Good day, and thank you for standing by. Welcome to the iRhythm Technologies Inc Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Leigh Salvo.

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the fourth quarter ended December 31, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions; the factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in iRhythm's Annual Report on Form 10-K, most recently quarterly report on Form 10-Q and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this presentation or to conform to these forward-looking statements to actual results. In addition, we will discuss certain financial measures that have not been prepared in accordance with GAAP, with respect to our non-GAAP and cash-based results. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release for a reconciliation of these measures to their most directly comparable GAAP financial measure. 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 report and quarterly report on Form 10-K and Form 10-Q, respectively with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 23, 2022. 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, Leigh. Good afternoon and thank you all for joining us. Doug Devine, our COO and CFO; and Dan Wilson, our EVP of Corporate Strategy and Investor Relations are joining me on today's call. My prepared remarks today will cover the progress we've made since our last call and commentary on the near and long-term growth initiatives we are focused on for our business. I'll then turn the call to Doug to provide a detailed review of our Q4 and full year 2021 results, as well as guidance for 2022. It's been an exciting four months since I joined iRhythm, and I could not be prouder or more energized by our team's collective progress. In this short time, we have identified and begun to implement measures that we are confident will enable us to accelerate growth in our core market and expand our opportunity into adjacent ones. We have also begun to implement operational changes that we believe will generate long-term sustainable growth and enable iRhythm to scale even more efficiently. I recently shared reflections from my first 100 days with the iRhythm family and I'd like to share some of that with you today. My vision is to turn iRhythm into a truly global organization, expanding the value we've realized domestically and extending across the world. Our artificial intelligence capability and deep learning algorithms are a significant differentiator from competitors, lifting our value well beyond medical devices and into the future of what AI can deliver. We see opportunities to leverage our core technology for new use cases not considered five years ago that can deliver significant value for both the healthcare system and our investors while keeping iRhythm at the forefront of revolutionizing the way healthcare operates. Good progress has been made, but our work is far from done. The potential is tremendous and our focus remains on delivering value to our clinicians, payers, and patients. We have a global responsibility to get these technologies out there more broadly and to get more people access to care. With that in mind, we are focused on three primary growth pillars: First, continued expansion in our core market with Zio XT and Zio AT. As the leader in the space, we’ve recently reached an exciting milestone of surpassing four million patients served. Today, physicians are treating well above one million new patients each year with our best-in-class technology that leverages more than one billion hours of curated ECG data and truly delivers the gold standard in ambulatory cardiac monitoring. We still have plenty of runway ahead of us with less than 25% adoption in our core US market, as well as an opportunity to further expand this market in time. Second, expansion into international markets. We have made great progress in operationalizing our service in the United Kingdom and plan to submit for approval in Japan later this year. Beyond these two countries, we see immense potential to introduce our technology platform in international markets and to make Zio the standard of care in cardiac monitoring, similar to the successes we've seen in the US. And third, leveraging our technology platform to expand into adjacent markets. Our efforts here are led by our expansion strategy in the silent AF, which is extending our Zio XT service into asymptomatic and high-risk patient populations that can potentially benefit from proactive monitoring. We also see the potential to leverage our technology platform into adjacent disorder and disease categories. With that as a backdrop, I'll summarize our 2021 and fourth quarter performance trends we're seeing in the early part of 2022 and recent progress on the objectives I've just outlined. For the full year 2021, our revenue grew 22% over 2020, exceeding the guidance we offered on our last call. Fourth quarter revenue reflected year-over-year growth of 3.8% and nearly 20% unit volume growth against an unseasonably strong fourth quarter in 2020. Adjusting for approximately one week of clinical backlog in Q2 that rolled into our third quarter, Q4 sequential growth was approximately 8%. And importantly, our turnaround times in the clinical queue remain with an expected bounce throughout the quarter. We saw a nice rebound in new account openings in the fourth quarter, as we restarted targeted efforts after successfully addressing our mid-year turnaround time issues. We were also encouraged to see average volume per new account near an all-time high since we began tracking this metric at the end of 2017, which signals the ability to launch larger accounts and rent new accounts more quickly. New accounts typically ramp up over a four-quarter period following launch, which suggests more meaningful contributions from these new account launches in the back half of 2022. Throughout much of the fourth quarter, our business recovered well from the combination of clinical backlog and COVID disruption. In late December, the Omicron variant spike had a meaningful impact on our business that continued through January. We have seen stronger trends in February and recently surpassed all-time record daily registrations. While we are encouraged by the recent trends and the strength of our commercial pipeline, we do anticipate continuing staffing and labor shortage headwinds, combined with the impact of fewer new account launches in both the second and third quarters of 2021, will have an impact in the first half of this year. Diving deeper into our core market in the US, and starting with Zio XT, unit growth continued to outpace revenue growth as a result of the reimbursement headwind that we navigated throughout 2021. Encouragingly, our sales reps have started to gain traction, expanding beyond cardiologists and EP couplings to reach primary care physicians, where an estimated eight million people a year visit for heart palpitations. As I've highlighted previously, we expect this to be an important driver of near-term growth in our core market, while also expanding our addressable market in time. On the innovation front, we recently launched Zio suite 3.0, which includes single sign-on as well as multi-factor authentication; these features will be rolled out to all of our US customers over the next 90 days and represent the outstanding cross-functional efforts we hope to build upon in our core technology offering. We plan to continue bringing new technologies to market, including a limited introduction of our third-generation biosensor expected in the coming months. Lastly, on the reimbursement front, we were pleased with the progress in Medicare pricing in early January with the decision by Novitas to update their 2022 reimbursement rates that affect Zio XT, moving rates from the seven to 14-day code from $115 in 2021 to $233 in 2022. We appreciate the continued engagement and efforts of the MACs to better understand long-term continuous ECG monitoring, the clinical benefits that it provides to patients and the cost and resources that go into delivering the service. The updated rates demonstrate progress in further understanding costs associated with delivering the Zio service. We along with the broad industry-wide working group will continue to work with the MACs, the Centers for Medicare and Medicaid Services or CMS, and other stakeholders to provide information in support of our continued pursuit of fair and appropriate pricing. We are committed to providing as much information as we can to CMS to allow them to set a national rate for calendar year 2023. We believe that they have sufficient information to establish national pricing and we look forward to the proposed rule in July or August of this year. On Zio AT, we saw strong growth throughout 2021 that outpaced overall company growth. Revenues from Zio AT doubled in 2021 versus 2020 and now represent approximately 10% of our revenues. We are pleased with the ramp of Zio AT and see an opportunity to continue to grow the product. Clinical use cases, including TAVR, Cinco Pete and early discharge have been key drivers for Zio AT, and we are evaluating several other opportunities to expand the use cases and the value that we can deliver to patients and physicians through clinical evidence and continued innovation. Now turning to international, we continue to make good traction in both the private and public sectors in the UK, where roughly 500,000 ambulatory cardiac monitoring tests take place each year. The backing in support of the NHS grant and the AI award, as well as the NICE recommendation, gives us confidence that the UK can be a significant market for us in the future. Our focus remains on executing against the AI award to demonstrate the clinical and economic value of our Zio XT service and generate the data required to achieve long-term sustainable reimbursement in the UK. The success we are seeing in the UK combined with CE Mark approval already in hand gives us the added confidence to pursue other markets throughout the EU, where we can deploy resources and begin growing our presence. We have also accelerated our efforts into Japan, where we are moving forward with an application for regulatory approval. Japan is the second-largest ambulatory cardiac monitoring market in the world, where reimbursement has historically been very good and physicians have been expressing strong interest in our technology. To oversee the execution of our international expansion goals, we are delighted to welcome Sandrine Moirez as our new international General Manager. Prior to joining us, Sandrine spent more than 20 years with Medtronic, most recently leading EMEA commercial efforts, including sales and marketing for spine, biologics, and several other key divisions. Turning to our third pillar of growth, the one that I believe has the most significant long-term potential is the adjacent markets. Our initial efforts are focused on where we estimate there are more than 10 million people in the US alone that are at high risk of undiagnosed cardiac arrhythmias, who can benefit from early screening. Additionally, there are other adjacencies like predictive stroke, heart failure, hypertension, and sleep apnea that can contribute to an enormous addressable market opportunity in the future. These are areas that we believe our technology platform can be leveraged to address clear unmet needs, and we look forward to sharing more details as we initiate efforts in these areas. In addition to our focus on growth, we are committed to improving operational discipline that will lead to long-term profitability and meaningful financial leverage over time. We are rethinking how we conduct our business, evaluating longer-term operating models that can enable future efficiencies and scale with the business as we globalize our company. Internally, we have begun to prioritize efforts with respect to our algorithms that will automate workflows for our clinical operations teams. We're evaluating the utilization of software to enhance interactions with our customer service functions. We've launched formal efforts to review our operational processes across our back-office transactional functions to clearly map out opportunities for efficiencies and new ways of doing business into the future. And we're doing this while also committed to improving upon our overall control environment as we introduce world-class operational capabilities. In line with these efforts, we will incur some restructuring charges within the first quarter of 2022 that are primarily associated with the reduction in size of our San Francisco facility to better align the company to the remote working environment that we have proven can be successful. With pricing at existing levels and with these operational changes underway, I am confident that we have adequate capital and a clear path to positive EBITDA and positive cash flows without the need for dilutive financing to get us to profitability. In summary, I'm confident that we have entered 2022 with good momentum and a platform that can grow and serve millions more patients. We are intently focused on this vision, and we look forward to sharing our progress throughout the year. I will now turn the call over to Doug.

Thanks, Quentin. Our fourth quarter results reflected the resilience of our teams through a highly uncertain environment. Having resolved our clinical operations backlog in the third quarter, the fourth quarter saw registrations and new account onboarding return to growth, which has set the company up for further revenue growth in 2022. Taking a more detailed look at our fourth quarter financial results on a sequential basis, revenue declined 4.2% due to the one-time benefit in Q3 from reducing clinical backlog by about one week not reoccurring in the fourth quarter, offset by growth in volumes from new accounts. Growth in our average daily registrations was solid, increasing by about 7% during the fourth quarter as compared to the third quarter. New account onboarding increased, both in the number of new accounts opened and the volume from new accounts, with volume from new accounts more than doubling as compared to the third quarter of 2021. Looking at new store, same store mix, new stores, defined as accounts that have been opened less than 12 months, accounted for 46% of year-over-year unit growth, up from 29% in the third quarter of 2021. XT home enrollment was up slightly to approximately 21% in the fourth quarter. Home enrollment has continued to decline to approximately 22% so far in the first quarter of 2022. Turning our attention to the rest of the P&L, gross margin for the fourth quarter was 62.7%, a 3% decrease compared to gross margin of 65.7% in Q3 of 2021. The decrease was due to lower sales volumes, higher shipping rates, and higher staffing costs in both our manufacturing and clinical operations organizations as we staff those functions ahead of anticipated revenue growth in 2022. Operating expenses for the fourth quarter were $83.5 million, up 5% from Q3 of 2021 and up 23% year-over-year. A sequential increase in operating expense was the result of a milestone expense to Verily of $3 million and an increase in bad debt expense. Verily costs included an OpEx worth $3 million in Q4 '21 compared to $4 million in Q4 '20. The company expects the next Verily milestone to occur in 2023. Adjusted EBITDA of negative $17.3 million in Q4 '21 was down $8.6 million versus Q3 '21 adjusted EBITDA of negative $8.7 million. Cash and short-term investments declined $17.7 million from the third quarter of 2021 to $239.1 million. Adjusted EBITDA losses, repayment of long-term debt, and capital spending were the primary uses of cash, partially offset by improvements in working capital. Accounts receivable decreased by $6.4 million to $46.4 million from $52.8 million in Q3 2021 as we continue to make progress with payers on adjudicating claims that were held in the first half of 2021. Finally, the net loss was negative $32.4 million or a loss of $1.10 per share compared with a net loss of $9.7 million or $0.33 per share in the same period of the prior year. Turning to guidance for 2022, we expect full-year revenue to range between $400 million and $410 million, reflecting year-over-year growth of 24% to 27%. We expect gross margin to range between 67% and 68%; this reflects Novitas’s updated reimbursement rates retroactive to January 1, 2022. Had these pricing changes been in effect for 2021, it would have increased our 2021 revenue by approximately 10%. We expect operating expenses to range between $375 million and $385 million. We expect adjusted EBITDA to range between negative $30 million and negative $40 million. Our adjusted EBITDA for 2022 will exclude restructuring costs that Quentin noted earlier and will continue to exclude stock compensation expense. Due to the Omicron impact on patient registration volume in December and January, we expect Q1 revenue to be a bit below typical seasonality, which was approximately 22% of full-year revenue in the first quarter of years prior to the COVID-19 pandemic. We expect to see gross margin steadily improve throughout the year and close the year around 70%. The first quarter of 2022 will also see some higher corporate expenses to gross margin due to staffing and testing impacts. Finally, we have signed a term sheet with Silicon Valley Bank to restructure our existing debt facility. The new facility will be non-dilutive, extend the maturity, reduce the cost of capital, and increase the amount of capital available by two to three times our current facility. We expect to close the facility by quarter-end and we'll provide further details when appropriate. And with that, Quentin, Dan and I would like to now open the call for questions.

Our first question comes from the line of Allen Gong from JP Morgan. Your line is now open.

Hey, guys. Congratulations on the good quarter. I guess my first question is going to be on reimbursement. It was really great to see you guys get the higher rates kind of under your belt. So when we think about the national pricing, should we think of you as feeling confident that you can get at least that rate, if not better? How have your communications with CMS gone so far and what gives you the confidence to move so quickly on national pricing?

Thank you for the question, Allen. We're quite encouraged by the ongoing discussions and their content with CMS. Currently, we're actively engaged in those talks and continuing to provide them with information. It was particularly reassuring that they expressed interest in the data we shared with the MACs, which was compiled by third-party sources across the industry. Their interest in the details and the reasoning behind that information is intriguing to us, especially considering their historical approach to pricing. This shows their willingness to learn more about the cost profile and the value we provide, which is a very positive sign. Additionally, it seems that CMS and the MACs are communicating more effectively during this process than they have in the past. Our interactions with the MACs and CMS continue, but now it appears they're also sharing information with each other, which is encouraging. While I won't speculate on the outcome regarding rates, I feel confident that they have the information needed to make an informed decision. The data they have suggests a higher price point compared to what the MACs have established, and we firmly believe that the value we provide exceeds that rate as well. I'm optimistic about this progression, though I won't predict where it leads, but I'm encouraged by what I'm witnessing.

Got it. And then just a quick little follow-on. When I look at your guidance range, it certainly brackets kind of where consensus was going into the print, but just from your point of view, what really gets you to the bottom versus the top of that range? And we have some uncertainty around the trajectory of the pandemic, whether or not we might see another seasonal impact in the fall or winter or if there might even be another variant on the way. What does your guidance contemplate for those kinds of factors? Thank you very much.

Yeah. We try to anticipate to the greatest degree possible those sort of headwinds in our guidance. We can't foretell what the future is going to bring in the back half of the year, but I can tell you, I feel like we've become much better as an organization, learning how to navigate through these potential challenges as they're created. We have tools like home enrollment that we've seen step up over the last several weeks and into the New Year that continues to demonstrate a viable model that can help us navigate these sort of headwinds. And so, we try to do our best to forecast those. I will tell you, when you get into the last part of December and in the early part of January, there is no question, Omicron had an impact on the business, but we navigated it fairly well. And if you look at the last several weeks of February here, it's encouraging to see numerous daily record registration numbers coming through. And really, if you look at the last three to four weeks, every week has stepped up sequentially off of that. So, the momentum is building. We're very excited by what we're seeing there. But at the same time, we want to be thoughtful when we set guidance expectations to anticipate a bit of what could be out there and to the degree that we can navigate through that well, then I think we're going to be very happy with the result at the end of the year. But I think the company is getting better navigating through those sorts of things.

Thank you. Our next question comes from the line of Cecilia Furlong from Morgan Stanley. Your line is now open.

Hey, thank you for taking the question is Calvin on for Cecilia. Congrats on the strong quarter. Just a couple of quick ones from me. First one is, I wanted to start on the margin guide. So it sounds like it's primarily picking in the Novitas update pricing. So I was hoping you could walk us through how much potential benefit on pricing, on margin, and on volume ramp of AT drive as you look at '22 and potentially beyond?

Yeah. I'll take that out of the gate. And Doug, you certainly can feel free to chime in there in terms of specific impacts on margins. Although I don't know that we've given that level of detail in the past around particular product profiles on the margin. Certainly, we were encouraged by what we saw with the increased rate around the Zio AT product with Meridian in particular. I think it continues to demonstrate that the value of the product is being realized by the MACs. We don't miss the opportunity when we sit down with them to articulate what our product can deliver into the marketplace, and to see that get reflected in updated rates is encouraging. And from our perspective, with respect to margins, those are the sort of things that we generally let flow through. And so, there certainly has been a benefit from the AT movement on the rate, although it's not a significant part of our business just yet, so I wouldn't say that it's moving margin profiles in a significant manner, but it is something that we let flow through. So, Doug, I don’t know if there's anything you want to add to that in particular, feel free.

Just as you're familiar with, Calvin, AT is currently about 10% of our revenue, and you're looking at roughly half of AT being impacted by that Medicare price increase; it’s not an impact on the commercial. So, that gives you a feel. It's incrementally positive; it's not a significant needle mover at the company level on gross margin.

Thank you. I have two quick follow-up questions. First, can you discuss your optimization goals regarding sales force enhancement, particularly how you plan to expand your physician reach and onboard more primary care physicians? What portion of this would be implemented in 2022 compared to later years? Second, could you provide updates on the clinical trial readouts for GUARD-AF and the mSToPS cost-effectiveness data? Are those expected to be available this year? Thank you.

Sure. Let me address the question about sales force augmentation, particularly in primary care. Interestingly, our most successful representatives have managed to engage with the primary care channel, with some reporting that 20% or more of their business comes from this area. This indicates a clear opportunity for us to focus more broadly on primary care within our commercial team. We also need to enable our commercial team to reach out to primary care physicians. We've explored various models, and our guidance includes some incremental investment this year in our commercial team by introducing additional profiles of sales representatives, such as key account managers. This approach will allow territory managers to seek new business in the primary care sector more efficiently. We are examining all possibilities to enhance our effectiveness in engaging new accounts, particularly focusing on primary care physicians. As we look to the future and recognize the vast potential of the primary care market, we're evaluating numerous opportunities, including expanding our own commercial team or potentially forming partnerships to better access this sector. We are considering various approaches, such as a payer or GPO perspective, to engage primary care physicians. You can expect more updates on this strategy as we refine and implement it later in the year. Regarding clinical trials, the GUARD-AF study is progressing well, although it's sponsored by Pfizer and Bristol. From what we observe, it appears to be moving favorably, and we anticipate receiving updates soon. Additionally, we are working on consolidating the economic aspects of the mSToPS study, which highlights the financial benefits of proactive screening and early engagement in AFIB cases. I'm optimistic about our findings and expect to share some insights on this later in the year.

Great, thank you.

Thank you. Our next question comes from the line of Margaret Kaczor from William Blair. Your line is now open.

Hey guys, this is Maggie Boeye on for Margaret today. I wanted to kind of hit on what you're assuming for pricing benefits and underlying growth for 2022. So, our initial read on the model suggests mid to high 20% growth rate on sales growth, which implies a deceleration of unit growth. So does this mean that there is conservatism baked in, or is there something else we should keep in mind here? Thanks.

Thank you for the question. Our approach to guidance is something we intend to maintain moving forward. We aim to set thoughtful expectations by anticipating potential challenges and developing plans to effectively address them. If we manage to do this, we believe the outcomes will be favorable, with the potential for exceeding our expectations. Should the anticipated challenges materialize, we won't view them as negative surprises. That's how we consider guidance. For 2022, we set our volume growth expectation at nearly 20%. Additionally, we expect about a 10% benefit from the Medicare rate change, though this will be partly offset by low single-digit pricing pressure we've consistently encountered in recent years. Your comments regarding slow growth lead me to remind you that the 2021 growth figures were affected by the significant impact of COVID on 2020 numbers. Adjusting for a more normalized 2020, unit growth in 2021 would likely be around 25%, which is comparable to our guidance for 2022. We believe the overall trends in our business remain strong, and we will continue to be mindful of the challenges ahead. If we navigate these challenges effectively, I think we will all feel positive about the year.

Got it. Thank you. You mentioned earlier on the call that during Q2 and Q3 of ‘21 you pulled back on new account openings. So can you talk about as we had entered 2022, how you're back on the offensive in new accounts? Can you give us some color on how long these new accounts take to ramp up and really start contributing to sales? Thanks so much.

Yeah. You heard a little bit of this in our prepared remarks. We were very encouraged with the way that we saw the new account activity sort of begin to really take hold in the fourth quarter coming off of two quarters of where we had really pulled back new account openings. And so, in the fourth quarter we saw a nice step-up in the number of new accounts we're doing business with, but importantly, near a record high in terms of the average unit volume per new accounts. It was the second-highest quarter on record for us since we ever began measuring that metric, dating all the way back into 2017. So we were very encouraged with the pace at which new accounts were coming on, but also the size of the new accounts that were coming on, which I think really speaks to the field team and the field team's ability to target those high-profile accounts and then win those accounts and bring them into the iRhythm family. So we were encouraged by that. I think that if you come into January, you continue to see the benefits coming from the new account. Certainly, we had the Omicron impact in the early part of January, but we've navigated through it pretty well to where we're back to the record daily levels of registrations continuing to build in February. So I think we've navigated through the near-term impacts. Those new accounts generally take about four quarters to really come up to speed, if you will. And they step up on a pro-rata basis kind of on a quarter-by-quarter basis, but by the time they get to the four quarters of having done business with us, they're usually at a pretty stable run rate and have grown into their potential. So I think what that does is it sets us up in the back half of the year for some nice incremental growth coming from some of these record levels of new accounts or sizes of new accounts that give us confidence on the year.

Great, thank you.

Thank you. Our next question comes from the line of David Rescott from Truist. Your line is now open.

Hey guys, thanks for taking the questions and congrats on the strong end to the year. I guess first one, just on the guidance. I appreciate the commentary you provided around some of the moving pieces there. It seems like kind of plus 20% growth rate in Zio XT, you mentioned just some comments on the ASP impact there as well, but how should we think about the AT and International segments impacting growth in ‘22? I know that you mentioned there is obviously an ASP increased to AT, that business doubled in 2022. How should we think about that this year? And then what does guidance contemplate as far as when new products come into the international expansion or the international markets?

The guidance figures I provided are for the overall company, combining Zio XT and Zio AT. We believe Zio AT will grow faster than Zio XT, although we haven't specified how quickly. Currently, approximately 25% of the ACM market uses Zio XT, while Zio AT has around 7% market share. This suggests significant potential for growth, and we are focused on enhancing our product to be more competitive. The value derived from our 14-day MCT compared to a traditional 30-day monitor is superior, and we need to continue raising awareness about this advantage. On the international front, I don't see it as a major growth driver at this time. Our main business is in the UK, which is experiencing rapid growth, but we are still working on establishing long-term reimbursement there. We are also beginning to approach the private sector for additional growth, though it's wise to take a cautious approach to expectations for now. In the long term, international markets will significantly contribute to our growth, but much of that will come from market access efforts this year. Revenue from these efforts may not begin until the latter half of 2023 as we expand into new countries. This year, while international will not be a huge growth driver, it presents ample opportunities that will position us well for future growth.

Okay, that's helpful. So I guess just to clarify, the 20% plus growth rate is total blended growth for volumes, not specifically to Zio XT?

That's right.

Okay. I know you've mentioned in the past that commercial payers might eventually adjust their rates based on the upcoming rate decision. Considering the potential range of that rate, do you believe that commercial payers would realign their rates in line with a national coverage decision, whether it's 1.2 or 1.5 times that of CMS? Or do you think that commercial payers have already established the rates they will maintain moving forward after the recent national coverage decision?

Yeah, my view is, generally speaking, the commercial payers understand the value of this product and they consistently looked at this product differently than what CMS or the MACs had done historically. Now I do think CMS and the MACs are coming around, understand it differently than what they had. Historically, you hear that now in those conversations with those parties where they will describe the Zio product, for example, as being very different than traditional Holter monitor. So we know that CMS and the MACs have come around to look at this a little bit differently. And I think the commercial payers have always sort of taken the position from the very beginning that they see it differently. And that's why you didn't see them make any drastic reaction to the CMS or the MAC rates. In the past, they were clear, they thought that CMS and the MACs would come around to see this in a different way, and I think that's what we've seen. I believe commercial payers, again, they understand the value for what it is. I don't see a lot of significant concerns around getting a national rate locked in and then seeing pressure on the commercial business. That's just not the way the majority of those discussions are going. Are there a couple of commercial payers here and there who might peg the rate directly to the CMS? There are, but those are not significant volumes and significant payers for the most part. And I feel like we've navigated that very well historically. The other thing that I think is interesting, and we'll spend more time talking about this into the future, but I'm not sure there is a difference between the commercial rate and the CMS rate that many folks anticipate there might be. We've done a pretty good job, I think, of negotiating into a place where there is not the sort of risk that our investor profile might believe that sits out there, but we'll spend more time around that in the future as we provide more clarity into the business.

Okay, very helpful. Thanks for taking my questions.

Thank you. Our next question comes from the line of David Saxon from Needham. Your line is now open.

Good afternoon and thanks for taking the questions. Maybe one on national pricing. Quentin, in the script, you mentioned that you think CMS has enough information to establish national pricing. So just wondering since the $200 price that they came out with late last year were just an average of 10 invoices. I guess, are you aware of any additional invoices that have been submitted that could change that average price? Or are they relying upon those 10 invoices or perhaps are they changing their approach to the other?

Yeah, I don't know that they're changing their approach. As I shared, they've been interested in going through the cost model that was presented to the MACs by the third party that consolidates that information. So I know that discussion has happened, but I don't know that they're changing their approach. I don't have any information that would indicate they're going to change their approach. I think it is more corroborative of the sort of place that they may be landing at. And again, I'm not going to speculate on where that is. But it's encouraging to me that they're wanting to get all of this information together and learn as much as they can. I have to believe there is more information being submitted to them as we speak; we're certainly doing our part to engage with them and continue to articulate the value of our product. And I'm sure every other player around the industry who has a vested interest is probably doing the same thing. But I'm not going to speak on their behalf or on behalf of CMS, but I would expect that more information is coming in soon.

Okay, that's helpful. And then I guess just with regards to the silent AF opportunity, you talked in the past about wanting to start these pilot. So just wondering, would they look something similar to what you did with mSToPS or would they be designed differently? And then if I could just sneak a third one in. You mentioned getting into sleep apnea and predictive stroke, et cetera. Any preliminary timelines you could share? And whether that would leverage the Zio patch or watch or would it be different form factor? Thanks so much for taking the questions and congrats on the quarter.

Sure. I'll ask Dan to step in and speak to silent AF and some of the pilot work that's being done there. He has done a terrific job leading this effort with him and his team, and I'll let him speak to that.

Yeah, thanks for the question, David. So, yeah, first, we're really pleased with the progress. As Quentin mentioned, we have a great team behind this effort and we're making a lot of good progress in the market. Your question about what does it look like, you're essentially right. It's essentially mSToPS and commercializing that type of program. We've built a minimally viable product, so to speak, that extends our capabilities beyond just the monitoring to the elements of patient identification, patient engagement on the front end and then diagnosing and communicating with the patient on the back-end. So we're building out those capabilities and really pleased with the progress there, and we are in the market actively selling those programs and hope to have a lot of positive updates to share as we go through the year.

To wrap things up, regarding predictive stroke, predictive heart failure, and sleep apnea, I see these as significant opportunities for our company. There's work to be done, and we are currently enhancing our focus on these areas to make them higher priorities. However, it's too soon to detail what that will entail. The dataset we possess, which contains over four billion hours of curated heartbeat data, holds great potential. I believe we will uncover valuable insights by thoroughly examining this data and leveraging our AI capabilities. It's all about ensuring we prioritize these opportunities. We will provide more updates in the future, but I expect that in the coming years, adjacent market opportunities will become a major topic of discussion and lead to noticeable benefits.

Great, thanks so much.

Thank you. Our next question comes from the line of Suraj Kalia from Oppenheimer & Company. Your line is now open.

Hey, Quentin and Doug, can you hear me all right?

We got you.

Perfect. Congrats on the quarter. So, Quentin, a couple of questions at least from my side. As expected, you have started talking about operational changes for long-term profitability. That's a welcome sign. The question I have, Quentin, and please forgive me if I misunderstood this. The AI that you’ve talked about is for back end, right? Does that imply the multilayer technician review is going to be obsoleted over time? And if so, how do you manage type two errors that are inherent in any algorithms.

Yeah. Suraj, thanks for the question. I'm not trying to indicate any real changes in that clinical oversight. I think there is a lot of work we can do with the algorithms in terms of how we correlate the data, how we group the data and who and how much time we spend with it. It's clear that some reports come in with more issues associated within that need to be dug into further, and other reports are more clean. And so, the better we can do it grouping those sorts of reports and making it more efficient for our technicians to work through those is more effective and efficient than we can become over time. I do think when you look at the capability of our AI capability, it's very clear and we've shown this back to the Nature publication a year or so ago that we can identify and diagnose AFIB equivalent to expert personnel, expert physicians, and we've only improved that algorithm since we've introduced it, which means we start to move beyond that. And so I do think the AI capability that we have here is truly unique and that it's leveraging 34 layers of deep neural network that I don't think our competition can speak to. So I think there is highly differentiated capability there. But in terms of how it reduces oversight of the physician. We're not speaking that that's the case. It's more about how it groups the reports and how we look at it in terms of driving efficiencies in the organization.

Got it. Quentin, I have a question for you and one for Doug, and then I'll go back in the queue. Quentin, you mentioned diseases related to conditions like heart palpitations and stroke, as well as sleep apnea. I'll focus on sleep apnea. Resmed conducted a significant study on the correlation between sleep apnea and AFIB, which did not succeed. My question is, to the extent you can share, what will you be doing differently now that hasn't been tried before, and how will you be compensated for it? Doug, could you also clarify the timeframe in which you expect iRhythm to reach profitability with the operational changes you're implementing, even if that's a few years down the road? Thank you, gentlemen, for addressing my questions, and congratulations once again.

Thanks for the questions, Suraj. Look, I think with sleep apnea, there is still a lot to be learned in that particular space. We know there's 25 million plus patients in the US who are impacted by this. Exactly what the reimbursement model would look like, I think, is work yet to be done. What I do know and believe to be the potential is that as we continue to move further into that primary care space, and you start to afford yourself the opportunity to look for more and more things and send more and more capabilities. And sleep apnea is one of those things that we think would be very appealing to be monitoring for identifying in the PCP space. We understand the challenges of getting into the sleep clinics today, the backlogs that are associated with it. How effective it can be and the need for repeat visits back into those. I believe there is a real opportunity to change the way diagnosis of sleep apnea is thought about. And I believe with the right attention, resources, work, and effort behind it. There are some interesting things we can do off of the patch that make it a realistic possibility and potential for us. And so, as we get up into those upstream channels, I think affordability starts to look for more things; sleep apnea is one of those things that's interesting to us. But exactly how it comes together? Those are all things that we continue to have to work through and navigate through, and reimbursement is one of them. With that, Doug, I’ll turn it to you.

Yeah. Thanks, Quentin. So, Suraj, I mean, first, when you look at our guidance for this year, revenue is going to be increasing as we go through the year, and gross margin is going to be increasing throughout the year. So we are going to be seeing leverage. So you should be expecting that we will be at least around breakeven EBITDA in Q4 this year. With these levels of pricing, if not a slightly positive EBITDA in the fourth quarter. Our adjusted, obviously we're not going to talk about the volume run rate where we get to a positive, other than my comments on Q4, other than to say that it is of course dependent on where the final level of Medicare pricing ends up landing.

Thank you, our next. Our next question comes from the line of Bill Plovanic from Canaccord. Your line is now open.

Great. Thanks for taking my question. A couple of kind of housekeeping questions here. First is, Doug, on the Zio AT I think your commentary was that it was about 10% of revenue. Was that for the fourth quarter or for all of 2021?

It's been running about that run rate. It’s true, Q2, Q3, and Q4 was a little bit below on the first quarter.

Okay. Additionally, I believe you mentioned an increase in bad debt for the fourth quarter. Is this related to delayed submissions from earlier in the year, and should we anticipate this impacting 2022, or has this mostly been resolved?

No, we had actually seen one-time good news on bad debt in Q3, and so Q4 bad debt was just returning to the normal expected levels.

Okay, and lastly, this might have been addressed already. As you move forward with commercialization, could you clarify your plans regarding the asymptomatic space? Have you decided whether to use the Verily wearable or the iRhythm Zio watch? Will you launch one of these products, or will you have two different products entering the market? I apologize if this question has already been answered.

No issues, Bill. That question has not been asked, but our initial efforts are to go to market with the patch, with our Zio patch. We're not going to wait for the watch itself, so we'll on some pilots here in the not-too-distant future that will utilize the patch technology that we already have. And then with a better form factor in the future, we will drop that into these programs as they get going. So we're not going to hold up and wait around. We're very bullish on the opportunity here. I think it's incredibly clear through the mSToPS data in particular just how valuable it is to get out there and start to monitor these broader populations, and we know we can do that with the existing patch form factor. So we're not going to wait on them.

Great. That's all I have. Thanks for taking my questions.

Thanks, Bill.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Quentin Blackford for closing remarks.

Well, thank you all for your time this evening. As I close, I want to thank each and every one of our incredible iRhythm employees. 2021 was a year that presented the opportunity for many distractions over the course of the year. The team was steadfast in their efforts to help as many people as possible, and we once again saw record numbers of new patients and their lives changed as a result of our best-in-class technology. This would not have been possible without the wonderful people who are here. With that, we appreciate your interest in iRhythm and we look forward to speaking with you all again soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.