iRhythm Technologies Announces Third Quarter 2022 Financial Results

November 1, 2022

SAN FRANCISCO, Nov. 01, 2022 (GLOBE NEWSWIRE) -- iRhythm Technologies, Inc. (NASDAQ: IRTC), a leading digital health care company focused on creating trusted solutions that detect, prevent, and predict disease, today reported financial results for the three months ended September 30, 2022.

Third Quarter 2022 Financial Results

  • Revenue of $103.9 million, a 21.6% increase compared to third quarter 2021
  • Gross margin of 68.3%, a 2.6 percentage point improvement compared to third quarter 2021
  • Cash, cash equivalents and short-term investments of $203.5 million as of September 30, 2022
  • Updating fiscal year 2022 revenue guidance to a range of approximately $407 million to $411 million
  • Improving profitability profile, including updated fiscal year 2022 adjusted EBITDA guidance of negative $10 to negative $12 million

Recent Operational Highlights

  • Third quarter registration growth of 22% year-over-year
  • Presentations at the European Society of Cardiology (ESC) in August highlighted Zio XT increased arrhythmia detection rates by 216% and reduced time to detection as compared to traditional Holter monitors1
  • Detailed refreshed vision and mission, long-term growth strategies, innovation pipeline and financial goals during analyst and investor day in September
  • Upcoming data presentations at the American Heart Association (AHA) in Chicago, IL, from November 5-7, 2022

"Despite the ongoing staffing and capacity challenges, we grew registration volumes by more than 20% in the third quarter, achieving our highest daily registration volumes ever as we exited September," said iRhythm CEO and President, Quentin Blackford. "However, within the quarter, we also realized softness in returned devices - which impacted our ability to perform our services and realize revenue which muted our growth. We view this as persisting into the fourth quarter. These dynamics, as well as fourth quarter trends in account staffing and capacity challenges as well as Zio AT utilization, have led to us reducing our full year revenue guidance."

"While disappointing, we continue to be encouraged by the underlying momentum of the business as demonstrated by the accelerating daily registration growth in the third quarter. As we shared during our Investor and Analyst Day in September, we continue to believe iRhythm's innovative device with differentiated AI capabilities and clinically actionable data insights is the gold standard in the space and sets us apart in the marketplace. We remain confident in the strong fundamentals of our business and are dedicated to bringing our innovative solutions to the millions of patients who may benefit," concluded Mr. Blackford.

Third Quarter Financial Results
Revenue for the three months ended September 30, 2022 increased 21.6% to $103.9 million, from $85.4 million during the same period in 2021. The increase was primarily driven by Zio XT and AT volume growth as well as an increase in net average selling price.

Gross profit for the third quarter of 2022 was $70.9 million, up 26.4% from $56.1 million during the same period in 2021, while gross margins were 68.3%, up from 65.7% 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.

Adjusted operating expenses for the third quarter of 2022 were $89.7 million, compared to $79.4 million during the same period in 2021. This increase in adjusted operating expenses resulted primarily from increased resources to scale and higher bad debt expense as a result of incremental volumes. Operating expenses for the third quarter of 2022 were $92.0 million, compared to $79.4 million for the same period in 2021.

Adjusted net loss for the third quarter of 2022 was $19.1 million, or a loss of $0.63 per share, compared with an adjusted net loss of $23.7 million, or a loss of $0.81 per share, for the same period in 2021. Net loss for the third quarter of 2022 was $21.5 million, or a loss of $0.71 per share, compared with net loss of $23.7 million, or a loss of $0.81 per share, for the same period in 2021.

Cash, cash equivalents and short-term investments were $203.5 million as of September 30, 2022.

Updated 2022 Annual Guidance
Given volume trends in the third quarter and anticipated volume contributions in the fourth quarter, iRhythm is updating its fiscal year 2022 revenue guidance to range from approximately $407 to $411 million, which represents approximately 26% to 27% growth over the prior year results. This compares to prior fiscal year 2022 revenue guidance of $415 to $420 million.

Gross margin for the fiscal year 2022 is expected to range from approximately 68% to 69% and adjusted operating expenses are expected to range between approximately $360 and $365 million. Adjusted EBITDA for the full year 2022 is expected to range from negative $10 to negative $12 million. This compares to prior fiscal year 2022 adjusted operating expense guidance of $375 and $385 million and prior fiscal year 2022 adjusted EBITDA guidance of negative $12.5 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 investors.irhythmtech.com.

About iRhythm Technologies, Inc.
iRhythm is a leading digital health care company that creates trusted solutions that detect, predict, and prevent disease.   Combining wearable biosensors and cloud-based data analytics with powerful proprietary algorithms, iRhythm distills data from millions of heartbeats into clinically actionable information. Through a relentless focus on patient care, iRhythm’s vision is to deliver better data, better insights, and better health for all.

Use of Non-GAAP Financial Measures
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 net loss, adjusted net loss per share and adjusted operating expenses. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. See the schedules attached to this press release for additional information and reconciliations of such non-GAAP financial measures.

Adjusted EBITDA excludes non-cash operating charges for stock-based compensation, depreciation and amortization as well as non-operating items such as interest income, interest expense, impairment and restructuring charges, and transformation costs.

We exclude the following items from non-GAAP financial measures for adjusted net loss, adjusted net loss per share and adjusted operating expenses:

  • impairment and restructuring charges, and
  • transformation costs to scale the organization.

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, the potential impact of Medicare reimbursement rates for the CPT codes primarily relied upon for the Company’s Zio XT services, 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 November 3, 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.

Investor Relations Contact: Media Contact:
Stephanie Zhadkevich Morgan Mathis
(919) 452-5430 (310) 528-6306
investors@irhythmtech.com irhythm@highwirepr.com
  1. Ameenathul M. Fawzy MB, Jade Edmonds, Anthony Shannon, David J. Wright MD. A Service Evaluation of Zio XT: The Liverpool Experience. In: ESC Congress 2022, August 26 - 29, 2022 Barcelona, Spain.


IRHYTHM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)

  September 30,   December 31,
    2022       2021  
Assets      
Current assets:      
Cash and cash equivalents $ 71,222     $ 127,562  
Short-term investments   132,316       111,569  
Accounts receivable, net   60,534       46,430  
Inventory   14,452       10,268  
Prepaid expenses and other current assets   7,326       9,693  
Total current assets   285,850       305,522  
Property and equipment, net   71,515       55,944  
Operating lease right-of-use assets   62,010       84,587  
Goodwill   862       862  
Other assets   20,153       16,052  
Total assets $ 440,390     $ 462,967  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 7,404     $ 10,509  
Accrued liabilities   60,264       51,486  
Deferred revenue   3,003       3,049  
Debt, current portion         11,667  
Operating lease liabilities, current portion   12,920       11,142  
Total current liabilities   83,591       87,853  
Debt, noncurrent portion   34,931       9,690  
Other noncurrent liabilities   1,163       697  
Operating lease liabilities, noncurrent portion   81,481       85,212  
Total liabilities   201,166       183,452  
Stockholders’ equity:      
Preferred Stock          
Common stock   28       27  
Additional paid-in capital   741,879       685,594  
Accumulated other comprehensive loss   (681 )     (61 )
Accumulated deficit   (502,002 )     (406,045 )
Total stockholders’ equity   239,224       279,515  
Total liabilities and stockholders’ equity $ 440,390     $ 462,967  
       


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

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2022       2021       2022       2021  
Revenue, net $ 103,875     $ 85,432     $ 298,304     $ 241,021  
Cost of revenue   32,954       29,284       95,379       78,737  
Gross profit   70,921       56,148       202,925       162,284  
Operating expenses:              
Research and development   11,448       8,685       33,935       26,801  
Selling, general and administrative   80,559       70,745       235,468       203,227  
Impairment and restructuring charges               26,608        
Total operating expenses   92,007       79,430       296,011       230,028  
Loss from operations   (21,086 )     (23,282 )     (93,086 )     (67,744 )
Interest expense   (614 )     (279 )     (3,125 )     (921 )
Other income (expense), net   365       (76 )     450       103  
Loss before income taxes   (21,335 )     (23,637 )     (95,761 )     (68,562 )
Income tax provision   116       94       196       308  
Net loss $ (21,451 )   $ (23,731 )   $ (95,957 )   $ (68,870 )
Net loss per common share, basic and diluted $ (0.71 )   $ (0.81 )   $ (3.22 )   $ (2.35 )
Weighted-average shares, basic and diluted   30,055,166       29,397,845       29,836,601       29,294,559  
               


IRHYTHM TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Information
(unaudited)
(in thousands, except per share data)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
Adjusted EBITDA reconciliation   2022       2021       2022       2021  
Net loss $ (21,451 )   $ (23,731 )   $ (95,957 )   $ (68,870 )
Income tax provision   116       94       196       308  
Depreciation and amortization   3,436       2,549       9,930       6,738  
Interest expense, net   15       223       2,198       717  
Stock-based compensation   12,945       12,160       41,946       42,651  
Impairment and restructuring charges               26,608        
Transformation costs   2,315             2,748        
Adjusted EBITDA $ (2,624 )   $ (8,705 )   $ (12,331 )   $ (18,456 )

 

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2022       2021       2022       2021  
Adjusted net loss reconciliation              
Net loss, as reported $ (21,451 )   $ (23,731 )   $ (95,957 )   $ (68,870 )
Impairment and restructuring charges               26,608        
Transformation costs   2,315             2,748        
Adjusted net loss $ (19,136 )   $ (23,731 )   $ (66,601 )   $ (68,870 )
               
Adjusted net loss per share reconciliation              
Net loss per share, as reported $ (0.71 )   $ (0.81 )   $ (3.22 )   $ (2.35 )
Impairment and restructuring charges per share               0.89        
Transformation costs per share   0.08             0.09        
Adjusted net loss per share $ (0.63 )   $ (0.81 )   $ (2.24 )   $ (2.35 )
               
Adjusted operating expense reconciliation              
Operating expense, as reported $ 92,007     $ 79,430     $ 296,011     $ 230,028  
Impairment and restructuring charges               (26,608 )      
Transformation costs   (2,315 )           (2,748 )      
Adjusted operating expense $ 89,692     $ 79,430     $ 266,655     $ 230,028  
               

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Source: iRhythm

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