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iRhythm Technologies Announces Fourth Quarter and Full Year 2017 Financial Results and Provides Full Year 2018 Financial Outlook

SAN FRANCISCO, Feb. 14, 2018 (GLOBE NEWSWIRE) -- iRhythm Technologies, Inc. (NASDAQ:IRTC), a leading digital health care solutions company focused on the advancement of cardiac care, today reported financial results for the three months and full year ended December 31, 2017.

2017 Highlights

  • Revenue for the year ended December 31, 2017 increased 54% to $98.5 million over 2016
  • Revenue for the three months ended December 31, 2017 increased 51% year-over-year to $28.2 million
  • Gross margin for the full year 2017 was 71.9%, a year-over-year improvement of 450 basis points
  • Exited the year with 86 sales representatives

       
"I’m pleased with the progress our team made throughout 2017 in not only achieving, but in many cases, surpassing the goals we set for the year. I am also very proud of the influence we continue to make on the clinical practice of diagnosing and managing patients with cardiac arrhythmias,” said Kevin King, CEO. "Overall trends in our business remain very encouraging and we see increasing opportunity to grow our share of the ambulatory monitoring market through further expansion of our sales organization, continued penetration in large hospital networks, and making progress with payor contracting. In addition, we believe there is a real opportunity to further extend the market for our Zio service by addressing additional patient populations with unmet clinical needs and we look forward to the results of several ongoing clinical trials in 2018.”

Fourth Quarter Financial Results

Revenue for the three months ended December 31, 2017 increased 51% to $28.2 million, from $18.7 million during the same period of the prior year. The increase in revenue was primarily due to increased volume of the Zio XT service.  

Gross profit for the fourth quarter of 2017 was $20.5 million, or 72.7% gross margin, up from $12.9 million, or 69.1% gross margin, for the same period of the prior year.

Operating expenses for the fourth quarter of 2017 were $31.1 million, an increase of 80% compared to the same period of the prior year. The increase in operating expenses was driven primarily by selling, general and administrative expenses used to expand the company’s sales force, SOX 404 compliance related expenses and increases in the company’s stock based compensation expenses.

Net loss for the fourth quarter of 2017 was $11.1 million, compared to $6.3 million for the same period of the prior year.

Full Year 2017 Financial Results

Revenue for the year ended December 31, 2017 increased 54% to $98.5 million, from $64.1 million in 2016. The increase in revenue was primarily due to increased volume of the Zio XT service.  

Gross profit for the year was $70.8 million, or 71.9% gross margin, up from $43.2 million, or 67.4% gross margin, in the same period of the prior year.

Operating expenses for the year were $98.1 million, an increase of 67% compared to the prior year. The increase in operating expenses was driven primarily by selling, general and administrative expenses used to expand the company’s sales force and support the growth in operations.

Loss from operations for 2017 was $27.3 million, compared to $15.6 million from the prior year.

Cash, cash equivalents, short-term investments and long-term investments were $105.4 million as of December 31, 2017.

Accounting Standards Update: Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update entitled Revenue from Contracts with Customers (Topic 606). The company adopted the standard January 1, 2018 and it is using the modified retrospective approach recognizing the cumulative effect of adopting this guidance as an adjustment to its opening accumulated deficit balance, which will have no effect on the company’s results for the year ended December 31, 2017.  Prior periods will not be restated.  

The adoption will result in a change to net revenue primarily due to the recognition of bad debt expense related to the patient responsibility of both contracted and non-contracted claims as a reduction of gross revenue rather than as a component of selling, general and administrative and, to a lesser extent, due to timing differences in its recognition of revenue related to non-contracted third-party payor claims as a result of changing from recognition based on the earlier of notification of the payor benefits allowed or when payment is received to the accrual basis based on historical experience.

For comparison purposes, the following table is provided:

                                                     
Estimated Topic 606 Impact                                                    
(Unaudited) Year ended December 31, 
  2017
(in millions) 2014     2015     2016     Q1     Q2     Q3     Q4     Total     Cumulative  
Accrual revenue / cash receipts, net $   0.8     $   2.6     $   (0.8 )   $   (1.1 )   $   (0.7 )   $   (0.2 )   $   (0.2 )   $   (2.2 )   $   0.4  
Bad debt expense   (0.2     (0.7 )     (1.1 )     (0.3 )     (0.6 )     (0.6 )     (1.4 )     (2.9 )     (4.9 )
Total revenue adjustments   0.6       1.9       (1.9 )     (1.4 )     (1.3 )     (0.8 )     (1.6 )     (5.1 )     (4.5 )
Sales, general & administrative expense    (0.2     (0.7 )     (1.1 )     (0.4 )     (0.8 )     (0.7 )     (1.5 )     (3.4 )     (5.4 )
Net income (loss) adjustments $   0.8     $   2.6     $   (0.8 )   $   (1.0 )   $   (0.5 )   $   (0.1 )   $   (0.1 )   $   (1.7 )   $   0.9  
                                                     


Guidance for Full Year 2018
iRhythm projects revenue for the full year 2018 to range from $126 to $131 million, inclusive of Topic 606, which represents 35-40% growth over the company’s prior year, also inclusive of Topic 606.  Gross margins for the full year 2018 are expected to range from 70% to 72% and operating expenses for the full year 2018 to be between $124 and $129 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 dialing (844) 348-0016 for domestic callers or (213) 358-0876 for international callers, and referencing Conference ID: 4859609 or from the webcast 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.

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 statements regarding financial guidance, market opportunity, ability to penetrate the market 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 on the Form 10-Q on November 14, 2017. 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.

Investor Relations Contact:  Media Contact
Lynn Pieper Lewis or Leigh Salvo Cherise Adkins
(415) 937-5404  (415) 486-3235
investors@irhythmtech.com  media@irhythmtech.com 
   


 
IRHYTHM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
    December 31, 2017     December 31, 2016  
Assets        
Current assets:        
Cash and cash equivalents   $8,671     $51,643  
Short-term investments   93,692     54,407  
Accounts receivable, net   12,953     9,406  
Inventory   1,683     1,390  
Prepaid expenses and other current assets   2,582     1,671  
Restricted cash       91  
Total current assets   119,581     118,608  
Investments, long-term   2,994     10,981  
Property and equipment, net   6,221     4,653  
Goodwill   862     862  
Other assets   3,465     3,052  
Total assets   $133,123     $138,156  
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable   $2,395     $2,103  
Accrued liabilities   15,644     10,165  
Deferred revenue   1,238     947  
Accrued interest, current portion   154      
Debt, current portion   1,487      
Total current liabilities   20,918     13,215  
Debt   32,491     32,227  
Deferred rent, noncurrent portion   161     26  
Accrued interest, net of current portion       126  
Total liabilities   53,570     45,594  
Stockholders’ equity:        
Common stock   23     22  
Additional paid-in capital   236,184     219,718  
Accumulated other comprehensive loss   (65)     (9)  
Accumulated deficit   (156,589)     (127,169)  
Total stockholders’ equity   79,553     92,562  
Total liabilities and stockholders’ equity   $133,123     $138,156  
             


 
IRHYTHM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share data)
 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
    2017       2016       2017       2016  
Revenue $28,182     $18,704     $98,509     $64,072  
Cost of revenue    7,706        5,786        27,708        20,883  
Gross profit    20,476        12,918        70,801        43,189  
Operating expenses:              
Research and development    4,148        2,303        13,335        7,150  
Selling, general and administrative    26,950        14,963        84,737        51,621  
Total operating expenses    31,098        17,266        98,072        58,771  
Loss from operations    (10,622)        (4,348)        (27,271)        (15,582)  
Interest expense    (864)        (827)        (3,386)        (3,248)  
Other expense, net    337        (1,091)        1,237        (2,073)  
Net loss $(11,149)     $(6,266)     $(29,420)     $(20,903)  
Net loss per common share, basic and diluted $(0.48)     $(0.37)     $(1.30)     $(3.95)  
Weighted-average shares used to compute net loss per common share, basic and diluted     23,150,061         16,756,608         22,627,327         5,285,847  
                               

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