more than 1,000 U.S. dollars per ACM test. That's going to contribute a nice gross margin profile for us. Japan's pricing has yet to be set, but we know they generally use a reference pricing model with the U.K., the U.S., and other countries.

Bryan: There was a bit of noise in the fourth quarter, but those were primarily investments made to set us up for the long term.

Speaker Change: Thank you.

Speaker Change: The next question is from Dateline of David Saxon with Needham. Your line is now open.

David Lewis: Hi, great. Thanks, Good afternoon, thanks for taking my questions.

David Lewis: Maybe I'll start with Grace.

David Lewis: So the Opex in 'twenty three.

David Lewis: I guess, 18% growth.

David Lewis: The year on year, but by my math the guidance is implying mid single digit opex growth and 24. So I guess is that the duplicative cost cutting rolling out in the model or what's really driving that that leverage.

Speaker Change: Yes, so as I think about it David it's not it's not quite that low as you're talking about remember we're in in 'twenty to 'twenty three we have business transformation related cost, but we also had some of those.

Quentin S. Blackford: And so that ought to be a pretty attractive price point as well, which we're looking forward to. So I think that it can be accretive over the planning horizon. We'll continue to evaluate that, and as we go broader into other markets, we'll have to look at each one on a one-off basis. But I do think that international can contribute nicely to the gross margin profile over time. And then to your point, ZOMCT, when we get it onto the monitor platform, is going to bring with it some nice benefits that we aren't realizing today. So again, feel good about where the gross margin is progressing towards and the line of sight we have to get into that low to mid-70s profile that we put out there with the long-range plan. There was a bit of noise in the fourth quarter, but those were primarily investments made to set us up for the long term. Thank you. The next question is from the line of David Saxon with Needham. Your line is now open.

Speaker Change: The one time item with regards to the.

Speaker Change: Impairment of the right of use asset in San Francisco.

David Lewis: Great. Thanks. Good afternoon. Thanks for taking my questions. Maybe I'll start with Bryce.

Bryce Bobzien: So, the OPEX in 23 was, I guess, 18% growth year-on-year, but by my math, the guidance is implying mid-single-digit OPEX growth in 24. So, I guess, is that the duplicative cost kind of rolling out of the model, or what's really driving that lever? Yeah. So, as I think about it, David, it's not quite that low as you're talking about. Remember, in 2023, we had business transformation-related costs, but we also had some of those, the one-time item with regard to the impairment of the right-of-use asset in San Francisco. Those two will not repeat.

Speaker Change: Integrated accounts is not any different with new <unk> new accounts as it is with existing accounts and I think as we really increase the focus on E. H R. And then we've got a program inside the company to get it north of 50 per cent and we're making good progress towards it that means we're working to drive integrations and our existing account just like we are with the new accounts. So I would say, it's a balanced effort between.

Bryce Bobzien: They're not out there. But when you look at what we call adjusted operating expenses, they're more in that 15% or so range. There's about 250 basis points of OPEX leverage baked into the guidance range as it stands, and a lot of that leverage is coming from that Global Business and Services Center that we set up in Manila, and we're starting to see the benefits. I will tell you, this is phase one of the benefits you can ultimately see from this, and that's on top of the investments we're making in the company. So, this is going to be a real lever for us moving forward, but it's about 250 basis points of operating margin leverage that we see from 2023 to 2024, removing some of those one-time items. Okay, great. Thanks for that. Maybe for Quinn, too.

Speaker Change: The two but we know that it's a very very important aspect of how we partner with our with our customers. When we can get EHR integrations put in place the ease of ordering the product the ease of reviewing the the reports and for the physician to ultimately make the diagnosis from it and improve the overall experience has been.

Speaker Change: Tremendous and we see the growth really take off once we get these integrations complete but what's also exciting about it particularly with are pushing to primary care is that once you get integrated with these large networks not only is it the cardiologist and the Electrophysiologist, who is now able to easily get access to <unk> within their their integrated.

Quentin S. Blackford: So you talked about the EHR connection, you know, benefiting utilization. So I wanted to ask what portion of the new accounts are also doing that EHR connection? And how should we think about the utilization ramp of those new accounts relative to what you've seen with prior cohorts of patients? Thanks so much. Yeah, thanks, David.

Speaker Change: Platform primary care can easily get into it nephrology can easily get into these other specialties can easily access the zeal product and we start to see quite a bit of an increase in subscriptions or prescriptions of the product Crumb from these other adjacent specialties and.

Quentin S. Blackford: Look, our focus on integrated accounts is not any different with new accounts as it is with existing accounts. And I think, you know, as we really increase the focus on EHR, and then we've got a program inside the company to get it north of 50%, and we're making good progress towards it, that means we're working to drive integrations in our existing accounts, just like we are with new accounts. So I would say it's a balanced effort between the two.

Speaker Change: In other channels within their network so that.

Speaker Change: That is quite encouraging and I think it's a big part of how we think about continuing to expand within our existing accounts, but also with new accounts and I think that the more that we spend time, they're increasing our enhancing that opportunity to to streamline the integration effort. The more value. We're gonna see pay off and you should expect to hear us talk a lot more about this into the future because.

Quentin S. Blackford: But we know that it's a very, very important aspect of how we partner with our customers. When we can get EHR integrations put in place, the ease of ordering the product, the ease of reviewing the reports, and for the physician to ultimately, you know, make the diagnosis from it and improve the overall experience has been tremendous. And we see growth really take off once we get these integrations complete. But what's also exciting about it, particularly with our push into primary care, is that once you get integrated with these large networks, not only is it the cardiologist and the electrophysiologist who are now able to easily get access to Zio within their integrated platform, but primary care can easily get into it. Nephrology can easily get into it.

Speaker Change: It's such a big enabler of unlocking the potential within the accounts were in.

Speaker Change: [noise] great. Thanks, so much.

Speaker Change: Thank you.

Speaker Change: The next question will be from the lineup Margaret <unk> William Blair. Your line is now open.

Speaker Change: Hi, everyone. This is my collar on for Margaret Tonight, Thanks for taking our question.

Margaret: In terms of dispute P. C. P M O, Montana and kind of the success you saw last year. Obviously that was ahead of your initial expectations and you mentioned the 21 per cent of registration glasser within the channel. So I guess, what's assumed in terms of peace.

Quentin S. Blackford: These other specialties can easily access the Zio product, and we start to see quite a bit of an increase in subscriptions or prescriptions of the product coming from these other adjacent specialties and other channels within their network. So that is quite encouraging, and I think it's a big part of how we think about continuing to expand within our existing accounts but also with new accounts. And I think that the more that we spend time there increasing or enhancing that opportunity to streamline the integration effort, the more value we're going to see pay off. And you should expect to hear us talk a lot more about this in the future because it's such a big enabler of unlocking the potential within the accounts we're in. Great. Thanks so much.

Margaret: P C P registration growth specifically within the guide and the mid teens volume growth within <unk> monitor.

Speaker Change: Yeah, Hey, my colleague Thanks for the question.

Speaker Change: You you can imagine pcp's will continue to be a a larger portion of the growth profile of the company moving forward won't give the exact amount that's contemplated here I would I would say is the 21% and this has been growing nicely over the last several years and that penetration level continues to increase what gets me really excited as the 21%.

David Lewis: Thank you. The next question will be from the line of Margaret Cazor with William Blair. Your line is now open. Hi, everyone. This is Macaulay on for Margaret tonight.

Margaret Cazor: Thanks for taking our question. In terms of just PCP momentum and kind of the success you saw last year, obviously, that was ahead of your initial expectations. And you mentioned the 21% of registrations last year within the channel. So I guess what's assumed in terms of PCP registration growth, specifically within the guide and the mid-teens volume growth within XTN monitor. Yeah, hey, Macaulay, thanks for the question.

Speaker Change: Our total registrations that comes through the PCP channel right now is really the integration with these large integrated health systems right until and a lot of cases, it's pushing this up the care continuum and ultimately the prescription comes from the PCP versus cardiologist. So there's a bit of cannibalization in there. However, as we get further integrate.

Speaker Change: Within these large PCP networks the ones, we've talked about the Oak Street to the world et cetera, That's where you really start to see a Tam expander and we've talked about 6 million ACM tests per year that are done right now a small percentage of those in the PCP channel, but 15 million patients that go to the Pcp's that have heart palpitations.

Bryce Bobzien: You know, PCPs will continue to be a larger portion of the growth profile of the company moving forward. We won't give the exact amount that's contemplated here. What I would say is 21%, and this has been growing nicely over the last several years, and that penetration level continues to increase.

Speaker Change: <unk> right, that's where you can start to see this tam expansion happening and and we have these contacts now that we hadn't happened in the past and in our long range plan, we baked in call at 3% to 4% increase in our overall tan from that six 6 million ACM test. We think this could go a whole lot faster once we get for.

Bryce Bobzien: What gets me really excited is the 21% of our total registrations that come through the PCP channel right now. It's really the integration with these large integrated health systems, right? And so, in a lot of cases, it's pushing this up the care continuum, and ultimately, the prescription comes from the PCP versus the cardiologist, so there's a bit of cannibalization in there. However, as we get further integrated within these large PCP networks, the ones we've talked about, the Oak Streets of the World, et cetera, that's where you really start to see a TAM expander. And we've talked about 6 million ACM tests per year that are done right now, a small percentage of those in the PCP channel, but 15 million patients that go to the PCPs that have heart palpit

Speaker Change: They're integrated within these PCP network. So from a guide perspective, we have a growing north of that of cardiology. As you can imagine we haven't put that percentage out there, but we believe this is a real tailwind for us moving forward.

Speaker Change: That's helpful. Thanks for that and I just want to quickly ask on the San Fran Ietf, obviously doing a lot of hiring there and may take a few quarters, but in terms of.

Speaker Change: The tailwind assumptions for a S. P. This year you know what what in terms of percentage of volumes could we expect I know you mentioned north of 50 per cent hopefully I agree with you in the year 2003. So so how much growth in terms of volume should we be expecting there for that are coming <unk>.

Bryce Bobzien: That's where you can start to see this TAM expansion happening. And we have these contacts now that we didn't have in the past. And in our long-range plan, we baked in a call it a three to 4% increase in our overall TAM from that 6 million ACM test. We think this could go a whole lot faster once we get further integrated within these PCP networks. So from a guide perspective, we have a growing north of that of cardiology, as you can imagine. We haven't put that percentage out there, but we believe this is a real tailwind for us moving forward. That's helpful. Thanks for that.

Speaker Change: <unk>.

Speaker Change: Yeah, I think I think this could be a real nice tailwind for us heading into 2024, we we mentioned the fact that we hadn't gotten to that 50% of total volumes going through San Francisco for the full year of 2023 really the contributing factor there was not being able to hire as fast as we were looking for however, I will say we exited.

Bryce Bobzien: And then just want to quickly ask about the San Francisco IDTF, obviously, doing a lot of hiring there, and may take a few quarters. But in terms of the tailwind assumptions for ASP this year, you know, what, what, in terms of percentage of volumes, could we expect? I know you mentioned north of 50%, hopefully exiting the year at 23. So, how much growth in terms of volume?

Speaker Change: Well north of that 50% in queue for and we anticipate especially as these folks get up and are scaling and enable to read the reports consistently with what we're doing.

Speaker Change: Across the rest of the country that volume is going to continue to grow we're not gonna give the percentage per se, but what I would say an important data point to understand this and and we've talked about aspie for years here at this company. What we expect in 2024 is effectively flat ESP year over year and there's some moving pieces when you could get into it.

Bryce Bobzien: Should we be expecting growth there for the coming quarters? Yeah, I think this could be a real nice tailwind for us heading into 2024. We mentioned the fact that we hadn't gotten to that 50% of total volumes going through San Francisco for the full year of 2023. Really, the contributing factor there was not being able to hire as fast as we were looking for.

Speaker Change: Certainly no the CMS national rate was.

Speaker Change: Updated January 1st and that had call at 3% to 4% net of inflationary impacts of pressure.

Bryce Bobzien: However, I will say we exited well north of that 50% in Q4, and we anticipate, especially as these folks get up and are scaling and able to read the reports, you know, consistently with what we're doing across the rest of the country. That volume is going to continue to grow. We're not going to give the percentage per se, but what I would say, an important data point to understand this, and we've talked about ASP for years here at this company, what we expect in 2024 is effectively flat ASP year over year. And there are some moving pieces when you get into it. You certainly know the CMS national rate was, you know, updated January 1st, and that had, call it, 3 to 4% net of inflationary impacts of pressure. AT had some similar movements in that direction.

Speaker Change: Had some similar movements in that direction that normal single digit pricing on the commercial side all of that is expected to be offset by the.

Speaker Change: The optimization and the utilization of our ITT F space. So that's.

Speaker Change: That's kind of where we're at is we expect flat asp's year over year.

Speaker Change: Awesome. Thanks for your help.

Speaker Change: Thank you.

Speaker Change: The next question will be from the line at Marie <unk> <unk> D. T. I G. Your line is now open.

Marie: Good evening, Thanks for taking the questions wanted to ask her about the progress on the warning letter I heard that you submitted the second five 10-K. Congrats on that can you tell us a little bit more about what you've heard from the F. D. A say on the first five 10-K, what we can expect timeline wife's going forward here.

Bryce Bobzien: The normal single-digit pricing on the commercial side, all of that is expected to be offset by the optimization and the utilization of our IDTF space. So, that's kind of where we're at: we expect flat ASP year over year. Awesome. Thanks again.

Marie: Why don't we might get a little more clarity on those on those Kansas.

Speaker Change: Hey, Maria equipment.

Maria: So we now have both <unk> on file with the FDA keep in mind that we filed the first one right at the turn of the year. The second one got file just a matter of of weeks later the first one really focused on the letter to file matters that we had made a decision on in history that we agreed to bring into five 10-K process and then the second one really on the day.

Marie Thibault: Thank you. The next question will be from the line of Marie Thibault with VTIG. Your line is now open. Good evening.

Quentin S. Blackford: Thanks for taking the questions. I wanted to ask here about the progress on the warning letter. I heard that you submitted the second 510K. Congratulations on that. Can you tell us a little bit more about what you've heard from the FDA, say, on the first 510K, what we can expect timeline-wise going forward here, and when we might get a little more clarity on those clearances? Hey, Maria, it's Quentin.

Marie: Zine enhancements design features that we've been working on with the FDA, which is really round patient notification improving.

Marie: The ability for the patient to see on the patch itself, if they're approaching an extra your limit or for the physician to see it right in the Z O Sweet tool.

Quentin S. Blackford: So we now have both 510Ks on file with the FDA. Keep in mind that, you know, we filed the first one right at the turn of the year. The second one was filed just a matter of weeks later.

Marie: Those have been submitted we have not engaged with the FDA and any back and forth on those 510 kg just yet I would expect will get some questions back here shortly but based upon all the dialogue that we've had to date.

Quentin S. Blackford: The first one really focused on the letter to file matters that we had made a decision on in history that we agreed to bring into the 510K process. And then the second one is really about design enhancements and design features that we've been working on with the FDA, which is really around patient notification, improving the ability for the patient to see on the patch itself if they're approaching, you know, say, a max trigger limit or for the physician to see it right in the ZO suite tool. Those have already been submitted.

Marie: Feel very good about those submissions FDA.

Marie: F D. A knows exactly what was going to be in those submissions.

Marie: Had worked with us on whether we should put them into one submission or to split them into two submissions and so I feel good about the fact that they are very much aware of what's in there and there's been a great line of communication between the two of US I would expect somewhere around the mid part of the year, just after going back and forth answering their questions call at roughly a six month process that we should see the formal approval.

Quentin S. Blackford: We have not engaged with the FDA in any back and forth on those 510Ks just yet. I would expect we'll get some questions back here shortly. But based upon all the dialogue that we've had to date, I feel very good about those submissions. The FDA knows exactly what was going to be in those submissions and has worked with us on whether we should put them into one submission or split them into two submissions.

Marie: <unk> those two 510 case, which doesn't really change anything with respect to how we're positioning or selling the product in the market, but certainly puts that aspect behind us in terms of closing out the five 10-K itself. The other thing that I would say that I I. Just think is is clarifying and important.

Quentin S. Blackford: And so I feel good about the fact that they're very much aware of what's in there. And there's been a great line of communication between the two of us. I would expect somewhere around the mid part of the year, just after going back and forth, answering their questions, call it roughly a six month process, that we should see the formal approval of those two 510Ks, which doesn't really change anything with respect to how we're positioning or selling the product in the market, but certainly puts that aspect behind us in terms of closing out the 510K itself. The other thing that I would say that I just think is clarifying and important, you know, throughout this process of working with the FDA on the ZOAT product, and we knew there were some questions earlier on around MCT, you know, through working with them, they've ultimately created a new category code themselves, which is more or less deemed to be MCT for ambulatory cardiac monitoring.

Marie: Throughout this process of working with the F D a on.

Marie: <unk> product and we knew there was some questions earlier on around MCT.

Marie: Through working with them ultimately they've created a new category code themselves, which is more or less deemed to be MCT for ambulatory cardiac monitoring and we are the first product that's been put into that new category code. So again through the collaboration of the teams working with the FDA answering the questions. They had around and I think that's a <unk>.

Marie: Big first step as we step into this new category code just being the first product into it that demonstrates just that the good progress that's taken place between the two entities being the FDA and ourselves. So we're excited with what we're seeing there.

Marie: Okay. That's really helpful and just as a quick follow up that does that mean some of your competitors on that side will also need to go through the same process.

Quentin S. Blackford: And we are the first product that's been put into that new category code. So again, through the collaboration of the teams, working with the FDA, answering the questions they had around that, I think that's a big first step as we step into this new category code, just being the first product into it, that demonstrates just the good progress that's taken place between the two entities, being the FDA and ourselves. So we're excited about what we're seeing there. Okay, that's really helpful. And just as a quick follow-up there, does that mean some of your competitors on that side will also need to go through the same process? You know, Marie, I don't know exactly what they'll have to go through.

Speaker Change: I don't know exactly what they'll have to go through I would imagine some of it might just be an administrative process where.

Speaker Change: Working with the F D a to get pulled into it but I don't know enough to speak to that with certainty I again I believe some of it's probably just administrative but we'll see.

Speaker Change: Watch and see how they play that all.

Speaker Change: Okay, Alright, thank you for being very clear and then I wanted to ask about the sleep pilot sorry to sound a little naive, but what exactly sort of will you be you know the the effort on <unk> part one could we sort of see this to calm you know a business or revenue contributor I realize it's just the first pilot.

Marie Thibault: You know, I would imagine some of it might just be an administrative process where they're working with the FDA to get pulled into it. But I don't know enough to speak to that with certainty. I, again, I believe some of it's probably just administrative, but we'll watch and see how they handle that. Okay, fair enough. Thank you for being very clear. And then I wanted to ask about the SLEAP pilot. Sorry to sound a little naive, but what exactly will you be, you know, the effort on Irhythm's part?

Speaker Change: And thanks for taking the questions.

Speaker Change: Yeah. This is something that we're really excited about I would expect to be out in the pilot within the next 30 to 60 days, it's coming together pretty well and we know exactly how we're going to approach. The pilot itself I guess important to understand like this whole space of getting too asleep diagnosis is entirely fragmented isn't as in <unk>.

Speaker Change: Credibly cumbersome process for the physicians and the patients today and now you have a significant competitor who just recently had stepped out of the whole home sleep test space themselves.

Quentin S. Blackford: When could we sort of see this become, you know, a business or a revenue contributor? I realize it's just the first pilot, and thanks for taking the question. Yeah, you know, this is something that we're really excited about. I would expect to be out in the pilot within the next 30 to 60 days. It's coming together pretty well, and we know exactly how we're going to approach the pilot itself. I think it's important to understand that this whole space of getting to a sleep diagnosis is entirely fragmented, and it's an incredibly cumbersome process for physicians and patients today.

Speaker Change: And I look at our position we have this incredible opportunity to leverage the call point that that we have been the cardiologist <unk> and now the primary care physician, which is where the initial prescription or <unk>.

Speaker Change: Referral onto a sleep specialist or a home sleep test or a sleep lab ultimately originates from and and so we already have this call point, we've got tremendous experience from an <unk> perspective, and understanding how that aspect works and we can step in I believe and fill a tremendous void, where we can make it very easy for the prescribing physician to to <unk>.

Quentin S. Blackford: And now you have a significant competitor who just recently stepped out of the whole home sleep test, you know, to space themselves. And I look at our position; we have this incredible opportunity to leverage the call point that we have being the cardiologist, the EP, and now the primary care physician, which is where the initial prescription or referral to a sleep specialist or a home sleep test or a sleep lab ultimately originates from. And so we already have this call point. We've got tremendous experience from an IDTF perspective and understand how that aspect works. And we can step in, I believe, and fill a tremendous void where we can make it very easy for the prescribing physician to prescribe the fact that they want a home sleep test or a sleep lab. We can step into that process, ensure that that sleep test gets performed, interpret the report, and ultimately hand the diagnostic report right back to the physician, making it incredibly seamless for them and the physician where that physician can see that report and ultimately make the final diagnosis.

Speaker Change: Scribed, the fact that they want a home sleep test or a sleep lab, we can step into that process ensure that that sleep test gets performed interpret the report and ultimately hand, a diagnostic report right back to the physician, making it incredibly seamless for them and the physician where that physician can see that report and make also we make the.

Speaker Change: The final diagnosis.

Speaker Change: You can almost imagine just making it as simple as having a single button and a single portal like Z O suite, where they can prescribed the device and the patient can get it at home and ultimately the report goes right back to the physician. So I think we can completely transform that entire space.

Quentin S. Blackford: You can almost imagine, you know, just making it as simple as having a single button in a single portal like ZioSuite where they can prescribe the device, and the patient can get it at home, and ultimately, the report goes right back to the physician. So I think we can completely transform that entire space. You know, the home sleep test market today is north of a billion dollars, by most estimates. 50 to 80% of AFib patients have sleep apnea.

Speaker Change: The home sleep test market today is north of a 1 billion dollar market by most estimates.

Speaker Change: 50% to 80% of <unk> patients have sleep apnea, we're performing nearly 2 million test a year. There's a huge percentage of that population that are likely going on to sleep test of some sorts. We think we can disrupted and streamline it for the physicians and the patients. So we're super excited we'll see what we learned in this initial pilot, but I think we're in a <unk>.

Quentin S. Blackford: We're performing nearly 2 million tests a year, so there's a huge percent of that population that are likely going on a sleep test of some sort. We think we can disrupt it and streamline it for physicians and patients, so we're super excited. We'll see what we learn in this initial pilot, but I think we're in a pretty interesting space here to leverage our product capabilities and our service capabilities to really deliver something that is transformational in this space. And the last thing I would add is that we spend a lot of time with our advisory boards. And these are physician advisory boards across the nation.

Speaker Change: Pretty interesting space here to the leverage our product capabilities in our service capabilities to really deliver something that is.

Speaker Change: Transformational in this space and the last thing I would add is we spend a lotta time with with our advisory boards knees or physician advisory boards out across the nation and we listened for ideas of what we can do to streamline their practices or help make them more efficient the number one item that comes back to us.

Quentin S. Blackford: And we listen for ideas of what we can do to streamline their practices or help make them more efficient. The number one item that comes back to us is finding a way to make that entire process more efficient for them. And I think this is a great way to do it. Thank you, Quentin.

Speaker Change: Round sleep, finding a way to make that entire process more efficient for them and I think this is a great way to do it.

Speaker Change: Thank you Clinton.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Richard Nevada with Trust. Your line is now open.

Quentin S. Blackford: Thank you. The next question is from the line of Richard Newiter with Truist. Your line is now open. Hi, it's Ling Ong for Rich.

Richard Nevada: <unk> Uhm. Thank you for taking the question. So could you help us understand the cadence of gross margin throughout the year and also how quickly can go from watching <unk> monitor transition completed.

Richard Newiter: Thank you for taking the question. So, could you help us understand the cadence of growth margin throughout the year? And also, how quickly growth margin can ramp up once monetary transition is completed?

Bryce Bobzien: Thank you. Yeah, as we mentioned in the prepared remarks, we think the exit rate at that 66% or so rate is reasonable to think for the first couple quarters. And the reason that timing is important is there are a couple of different things. First of all, it takes about six to nine months for a clinical cardiac technician to get fully up to speed and optimize.

Richard Nevada: <unk>.

Richard Nevada: Yep. Good question, Yes, we mentioned in the prepared remarks, we think the exit rated that 66% or so right. It is reasonable to think for the first couple of quarters and the reason that timing is important is there's a couple of different things first of all it takes about six to nine months for a.

Richard Nevada: Clinical cardiac technician to get fully up to speed and optimize and we talked about hiring 100, plus or so in the queue for so it's gonna take a little bit of time for them to get up and be efficient.

Bryce Bobzien: And we talked about hiring 100 plus or so people in Q4. So it's going to take a little bit of time for them to get up and be efficient. The second one is we talked about automation, and automation comes into play in the back half of the year, specifically with Xeo Monitor.

Richard Nevada: The second one is we talked about automation and automation comes into play in the back half of the year specific two zero monitor and remember we had no automation in place for zero S. T. So that's all incremental efficiency that will ultimately be created with the new product lines. So we're thinking the exit rate for Q1 Q2 is it.

Bryce Bobzien: And remember, we had no automation in place for Xeo XT. So that's all incremental efficiency that will ultimately be created with the new product line. So we think the exit rate for, you know, Q1, Q2 is a reasonable spot to think, call it the 66% or so margin. To get to 68% to 69%, you'll be able to do the math, and you see how we're going to put up some really nice gross margin numbers in Q3 and Q4. With automation in place, efficiency within the San Francisco COE, and scale with the Xeo Monitor, effectively 80% of our total volume will be on Xeo Monitor at any given time.

Richard Nevada: Reasonable spot to think call it to 66% or so margin to get to 68, 69%, you'll you'll be able to do the math and you see how we're going to put up some really nice gross margin numbers in Q3, and Q4 with automation in place efficiency within the San Francisco.

Richard Nevada: Scale with a zeal monitor effectively 80% of our total volume will be on sale monitor at the time all of those will be nice levers for us in the back half gross margin and our exit rate is going to be at that 70% to north of 70 per cent rate, which is some of the highest gross margins we've ever put up in company's history. So there's some investments and a.

Bryce Bobzien: All of those will be nice levers for us in the back half for gross margin. And our exit rate is going to be, you know, at that 70% to north of 70% rate, which is some of the highest gross margins we've ever put up in the company's history. So, there are some investments in the short term. However, it comes with some really nice payback relatively quickly.

Richard Nevada: In the short term however, it comes with some really nice payback relatively quickly. So that's how we think about cadence for gross margin.

Bryce Bobzien: So that's how we think about cadence for gross margin. Thank you. The next question will be from the line of Nathan Trabeck with Wells Fargo. Your line is now open.

Speaker Change: Thank you.

Speaker Change: The next question will be from eight line that Nathan trade that worthwhile Spargo. Your line is now open.

Nathan Trabeck: Thanks for taking the question. Can you talk about your guidance assumptions for competition and where your 70% market share is going in 2024? And also, if you could just talk about the competitive dynamics and the PCP channel? Thanks.

Speaker Change: Thanks for taking the question can you talk about your guidance assumptions for competition, and where you're 70 per cent mortgage here. It goes in 2024 and also if you could just talk about the competitive dynamics in the P. C. P channel. Thanks.

Spargo: Yeah. So.

Quentin S. Blackford: Yeah, so... You know, when you think about 2023, and I mentioned the fact that it was a transformational year for us, all of our data would tell us that over the course of the year, as we saw our volume momentum really pick up and increase, and we increased unit volume growth in 23 relative to 22 in a pretty substantial way, that despite the fact that we have 70% of that long-term cardiac monitoring space, I actually think we picked up another couple points of share in that marketplace. That's a market that, you know, we had given a bit of share in the past as new competitors came into it, but on the heels of the Camelot data being out there, on the move into the primary care channel, I'm convinced that we took share in the long-term cardiac monitoring space in 2023, and, you know, we hope to continue to find ways to do that into the future, but I think that's pretty remarkable in a market where you already have 70%.

Spargo: You know what you think about 2023 and I mentioned, the fact that as a transformational year for US all of our data would tell us that over the course of the years, we saw volume momentum really pick up an increase in we increased unit volume growth and twenty-three relative to 22 in a pretty substantial way that despite the fact that we have 70% of that long term cardiac monitoring.

Speaker Change: Space I actually think we picked up another couple of points of share in that in that marketplace. That's a market that you know we had given a bit of share in the past is new competitors came into it but on the heels of the Camelot data being out there on the move into the primary care channel.

Speaker Change: Convinced that we took share in the longterm cardiac monitoring space in 2023, and we hope to continue to find ways to do that into the future, but I think that's pretty remarkable in a market where you already have 70%. So I do think we're taking sure there with respect to primary care I I think we have a very unique and differentiated opportunity with primary care most.

Quentin S. Blackford: So I do think we're taking share there. With respect to primary care, I think we have a very unique and differentiated opportunity with primary care. You know, most of our competitors lead with the cardiologist and the electrophysiologist with an MCT-style product, and then they simply step down into a long-term cardiac monitor or an event holter, event recorder, or extended holter. So we take a very different approach where we come right in with long-term cardiac monitoring.

Speaker Change: Our competitors lead lead with the cardiologist and Electrophysiologist with an MCT style product.

Speaker Change: And then they simply stepped down into a longterm cardiac monitor or an event poulter.

Speaker Change: Event recorder extended older. So we take a very different products will become right in with longterm cardiac monitoring we have a very different cost profile at that price point, we're able to deliver in the mid sixties to what's gonna be the prices comedy just made 70% as we exit 2024 north of that Ah monitor alone.

Quentin S. Blackford: We have a very different cost profile. At that price point, we're able to deliver in the mid-60s what's going to be to Bryce's, you know, comedy just made, 70% as we exit 2024, north of that on the monitor alone. I just think we're in a very unique position to go in and compete for that primary care space. I've had a couple folks that I've been able to sit with competitors, and we talk about our success in the primary care channel, and they look at it a bit skeptically, I think, primarily from an economic perspective, but with our gross margin profile, we know that we can drive a very nice business there and expect to be able to build it pretty significantly.

Speaker Change: I just think we're in a very unique position to go in and compete for that primary care space I I've had a couple of folks that I've been able to sit with <unk>.

Speaker Change: Competitors and we talk about our success in the primary care channel and they look at it a bit skeptical I think primarily from an economic perspective, but with our gross margin profile. We know that we can drive a very nice business, there and expect to be able to build it pretty significantly. So I don't think a lot of competitors are trying to move to primary care at this point that's why.

Quentin S. Blackford: So I don't think a lot of competitors are trying to move into primary care at this point. That's why speed is of the essence, and we're going to move as fast as we can, but I think we have an opportunity to truly disrupt it and open it up, you know, to Bryce's point earlier, in a way that expands the market meaningfully versus just contributing to the overall market growth of 3% to 4% we've historically seen. Okay, that's helpful.

Speaker Change: Speed is of the essence, and we're going to move as fast as we can but I think we have an opportunity to truly disrupted in and open. It up you know to price point earlier in a way that expands the market meaningfully versus just contributes to the overall market growth of 3% to 4% we've historically T.

Speaker Change: Okay. That's helpful. My follow up can you talk about international contributing a point of growth in 2024, and this is before the Japan launched which you expect an early 20th 2025, I guess, how should we think about that ramp in Japan.

Quentin S. Blackford: My follow-up question, so you talk about international contributing a point of growth in 2024, and this is before the Japanese launch, which you expect in early 2025. I guess, how should we think about that ramp in Japan? Can it be, you know, higher than a point of growth contribution from international in 2025? And maybe just timing for reimbursement in Japan? Yeah, maybe I'll take the first one with reimbursement first.

Speaker Change: Can it be higher than a point of growth contribution from international and 25, and maybe just timing for reimbursement in Japan.

Speaker Change: Yeah, maybe I'll take the first one with reimbursement first we need to get through the regulatory approval of the product. That's on file with them were actively engaged going back and forth and that's moving quite well I would expect that to get approved you know in the back half of the year and then moved directly into discussions around reimbursement with probably take a.

Quentin S. Blackford: You know, we need to get the regulatory approval of the product that's on file with them. We're actively engaged, going back and forth, and that's moving quite well. I would expect that to get approved, you know, in the back half of the year and then move directly into discussions around reimbursement, which probably take a couple of months. That should get us to the point where we're ready to introduce the product from a commercial perspective right around the turn of the year or early part of 2025. So, you know, that has us excited. When I think about 24 and the point of growth coming from international, we really didn't get any contribution to our growth profile in 2023 as we stepped through some of the NHS-related accounts in the UK and started to really focus on the private sector. But the majority of that growth in 2024, frankly, will come from that UK business now that we've overcome some of those challenges. But I love the setup as I think about 24 and even more so into 25.

Speaker Change: A couple of months that should get us to the point, where we're ready to introduce the product from a commercial perspective right around the turn of the year early part of 2025 so.

Speaker Change: That has us excited.

Speaker Change: When I think about 24, and the point of growth coming from international we really didn't get any contribution to our growth profile in 2023, as we step through some of the.

Speaker Change: <unk> related accounts in the UK.

Speaker Change: Started to really focus in the private sector, but the majority of that growth in 2024, frankly will come from that UK business now that we've anniversary.

Speaker Change: Some of those challenges, but I love. The setup is I think about 24 and even more so than the 25, you've got international or we're expanding with Japan, you got Switzerland, coming on Board, Netherlands, Spain, Austria right. There on the roadmap and then you launched Japan and early 25 and should be launching a new and exciting MCT product as well and twenty-five.

Quentin S. Blackford: You've got international where we're expanding with Japan. You've got Switzerland coming on board, the Netherlands, Spain, Austria right there on the roadmap. And then you launch Japan in early 25 and should be launching a new and exciting MCT product as well in 25. I think the setup is terrific as we think about all the tailwinds that are in the business. So, we're excited with what's in front of us and feel like we've got a lot of good tailwinds that we can execute against. And I do think international business will be another growth contributor, not only in 24, but again in 25. Thanks. Thank you. The next question will come from the line of Bill Plavnik with Canaccord. Your line is now open. Hey, Quentin and Bryce, it's Sean on for Bill tonight.

Speaker Change: I think the setup is terrific and as we think about all the tailwind that are in the business. So we're excited with with what's in front of us and feel like we've got a lotta good tailwind that we can execute against and I do think international be another growth contributor.

Speaker Change: Not only 24, but yes again in 25.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: The next question will come from the line Apple L. Plotnik.

Speaker Change: Ken According to your line now okay.

Speaker Change: Hey, Clinton standby at this John on for Bill Tonight. Thanks for taking our questions I just wanted to focus on the the pilot program for no you've rather than that you mentioned on the call maybe just some more color on that details on the revenue model and risk sharing around that and how much of it if that is being considered in 24 guidance.

Bill Plavnik: Thanks for taking our questions. I just wanted to focus on the pilot program for Know Your Rhythm that you mentioned on the call. Maybe just some more color on that, you know, details on the revenue model, and what we're sharing around that. And how much of that is being considered in 24 Guidance? Thanks.

Speaker Change: Thanks.

Speaker Change: Yeah. So we haven't considered a whole lot of incremental revenue from no your rhythm and the 24 guidance at this point our view has been let's let these models are these pilots play out and once they're validated and we know they're going to be a commercial success and we can start to bring those into the commercial or sorry, the revenue expectations. So we're gonna let.

Quentin S. Blackford: Yeah, so we haven't considered a whole lot of incremental revenue from Know Your Rhythm in the 24 guidance at this point. Our view has been, let's let these models or these pilots play out. And once they're validated and we know they're going to be a commercial success, then we can start to bring those into revenue expectations. So we're going to let the pilot play out, and then we'll think about how we think about revenue for the year. I will tell you that early indications in the pilot with PCC have been terrific. But it's very, very early.

Speaker Change: The pilot play out and then we'll we'll think about sort of how we think about revenue for the year I will tell you that early indications and the pilot with PCC have been terrific. It's very very early the look out of the first 300 patients that came through that have gone through the pilot with a zeal patch and to keep in mind Mrs. <unk>.

Quentin S. Blackford: But look, out of the first 300 patients that came through or that have gone through the pilot with the ZO patch, and keep in mind this is an asymptomatic population that we believe dangerous arrhythmias might be present, nearly 200 of them have come back, or 70% of the asymptomatic patients have been identified as having a dangerous arrhythmia. That's pretty phenomenal and well above where sort of that diagnostic rate needs to be for the pilot to be considered a success. So, early stages, but beyond our own expectations at this point in time and gives us a lot of hope with respect to where no arrhythmia can go. In terms of the economic model, we're still working through what that can look like at a full, larger scale, and so I won't get into the details of that just yet.

Speaker Change: Asymptomatic population that we believe dangerous arrhythmia might be president.

Speaker Change: Nearly 200 of them have come back or 70% of them asymptomatic patients have been identified with having a dangerous arrhythmia, that's pretty phenomenal and well above were sort of that diagnostic right needs to be for the pilot to be considered a success. So early stages, but beyond our own expectations at this point in time and.

Speaker Change: Give us a lot of hope with respect to wear no. Your rhythm can go in terms of the economic model, we're still working through with that can look like at full larger scale and so I won't get into the details of that just yet but early indications are that we can be very good with our data with our AI at identifying and targeting the right populations and finding these dangerous.

Quentin S. Blackford: But early indications are that we can be very good with our data and our AI at identifying and targeting the right populations and finding these dangerous arrhythmias that, frankly, end up with a significant and tremendous cost to our healthcare system if they go undiagnosed. Great, thanks, Quentin. And then just as a follow-up to, you know, IBM has been, you know, a particular strong strength for you guys, too. How many greenfield opportunities are left there when it comes to these integrated networks for you guys to penetrate and go into? Thanks again for taking our question. Yeah, well, I think that with IDNs, you have to look at it from two different angles.

Speaker Change: Arrhythmia.

Speaker Change: Frankly.

Speaker Change: End up in a significant and a tremendous cost of our health care system. If they go on diagnosed.

Speaker Change: Great. Thanks, and then just as a follow up to I T. And then you know a particular <unk> strength you guys <unk>, how much greenfield opportunity lots there when it comes to these integrated networks <unk> Galaxy. Thanks again for taking my question.

Speaker Change: Yeah, well I think that with the idea.

Speaker Change: You got to look at it from two different angles.

Speaker Change: In several cases, we might be in a small part of a larger ivy in that.

Quentin S. Blackford: In several cases, we might be in a small part of a larger IDN that we have the opportunity to go much more expansive with. And there are other cases where we're just not in the IDN at all, and we can come in from sort of a top-down approach and be pushed down into their network. I would say we're going at it from both ways. You know, I was just reviewing the pipeline with the commercial team just yesterday, and it's as strong as we've ever seen it, including, you know, these large IDNs. And what I love about it is...

Speaker Change: We have the opportunity to go much more expansive with and there's other cases, where we're just not in the Ivy and it all in and we can come in from sort of a top down approach and and be pushed down into their network I would say, we're going at it from both ways.

Speaker Change: I was just reviewing the pipeline with the commercial team just yesterday and it's as strong as we've ever seen it including you know these large I D and and what I love about it is.

Quentin S. Blackford: Some of the highest growers, as a matter of fact, some of our strongest growers through the first two months of this year are coming from these new networks that we're opening up. That's pretty incredible. And I think it just speaks to the sort of opportunity that is out there. Great, thanks again. Thank you. The next question comes from the line David Rescott made with Baird. Your line is now open. Hey, thanks for taking the questions. I have two questions.

Speaker Change: Some of the highest growers as a matter of fact, some of our strongest growers through the first two months of this year are coming from these new networks that we're opening up that's pretty incredible.

Speaker Change: They could just speak to the sort of opportunity to sits out there.

Speaker Change: Okay. Thanks again.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of David Wescott with <unk>. Your line is now open.

David Lewis: Hey, Thanks for taking the questions I have two questions just gonna ask them upfront Uhm first on the because I may hear some of the the updates are on the sleep program I know what the analysts day, a coupla years or you talked about the.

David Lewis: I'm just going to ask them up front. First, I'm excited to hear some of the updates around the sleep program. I know at analyst day a couple of years ago, you talked about the expected spend baked into the longer-range plan, but some of the upside from revenue was not. So I'm wondering if that's still the case.

David Lewis: Expected span baked into that the longer range plan, but some of the upside from revenue was not so wondering if that's still the case and then just on Japan and when you think about framing up the timing of that market. How should we think about the robot into that international markets, particularly Japan. Thank you.

Quentin S. Blackford: And then just on Japan, when you think about framing up the timing of that market, how should we think about the rollout into that international market, specifically Japan? Thank you. Yeah, so from the sleep perspective, that spend is, it's in the base, it's in our guide that Bryce has provided, and I can give you a bit of details about it, but there's not any incremental spend there that we're thinking of at this point in terms of ramping up that sleep pilot. With success, you know, we'll see just how much success we think we can drive and how fast, and we'll But again, I think there's a massive opportunity to disrupt that space, leveraging a lot of the existing infrastructure we already have put in place. And so we're going to look to do that to the greatest extent that we can. With respect to Japan, again, I think the timing, the right way to think about that, is the early part of 2025.

Speaker Change: Yeah, so from the sleep perspective that spend as it's in the base and it's in our guide that prices provided and give you. The details around so there's not any incremental spend their that we're thinking of at this point in terms of ramping up that sleep.

Speaker Change: Pilot.

Speaker Change: With success will see just how how much success, we think we can drive and how fast and we'll take a look at it but I again, I think there's a massive opportunity to disrupt that.

Speaker Change: Space leveraging a lot of the existing infrastructure, we already have put in places so.

Speaker Change: We're going to look to to do that to the greatest extent that we can with respect to Japan again, I think the timing the right way to think about that as early part of 2025, we've got our partner identified we're working very closely with them as we prepare from a commercial readiness perspective to be able to enter that market right. After the turn of the year.

Quentin S. Blackford: We've got our partner identified, and we're working, you know, very closely with them as we prepare from a commercial readiness perspective to be able to enter that market right after the turn of the year. And then, you know, I think just in that Japanese market, it's probably prudent for us to think about, you know, relatively modest ramps as we go. But I do think having the high medical needs designation specific to Xeo puts us in a really unique position there. We know that patients need access to this product, but at the same time, we're not going to get ahead of ourselves with expectations.

Speaker Change: And then I think just isn't that Japanese market is probably prudent for us to think about relatively modest ramp as we go I do think having a high medical needs designation specific zeal puts us in a really unique position there.

Speaker Change: We know that patients need access to this product, but at the same time, we're not going to get ahead of ourselves with expectations were incredibly bullish on on the market and the second largest market in the world, but at the same time, we we want to let the resolved sorta play out get a little bit of experience.

Quentin S. Blackford: We're incredibly bullish on the market being the second largest market in the world. But at the same time, we want to let the results sort of play out, get a little bit of experience under our feet, and then we'll think about the right way to really think about the cadence of growth. Thank you. The next question will come from the line of Michael Polark with Wolf Research. The line is now open. Good afternoon.

Speaker Change: Under our feet and then we'll we'll think about the right way to really think about the case of girls.

Speaker Change: Thank you.

Speaker Change: The next question will come from the lineup Michael <unk> free search now.

Speaker Change: Okay.

Michael: Good afternoon <unk>.

Michael K. Polark: Quick one, the weather impacts for the first quarter. I haven't heard that yet through the reporting season. Was that cold weather, snow in January, or was there some large storm I missed?

Michael: Click on the weather impacts for the first quarter I haven't heard that yet through reporting season was that cold weather snow in January or was there. Some large dorm I missed I guess, what what specifically are you calling out there.

Bryce Bobzien: I guess, what specifically are you calling out there? Yeah, it's a good question, David. What we did see were large storm impacts in the Northeast and really across the country in certain respects.

Michael: Yeah. It's a good question, David what we did see as large storm impacts in the northeast and really across the country and surgery specs. It's it's not a huge number it's one or two <unk> 2 million, but we thought it was important to call out and we certainly have heard others in the industry talk about that it's not unique to us and and I would expect you'll continue to hear that as feedback hi.

Bryce Bobzien: It's not a huge number. It's one to two million, but we thought it was important to call it out. And we certainly have heard others in the industry talk about that. It's not unique to us.

Bryce Bobzien: And, you know, I would expect you'll continue to hear that as feedback. However, it didn't change the overall guidance at 575 to 585, just a little bit of timing issues. Helpful. And then my question on Switzerland at 1,000 USB per case stands out obviously as a high number. Is that for an MCT configuration or is that more for an XP product? And if it's XP, how did they get

Speaker Change: Never didn't change the overall guidance at 575 to 585, just a little bit of timing issue there.

Speaker Change: [noise] helpful.

Speaker Change: And then my question on Switzerland at a thousand USB per case stands out obviously has a high number is that for an M. C. T configuration or is that more for an X T product and if it's X P.

Speaker Change: How did they get there.

Speaker Change: Yeah, that's the longterm cardiac monitoring.

Quentin S. Blackford: Yeah, that's long-term cardiac monitoring. So that's not the MCT product. And Mike, we have been in sort of market evaluation, or I guess a focused evaluation with the University of Basel over there for a little while now. And I think that when you look at the Camelot data, and you look at their own internal data in terms of the cost avoidance downstream that they're realizing from an earlier diagnosis, they see that the value of the product is far beyond just the initial diagnosis; it's the avoidance of downstream, And so, you know, they worked those models together, and they came up with their rates, and certainly we're pleased to see that value being recognized. Obviously, it's a very attractive rate, and it makes that Swiss market, while the volumes aren't near as large as some of the other markets throughout Europe, that one's a pretty interesting one at those rates. Thank you. The next question is from the line of Suraj Kalia with Oppenheimer. Your line is now open. Hey, this is Seamus on for Suraj.

Speaker Change: So that's not the MCT product and like we have been in sort of market eval or or.

Speaker Change: I guess, a focused evaluation with the university of Basel over there for a little while now and I think that you look at the Camelot data you look at their own internal data in terms of the cost avoidance downstream that they're realizing from an earlier diagnosis. They see that the value of the product is far beyond just the initial diagnosis is the avoidance of down.

Speaker Change: Stream unnecessary costs and so they work those models together and they came up with with their rates and certainly we're pleased to see that value being recognized.

Speaker Change: Obviously, it's a very attractive right and it makes that Switzerland market, while the volumes aren't near as large as some of the other.

Markets throughout Europe that one's pretty interesting one at those rates.

Speaker Change: Thank you.

Seamus: Thank you.

Seamus: The the next question is from the lineup Suraj <unk> Oppenheimer. Your line is now open.

Quentin S. Blackford: Hey, this is seamus off <unk>, thanks for taking our questions ultra assess both upfront.

Quentin S. Blackford: Thanks for taking your questions. I'll just ask both up front. For the Philippines IDTF, can you guys quantify what percentage of scripts are being sent there so far? And you know, what percentage of your commercial payer mixes agreed to be moved? Any idea at this point?

Suraj: For the Philippines, <unk> can you guys quantify what percentage of scripts are being sent there so far and you know what percentage of your commercial payer mixes agreed to be moved the Philippines idea at this point.

Quentin S. Blackford: And then kind of following up in the guide, you know, can you give a little bit more color to the adjusted EBITDA bill for 24? You know, what are you assuming in terms of stock-based com, transition costs, etc. Thank you. So I'll hit the first one with the Philippines, and Bryce can jump in on the second one.

Speaker Change: And then kind of following up and the guide you know can you give a little bit more color to the adjusted EBITDA Bill for 24, what are you assuming in terms of stock based calm transition costs et cetera. Thank you.

Speaker Change: Yeah, So I'll hit the first one with the Philippine price can jumping on the second one.

Quentin S. Blackford: You know, the Philippines, we set up that Global Business Services Center, really focused on the back office more so than, you know, the clinical operations function, if you will, right? So think about that as finance, HR, IT, customer care, leveraging a bit of outsourced capabilities there, but that's really the intent of the Global Business Services Center. To your point, a lot of what we continue to process from a CCT or an IETF perspective continues to be back here in the States. Unless we do get consent from a payer, then we can leverage, you know, an offshore capability or a third-party capability.

Speaker Change: Philippines, we set up that global business services Center really focused on the back office more so than the clinical ops.

Quentin S. Blackford: Function. If you will rise to think about that as finance H R. I T customer care, leveraging a bit about source capabilities, there, but that's really the intent of the global business services Center.

Quentin S. Blackford: To your point a lot of what we continue to process from Ah CCT or 90, Jeff perspective continues to be back here in the states unless we do get a.

Quentin S. Blackford: Consent from a payer then we can leverage you know an offshore capability or third party capabilities. So Philippines is primarily those other back office functions and we've had great success getting that stood up.

Bryce Bobzien: So Philippines is primarily those other back office functions, and we've had great success getting that set up, great success in terms of their focus on quality of work and the process excellence that they bring. And as Bryce pointed out earlier, it's driving a nice improvement in the margin profile for us already here in 24, and we'll continue in 25. Perfect.

Michael K. Polark: Great success in terms of their focus on quality of work in the process excellence that they bring in as Bryce pointed out earlier, it's driving a nice improvement in the margin profile for US already here 24 and will continue in 25.

Speaker Change: Perfect and maybe I'll take the second one there on the adjusted EBITDA build this is the way we think about it if we think about just walking down the P&L gross margin I gave in the prepared remarks to 68, 69%.

Bryce Bobzien: And maybe I'll take the second one there on the adjusted EBITDA build. This is the way we think about it. If we think about just walking down the P&L, gross margin, I gave in the prepared remarks, 68 to 69%. You know, when you get to the midpoint, it's about 120 basis points or so of benefit that you're seeing from gross margin. On the OPEX side, it's about 250 basis points. And then, if you start to do the map, where does the rest come from?

Bryce Bobzien: When you get to mid point, it's about 120 basis points or so of benefit that you're seeing from gross margin.

Bryce Bobzien: On the Outback site, it's about 250 basis points and then if you start to do the math, whereas the rest come from the rest really comes from depreciation and amortization and most notably depreciation and amortization, which is up in our standard operating expenses. However, it's non-cash that's growing at a rate much north of what the rest of our operator.

Bryce Bobzien: The rest really comes from depreciation and amortization. And most notably, depreciation and amortization, which is included in our standard operating expenses, but it's non-cash. That's growing at a rate much north of what the rest of our operating expenses are. So that's effectively 100 basis points, though that comes out of adjusted EBITDA from a peer-adjusted EBITDA margin calculation. So, the other thing I would say, as you think about stock-based comp in 2024, we expect that to grow about in line with the rest of operating expense, maybe a point or two north of that. Again, it's removed from adjusted EBITDA, but that's the way I think about stock-based comp.

Bryce Bobzien: Expenses, so that's effectively 100 basis points, though that comes out of adjusted EBITDA from from appear adjusted EBITDA margin calculation.

Bryce Bobzien: So the other thing I would say as you think about as you think about stock based comp in 2024, we expect that take up to grow about in line with the rest of operating expense, maybe a point or two north of that again, it's removed from adjusted EBITDA, but that's the way I think about stock based <unk>. The other piece is as I think.

Bryce Bobzien: The other piece is, as I think about business transformation, we're effectively finished with our Philippines IDTF, and there's nothing specific that we're calling out from a business transformation expense standpoint that we're expecting to remove from results in 2024. So, no specific guidance there. We don't see much in the way of need at this point.

Bryce Bobzien: About business transformation, we're exclusive area, where effectively finished with our Philippines, Ietf and there's nothing specific that we're calling out from a business transformation expense standpoint that we're expecting to remove from results in 2024. So no specific guidance. There we don't see much in the way of need at this point however.

Quentin S. Blackford: However, we'll certainly bring you up to speed should anything change. Thank you. At this time, we have no further questions remaining in the queue, so I will turn the call back over to the team for final closing remarks. All right. Well, thank you for joining us today. You know, 2023 was a transformational year for us. And I want to thank our team members for their hard work and transforming our company as we build the foundation to capitalize on the opportunities that sit in front of us. We couldn't feel better about how we are positioned as we head into the year of 2024. We've got numerous tailwinds that exist in the business, including primary care, the sleep pilot, our Know Your Rhythm pilots, asymptomatic screening, a full year of monitoring, ramping international growth, and Camelot continuing to become more and more popular in the marketplace. Our future has never been brighter. We look forward to connecting with many of you over the next couple of months, and we'll talk soon. Take care. That concludes today's conference call. Thank you all for your participation, and you may now disconnect your lines.

Bryce Bobzien: Certainly bring you up to speed should anything change there.

Speaker Change: Thank you.

Quentin S. Blackford: At this time, we have no further questions remaining in the account so I will turn the call back over to the team for final closing remarks.

Speaker Change: Great well. Thank you for joining us today 2023, with a transformational year for us and I want to thank our team members for their hard work and transforming our company as we build the foundation to capitalize on the opportunity to sit in front of US we couldn't feel better about how we are positioned as we head into the year of 2024, we've got numerous tailwinds that exist.

Quentin S. Blackford: In the business, including primary care, the sleep pilot or no. Your rhythm pilots asymptomatic screening a full year of monitor ramping international growth in Camelot, continuing to become more and more popular in the marketplace or future has never been brighter. We look forward to connect you with many of you over the next couple of months and we'll talk soon take care.

Quentin S. Blackford: That concludes today's conference call. Thank you all for your participation and you may not disconnect Caroline.