My name is Brandon Vasquez. For those of you that I haven't met, I am one of William Blair's medical device and animal health analysts. And we are excited to kick the morning off here with iRhythm. I need to read you real quick that I'm required to inform you that a complete list of disclosures or potential conflicts of interest, please visit our website at williamblair.com. And with that, I'm happy to introduce Quinton Blackford, the CEO of iRhythm, that will take us to your company presentation. Then we'll go to the breakout room, Jenny B, after this.
Well, thank you, Brandon. Thanks for having us. We're excited to be here with you this morning. Just a quick reminder, I will be using some forward-looking statements during the course of this presentation. I'd refer you to our company website or company filings for any further information that you might be looking for there. I think we all realize we're dealing with some significant challenges with respect to the U.S. health care system these days, and cardiovascular in particular is sort of leading the charge with that respect. Today, it continues to be the leading cause of death on a global basis. In 2026, it's estimated to cost our health care system somewhere around $400 billion. That is expected to rise to $1.5 trillion over the next 25 years, and there's several reasons for that. There's a lot of different catalysts that are driving that. There's our aging population there's a continued growth in the awareness of of disease states at an earlier stage folks want to learn about this earlier we see a proliferation of technologies that are increasing awareness around this and also increasing cost but also therapy and treatment we have a move towards value-based care population health these are all things that actually work very well in our favor but at the same time still create a challenge in our health care system part of that challenge is an access gap most folks don't realize this but roughly 46 percent of all counties in the united states do not have a cardiologist or an ep within them if you move into the rule setting nearly 90 of all counties have no cardiologist or ep and if they do they're still using an older traditional style of short duration monitoring which we know miss a lot of cardiac arrhythmias therefore we're not finding disease early enough and that is where we're trying to change the game we're in our 20th year now as a company we've been really perfecting the ability to find arrhythmia is at a very high degree of accuracy. Physicians agree with our recommended findings 99% of the time when they utilize our device. When you think about iRhythm today, we've sort of built a moat around the business and created a platform over the course of those 20 years. It starts with a wearable device. Our patients will wear our device up to 14 days. 98% of all of our patients will actually wear it over the entire duration of those 14 days, which gives us roughly one and a half million hours of heartbeat data per patient that then our software, our AI, our algorithms can work against or across to identify what arrhythmias are present. And ultimately, that's what enables us to have that 99% alignment with physicians in terms of agreement with the recommended findings that we're finding in those EKG strips. Importantly, we're on our second generation of the algorithm. We talked in our last earnings call that we had submitted a third generation of an algorithmic capability to the fda i'm excited to share that we actually just received approval from the fda this past weekend on that third generation algorithm we will ultimately bring that to market in the first half of 27 alongside our zoomct product and that we expect to be approved and launched into the market in the first half of next year as well but excited to see that get through the fda and continue to demonstrate the progress that we're making with the agency once we have the algorithm doing the work that it does, it all comes together in a digital workflow. We spend a lot of time integrating directly into our customer interfaces, the electronic medical records, the electronic history files. All of that is automatically brought together in these integrations that we're focused on, making it very easily for our customers to prescribe, diagnose, and store the reports and the medical history of their patients within their own EMR. A little bit about who we are today. coming off the first quarter we just delivered just shy of 200 million dollars in revenue in q1 alone we grew about 26 percent fifth consecutive quarter that we've been well north of 20 growth we'll serve between two and a half to three million patients on an annual basis but there's still tremendous runway in the core market that we serve today we've got about 40 market share in the broader ambulatory cardiac monitoring market in the u.s alone if you looked at just long-term cardiac monitoring meaning going out to 14 days of duration we actually have about 72 market share in that category of the market, but we think the market is, frankly, improperly defined in terms of what it could be. There's roughly 27 million folks in the United States alone who have signs and signals in their medical history files that would identify there's likely an arrhythmia to be present. We need to go find those arrhythmias so that we can treat them earlier and present or prevent the catastrophic downstream event that can come from not knowing where arrhythmias are present in the international markets that we serve today there's about seven countries that we're in that represents 3.2 million tests that are already being performed each and every year that does not count anything around this undiagnosed opportunity like i just shared with you in the u.s i think that same opportunity is present but we haven't begun to focus there just yet so 3 million tests being performed in the international space we've got call it one percent of that market opportunity today we think we can disrupt the international markets just like we have the u.s markets over time and importantly there's not anybody else in this marketplace that will stand behind their own results in the data and publish that data we invest heavily into clinical research and articulate the difference in the unique capability of zeo relative to the competitive offerings more than 140 published manuscripts more than 40 of them are independently peer-reviewed demonstrating the superiority of our irithm zeo product relative to competitive offerings i talk about the growing marketplace today the market we serve is roughly 10 million tests on an annual basis think about that as six to seven million tests in the u.s market plus the three million international tests that are taking place in today's market but you think about the future the 27 million patients at least in the united states that have identifiers in their medical history records that would identify that arrhythmia is likely present that market balloons to roughly 30 million on a global basis. Think about that as roughly 27 million in the United States, 3 million internationally. The majority that's going to come through LTCM, or long-term cardiac monitoring, which is the segment of the market where we have 72% market share. To open that up, and I'll talk about what we're doing there, you're going to have to move further up the care pathway. There's just simply not enough cardiologists and EPs to see these patients, but you've got to move into primary care, and that's where we're moving the business, and that's how we'll serve this opportunity outside of that 27 million you still have roughly 2 million short duration monitors that are being prescribed each and every year in the united states alone that's about a 500 million opportunity that we will continue to penetrate into and disrupt we know that roughly 60 of all arrhythmias are found after 48 hours of monitoring short duration monitoring just simply is not good enough you got to be monitoring for a longer period of time the mct opportunity is another one that excites us we've got our mct product on file with the fda as we speak a new generation of that product that we expect to see approved and launched in the market in the first half of next year we've got roughly 15 market share with a product today that is inferior in terms of the competitive offering set we need to catch up to and then surpass our competitors we also know that every 10 points of share within the mct category is roughly 80 to 100 million dollars of incremental revenue for us so while we have an inferior product we still are doing a nice job of taking the share that we can with 15% market share. I don't know that we ever get to a 70% market share clip like we have an LTCM, but if we could move that needle to call it 30, 40% market share, there's several hundred million dollars, a couple hundred million dollars of incremental annual revenue available to us in that opportunity. And then finally, the international market, like I shared earlier, less than, call it one, two percent market share in the international space. I talk about the growing market opportunity. Moving into primary care will be the way that we open up and make the 27 million patients a reality in the U.S. marketplace. We have focused intently on moving up the care pathway into primary care. You can see the chart here. Prescribing is starting to take place in the primary care office in the U.S. About 35 percent of all of the prescribing within iRhythm is now taking place from a primary care physician's office. And we've come at this in two particular ways. One is directly through the large health networks that we're already operating within we're in 23 of the 25 largest health networks we will leverage the relationship that we have with the cardiologist in the ep they are actually bringing the primary care physicians within their large networks to the table to educate them on the ease of prescribing the zeopatch and moving the actual prescribing of the device earlier into the patient's journey into primary care there are some situations where we'll run into a an issue where primary care is not comfortable diagnosing what they're finding in the report despite the fact that we know physicians agree with us 99 of the time because of our digital interface and the integrated workflow that we've created the cardiologist and the ep can actually go in and review the report after primary care has prescribed it and they can do the diagnosing right there and what you end up finding is that it ends up becoming a workflow routing tool almost like a rule in and a rule out device for these large health networks that the specialists are then determining yes i want to see this patient or no I don't need to see this patient. So the majority of our growth right now in primary care is certainly coming from the large IHNs that we're working within. The other pathway that we're using to approach primary care is through these large innovative channel partners that we call them, large national primary care groups, the likes of a Centerwell, a Signify, an Oak Street, a One Medical, and sort of pushing in through that primary care network and we're having great success there. This is a business that was relatively nascent, just I call it two years ago. It's in mid-single digits as a percent of our total revenue at this point in time. It's the fastest growing channel within the business and something that's getting a lot of traction and gaining a lot of ground. Part of the reason for that is those folks take a very population health management directed focus when they launch these programs. Generally, they're launching their search for these arrhythmic patients in these comorbid disease states, whether it's type to diabetes, COPD, CAD, CKD, sleep, heart failure, each of these programs generally get launched with a targeted focus in these particular comorbid disease states. And the reason for that is we know the arrhythmia patients within them cost these systems an incredible amount of money more than what a non-arrhythmic patient will cost them. Arrhythmia patients are hospitalized at a rate of nearly twice that of a non-arrhythmic If they are hospitalized, they stay two to five days longer. The emergency room visits are incredibly higher, nearly double with an arrhythmia patient versus a non-arrhythmia patient. And if those folks do ultimately get admitted or come into the emergency department, on average, that cost is $15,000 to $17,000 higher per patient than a non-arrhythmia patient. So there's a lot of focus in these channel partners to really lean into these arrhythmia populations. Part of the way that we help make this successful for our partners is we built the front-end capability from an AI perspective to be able to sit on top of their medical history files, their EMRs, and look through the data and identify which patients are likely at greatest risk that have never been identified, never been diagnosed with an arrhythmia, but we can see in their medical records that there are signals and signs that an arrhythmia is likely present. And in the first two pilots that we ran, which was roughly 1,000 patients in pilot one, 1,000 patients in pilot two, we found that when we identified patients that we thought had an arrhythmia but had never been diagnosed, once we put a patch on those patients, we found that 85% of them did in fact have an actual arrhythmia that the physician wanted to treat, which gives us confidence that we can continue to go find these folks, the 27 million patients that we believe that are sitting out there, we can find them and with a high degree of accuracy ultimately diagnose them. I talked about Xeo MCT. This is an exciting product for us. We're currently in the MCT product category with a product called ZOAT. This is a product that's been around for a little while now. It's not nearly as competitive as we need it to be. We're excited to get the new MCT product through the FDA, get that approved and launched into the market in the first half next year. And this will start to close some of the competitive gaps. The biggest competitive gap today is our ZOAT product is only worn for 14 days in a category where physicians want to prescribe a product for wear up to 30 days. ZO-MCT will actually be a 21-day wear product. We'll also move to a mobile gateway, which starts to open up the future to get to a full 30 days as well. We'll see increased algorithmic capabilities, detection capabilities. These are all important things for our customers, so we're excited to get MCT into the market. I mentioned international. You can see where we play today. The UK, Switzerland, Spain, Austria, Netherlands, Japan. The UK and Japan are certainly our most exciting market opportunities. The UK just came off the strongest quarter in the history of our working within that market. Japan is early stages. We just launched into it in 2025. It's growing incredibly quickly. We were exciting to see some movements on the reimbursement side of things. Today, we're in the process of doing a head-to-head study with our own Zeo product in the local market against local manufactured Japanese Holter-style monitors. That's what the local authorities have asked for to help us get to a higher reimbursement rate where we can show head-to-head data. That should wrap up in the first half of next year but but even as part of that journey we saw here recently that the local reimbursement body make a decision to go ahead and increase our reimbursement a bit just based upon early signals that they're seeing from the product in the market and we're excited by where that has the potential to go japan is the second largest market in the world from an ambulatory cardiac monitoring space cardiovascular disease is prevalent and it's a highly compliant market that when they see data they will follow the data there's no doubt that long-term patching is superior to short duration, we expect this to be a meaningful market for us. We talk a lot about AI these days. I think it's important to understand that AI in a clinically validated or a clinical medical grade diagnostic program for these hospitals is about a whole lot more than just an algorithm. It's an entire platform that we've perfected over 20 years of operating as a business. It's an end-to-end platform that includes devices on the front end, inventory management intake downloading the data bringing together with it contextual data we have a lot of patients who are aware device that if they feel arrhythmias they're pressing buttons they want to click the button to note that they felt something while the device is recording a lot of times a physician will record or they'll look at that manual recording and realize that there was nothing going on from an arrhythmia perspective at that same point in time you can't get that in ai alone you've got to have that contextual data the physician still wants to about that they need to treat that that comes with the sort of program and a capability that we offer but then with that highly regulated tremendous amount of fda scrutiny in and around medical grade diagnostics in this particular space bringing that all together in an integrated platform makes it very easy for our customers to order prescribe diagnose ensure their records are kept up to date in their emr with the integrated system that we have and so we're excited with what we've built here. And frankly, with the integrations that we have built, more than half of our volume now flows through integrated systems. Nearly three quarters of all of our systems are fully integrated now. We believe we have the opportunity through that integration to bring other AI capabilities onto the platform, make it available to our customers in a very easy, seamless way to use for our customer accounts. I talked about evidence generation. We spent a lot of time, effort really leaning in the differentiation of our product solutions. We were excited to bring the Camelot and Avalon study. Camelot was a retrospective study looking at the CMS data set, more than 300,000 patients that looked at our device relative to other monitoring modalities and other competitive offerings. And on a head-to-head basis, we found that zeal was superior in terms of diagnostic yield, fastest time to diagnosis, lowest retest rate, and lowest healthcare resource utilization we replicated that same study in a commercial insured data set in our avalon study and it reinforced those same findings we will publish another data set later this year off of a large commercial payer that i haven't seen it just yet but i expect it's going to reinforce the same things that we've seen in these prior two data sets we're excited to get that out there on the economic value side exciting with what we're seeing on the innovative channel partners we're certainly seeing the ability to reduce cost in these channel programs that's that's first and foremost behind that there's certainly the raf opportunity that these channel partners see but they're focused on getting costs down and managing these patients at a lower cost profile i expect you're going to see some cost data start to get published in the back part of this year from some of these channel partners as well which will reinforce why these programs are so interesting to them and then adjacent populations we know and i spoke on this a little bit earlier the cost of an arrhythmia that's present in a type 2 diabetic or a copd patient as an example is incredibly higher than a non-arrhythmia patient these folks want to find these individuals early we talk about adjacent market opportunities we're excited to be stepping into sleep we've been launching some pilots over the course of the year we believe with the tremendous overlap of arrhythmias and sleep disease that finding sleep apnea is something that we can do incredibly well and that our physician customers are already looking for. As we do these pilots, we're finding more and more home sleep tests are being prescribed by the primary care channel. I think that's going to continue to grow, particularly with the GLP-1 proliferation to treat sleep disease. You're going to see more and more primary care prescribing it. It is a primary call point for us. We think we can disrupt sleep just like we did cardiac arrhythmia years and years ago. The ability to get to a sleep diagnosis, it's very cumbersome, it's archaic, The physicians are frustrated with it patients are frustrated with it They fall out of the loop many times as they're referred on to a sleep lab or a sleep specialist We believe we can make it as simple as just the click of a button right within zeo suite when you're ordering a Zeo as an example, would you like to monitor for sleep disease or not? Yes? No, if you would we can get a sleep test to you We can leverage the back-end IDTF capability and know how that we've built over the last 20 years to provide a sleep IDTF capability and make this incredibly seamless for our physician customers The pilots have been super encouraging. You're going to continue to see us lean into this in a bigger way. It's not moving the needle today, but in the future, I think it does have the potential to move the needle in what I think is a $2 billion market opportunity for us. So we're excited to lean into SLEEP. All that we've been doing here is validating that this opportunity is real for us and exciting for us. You'll learn more about it, hear us talk more about it as we go into the future. As I look back on Q1, I'm not going to go through all these data points, but Q1 was a tremendous quarter for us. It was great from a top-line perspective where we continue to see momentum stay very, very strong, really across all of the foundational growth pillars in the business, the core business, innovative channel partners, MCT, or the AT product that we have, the international business. Those all are performing incredibly well, continue to be strong growth drivers. We continue to focus on driving integrations. Integrations into our systems are incredibly important. It creates the stickiness that ultimately will prevail into the future. We continue to lean into innovation. We've talked a lot about MCT. Again, excited to get that into the marketplace. Clinical evidence, you're going to see more clinical evidence that we're investing in today get published in the back part of the year. And importantly, we're doing this while we stay focused on executing with discipline and fiscal responsibility. We saw tremendous improvement in our profitability profile, 7% EBITDA margin in the first quarter was nearly a 900 basis point improvement year over year, continuing on from the progress that we've made in the past. With respect to the financial picture i mentioned this just shy of 200 million on q1 we grew 26 percent importantly operating expenses are only growing roughly nine percent so well below half the rate of revenue growth which leads to some meaningful financial leverage in the p l you're seeing the gross margin profile continue to improve up 200 basis points year over year ebitda up nearly 900 basis points which led us to reset expectations on the full year so we increased full year revenue guidance to 875 and 85 million we also improved bottom line expectations from a profitability perspective to 12 to 13 percent with the primary drivers there on the right side a lot of different drivers across the core business international adjacent market opportunities and so as i wrap up i would just i would leave you with this we're incredibly excited about where the company sits i think i couldn't be more pleased frankly from an operational perspective the company's operating well across all the strategic levers that we've identified i think we're positioned really well when you think about where the future of health care is going you got to move towards proactive care preventative care predictive care population health programs value-based care these are all things that lend themselves very well to iRhythm and the solution set that we have and the programs that we're launching importantly we're a company that serves in a market today that still has tremendous runway in terms of share capture so 40 of the current market today we think we can continue to take share particularly short duration monitoring more moves towards longer duration monitoring but important the market is is much bigger than how we define the market today particularly when you look at where arrhythmias are present they're just undiagnosed patients are unaware usually in these comorbid disease states we know where they're at we're going after them we'll open the entire market as we lean into those opportunities and then adjacent markets things like sleep excite us we do think we can disrupt that should be a nice tailwind for us the same things that we've done in the u.s market we believe we can do in the international markets as well. We're just in the early stages there. So global expansion will continue to be a focus for us. And then importantly, doing this with a mind towards profitability. When we set out a long-range plan about four years ago, we aspired to be a billion-dollar company by the time we got to 2027 with a 15 percent adjusted EBITDA margin. We will achieve that. We won't stop at 15 percent EBIT margins. We believe that there's a pathway into the mid-20s over time for the company. There's reason that structurally the company can't be there and we've made tremendous progress we've been a bit ahead of that curve but we're excited by where that could go so thanks for your time i appreciate it and uh happy to move to q a yeah maybe we'll we have a couple minutes here uh maybe
i'll ask you to just repeat it into the uh the question into the uh into the mic for the webcast and then we'll go to the breakout in a minute um one a question of clarification uh did i hear you correctly say that mct is filed i know there was like a rolling submission and then a full submission so just maybe just clarify where we are with that for now yeah so i think i think everybody could
hear that question but the question was are you on file with mct um or not what it's an interesting process so we've been on file with the fda with mct we moved towards a mobile gateway their recommendation to us was rather than submitting rolling data particularly around testing data to submit all of that in a formal submission later this year so we're still working to get to that point with them and we will get that back to them later this year and then they will pick that up from where we left the original submission off so that we've already received all the additional information requests through that initial submission and we've been able to address those answer those questions they're going to pick up from that point when we resubmit all
the test data okay and then um you did just tell us and congratulations on the clearance of the next use algorithm i just saw a couple days ago was approved unfortunately uh summary is not up yet so i'll ask you for the summary data now that it's actually cleared how did the clearance come relative to your expectations i was timing relative to your expectations and maybe remind everybody on the benefits of this next generation algorithm now that it's clear so we're talking
about the third generation algorithmic capability um that we'll put into our product importantly this algorithm will be used across the entire portfolio so zeo monitor and zeo mct once we launch uh with mct and and we'll bring it into production with the mct launch so so it's our team is working across one platform for every product offering that we have i think that's important we don't want to confuse the two i would say the approval came more or less right in line with what we would have expected we anticipated that it could come any day at this point in time so i think everything moved along just like we thought there i think importantly you know there's been some questions with mct and us working with the fda when they asked us to move to the gateway and there's been some questions with us talking about not using the rolling submission and resubmitting later this year does that sort of give off some flags of is there there's something that the FDA didn't like with MCT or it's holding up its approval I think this algorithm getting through approval is just it's clarity there is not an issue with the FDA this is more about us making the move to the mobile gateway getting them the test data that they're asking and that we knew we'd have to provide in a manner that they would like to see it I mean it truly is an administrative sort of effort versus anything else if you think about the FDA's perspective if would have been submitting sort of rolling test data as we go they had a hard time identifying how are we going to allocate resources to your review file right we can't just have our resources sitting on the side waiting for you to submit data we need to better resource plan our resources on the inside so it's truly an administrative issue more than anything else and we'll get that back on file with them later this year the benefits of the third generation algorithm are significant to us it will it will reduce our clinician review time by almost half which over the next five years will generate at least 100 million dollars of savings to us from the current uh run rate of the of what you see in our p l so that's not 100 million dollars a year that's 100 million dollars cumulative over the five years but it's a meaningful margin improvement lever for us so we're excited to get that out there it'll be a big part of how we continue to move through 15 percent and and beyond from an adjusted EBITDA perspective over time