iRhythm Technologies Announces Second Quarter 2022 Financial Results

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SAN FRANCISCO, Aug. 04, 2022 (GLOBE NEWSWIRE) — iRhythm Technologies, Inc. (NASDAQ: IRTC), a leading digital healthcare solutions company focused on the advancement of cardiac care, today reported financial results for the three months ended June 30, 2022.

Second Quarter 2022 Financial Highlights

  • Revenue of $102.1 million, a 25.6% increase compared to second quarter 2021
  • Gross margin of 68.8%, a 0.8 percentage point improvement compared to second quarter 2021
  • Cash and short-term investments of $204.5 million at June 30, 2022
  • Raised full year 2022 revenue guidance to range from $415 million to $420 million

Recent Operational Highlights

  • Reimbursement rates proposed by the Centers for Medicare and Medicaid Services (“CMS”) as part of the Proposed Medicare Physician Fee Schedule for Calendar Year 2023 that impact Zio XT for CPT codes 93247 and 93243
  • 510(k) FDA clearance granted for clinically integrated ZEUS system for the Zio® Watch, developed in partnership with Verily as clinical grade watch to detect and characterize atrial fibrillation and integrate with clinician workflow
  • Recent additions to the executive leadership team reflective of company’s commitment to driving sustainable value and significant growth across multiple pillars
  • iRhythm to hold investor day on September 21, 2022, in New York City, with content to incorporate key elements of long-term business strategy, details of stated growth vectors and long-range financial targets

“We made steady progress in the second quarter, out-performing revenue expectations and delivering another quarter of record registrations in our core U.S. business, fueled by an all-time high number of new accounts doing business with us,” said iRhythm CEO and President, Quentin Blackford. “New account openings were up 22% quarter-over-quarter and revenue volumes increased 10% sequentially, underscoring our solid performance amidst a difficult market environment. With business highlights regarding reimbursement and our Zio Watch clearance already announced in July, we are pleased with the way that the second half of 2022 has begun.”

“We also rounded out our executive leadership team with recent additions that position us well to advance our long-term strategies for sustainable growth in our core U.S. market, expand into greater international geographies and enter adjacent markets. The sizable opportunity ahead of us to bring our innovative technology platform powered by data-driven artificial intelligence to patients, clinicians, healthcare systems and payers gets us excited every day. We look forward to sharing more details on this vision at an investor day during the third quarter,” concluded Mr. Blackford.

Second Quarter Financial Results
Revenue for the three months ended June 30, 2022 increased 25.6% to $102.1 million, from $81.3 million during the same period in 2021. The increase was primarily driven by Zio XT and AT volume growth and increases in Medicare pricing.

Gross profit for the second quarter of 2022 was $70.2 million, up 26.9% from $55.3 million during the same period in 2021, while gross margins were 68.8%, up from 68.0% during the same period in 2021. The increase in gross profit was primarily due to increased volume and average selling price, partially offset by increases in cost per unit.

Operating expenses for the second quarter of 2022 were $93.7 million, compared to $72.3 million for the same period in 2021 and $110.3 million in the first quarter 2022. The sequential decrease in operating expenses was due to the absence of one-time impairment and restructuring charges incurred in the first quarter 2022, associated primarily with a reduction in size of our San Francisco facility and severance and other employee exit related costs.

Net loss for the second quarter of 2022 was $23.9 million, or a loss of $0.80 per share, compared with net loss of $17.4 million, or a loss of $0.59 per share, for the same period in 2021.

Cash, cash equivalents and short-term investments were $204.5 million as of June 30, 2022.

Guidance
iRhythm projects revenue for the full year 2022 to range from $415 million to $420 million, which represents 29% to 30% growth over prior year results. Gross margin for the full year 2022 is expected to range from 68% to 69% and adjusted operating expenses are expected to range between $375 million and $385 million. Adjusted EBITDA for the full year 2022 is expected to range from negative $12.5 million to negative $17.5 million.

Webcast and Conference Call Information
iRhythm’s management team will host a conference call today beginning at 1:30 p.m. PT/4:30 p.m. ET. Investors interested in listening to the conference call may do so by accessing the live and archived webcast of the event, which will be available on the “Investors” section of the company’s website at: www.irhythmtech.com

About iRhythm Technologies, Inc.
iRhythm is a leading digital health care company redefining the way cardiac arrhythmias are clinically diagnosed. The company combines wearable biosensor devices worn for up to 14 days and cloud-based data analytics with powerful proprietary algorithms that distill data from millions of heartbeats into clinically actionable information. The company believes improvements in arrhythmia detection and characterization have the potential to change clinical management of patients.

Use of Non-GAAP Financial Measures and Other Operating Metrics
We refer to certain financial measures that are not recognized under U.S. generally accepted accounting principles (GAAP) in this press release, including adjusted EBITDA, adjusted operating expenses and adjusted net loss. See the schedules attached to this press release for additional information and reconciliations of such non-GAAP financial measures.

Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These statements include those regarding financial guidance, market opportunity, ability to penetrate the market, anticipated productivity improvements and expectations for growth. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include risks described in the section entitled “Risk Factors” and elsewhere in our filing made with the Securities and Exchange Commission, including those on the Form 10-Q expected to be filed on or about August 5, 2022. These forward-looking statements speak only as of the date hereof and should not be unduly relied upon. iRhythm disclaims any obligation to update these forward-looking statements.

IRHYTHM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)

  June 30,   December 31,
    2022       2021  
Assets      
Current assets:      
Cash and cash equivalents $ 101,253     $ 127,562  
Short-term investments   103,238       111,569  
Accounts receivable, net   57,380       46,430  
Inventory   14,422       10,268  
Prepaid expenses and other current assets   8,526       9,693  
Total current assets   284,819       305,522  
Property and equipment, net   65,923       55,944  
Operating lease right-of-use assets   63,940       84,587  
Goodwill   862       862  
Other assets   20,142       16,052  
Total assets $ 435,686     $ 462,967  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 5,987     $ 10,509  
Accrued liabilities   49,954       51,486  
Deferred revenue   2,977       3,049  
Debt, current portion         11,667  
Operating lease liabilities, current portion   11,498       11,142  
Total current liabilities   70,416       87,853  
Debt, noncurrent portion   34,927       9,690  
Other noncurrent liabilities   952       697  
Operating lease liabilities, noncurrent portion   84,749       85,212  
Total liabilities   191,044       183,452  
Stockholders’ equity:      
Preferred Stock          
Common stock   28       27  
Additional paid-in capital   725,748       685,594  
Accumulated other comprehensive loss   (583 )     (61 )
Accumulated deficit   (480,551 )     (406,045 )
Total stockholders’ equity   244,642       279,515  
Total liabilities and stockholders’ equity $ 435,686     $ 462,967  
       

IRHYTHM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)

  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
Revenue, net $ 102,051     $ 81,278     $ 194,429     $ 155,589  
Cost of revenue   31,806       25,995       62,425       49,453  
Gross profit   70,245       55,283       132,004       106,136  
Operating expenses:              
Research and development   11,945       9,606       22,487       18,116  
Selling, general and administrative   81,751       62,669       154,909       132,482  
Impairment and restructuring charges               26,608        
Total operating expenses   93,696       72,275       204,004       150,598  
Loss from operations   (23,451 )     (16,992 )     (72,000 )     (44,462 )
Interest expense   (482 )     (307 )     (2,511 )     (642 )
Other income, net   69       55       85       179  
Loss before income taxes   (23,864 )     (17,244 )     (74,426 )     (44,925 )
Income tax provision   33       116       80       214  
Net loss $ (23,897 )   $ (17,360 )   $ (74,506 )   $ (45,139 )
Net loss per common share, basic and diluted $ (0.80 )   $ (0.59 )   $ (2.51 )   $ (1.54 )
Weighted-average shares, basic and diluted   29,843,141       29,318,894       29,720,415       29,242,089  
               

IRHYTHM TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Information
(Unaudited)
(In thousands)

  Three Months Ended
June 30,
  Six Months Ended
June 30,
Adjusted EBITDA reconciliation   2022       2021       2022       2021  
Net loss $ (23,897 )   $ (17,360 )   $ (74,506 )   $ (45,139 )
Income tax provision   33       116       80       214  
Depreciation and Amortization   3,351       2,153       6,494       4,189  
Interest expense, net   286       247       2,183       494  
Stock-based compensation   15,098       10,260       29,001       30,490  
Impairment and restructuring charges   175             27,041        
Adjusted EBITDA $ (4,954 )   $ (4,584 )   $ (9,707 )   $ (9,752 )
  Three Months Ended
June 30,
  Six Months Ended
June 30,
Non-GAAP restructuring and impairment reconciliation   2022       2021       2022       2021  
Impairment and restructuring charges, as reported $     $     $ 26,608     $  
Restructuring related consulting fees   175             433        
Non-GAAP restructuring and impairment $ 175     $     $ 27,041     $  
               
Adjusted net loss reconciliation              
Net loss, as reported $ (23,897 )   $ (17,360 )   $ (74,506 )   $ (45,139 )
Impairment and restructuring charges, as reported               26,608        
Restructuring related consulting fees   175             433        
Adjusted net loss $ (23,722 )   $ (17,360 )   $ (47,465 )   $ (45,139 )
               
Adjusted net loss per share reconciliation              
Net loss per share, as reported $ (0.80 )   $ (0.59 )   $ (2.51 )   $ (1.54 )
Impairment and restructuring charges per share               0.90        
Restructuring related consulting fees per share   0.01             0.01        
Adjusted net loss per share $ (0.79 )   $ (0.59 )   $ (1.60 )   $ (1.54 )
               
Adjusted operating expense reconciliation              
Operating expense, as reported $ 93,696     $ 72,275     $ 204,004     $ 150,598  
Impairment and restructuring charges, as reported               26,608        
Adjusted operating expense $ 93,696     $ 72,275     $ 230,612     $ 150,598