iRhythm Technologies Announces Third Quarter 2020 Financial Results

Rhea-AI Summary

iRhythm Technologies reported a robust third quarter for 2020, with revenue reaching $71.9 million, representing a 31.6% increase year-over-year and a 41.4% increase from Q2. Gross margin remained high at 74.7%, consistent with the previous year, while adjusted EBITDA turned positive at $14.8 million. The company completed a follow-on offering, generating $206.8 million in net proceeds. Cash and short-term investments totaled $327.2 million at quarter end. CEO Kevin King highlighted increased demand for the Zio XT service despite ongoing pandemic challenges.

Positive

• Revenue increased 31.6% year-over-year to $71.9 million.
• Gross margin of 74.7% remained strong and consistent with previous quarters.
• First positive adjusted EBITDA of $14.8 million.
• Completed a follow-on offering raising $206.8 million in net proceeds.
• Cash and short-term investments of $327.2 million at quarter end.

Negative

• Net loss of $4.7 million ($0.17 per share), although improved from $18.3 million loss in Q3 2019.

SAN FRANCISCO, Nov. 05, 2020 (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 ended September 30, 2020.

Third Quarter 2020 Summary

• Revenue of $71.9 million
  • 31.6% increase compared to third quarter 2019
  • 41.4% increase compared to second quarter 2020
• Gross margin was 74.7%
  • Consistent with comparable quarter in 2019
  • 510 basis point increase quarter on quarter
• Adjusted EBITDA (defined as EBITDA less stock compensation) was positive for the first time at $14.8 million
• Completed follow on offering generating $206.8 million in net proceeds
  • Cash and Short Term Investments of $327.2 million at quarter end
• Recipient of National Health System funding in the United Kingdom as a winner of the Artificial Intelligence in Health and Care Award

“Our strong performance during the quarter was driven by further penetration of Zio XT in both existing and new accounts, continued ramp of Zio AT and continued utilization of our Home Enrollment service to sustain patient registration volumes in telemedicine settings. As we exited the quarter, many centers were prescribing Zio at or above the daily average we saw in February, prior to the impact of COVID-19. While the pandemic undoubtedly created unprecedented challenges, it also served to escalate awareness as to the benefits of Zio as our digital platform allows for cardiac monitoring independent of patient and physician location,” said Kevin King, CEO.

“There still remains some degree of regional variability in terms of registration volumes, and this trend significantly correlates to the new or continuing outbreaks in those areas. Nonetheless, we remain very confident in our ability to drive further market penetration, as well as the potential for expansion into the asymptomatic market following data from  important trials currently underway,” concluded King.

Third Quarter Financial Results
Revenue for the three months ended September 30, 2020 increased 31.6% to $71.9 million, from $54.7 million during the same period in 2019. The increase was primarily due to higher volumes.

Gross profit for the third quarter of 2020 was $53.7 million, or 74.7% gross margin, compared to $40.9 million, or gross margin of 74.8%, during the same period in 2019.

Operating expenses for the third quarter of 2020 were $58.5 million, compared to $59.1 million for the same period in 2019 which was a decrease of 1%.

Net loss for the third quarter of 2020 was $4.7 million, or a loss of $0.17 per share, compared with net loss of $18.3 million, or a loss of $0.72 per share, for the same period in 2019.

Total Cash and Short-Term Investment balance as of September 30, 2020 was $327.2 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 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, the impact of COVID-19 on our business, market opportunity, ability to penetrate the market, operating plans and expectations for economic recovery. 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-K on March 2, 2020. 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.

Use of Non-GAAP Financial Measures
iRhythm has supplemented its GAAP net income (loss) with a non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of the Company, facilitates a more meaningful comparison of results for current periods with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of non-GAAP Adjusted EBITDA to GAAP net income (loss), the most directly comparable GAAP measure, is provided in the schedule below.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. This non-GAAP financial measure should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with iRhythm’s financial statements prepared in accordance with GAAP and the reconciliations of the non-GAAP financial measure provided in the schedule below.

Investor Relations Contact:		Media Contact:
Leigh Salvo		Saige Smith
(415) 937-5404		(262) 289-7065
investors@irhythmtech.com		irhythm@highwirepr.com

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

	September 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	95,336			$	20,462
Short-term investments	231,901				120,089
Accounts receivable, net	28,955				23,867
Inventory	5,062				4,037
Prepaid expenses and other current assets	4,685				4,337
Total current assets	365,939				172,792
Long-term investments	—				8,030
Property and equipment, net	32,775				26,464
Operating lease right-of-use assets	86,247				90,124
Goodwill	862				862
Other assets	11,378				7,940
Total assets	$	497,201			$	306,212
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,838			$	8,243
Accrued liabilities	32,185				32,714
Deferred revenue	938				1,251
Debt, current portion	10,694				1,944
Operating lease liabilities, current portion	8,211				7,914
Total current liabilities	55,866				52,066
Debt, noncurrent portion	24,252				32,989
Operating lease liabilities, noncurrent portion	82,537				85,748
Total liabilities	162,655				170,803
Commitments and contingencies
Stockholders’ equity:
Preferred Stock	—				—
Common stock	27				25
Additional paid-in capital	629,484				395,695
Accumulated other comprehensive income	68				82
Accumulated deficit	(295,033		)		(260,393		)
Total stockholders’ equity	334,546				135,409
Total liabilities and stockholders’ equity	$	497,201			$	306,212

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,
	2020				2019				2020				2019
Revenue, net	$	71,944			$	54,673			$	186,357			$	155,448
Cost of revenue	18,232				13,785				49,779				38,570
Gross profit	53,712				40,888				136,578				116,878
Operating expenses:
Research and development	8,768				13,499				29,725				28,031
Selling, general and administrative	49,701				45,649				140,945				125,876
Total operating expenses	58,469				59,148				170,670				153,907
Loss from operations	(4,757		)		(18,260		)		(34,092		)		(37,029		)
Interest expense	(384		)		(409		)		(1,145		)		(1,258		)
Other income, net	569				396				1,311				1,066
Loss before income taxes	(4,572		)		(18,273		)		(33,926		)		(37,221		)
Income tax provision	105				20				253				47
Net loss	$	(4,677	)		$	(18,293	)		$	(34,179	)		$	(37,268	)
Net loss per common share, basic and diluted	$	(0.17	)		$	(0.72	)		$	(1.25	)		$	(1.50	)
Weighted-average shares, basic and diluted	28,050,210				25,247,831				27,358,096				24,818,482

IRHYTHM TECHNOLOGIES, INC.
Reconciliation of Net Loss to Adjusted EBITDA
(Unaudited)
(In thousands)

	Three Months Ended September 30,
Net loss	$	(4,677	)
Income tax provision	105
Depreciation and Amortization	1,702
Interest expense	223
Stock-based compensation	17,444
Adjusted EBITDA	$	14,797

FAQ

What were iRhythm Technologies' Q3 2020 financial results?

iRhythm reported a revenue of $71.9 million, a 31.6% increase from Q3 2019, with a net loss of $4.7 million.

What is the cash position of iRhythm Technologies as of September 30, 2020?

As of September 30, 2020, iRhythm had cash and short-term investments totaling $327.2 million.

How did the COVID-19 pandemic affect iRhythm Technologies' performance?

Despite the challenges, iRhythm saw increased awareness and utilization of its Zio services during the pandemic.

What is the outlook for iRhythm Technologies following the Q3 2020 results?

CEO Kevin King expressed confidence in further market penetration and expansion into the asymptomatic market.