iRhythm Technologies, Inc. Q2 FY2025 earnings call

• Second quarter results were strong with $186.7 million in revenue, over 26% year-over-year growth driven by core long-term continuous monitoring, innovative channel partners, and Zio AT.
• Record new account openings in long-term continuous monitoring due to innovative channel partnerships and growth from IDN customers.
• International markets showed momentum with strong demand in the UK, uptake in 4 European countries, and commercial launch in Japan.
• Strategic focus on moving prescribing early in the care journey to primary care physicians has led to strong volume growth.
• Epic Aura solution generating strong customer interest with over 40 health systems actively implementing or preparing integrations.
• Partnership with Lucem Health to accelerate early detection of undiagnosed arrhythmias using AI.
• Zio AT had another record quarter with sustained momentum, and next-generation Zio MCT product to file 510(k) this quarter.
• Market access and payer relations teams made progress in expanding access to Zio services.

In the second quarter ended June 30, 2025, iRhythm Technologies, Inc. reported revenue of $186.7 million, representing more than 26% year-over-year growth. The core long-term continuous monitoring business and Zio AT product line both saw revenue growth. The contribution from innovative channel partners continued to grow, with over 1,000 prescribers added at Signify Health, a launch with CenterWell, and a renewal with an innovative channel partner. Internationally, there was strong demand in the UK, steady uptake in 4 additional European countries, and a broad commercial launch in Japan. Revenue contribution from core long-term continuous monitoring and Zio AT products was significant, with the core business driving much of the growth.

• Raised full year 2025 revenue guidance to $720 million to $730 million due to first half outperformance, core business momentum, AT strength, and innovative channels.
• Anticipate third quarter 2025 revenue to be slightly down compared to second quarter due to seasonality.
• Full year 2025 gross margin expected to slightly exceed 2024 gross margin with clinical operations and manufacturing efficiencies offsetting tariffs.
• Adjusted EBITDA margin guidance updated to 8% to 8.5% of revenues.
• Expect to become free cash flow positive in full year 2026.

• FDA compliance risks related to remediation efforts and responses to warning letters and 483 observations.
• Tariff impacts on global imports, though impact slightly below prior estimates.
• Uncertainties related to the execution and ramp-up of innovative channel partners.

Q: Congratulations on a really good quarter. So I guess my first question is really going to fall on the guide, right? You clearly saw a lot of upside in the quarter, came in a little over $10 million above consensus for second quarter, and you're raising your full year guide...

A: Yes. Thanks, Allen. Appreciate the question and being on the call here. Look, clearly, there's a lot of momentum in the business right now that has us very excited. I think the one thing I do want to be really clear about is our approach to how we think about guidance has not changed at all. We continue to set expectations that we feel highly confident in being able to deliver. And this latest revision of that guidance reflects the same philosophy. So we're not thinking about it any differently. To your point, we raised guidance last quarter by roughly $15 million on the year. This quarter, we're raising roughly $30 million on the year. It's not about introducing incremental risk. I think it's more about acknowledging the strength that we see coming across the business really across all sectors of it. In Q2 alone, we beat by our numbers, roughly $12 million. We raised the back half of the year by, call it, $18 million, which is roughly $9 million in Q3 and Q4, which to us is a measured step-up from what we're already seeing. And if you look at Q2, the momentum within the quarter was really strong, particularly towards the back half of it. So just a lot of strength in the quarter itself and really accelerating over the course of the quarter. When you think about the drivers, the core business continues to be the biggest driver that's far and away. Yes, innovative channels did contribute -- contributed nicely, but the core business is where we saw the majority of the outperformance in the quarter itself. And when we think about the full year increase of $30 million, I would say roughly 2/3 of that is coming out of the core business, which is being fueled by both strong execution from our commercial team and our EHR integration teams, but onboarding of new accounts as well that are just meaningful in size and have quickly transitioned into some of our largest accounts. So the core business is performing incredibly well. I would tell you, Zio AT continues to perform exceptionally well. I think the competitive disruption that we saw there late last year initially helped turn attention towards AT. But I think the momentum we see in that business right now is more sustained, especially in accounts where we've built strong integrations. We see our new customers coming on deploying both Zio monitor and Zio AT at the same time to a much greater degree than what we had seen in the past. And so we're highly confident in that business. And then to your point on innovative channels, we certainly saw a bit of outperformance in the second quarter. We've guided a bit of an increase. I'd say about 1/4 of the increase on the full year is coming out of innovative channels. I spoke about the fact that we increased our prescribing physicians with Signify by nearly 1,000 physicians in the quarter itself. We just got launched with CenterWell, and we just re-upped the contract with the partner in the fourth quarter that we had talked about a couple of quarters ago that will begin patching in the back half of the year. So continue to feel really good about the guide overall. I would set it out there that it's not our intent to beat the guide each quarter by, call it, $10 million to $12 million, but it is about setting up a guidance expectation that we feel very good we can execute against and deliver. And if we execute well, outdeliver.

Q: This is actually Anthony on for Joanne. Just a quick follow-up on the previous question. Are you able to share what -- in the quarter, what the volume contribution was from those innovative channel partners? And then the 40 accounts that you're sort of in active discussions with, can you give any maybe timeline on when you expect those to come online?

A: Yes. We're not going to break out the actual contribution from the innovative channel partners. We gave you a peek into that last quarter. We said it was about 3% of total revenue. I can tell you that stepped up in Q2 and exited the quarter even higher as we continue to bring these folks on and they continue to prescribe more on a daily basis. Relative to the 40 accounts that are out there, I think it will be a nice steady cadence over the remainder of the year and into next year. I'm not going to guide in terms of how quickly and what number we expect within the next quarter itself. I think we want to continue to get some experience here and see how that comes together. I am excited by the Lucem announcement that we made relative to the AI partnership. I think it speaks directly to the innovative channel partners incredibly well, where we can get into those innovative channel partners medical data history sets of their patients, identify through algorithms, which ones are likely to have arrhythmias and then get patches on those folks. Early results coming out of some of these pilots with the Lucem algorithm, it's remarkable where we find yields of 80% to 90% hit rates in terms of patients who had no idea they might have had an arrhythmia do, in fact, have an arrhythmia that needs to be treated. So we're excited by it. We'll update you as we go, but I'm not going to give a specific number this quarter. I'll just tell you it stepped up from where it was at in Q1.

Q: Congrats on a nice quarter here. Quentin, I was really intrigued by the comment that you had made about when you're getting into these Epic accounts, you're actually seeing increased volumes as you go and you integrate into the accounts. So maybe can you spend a minute just talking about what does that look like? Where are these incremental patients coming from? Why are you seeing increased volumes? And if possible, I'll stretch and try to ask, are there any numbers you can give us on how big that opportunity is and like what the incremental patients are. But any color around that would be helpful.

A: Yes. Look, we've been really pleased with the integrations around the Epic opportunity. They've been a terrific partner. We've got a team internally who's dedicated entirely to the Epic integrations, and we're moving as quickly as we can, and that team has done a phenomenal job. As I mentioned, we've got north of 40 accounts actively in integrations in that pipeline and continues to build. And so we're super excited by it. I would tell you the contribution in the second quarter from Epic didn't really lead to outperformance. We're still in the very early stages of getting these accounts onboarded. We really just started to open it up at the beginning of the year. But we see some really promising trends in those accounts that we're integrating. I would tell you, on average, we see north of 20% increase in prescribing patterns post integration, some accounts even as high as 40%. So we'll monitor it as we go. We're super bullish on the opportunity here with Epic. We understand the value of the streamlined workflow. What we like to see is when we get integrated with these accounts, not only are they integrating Zio monitor, but Zio AT quickly comes along and we become a single solution for an entire system, which is nice to see. In terms of the size of the opportunity, I would just tell you, 65% of our accounts that are integrated or using EMRs are roughly Epic related. So there's a tremendous opportunity in the current customer population that are already using Epic to integrate with Aura.