iRhythm Technologies, Inc. (NASDAQ:IRTC) Q3 2020 Earnings Conference Call November 5, 2020 4:30 PM ET Company Participants Leigh Salvo - Investor Relations Kevin King - Chief Executive Officer Doug Devine - Chief Financial Officer Dan Wilson - Executive Vice President, Strategy, Corporate Development and Investor Relations Conference Call Participants David Lewis - Morgan Stanley Robbie Marcus - JPMorgan Margaret Kaczor - William Blair Kaila Krum - Truist Securities Suraj Kalia - Oppenheimer Operator Ladies ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents iRhythm Technologies' unaudited condensed consolidated financial statements as of September 30, 2020, including balance sheets, statements of operations, comprehensive loss, cash flows, and stockholders' equity [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets significantly increased to **$497.2 million** by September 30, 2020, from **$306.2 million** at year-end 2019, driven by cash and investments, while stockholders' equity grew to **$334.5 million** due to capital raised Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $95,336 | $20,462 | | Short-term investments | $231,901 | $120,089 | | Total current assets | $365,939 | $172,792 | | Total assets | $497,201 | $306,212 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $55,866 | $52,066 | | Total liabilities | $162,655 | $170,803 | | Total stockholders' equity | $334,546 | $135,409 | | Total liabilities and stockholders' equity | $497,201 | $306,212 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2020 revenue grew **32%** to **$71.9 million**, with net loss narrowing to **$4.7 million**, while nine-month revenue increased **20%** to **$186.4 million**, and net loss improved to **$34.2 million** Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $71,944 | $54,673 | $186,357 | $155,448 | | Gross profit | $53,712 | $40,888 | $136,578 | $116,878 | | Loss from operations | $(4,757) | $(18,260) | $(34,092) | $(37,029) | | Net loss | $(4,677) | $(18,293) | $(34,179) | $(37,268) | | Net loss per share | $(0.17) | $(0.72) | $(1.25) | $(1.50) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$21.6 million** for the nine months ended September 30, 2020, with **$211.4 million** provided by financing activities, leading to a **$74.9 million** net increase in cash and cash equivalents Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,577) | $(17,003) | | Net cash used in investing activities | $(114,906) | $(76,766) | | Net cash provided by financing activities | $211,357 | $108,380 | | **Net increase in cash and cash equivalents** | **$74,874** | **$14,611** | - The company raised **$206.4 million** (net) from a follow-on public offering in the first nine months of 2020, significantly bolstering its cash position[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details significant accounting policies, the impact of COVID-19, revenue recognition by payor, balance sheet components, commitments including the Verily development agreement, debt, and stock-based compensation - The company's business was significantly disrupted by the COVID-19 pandemic, leading to cost-reduction measures in Q2 2020, including furloughs, layoffs, and temporary pay reductions[35](index=35&type=chunk)[38](index=38&type=chunk) However, by August 2020, most of these measures were reversed as business conditions improved[38](index=38&type=chunk) Revenue by Payor Type (in thousands) | Payor Type | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Contracted third-party payors | $36,317 | $25,961 | $94,571 | $73,006 | | Non-contracted third-party payors | $4,607 | $2,686 | $10,851 | $8,050 | | Centers for Medicare & Medicaid | $19,978 | $15,379 | $51,012 | $42,573 | | Healthcare Institutions | $11,042 | $10,647 | $29,923 | $31,819 | | **Total** | **$71,944** | **$54,673** | **$186,357** | **$155,448** | - The company has a development collaboration agreement with Verily Life Sciences to create next-generation atrial fibrillation (AF) screening products[91](index=91&type=chunk) The company paid a **$5.0 million** upfront fee in 2019 and an additional **$3.0 million** milestone payment in June 2020[92](index=92&type=chunk)[93](index=93&type=chunk) - Due to the impact of COVID-19, the company determined that performance targets for its 2019 Performance-based RSUs (PRSUs) were not probable[116](index=116&type=chunk) The terms were modified in June 2020 to vest based on the company's average stock price, resulting in an incremental compensation cost of **$13.6 million** to be recognized through March 2021[117](index=117&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, noting a **32%** Q3 2020 revenue increase driven by Zio service volume, COVID-19 impact and recovery, and strengthened liquidity from a **$206.8 million** public offering - The company's Zio service revenue is primarily from third-party payors[127](index=127&type=chunk) For the nine months ended September 30, 2020, contracted third-party payors accounted for **51%** of revenue, CMS for **27%**, healthcare institutions for **16%**, and non-contracted payors for **6%**[127](index=127&type=chunk) - The COVID-19 pandemic led to decreased patient registrations in mid-March 2020[131](index=131&type=chunk) However, during Q3 2020, patient registrations for the Zio service recovered to pre-COVID levels seen in Q1 2020[131](index=131&type=chunk) - In response to the pandemic, the company significantly increased the utilization of its "Home Enrollment" service, which allows patients to receive and use the Zio monitor without visiting a healthcare facility[133](index=133&type=chunk) Comparison of Results for the Three Months Ended September 30 (in thousands) | Metric | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $71,944 | $54,673 | $17,271 | 32% | | Gross Profit | $53,712 | $40,888 | $12,824 | 31% | | Gross Margin | 75% | 75% | - | - | | Loss from Operations | $(4,757) | $(18,260) | $13,503 | (74)% | | Net Loss | $(4,677) | $(18,293) | $13,616 | (74)% | Comparison of Results for the Nine Months Ended September 30 (in thousands) | Metric | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $186,357 | $155,448 | $30,909 | 20% | | Gross Profit | $136,578 | $116,878 | $19,700 | 17% | | Gross Margin | 73% | 75% | - | - | | Loss from Operations | $(34,092) | $(37,029) | $2,937 | (8)% | | Net Loss | $(34,179) | $(37,268) | $3,089 | (8)% | [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate sensitivities on cash, investments, and variable-rate debt, and foreign currency exchange rates, though these are not considered material - The company's primary market risks are interest rate sensitivity and foreign currency exchange rate sensitivity[187](index=187&type=chunk) - As of September 30, 2020, the company had **$327.2 million** in cash, cash equivalents, and investments, and **$34.9 million** in outstanding debt with a variable interest rate[188](index=188&type=chunk)[190](index=190&type=chunk) Management concluded that a hypothetical **10%** change in interest rates would not materially impact the financial statements[190](index=190&type=chunk) - Foreign exchange risk from transactions denominated in currencies other than U.S. dollars, particularly the British Pound Sterling, is not considered material as of September 30, 2020[191](index=191&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of September 30, 2020, due to material weaknesses in the control environment, financial statement close process, and revenue accounting, with a remediation plan underway - As of September 30, 2020, management concluded that disclosure controls and procedures were not effective due to ongoing material weaknesses[192](index=192&type=chunk) - The identified material weaknesses relate to: 1) an ineffective control environment due to insufficient experienced accounting personnel, 2) an ineffective financial statement close process, and 3) ineffective controls over accounting for revenue and related receivables and reserves[193](index=193&type=chunk)[196](index=196&type=chunk) - The company is executing a remediation plan that includes hiring additional finance and internal audit personnel and modifying the design of key controls related to journal entries, business performance reviews, and revenue accounting[197](index=197&type=chunk)[198](index=198&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though it may encounter legal matters in the ordinary course of business - As of the report date, iRhythm is not a party to any material legal proceedings[201](index=201&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) Key risks include the ongoing material adverse impact of COVID-19, a history of net losses, reliance on Zio service adoption and reimbursement, intense competition, potential CMS policy changes, supply chain dependence, and internal control weaknesses - The COVID-19 pandemic is expected to continue to materially and adversely impact the business through reduced patient volumes, limited access for sales staff to hospitals, and potential supply chain disruptions[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - The company has a history of net losses, with an accumulated deficit of **$295.0 million** as of September 30, 2020, and expects to continue incurring losses as it invests in growth[211](index=211&type=chunk) - A significant portion of revenue (approximately **27%** for the nine months ended Sep 30, 2020) comes from CMS, making the business highly sensitive to changes in Medicare regulations and reimbursement rates[217](index=217&type=chunk) - The company faces intense competition from large, established medical device companies and smaller service providers, some of whom have greater financial resources and broader product offerings[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - The company has identified and is remediating material weaknesses in its internal control over financial reporting, which could result in material misstatements if not corrected[293](index=293&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the current reporting period - Not applicable[352](index=352&type=chunk) [Other Information](index=72&type=section&id=Item%205.%20Other%20Information) A new Severance and Change in Control Policy was approved, standardizing severance payments and benefits for executives for qualifying terminations - A new Severance and Change in Control Policy was approved, standardizing benefits for executives[354](index=354&type=chunk) - In a change of control scenario, qualifying terminated officers are entitled to benefits including lump sum salary payments (**24 months** for the CEO, **15** for other officers), bonus payments (**150%** of target for CEO, **100%** for others), COBRA premium payments, and **100%** accelerated vesting of unvested equity awards[356](index=356&type=chunk) - For terminations outside of a change of control period, benefits include continued salary payments (**18 months** for the CEO, **12** for others) and COBRA premium payments for the same duration[357](index=357&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed as part of the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files

iRhythm Technologies, Inc. (NASDAQ:IRTC) Q2 2020 Earnings Conference Call August 6, 2020 4:30 PM ET Company Participants Leigh Salvo - IR Kevin King - President, CEO & Director Douglas Devine - CFO & Secretary Daniel Wilson - EVP, Strategy, Corporate Development & IR Conference Call Participants Lilia-Celine Breton Lozada - JPMorgan Chase & Co. Calvin Chu - Morgan Stanley Brandon Vazquez - William Blair & Company Kaila Krum - Truist Securities Cecilia Furlong - Canaccord Genuity Suraj Kalia - Oppenheimer Ma ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________________________________ Form 10-Q _______________________________________________________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-37918 ____________ ...

iRhythm Technologies, Inc. (NASDAQ:IRTC) Q1 2020 Earnings Conference Call May 7, 2020 4:30 PM ET Company Participants Leigh Salvo - Investor Relations Kevin King - President and Chief Executive Officer Matthew Garrett - Chief Financial Officer Daniel Wilson - Executive Vice President of Strategy, Corporate Development and Investor Relations Conference Call Participants David Lewis - Morgan Stanley Brandon Vazquez - William Blair & Company, L.L.C. Cecilia Furlong - Canaccord Genuity Group Inc. Suraj Kalia - ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q1 2020 financials show a 31% revenue increase to $63.5 million, a net loss of $9.1 million, and total assets of $282.9 million, with prior period revisions for immaterial errors [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $56,514 | $20,462 | | Short-term investments | $65,256 | $120,089 | | Total current assets | $154,431 | $172,792 | | Total assets | $282,940 | $306,212 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $42,845 | $52,066 | | Total liabilities | $157,963 | $170,803 | | Total stockholders' equity | $124,977 | $135,409 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Revenue, net | $63,535 | $48,334 | | Gross profit | $47,472 | $36,561 | | Loss from operations | $(9,173) | $(8,204) | | Net loss | $(9,065) | $(8,250) | | Net loss per common share | $(0.34) | $(0.34) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(22,366) | $(17,163) | | Net cash provided by investing activities | $59,911 | $26,379 | | Net cash used in financing activities | $(1,493) | $(1,138) | | **Net increase in cash and cash equivalents** | **$36,052** | **$8,078** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company identified and revised prior period financial statements for immaterial errors in its historical accounting for revenues, contractual allowances, and allowance for doubtful accounts, impacting 2017, 2018, and early 2019 financials[29](index=29&type=chunk) - The COVID-19 outbreak caused significant business disruptions, including travel restrictions and reduced customer access. The company transitioned to remote work and increased utilization of its home enrollment service[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Revenue is disaggregated by payor type, with **Contracted third-party payors** and **Centers for Medicare & Medicaid (CMS)** being the largest contributors[58](index=58&type=chunk) - Due to the impact of the COVID-19 pandemic, management determined that achievement of performance targets for Performance-based RSUs (PRSUs) is not probable. As a result, **$4.8 million in PRSU expense recognized in 2019 was reversed in Q1 2020**[104](index=104&type=chunk) - In response to COVID-19, the company initiated cost reduction measures starting in April 2020, including temporary salary reductions for all salaried employees, furloughs, layoffs, and reduced executive and board compensation[114](index=114&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2020 revenue grew 31% to $63.5 million, operating expenses increased, resulting in a $9.1 million net loss; financial guidance suspended due to COVID-19 - The company's Zio service combines a wearable biosensor (Zio XT and Zio AT) with cloud-based data analytics to diagnose cardiac arrhythmias. Revenue is primarily from third-party payors, with **CMS accounting for approximately 27% of revenue in Q1 2020**[117](index=117&type=chunk)[118](index=118&type=chunk) - In response to COVID-19, the company has suspended financial guidance, transitioned employees to remote work, and significantly increased the use of its home enrollment service to ensure uninterrupted patient care[122](index=122&type=chunk)[124](index=124&type=chunk) Results of Operations Comparison (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $63,535 | $48,334 | 31% | | Gross profit | $47,472 | $36,561 | 30% | | Gross margin | 75% | 76% | -1 ppt | | Total operating expenses | $56,645 | $44,765 | 27% | | Net loss | $(9,065) | $(8,250) | 10% | - As of March 31, 2020, the company had **cash and cash equivalents of $56.5 million** and **short-term investments of $65.3 million**. Net cash used in operating activities was **$22.4 million** for the quarter[141](index=141&type=chunk)[144](index=144&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposure from interest rates and foreign currency exchange rates is deemed immaterial as of March 31, 2020 - The company's interest-earning instruments and variable-rate debt carry interest rate risk, but a hypothetical **10% change in interest rates** would not have a material impact[163](index=163&type=chunk)[166](index=166&type=chunk) - Foreign exchange risk from transactions in currencies other than U.S. dollars, particularly the British Pound Sterling, is not considered material as of March 31, 2020[167](index=167&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of March 31, 2020, due to material weaknesses in control environment, financial close, and revenue recognition; a remediation plan is underway - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2020, due to ongoing material weaknesses[168](index=168&type=chunk) - Specific material weaknesses include: an ineffective control environment lacking sufficient accounting professionals, ineffective controls over the financial statement close process, and ineffective controls over revenue recognition and related accounts receivable[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - A remediation plan is in progress, focusing on new finance hires, enhanced internal control education, and consistent execution of controls, particularly in financial close and order-to-cash cycles[175](index=175&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings but may become involved in future matters - As of the report date, the company is **not a party to any material legal proceedings**[179](index=179&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include COVID-19 impacts, a history of net losses, dependence on Zio service, reimbursement uncertainties, and material weaknesses in internal controls - The COVID-19 pandemic poses a significant risk, potentially impacting sales due to reduced access to hospitals, deferred diagnostic procedures, and increased unemployment affecting patient insurance coverage[181](index=181&type=chunk)[182](index=182&type=chunk) - The company has a history of net losses, with a **net loss of $9.1 million for Q1 2020** and an **accumulated deficit of $269.9 million**, and expects to continue incurring losses[188](index=188&type=chunk) - Business success is highly dependent on the adoption of the Zio service by physicians and securing adequate reimbursement from third-party payors, including **CMS, which accounted for 27% of revenue in Q1 2020**[189](index=189&type=chunk)[190](index=190&type=chunk)[196](index=196&type=chunk) - The company faces risks from its reliance on single suppliers for critical components, which could lead to supply shortages and price fluctuations that could harm the business[215](index=215&type=chunk)[218](index=218&type=chunk) - Previously identified material weaknesses in internal control over financial reporting could result in material misstatements in financial statements if not successfully remediated[271](index=271&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period - Not applicable[330](index=330&type=chunk) [Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period - Not applicable[331](index=331&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period - Not applicable[332](index=332&type=chunk) [Other Information](index=73&type=section&id=Item%205.%20Other%20Information) Corporate contact information and channels for investor communication, including social media, are disclosed - The company discloses its principal executive office location and contact information and states that it uses various channels, including social media, to communicate material information to investors[333](index=333&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[337](index=337&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________________________________________________________________________________ FORM 10-K ________________________________________________________________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHA ...

Financial Data and Key Metrics Changes - Full year 2019 revenue was $214.6 million, representing a 46% growth over the prior year, exceeding initial guidance of $201 million to $206 million [11] - Gross margin for the year was 75.5%, a 1.8 percentage point improvement over the prior year [12] - Fourth quarter revenue was $59.1 million, up 41% compared to the prior year period, with gross margins increasing to 76.5%, a 2.4 percentage point improvement [12][35] - The net loss for the fourth quarter 2019 was $17.3 million, or a loss of $0.65 per share, compared with a net loss of $16.3 million, or loss of $0.67 per share for the same period of the prior year [43] Business Line Data and Key Metrics Changes - The full commercial launch of Zio AT in October 2019 has enabled the company to be a single supplier to large integrated delivery systems [21] - Customer feedback on Zio AT remains extremely positive, with significant clinical advantages noted [23] - The diagnostic yield of Zio AT is 83%, approximately 20 points higher than traditional MCTs [24] Market Data and Key Metrics Changes - The company anticipates full year 2020 revenues to range from $280 million to $290 million, representing annual revenue growth of 31% to 35% [14] - The silent AFib market is a major part of the company's expansion strategy, with participation in three large-scale clinical trials [27] Company Strategy and Development Direction - The three primary components of the company's growth strategy are increased market penetration, increased operating leverage, and expanding the addressable market into new indications and geographies [18] - The company plans to add 20 additional sales representatives in 2020, ending the year with approximately 160 sales reps [19] - The company is focused on developing next-generation atrial fibrillation products in partnership with Verily [30] Management's Comments on Operating Environment and Future Outlook - Management expressed high confidence in the ability to grow and expand the business, driven by competitive differentiation and clinical superiority [13] - The company does not foresee any material impact from the coronavirus on its business in the near term [51] - Management anticipates achieving cash flow breakeven no later than the first half of 2021 [50] Other Important Information - The company raised net proceeds of approximately $107 million from a follow-on offering in September 2019 to fund growth initiatives [17] - The transition of the category three CPT code to a category one code is progressing as expected, with a recommendation to CMS anticipated in July [31][32] Q&A Session Summary Question: Update on RVU process and timing - Management confirmed that full disclosure regarding RVU values is expected in July [54][55] Question: Impact of delayed returns on revenue - Management estimated that approximately $1 million in revenue was delayed, with a 70-30 split between December and January [56][57] Question: Growth impact of Zio AT - Management indicated that Zio AT is contributing to growth, enhancing the overall platform's value [60][62] Question: Commercial pricing stability - Management stated that commercial contract rates have remained stable, with potential for increases based on clinical evidence [126][127] Question: Long-term growth outlook - Management remains bullish on long-term growth opportunities, emphasizing the large market potential and competitive dynamics [117][118]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for iRhythm Technologies, Inc. as of September 30, 2019, and for the three and nine-month periods then ended, including a revision of prior period financial statements to correct immaterial errors [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$310,080** | **$117,523** | | Total current assets | $184,880 | $104,295 | | **Total Liabilities** | **$167,495** | **$65,386** | | Total current liabilities | $45,467 | $30,334 | | **Total Stockholders' Equity** | **$142,585** | **$52,137** | - Total assets increased significantly from **$117.5 million** at the end of 2018 to **$310.1 million** as of September 30, 2019, primarily driven by an increase in cash, cash equivalents, and investments, as well as the recognition of operating lease right-of-use assets[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | **Revenue, net** | **$54,673** | **$38,441** | **$155,448** | **$105,495** | | Gross profit | $40,888 | $28,488 | $116,878 | $77,506 | | Loss from operations | $(18,260) | $(9,221) | $(37,029) | $(32,600) | | **Net loss** | **$(18,293)** | **$(9,727)** | **$(37,268)** | **$(34,108)** | | Net loss per share | $(0.72) | $(0.40) | $(1.50) | $(1.44) | - Revenue grew **42% YoY** for the third quarter and **47%** for the nine-month period, while net loss also widened due to a significant increase in operating expenses, particularly in Research and Development and Selling, General and Administrative[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,003) | $(24,720) | | Net cash (used in) provided by investing activities | $(76,766) | $29,848 | | Net cash provided by financing activities | $108,380 | $3,546 | | **Net increase in cash and cash equivalents** | **$14,611** | **$8,674** | - Financing activities provided **$108.4 million** in cash, primarily from a public stock offering of **$107.1 million**, which significantly boosted the company's cash position despite negative cash flow from operations and investing activities[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, financial statement line items, prior period revisions, revenue recognition, collaboration agreements, debt, and stock-based compensation - On September 10, 2019, the company completed a public offering of 1,575,342 shares of common stock, raising total net proceeds of **$107.3 million**[31](index=31&type=chunk) - The company identified and corrected immaterial errors in its historical accounting for revenues, contractual allowances, and other items, leading to a revision of previously issued financial statements to avoid a significant cumulative impact on Q3 2019 results[32](index=32&type=chunk) Disaggregation of Revenue by Payor Type (in thousands) | Payor Type | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | | Contracted third-party payors | $72,040 | $38,270 | | Non-contracted third-party payors | $9,016 | $10,302 | | Centers for Medicare & Medicaid | $42,573 | $29,317 | | Healthcare Institutions | $31,819 | $27,606 | | **Total** | **$155,448** | **$105,495** | - On September 3, 2019, the company entered into a Development Collaboration Agreement with Verily Life Sciences, involving an upfront fee of **$5.0 million** and potential milestone payments up to **$12.75 million** for next-generation atrial fibrillation screening products[91](index=91&type=chunk)[92](index=92&type=chunk) - Subsequent to the quarter end, on November 12, 2019, the company entered into a Master Services Agreement with Bristol-Meyers Squibb (BMS) to provide Zio services for clinical studies, with potential fees up to **$6.8 million** under the first Statement of Work[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations)) Management discusses the company's financial performance, highlighting **47%** revenue growth, increased operating expenses, and a strong cash position following a public stock offering - Revenue for the nine months ended September 30, 2019, increased by **47%** year-over-year, primarily due to increased volume of Zio services from expanded payor coverage, growing physician acceptance, and sales force expansion[161](index=161&type=chunk) - Gross margin improved to **75%** for the nine months of 2019 from **73%** in 2018, attributed to lower manufacturing costs, fixed cost absorption, and algorithm-driven labor efficiencies[163](index=163&type=chunk) - Research and Development expenses increased **103%** for the nine months of 2019 compared to 2018, largely due to a **$5.0 million** payment to Verily and a **$6.4 million** increase in payroll and personnel-related expenses from increased headcount[164](index=164&type=chunk) - Selling, General and Administrative expenses rose **31%** for the nine months of 2019, driven by a **$22.6 million** increase in payroll and personnel costs, a **$5.5 million** increase in bad debt expense, and **$3.9 million** in rent for the new San Francisco headquarters[165](index=165&type=chunk) - As of September 30, 2019, the company had **$34.6 million** in cash and cash equivalents and **$118.1 million** in short-term investments, bolstered by a recent public offering[169](index=169&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company discloses its exposure to market risks, primarily interest rate and foreign currency exchange rate sensitivity, concluding neither is material to its financial position - The company's primary market risks are interest rate sensitivity on its cash, investments, and variable-rate debt, and foreign currency exchange risk related to the British Pound Sterling[198](index=198&type=chunk)[202](index=202&type=chunk) - Management has determined that the company is not exposed to material risks from changes in interest rates or foreign currency exchange rates, and a hypothetical **10%** change would not have a material impact[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2019, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were not effective due to material weaknesses[203](index=203&type=chunk) - Identified material weaknesses include an ineffective control environment due to insufficient accounting personnel, ineffective controls over the financial statement close process, and ineffective controls over the accounting for revenue, bad debt, and related reserves[204](index=204&type=chunk)[205](index=205&type=chunk) - These weaknesses resulted in the misstatement and subsequent revision of financial statements for 2017, 2018, and interim periods in 2019, with a remediation plan being executed to address the underlying causes[206](index=206&type=chunk)[209](index=209&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company states it is not currently a party to any material legal proceedings but may become involved in such matters in the ordinary course of business - As of the filing date, the company is not a party to any material legal proceedings[212](index=212&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could adversely affect the company's business, financial condition, and operating results, including business, intellectual property, regulatory, and common stock-related risks [Risks Related to Our Business](index=51&type=section&id=Risks%20Related%20to%20Our%20Business) - The company has a history of net losses, with a net loss of **$37.3 million** for the nine months ended September 30, 2019, and expects to continue incurring losses as it invests in growth[214](index=214&type=chunk) - Business success is highly dependent on physician adoption of the Zio service and securing adequate reimbursement from third-party payors and CMS[215](index=215&type=chunk)[227](index=227&type=chunk) - The company's revenue relies substantially on the Zio service, its only product offering, and failure to maintain or grow its market acceptance would harm the business[216](index=216&type=chunk) - The company relies on single suppliers for critical components of the Zio monitor, making it vulnerable to supply shortages and price fluctuations[240](index=240&type=chunk) - A collaboration with Verily Life Sciences to develop new products may not result in commercially viable products or significant future revenue[257](index=257&type=chunk) [Risks Related to Our Intellectual Property](index=68&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - The company may become involved in costly intellectual property litigation, as the medical device industry is characterized by extensive patent disputes[296](index=296&type=chunk) - The company's intellectual property rights, including patents and trade secrets, may not provide adequate protection, potentially allowing competitors to develop similar products[301](index=301&type=chunk)[303](index=303&type=chunk) - Recent and future changes in U.S. patent law, such as the Leahy-Smith Act and recent court decisions, could diminish the value of patents and impair the ability to protect products[309](index=309&type=chunk)[310](index=310&type=chunk) [Risks Related to Government Regulation](index=71&type=section&id=Risks%20Related%20to%20Government%20Regulation) - The company is subject to extensive and complex healthcare regulations, including the federal Anti-Kickback Statute, False Claims Act, and HIPAA, with non-compliance potentially resulting in substantial penalties[313](index=313&type=chunk) - Failure to obtain and maintain necessary regulatory clearances from the FDA and other bodies for products and services could harm commercial operations[317](index=317&type=chunk) - Manufacturing processes must comply with the FDA's Quality System Regulation (QSR), and failure to pass regulatory inspections could lead to a shutdown of manufacturing operations[325](index=325&type=chunk) [Risks Related to Our Common Stock](index=76&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - The market price of the company's common stock may fluctuate substantially due to a variety of factors, including operational results, analyst recommendations, and market conditions[336](index=336&type=chunk) - The identification of material weaknesses in internal control over financial reporting could cause investors to lose confidence in financial reports, potentially decreasing the stock price[293](index=293&type=chunk)[294](index=294&type=chunk) - Future sales of equity securities to raise capital could dilute the ownership of existing stockholders[333](index=333&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period [Defaults Upon Senior Securities](index=79&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period [Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period [Other Information](index=79&type=section&id=Item%205.%20Other%20Information) This section provides the company's principal executive office address and notes the channels it uses for investor communications [Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index, which lists all documents filed as part of the Quarterly Report on Form 10-Q

iRhythm Technologies, Inc. (NASDAQ:IRTC) Q3 2019 Earnings Conference Call November 5, 2019 4:30 PM ET Company Participants Lynn Lewis – Investor Relations-Gilmartin Group Kevin King – President and Chief Executive Officer Matthew Garrett – Chief Financial Officer Conference Call Participants Allen Gong – JPMorgan Jason Mills – Canaccord Genuity Lynn Lewis Thank you, this is Lynn Lewis from Gilmartin Group. Thank you all for participating in today's call to iRhythm’s Q3 2019 conference call. Joining me are K ...