iRhythm Holdings, Inc. (IRTC) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for being here. My name is Allen Gong. I'm from the medical supply and devices team here at JPMorgan. Thanks for joining us today in the afternoon session at the health care conference. I'm really excited to be introducing iRhythm's management team. Speaking today will be Quentin Blackford, President and CEO. And joining us on the Q&A will be Doug Devine, CFO and COO; and Dan Wilson, Head of Strategy. If you have any questions that you want me to touch on when we get to the Q&A session, please feel free to e-mail them to me, send to me over Bloomberg or use the built-in capabilities on the online portal. With that, Quentin, take it away.

Thanks for having us, Allen. Look, I'm decided to be here presenting for the first time at the JPMorgan Conference as the CEO of iRhythm. Only 100 days [indiscernible], but I can say that I sit here with more excitement about the opportunity today than what I envisioned when I stepped into the [indiscernible] 100 days ago. We have a remarkable opportunity that sits in front of us, and I'm excited to partner with the terrific group of people who have laid the foundation for what this can become. I also want to take just a quick moment to thank our frontline workers who continue to show in every day to deliver our product and service that is changing patient lives to [indiscernible] pandemic that we continue to navigate. Obviously, we're very happy with Novitas [indiscernible] their reimbursement rate yesterday. I thank them for the time, the effort that they've put into this process to learn about the technology and the value that it delivers. But more on reimbursement a bit later. If you take anything away from the President's statement this morning, I wanted to be [indiscernible]. One, we have an incredible growth opportunity within our core market that has a lot of runway left in front of it. We're serving today with the best-in-class [indiscernible] that truly is the gold standard in this space. Two, we have multiple new channels for growth that have been untapped in the past, that we're going to be on the cusp of entering into, including both the international space that is as large as the U.S. market that we serve today in an adjacent market opportunity that can add multiples to our total addressable market over time. And then third is that there are significant optional transformation efforts in front of us that will ultimately lead to a path of meaningful profitability improvements and financial leverage over time. Before I get started, just a quick reference on Slide 2. I'm going to be making forward-looking statements over the course of the presentation. I will refer you to our public filings for more information there. So moving forward to Slide 3. Here at iRhythm, we believe that there is an incredible need on a global basis for a better capability to understand what cardiac signals can tell us. The one word is central to nearly all things occurring within the body is the heart. And with that, we believe that we're uniquely positioned with our best-in-class Zio platform to be able to better understand all sorts of health-related matters. [indiscernible] health conditions that we know have an incredible cost to the health care system. And so our mission is simple, it's to discover [indiscernible] and to transform those into useful information to improve the quality of life all over the globe. Moving forward, the prevalence of arrhythmias in the U.S. alone is astounding with nearly 11 million people having abnormal heart rhythms. Nearly half of the folks are [indiscernible] age of 55 and experienced AFib in their lifetime. And the consequences are significant with a fivefold increase in the risk of stroke for those with AFib and an [indiscernible] cost of nearly $46 billion per year related to stroke alone. We believe there's a significant opportunity for us to impact that. On Slide 5, I just want to share a quick patient journey with you that we hear all too often here at iRhythm. In this particular situation, I'm going to listen to this individual as Jim [indiscernible] of what these patients deal with. Jim was 62 years old. He's been experiencing heart [indiscernible], and he would tell you that he knows something in writing. So he want to see a physician in a long traditional treatment pathways, he receives a Holter monitor. For days of wearing that, struggling to keep it in place and firmly applied, it finds no arrhythmia. Jim continues to believe that something is not right and remains persistent. He sees a specialist and they are supposed to put them on an event monitor, again, finding no arrhythmia. [indiscernible] specialist is disappointed, virtually the palpitation continue. And without knowing what to do with this, he finally decides to go to the hospital where he ends up being admitted. And while at that hospital, he has a Zio applied and he's discharged. And within in 14 days, he was diagnosed with AFib, something that he's likely had and has been [indiscernible] the entire time. We hear stories like this all the time. And unfortunately, many times these patients end up in the hospital because of having a stroke, which significantly increases the cost of caring for the patient or worse yet, the patient ends up deceased. This is where we know that we can make a difference with our technology. If you move to Slide 6, for those of you who are less familiar with our Zio platform, our offering consists of 3 [indiscernible]. First, a best-in-class wearable sensor that patients wear for up to [indiscernible] days, far less obtrusive than the traditional monitoring capabilities like a Holter monitor, but with significantly better patient adherence and, therefore, results. Second and most importantly, we now believe it to be the most underappreciated aspect of iRhythm today is our artificial intelligence capability. We hear a lot of discussion around the focus of AI in today's world, and it's important to understand that there are several other capability with respect to AI from expert rules and machine learning, where data is being organized and structured in a particular way, and the majority of the capabilities are likely to exist within the marketplace, to a deep learning capability with neural networks where algorithms are teaching and learning from themselves to continually get better as we operate [indiscernible] on the path with these learning capabilities, and I believe that's what sets us apart. As I've now been with the company just at 100 days, it's this capability that excites me most about our future. And then finally, our digital platform have reduced all this information together and enables it to easily be shared by our physicians, our patients, our payers, all through desktop, mobile and EHR connectivity. If we move forward, just a quick snapshot of who iRhythm is today. So we are the market leader in this space, having just surpassed our 4 million patients served and treating well north of 1 million new patients each and every year. We have the single largest data repository that curated ECG data with more than 1 billion hours that we are aiding research reps with and it's going to foster innovation into the future. And importantly, our products and capabilities have been independently validated by more than 35 peer-reviewed publications and the company [indiscernible] north of 1,600 employees on a global basis. Moving forward with some of the financial figures. In 2021, our latest guidance provided in early November called for revenue of $317 million to $319 million, which resulted in a 3-year revenue CAGR of about 29%. Unit growth has far exceeded the dollar growth really as a result of the recent headwind that we were navigating through over the course of '21. And while we aren't prepared to speak to our fourth quarter and full year revenue results in 2021, given the early nature of opposing out the quarter, we were very happy with our unit volume performance in the fourth quarter. That was a bit above our expectations. So the underlying business continues to be incredibly strong. Our gross margin profile here at iRhythm is in the mid- to upper 60s with slightly negative EBITDA margins for the time being, but a path towards profitability over time. And we're well capitalized with north of $250 million in cash as of early November and little debt. So we feel good about the position now. [indiscernible] is the runway in our future [indiscernible] brighter than the past that has me most excited about what's in store for us here at iRhythm. I want to spend a little bit of time talking about that now. As I think about our future and more importantly, our focus heading into 2022, there's 3 primary pillars that I've identified the company, which you'll hear us talk about over the course of the year. Each in and of itself represents significant market opportunities, and combined, provides a tremendous run rate for iRhythm to grow into the future. In the U.S. core market that we currently serve today, 5.5 million ambulatory cardiac tests that are being performed annually, that represent a clear market for us, and I'll talk more about that in a second. We're just getting started in the international markets with a small presence in the U.K. today, but again, expecting to see market opportunity that's in that space of roughly 5 million annual ambulatory tests that we can address. And again, I'll speak further to that. And then finally, the tremendous opportunity that exists in adjacent markets. Our initial focus will be on silent AFib with more than 10 million people in the U.S. alone that have conditions with [indiscernible] for AFib, and they have no idea that they have undiagnosed arrhythmias that we believe we are already screening for in some frequency. If you add in the international opportunity around AFib, then it more than doubles what's in front of us. While silent AFib will be our first area of focus, there are other adjacencies like predictive stroke, heart failure, hypertension, sleep apnea, all things that contribute enormous growth and really increase the addressable market opportunity for us into the future. Let me talk about each of the pillars for a second. If you go to Slide 10, the first area of focus is within the core U.S. market that we serve today. Roughly 5.5 million tests being administered annually in the U.S. alone, only about 25% of these are utilizing that technology. And our belief is that there should and will continue to be significant adoption of the technology and that it ultimately will represent the majority of this market over the next several years. In addition, we're seeing significant interest in the technology by the primary care physicians and a further upstream in the care pathway to that call point with success. Importantly, [indiscernible] that 8 million patients in the U.S. alone visit their health care specialists with heart palpitations. And by being further into that channel, we believe that there's potential that you can see to expand this market from the 5.5 million ambulatory tests that are being performed today to more in line to the 8 million or so folks who are visiting their primary care physician with palpitations. And we're seeing this play out in our current book of business today, where our most successful reps are already moving up into the care pathway, into that primary care physician space. And so we don't expect that this is a stretch by any means to see this market expand and the value of the technology is ultimately better understood and folks begin to realize the potential that it brings, but being better able to screen for conditions versus being in a situation where you're simply reacting to conditions that are being presented by the patients, and therefore, reacting and diagnosing at that point in time. In addition, a greater focus within the particular specialties in this core market creates the potential to expand market also focusing on like post-procedure TAVR patients, early discharge monitoring, stroke centers, heart failure, all of these things lend opportunities to us. Moving to Slide 11. The second area of focus is elevating our efforts in the international space. We have operations in the U.K. today where 500,000 ambulatory cardiac monitoring tests are taking place each year. We're making good track in both the private and the public sectors. And with the backing and the support of NHSX and the AI award that we've been awarded as well as the NICE recommendation that we have, we're excited about our prospects in the U.K. But we're also accelerating into Japan where we're just months away from submitting our [indiscernible] application for regulatory approval to participate in that market. Japan's the second largest ambulatory cardiac monitoring market in the world, and we are seeing strong physician interest in our technology. Additionally, it's an exciting market with strong reimbursement. We're hopeful on what can be accomplished there. And then with the CE Mark approval that we already have in hand, we're going to be focusing on expanding rapidly into other markets that we believe represent another 3 million or so ambulatory [indiscernible] being performed on an annual basis. And with regulatory approval already in place for the majority of those countries, for me, this is much more of a market access than a reimbursement story and focused effort. So we see no reason why our product can't deliver the same sort of benefit in that space [indiscernible]. Moving forward to Slide 12. With the validation of technology by both the NHSX, AI award, as well as the positive revenue that our product has received by NICE, we expect to leverage those as we focus on the market access in each of these new opportunities. As most of you know, given that NICE recommendation is not an easy thing to accomplish and with a strong reputation, I believe, it's something that we can leverage and benefit from as we begin these market access efforts. On Slide 13, as we think about significant future opportunities for us, maybe [indiscernible] the expansion into the adjacent markets. Our initial efforts are currently focused on silent AFib, where we expect there's more than 10 million patients in the U.S. alone that are at high risk of undiagnosed arrhythmias that can -- we ought to be proactively screening. But when we spin that effort into the international space, we can probably double that market opportunity more than 20 million patients globally. You're going to hear us begin to talk much more about this over the course of '22 as we launch initial pilots that open up the [indiscernible] opportunity. We know that AFib is a risk factor for stroke, heart failure and cardiovascular mortality. And more importantly, we know that early detection can save lives and it significantly reduces the overall health-related costs. And there are opportunities that exist beyond silent AFib with areas like hypertension where more than 100 million people suffer from this in the U.S. alone. In sleep apnea where another 25 million people affected from it in the U.S. alone, both massive markets that dwarf even this opportunity that we believe we have the potential to contribute or see contribute to growth over time. If we move to Slide 14, now related to the silent AFib market, the clinical evidence regarding the need for active monitoring and screening, it speaks for itself. The mSToPS study told us exactly that, but the trial was designed as a direct to participant study, enrolling patients remotely and utilizing a virtual care pathway. The initial data showed that there was a nearly ninefold increase in AFib detection in the active monitor group versus the control group, with early data also showing a significant improvement in health resource utilization with fewer emergency room visits and hospitalizations in that active monitoring group. But even more exciting are the clinical outcomes data published in POS1, which showed that individuals that underwent active monitoring had a statistically significant reduction in the primary outcome of time to first event in the combined endpoint of death, stroke, systemic embolism or myocardial infarction. And also encouragingly, there was a statistically significant improvement in the safety endpoint of hospitalizations due to bleeding. Now not shown on the page here, but just as important were the findings that individuals that were diagnosed with AFib in the control arm had a higher rate of clinical events surrounding their diagnosis with 43% of them being hospitalized in the weeks before and after their new AFib diagnosis and 24% receiving a new diagnosis of an irreversible event, including things like stroke or heart failure. On the other hand, people diagnosed with AFib through the active monitoring arm not only had a very low rate of clinical events around the time of diagnosis, but also throughout the entire 3-year follow-up period. This data suggests that with active monitoring and treatment, we can detect AFib ahead of clinical outcomes and in a lower cost setting. And we're very excited by what the data is showing, and it positions us incredibly well as we begin early commercialization of efforts with our silent AFib. Moving on to Slide 15. Further support to our efforts to open up this market opportunity is the significant amount of time and attention being put into this space where we see many numerous trials being conducted as we speak around the value of proactive screening for AFib and arrhythmias. And to the point on the right of this slide, while our focus has been dedicated to the U.S. to date, the clinical guidelines in the U.S. are much more rigorous and harder to overcome than what we had find in the EU, for example, where they're already beginning to encourage proactive screening of certain patients which gives me the confidence that as we open up this opportunity in the U.S., we're going to see similar opportunities to do so on a rapid pace in the EU region, nearly doubling the initial 10 million plus U.S. patient opportunity that we see with a similar-sized market outside the states.

Well, I apologize to the group. It sounds like we were having some audio difficulty, so I apologize for that. I hope that you guys can hear me much better now. I'm going to pick back up, and hopefully, we can address any questions that you might have in Q&A. But on Slide 14, related to the silent AFib market, the clinical evidence regarding the need for active monitoring and screening, I think, it speaks for itself. The mSToPS study told us exactly that. The trial was designed as a direct to participant study, enrolling patients remotely and utilizing a virtual care pathway. Initial data showed that there was nearly a ninefold increase in AFib detection in the active monitor group versus the control group. And with early detection and early data, it's shown a significant improvement in health care resource allocation and utilization with fewer emergency room visits and hospitalizations in that active monitoring group. But even more exciting are the clinical outcomes data published in PLOS One which showed that individuals that underwent active monitoring had a statistically significant education in the primary outcome of time-to-first event, of the combined endpoint of death, stroke, systemic embolism or myocardial infarction. It also encouragingly -- there was a statistically significant improvement in the safety endpoint of hospitalizations due to bleeding. Not shown on the page here, but just as important, where the findings that individuals that were diagnosed with AFib in the control arm had a high rate of clinical events surrounding their diagnosis with 43% of them being hospitalized in the weeks before and after their new AFib diagnosis and 24% receiving a new diagnosis of an irreversible event including things like stroke or heart failure. On the other hand, people that were diagnosed with AFib through active monitoring not only had a very low rate of clinical events around the time of the diagnosis, but they also had that continued reduction in clinical events throughout the entire 3-year follow-up period. And this suggests that with active monitoring and treatment, we can detect AFib ahead of a clinical outcome and in a lower cost setting. So we're very excited by what the data showed here. And I think it positions us really well as we think about commercializing efforts in the silent AFib space. Moving forward to Slide 15. Now further support to our efforts to open up this market opportunity is the significant amount of time and attention being put into the space where we see many numerous trials being conducted as we speak around the value of proactive screening for AFib and arrhythmias. And to the point on the right side of the slide, while our focus has been dedicated in the U.S. to date, the clinical guidelines in the U.S. are much more rigorous and harder to overcome than we find in the EU, for example, where they're already beginning to encourage proactive screening of certain patients, which gives me the confidence that we can open up this opportunity in the U.S. and over time. And as we do, we're going to see similar opportunities in that EU space. Moving to Slide 16. In terms of what gives us the confidence to create value within each of these growth pillars, one aspect of what has set iRhythm apart to date has been our technology and the gold standard for which we've created. Now we remain committed to investing in innovation and looking to extend our lead in less areas and we look to stay ahead of the competition. As I mentioned earlier, our artificial intelligence capability and deep learning algorithms are a significant differentiator. Not only are we monitoring heart beats, but we're listening for beat types, beat rates, rhythms, all of which our algorithms are bringing together in their interpretations. And you're going to continue to see us invest here in a significant way. But more on that in just a moment. In 2022, we'll begin to roll out for market evaluation our third-generation biosensor with a much improved form factor that is 60% lighter, is 25% smaller and it's 30% thinner than our current product and with the new and improved breathable and waterproof outer layer that we believe is going to deliver a much improved patient experience. On Slide 17, with respect to our artificial intelligence efforts, we will continue to leverage AI to differentiate the clinical value and scalability of our service. In 2021, we received 510(k) clearance and subsequently launched our fourth generation of ECG detection algorithm which was our second generation of deep learning algorithm. That has further improved the clinical insight and efficiency of our platform. It's this success that was the result of combining our industry-leading data science team with our world-leading ECG data repository, which last year surpassed 1 billion hours of curated data from over 4 million patients. In 2019, we published clinical evidence demonstrating the equivalence between the detection and performance of our ECG algorithm and that of expert cardiologists, and we've only continued to raise the bar of performance since then. We believe this sets us apart from our competitors and that they're likely still at that expert role in machine learning phase. However, we're not going to stop here. We will continue to invest and leverage the tremendous data set that's at our fingertips. Moving forward to Slide 18. A good example of this investment is the Zio Watch program, the focus of our collaboration with Verily. In driving this program, we always start with the unmet need in mind. Here, we recognize a gap in monitoring solutions to address the growing challenge of detecting AFib in an aging population. The invasive, the costly nature of current technology to screen this population, leaves an unmet need for wearable solutions. And while there's always been a proliferation of AF monitoring wearables, most notably in the smartwatch form, the lack of clinical-grade diagnostic capability together with the integration of these consumer products with the health care system has limited their utility. In our Verily collaboration, we're leveraging a new approach to AI to deliver a diagnostic-grade solution for both AFib detection and characterization, which we'll leverage our existing Zio service infrastructure to offer a fully integrated and market differentiated monitoring service. We're currently in the process of obtaining regulatory clearance for the offering, and I look forward to providing further updates over the course of '22. On Slide 19, importantly, clinical data is and will continue to be a differentiator for us into the future with more than 35 peer-reviewed publications to date. You're going to continue to see us invest in this space, leveraging the more than 1 billion hours of curated data that we have now available to us to continue to demonstrate and validate the strength of our offering relative to our competitors and to stay ahead of the field here. Slide 20, it's important to acknowledge and address that the reimbursement landscape within the core market. As I noted from the time that I stepped in to lead iRhythm, I've been very pleased with the way that Novitas and the broader MAX as well as CMS have engaged with us to learn about the differentiation and the value of our technology. And I commend them on the effort they've put into this on their part and commend both our team and the broader industry wide working group on the work that's gone into this and aiding the effort. We were pleased with the Novitas decision yesterday morning to update their rates to $223 and $233 in that Houston jurisdiction. And I think the recent move is just -- it's another positive step in the right direction towards a reasonable long-term permanent rate. We're going to continue to work with the remainder of the MAX and also CMS to provide them all the information they need to ultimately get to a place where there's a final rule and a final rate established in our hopes in calendar year 2023. On Slide 21, of course, foundational to realize the potential in any of these opportunities that I've laid out is really ensuring that we have a foundation in place for profitable growth with a scalable and efficient infrastructure that can serve tens of millions and on to hundreds of millions of patients over time as we open up these existing and exciting markets. This means introducing things like automation, where possible, reconfiguring processes and streamlining systems and structures across the organization as well as really rethinking how and where we do the work in this new remote environment that we're proving can be so successful. So ultimately, our goal is to ensure that we have the infrastructure in place to ensure long-term profitable revenue growth. With that, I would leave you with this on the final slide. We're incredibly excited about our future here at iRhythm and believe there's incredible runway ahead of us. With our AI capabilities, we're redefining really the way that arrhythmias are being diagnosed. We have several pillars of tremendous growth in front of us. We operate in a core market today that is only about 25% penetrated with a technology that should really be the standard of care, leaving tremendous runway. We have untapped international market opportunities ahead of us with support from some of the most significant institutions that validate our technology in both NHS and NICE, and we have significant adjacent market opportunities as well. And all while we're pursuing those opportunities, there's a clear opportunity to get after the infrastructure in the operational side of the business that can lead to a profitable and significant financial leverage over time as we move into the future here. So as I've shared with you, I believe, we're uniquely positioned in a way that allows us to create value from multiple to different growth angles. And with that, I'd now like to have Dan and Doug join us again, and we'll open this up for Q&A. But thanks for your time.

Okay. Thanks so much for that, Quentin. Apologies for the technical difficulties we're experiencing in some of that. If you have any questions, if anything wasn't clear, feel free to shoot an e-mail over to me, and I'll definitely get to as many questions as they can. But I'm guessing what's really top of mind for most investors on this call is, yes, there's a reimbursement update from Novitas that you touched upon here. So the decision to move up to 230 from around 100 seems to be pretty directly linked to CMS' establishment of that $200 price for the supply item last year. And you seem to highlight that going forward, you're still going to be aiming for that national price aiming to continue pushing the reimbursement envelope. So should we really be expecting you to aim for higher than that $230, right? Like it's still a little bit lower than where you were at previously. So where can we really see reimbursement go from here? And also, with that $230 in place, how should we think about affecting the rest of your customer base, say, with commercial or contracted?

Sure. Well, I think, this certainly was a nice step in the right direction to see the rate move to where it has been. And again, we thank the group is involved for really pouring into this and trying to learn about it. But I think it's clear, the cost data that's come together from industry-wide players in this space, not just iRhythm, clearly articulate a higher price point for this technology in terms of recognizing the value that it delivers and covering the cost of offering it. So yes, we are going to continue to push the pathway of educating folks around the cost of the technology and the value that it delivers in hopes of seeing that rate continue to move north. Ultimately, we want to see a final rule put in place by CMS that I think removes a lot of the overhang around the reimbursement environment, create some permanency to where it can be into the future, and it's just the right path forward to open up access to these technologies. So we are going to stay down that pathway. In terms of how it impacts other payers, I've long said, I believe the commercial payers have viewed this differently for the last several years to where they're getting much more sophisticated in looking at the overall cost of caring for a patient. And I think they see the value of having a better diagnostic capability upfront to then treat off of and avoid downstream cost and they see that our technology delivers that. And so even through some of the choppiness that we were navigating with the MAX and CMS over the last year or so, the commercial payers were pretty quick to step up and say, "Look, I don't think this is being viewed appropriately." They're going to do their work, they're going to get educated on it, and they're ultimately going to see the value that this delivers. And so I've been highly encouraged by those conversations with the commercial payers and ultimately, where I think this goes with them, I feel good about that. I think we've done a good job of articulating our value and they're seeing that.

So kind of piggy back off that idea of payers becoming more and more aware of, more focused on reducing these downstream costs, I would argue that, that seems to be kind of the main argument for using your technology, using the study watch, for example, in asymptomatic AF, right? So to kind of push on that a bit, if payers are getting more and more conscious of these kinds of costs, what really needs to happen for you to start penetrating asymptomatic AF, right? You have the good data from mSToPS. It looks like you have a device with Verily. And I think in the past, you've said that even the current generation of Zio XT really should be able to have an application in this patient population. Are there any -- is there any like hard catalyst we should be looking for? Or is it really just kind of a more gradual process?

It's one that I think we've spent a lot of time talking about as an organization and preparing ourselves to be able to put formal pilots out into the marketplace with payers to really start to get some traction in this space. The point is we just -- we haven't been at the point where we could launch those pilots just yet. You're going to see us do that in 2022 for the first time. And we'll do it with the existing products form factor that we have today. There's something like a Zio Watch and that wearable open up the opportunity even further and create some difference to how we think about it into the future, potentially. But there's no reason to stop the efforts or to halt the efforts or slow them down today than to go at them full tilt with the existing wearable. And so we'll do that. I think part of it is you look at the masses of the population that really ought to be screened for potential AFib, and it's significant. And any time a payer looks at how large that audience is, I think, the first thing they think is how do we afford to put this on that entire population. And I think we, as a company, have to be forthright with some creative models that entice them to go ahead and put it on the broader populations, let us screen. And when we do diagnose AFib or other arrhythmias that are going to lead to downstream potential cost, that's when the economics can look a little bit different in that diagnosis of AFib, right, or other arrhythmia. So I think getting creative around the models with the payers is going to really start to move the needle on this. I'm excited to see how that works in 2022 as we launch these pilots. But that's exactly what these pilots are doing, are getting creative around the economic model with the payers to really make it attractive to them to say, "Look, we ought to be screening every patient over the age of 55 that presents with some other condition." I think there's great evidence for that. We've got to make the model clear for them to trial this and then I think we build that data set, it can really proliferate, and it might look different 4, 5, 6 years down the road, but to get it off the ground, we've got to think creatively here. And that's what we're doing.

Got it. So taking a step back, just kind of look at the core asymptomatic market, it seems like from a volume perspective, you guys have been able to grow very well through the pandemic, even through some competitive noise when it comes to things like Apple Watch, other extended competitors. But I would say that now that we have several of your smaller competitors, used to be small private companies, in the hands of larger, much better established competitors, how does that really change the landscape for you going forward with the Zio XT? How confident are you in really being able to maintain the advantage that you have with that technology now that you're up against bigger competitors?

Yes. Well, as I mentioned in my prepared remarks, I think, one of the greatest differentiators for us really is this AI capability and the fact that we truly are employing deep learning neural network sort of capability where I don't think the majority of the competition is there. And in my experience in this medical device space, I've learned there's very different levels of AI capability from the expert rule and machine learning all the way into this deep learning capability and I just think the majority of the competition has not come as far along as we have, and I think that's validated in the 35-plus peer-reviewed articles that have been put out there. So I don't think it's just iRhythm that's speaking that. It's been validated in the technology. I welcome the competition into the space. I think that in many ways it reminds me of prior experiences that I've had where you're starting to open new markets, are bringing a different standard of care into an existing market, and as awareness gets created, it kind of -- it assists all companies really. So as there's more resources being poured into this to educate around the value of the patch technology and to create awareness around it, there's no reason that the 25% of the market today using patch technologies leaving 75% more or less with Holter monitors, there's no reason this shouldn't shift. And so I think as that shift, there's meaningful growth for multiple players in this space for the next several years. I go back to if we can get further up into that primary care pathway where you've got 8 million-plus patients seeing their primary physician with heart palpitations, I think, you can expand that market. So again, as the awareness grows and as there's investment put into the space to create that awareness and to articulate the value of it, I think, we can win in a significant way in that environment. And it doesn't mean other folks have to lose. I think there's multiple players that can win here together.

Building up upon that, we've seen that there have been nontraditional kind of entrance into the market. I mentioned the Apple Watch, but there are other consumer companies, like say, Fitbit, right? They are trying to stick a toe into the symptomatic AF detection game. In the past, I think, the stance of the company has been that these are clinical grade kind of technologies. And if anything, it'll just serve as a pipeline to get more people aware of symptomatic AFS condition and then hopefully be a pipeline for actual clinical grade technologies like your own. Is that still your view on it or is there a world where we see physicians maybe getting more comfortable just diagnosing off of these more consumer-grade technologies?

I think it's something to pay attention to in this space. You hear a lot of noise around it. But the reality is there is a very different level of capability in terms of true diagnosis versus just creating awareness around a potential issue. And so to have that clinical-grade diagnostic capability is a significant stretch. I think it's something that does continue to differentiate us. And I think that ultimately, even if you're creating awareness, they probably do find theirselves -- those patients find themselves coming on to our sort of technology where they can get a true diagnosis off of it. So in many ways, I think, it may help aid in creating awareness around it, but I think they find themselves to us. I think for us, the point is how do we get that clinical grade capability into more of the wearable sort of technology and really leverage that from an iRhythm perspective to get after as many patients as possible. But to me, the differentiation continues to come back to that AI perspective. And having the 1 billion hours of heartbeat data that we have, digging deep into that, understanding what it can deliver to us and the differentiation that we have, that's going to be important to us. You're going to hear us continue to invest and innovate in that space to stay ahead of the competition. I think we've got a lead here that we have to invest into and we certainly will.

Before we kind of move on to the pipeline, I would say just looking at your business today, it is still majority symptomatic AF. So when we think about the growth that we could really see from that business going into next year, going into the years after that, we've really seen volume growth very healthy and like I said, 20% to 30% and even above that range in a few years ago. So when we think about 2022, 2023, what's stopping you from continuing to grow that kind of pace going forward? Or is that the right pace to be growing at?

Yes. I think for the time being, you're thinking about it the right way. I guess I'm not prepared to give specific '22 guidance or '23 guidance, but I'll talk a little bit around the cadence of growth drivers that I think gets exciting for long-term sustainable growth in this organization. And the first is that core U.S. market, where, again, only 25% of the market is using this sort of technology, I think, as you see it become the standard of care, that's going to lead to several years of meaningful growth and sustainable growth for us. At the same time, we're really increasing the focus to get into these international markets that's just as large as the U.S. space, and I feel comfortable that you're going to see the U.K. contribute in a meaningful way into the future. We just launched or we're just about to launch the [indiscernible] application in Japan to open up that second largest market. So you're going to see revenue contribution out into the future from there. You look at the EU region where we have CE Mark approval, you start to open up a few of those countries. And I like the cadence of how the revenue growth sets up where you're going to focus on the U.S. and probably have that be the meaningful contributor in the near term. International starts to kick in and becomes a meaningful contributor for you on the heels of that. And then you're opening up these adjacent markets that again become meaningful contributors all along the way, and it sets up for long-term sustainable growth that I think gets very exciting around where we can take the company. So there's a lot of pathways to growth, and I think they sequence themselves really well to set up for sustainable growth, not just a period of 12 months here or there, it's sustainable growth over a long period of time.

Okay. So unfortunately, there's obviously so much of what we can talk about with the pipeline, but we are coming up on the top of the session. So just moving on to like a more financially-oriented question, right? In the past, you've really talked about how you see a path forward for this company to reach profitability even with the lower reimbursement that you had at the time. So better reimbursement, even better way to get there. But with so many kind of growth drivers to invest into and then kind of like a difficult environment from a kind of a macro perspective with inflation, supply disruption, all of that, how do you really support cost rationalization while continuing to make sure you don't take the foot off the gas on the top line?

Yes, it's a great question. I look at the profile of the P&L today for iRhythm, and I feel pretty good around where we're spending or the percent of spend that we're investing into things like R&D and sales and marketing. I don't think those are meaningfully off from where they go into the future. And they may fluctuate from time to time year-to-year where we've doubled down and make an investment here or there. But the big gap for us and the big challenge is the fact that we've got G&A spend that sits at well north of 50% of every revenue dollar being consumed by back office and G&A type activities. That's where we have to get focused to really drive the meaningful leverage into the future, coupled with our cost of sale, the COGS profile of the business. So I look at those 2 areas and the reality is both of those areas have increased significantly over the last, call it, 2 years or 8 quarters, both on a unit cost perspective and a cost to serve perspective. So I think as we get after those, there's meaningful leverage in those 2 areas that some of that can be poured back into investment in growth and innovation in the future. Some of that gets dropped through to the bottom line and creates a nice financial leverage into the profile of the company into the future. So I think it's about introducing this operational discipline and just really setting the company up for long-term scalable, profitable growth that affords you those sort of opportunities to invest in growth drivers.

Okay. Perfect. We just hit time. Thank you so much for speaking with us today. And I just want to thank everyone else for joining us on the call.

Thanks for having us, Allen. It's good to be here. See you.