iRhythm Technologies Inc

NASDAQ:IRTC

Earnings Call Transcript 2020-Q2

[Operator]

Thank you for standing by, and welcome to the iRhythm Technologies Q2 2020 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker for today, Leigh Salvo, Investor Relations. Please go ahead.

[Leigh Salvo, IR]

Thank you all for participating in today's call. Joining me are: Kevin King, CEO; Doug Devine, CFO; and Dan Wilson, EVP, Strategy, Corporate Development and Investor Relations. Earlier today, iRhythm released financial results for the second quarter ended June 30, 2020. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, those statements related to the impact of COVID-19 on our business, expectations for economic recovery, market expansion and penetration, productivity improvements, reimbursement, release of clinical data, operating trends and our future financial expectations, including revenue, gross margins, profitability and operating expenses are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list and description of risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent annual and quarterly reports on Form 10-K and Form 10-Q, respectively, with the SEC. This conference call contains time-sensitive information and is accurate only as of live broadcast today, August 6, 2020. iRhythm disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

And with that, I'll turn the call over to Kevin.

[Kevin King, President, CEO & Director]

Thanks, Leigh. Good afternoon, and thank you for joining us. On behalf of the iRhythm team, we hope you're remaining safe and healthy. I'd like to start our call by recognizing the iRhythm team. Over the past few months, I've observed our team rallying to meet the challenges, demonstrating incredible resilience and operating at the highest level, all while adopting to a new work environment. Despite the challenges, we have continued to deliver our service without interruption to the physicians and patients that rely on it. We recognize the need for high-quality care has never been greater, and the iRhythm team is intently focused on delivering the care needed in today's environment.

I'd also like to welcome Doug Devine to our team. Doug joined us during an exceptionally challenging and unusual time of our business. Despite that, he was able to immediately step in to provide a very smooth transition, and has already demonstrated the impact of his leadership on our finance organization and input on our long-term growth objectives.

In my prepared remarks today, I'll discuss the key highlights of our second quarter, provide our current views of the market environment, discuss our outlook and our strategic priorities for this environment. Doug will go into more detail on our financials for the second quarter before we open the call up for questions.

As we entered the second quarter, we faced many uncertainties related to the impact of COVID-19 and that would have - and what that would have on our business. To manage through this uncertainty, we implemented 3 operating initiatives: first, to protect and support the health and wellbeing of our employees, our communities and our customers; second, to ensure uninterrupted ZIO Service delivery; and third, to ensure continued financial strength by adjusting our operating plan. Our team delivered on all 3 objectives and our financial and operating results for the second quarter demonstrate this.

We were encouraged by our second quarter results despite the impact and challenges of COVID-19, which we felt especially early in the quarter. Total revenue for the second quarter of 2020 was $50.9 million, a decrease of 3% compared to the same period in 2019 and a decrease of 20% compared to the first quarter of 2020. We saw steady recovery throughout the quarter, and the pace of recovery exceeded our expectations and revised operating plans. Average daily registration rates grew steadily through the quarter. And compared to the average weekly registration rates prior to COVID, April represented the trough at 65% of pre-COVID levels and June was approximately 90% of pre-COVID levels.

While COVID-19 suppressed the overall market in the second quarter, we believe iRhythm increased its share of the market as measured by our success in 3 areas. First, compared to legacy Holter monitoring services, our clinically superior digital platform was proven to be well suited to deliver services in a virtual environment. Our single-use ZIO devices are patient-friendly and eliminate the need for cleaning of equipment between uses.

Second, our home enrollment service enabled by our digital platform was instrumental in maintaining the registration levels we experienced in the quarter. We expect it will remain an important component of many of our accounts workflows going forward. As we shared in early May, home enrollment represented over 50% of registrations for the month of April. As hospitals and physicians began resuming in-office patient visits, this percentage leveled out to just below 30% as we exited the quarter. We expect to remain at these levels for the foreseeable future, and believe this will be a key factor in ensuring continuity of patient care in the event of a continued ramp in COVID cases that leads to reduced in-office patient care.

As such, we've been actively working on improving the efficiency of our home enrollment service and are prepared to support 100% of our volume, if needed. For example, we recently launched version 1.8 of ZioSuite, which now tracks - includes a tracking feature that provides us and our physician customers with patient and device visibility from registration through report delivery. ZioSuite is an important component of our service as we continue to scale our operations and home enrollment service.

Lastly, ZIO AT demonstrated continued strong traction and meaningful growth over the first quarter of 2021 - over 2020. Our single platform solution continues to resonate with our customers as they put high value in streamlining workflows across their cardiac monitoring needs. The experience that our customers have with ZIO XT and the high confidence of familiarity they have with our service and platform has benefited ZIO AT adoption.

Further, ZIO AT has unique advantages over traditional MCT technologies that are being recognized by our physician customers. ZIO AT utilizes the same form factor as ZIO XT, resulting in high patient compliance and wear time and is backed by the same detection algorithms and AI tools we have developed for ZIO XT over the last several years. Less than a year into the full market launch of ZIO AT, we're very pleased with the adoption to date. We are increasingly confident that we can continue to expand into the MCT market and take meaningful share.

While we're pleased to see signs of market recovery, the situation remains fluid with the level of recovery varying widely within accounts and within regions. So while we've continued to see slight improvement in July, we believe there are several market factors that may lead to suppressed demand through the rest of 2020. Feedback from our commercial team indicates that a number of accounts have effectively worked through their backlog and are now seeing a steady flow of new patients. While encouraging, we're not yet experiencing this trend consistently as patient willingness to enter the health care system remains varied, particularly in regions that have experienced a strong resurgence of COVID-19 and continued uncertainty as numbers escalate.

In addition, we're aware that hospitals, especially those in hotspot regions, have limited or even ceased performing procedures deemed deferable or elective. And nearly all health care facilities have adopted new, highly stringent protocols and workflows, which are likely to impact patient volume and throughput while they remain in place. Utilizing telemedicine solutions, including our home enrollment service, will help offset these pressures. But the adoption of virtual care models has also been varied. That said, new account adoption of our ZIO Service continues to be at lower than pre-COVID-19 levels.

The impact to our third quarter and to the second half of the year remains unpredictable, particularly with the continuing rise in daily new cases of COVID-19, up 3x over May levels. We remain cautious on steady rates of volume recovery as we progress into the second half of the year. However, we do expect to return to year-over-year revenue growth in the third quarter. If current trends continue, we expect Q3 to be in line with pre-COVID levels with volumes growing slightly from June levels. Offsetting this is the expected impact of summer seasonality and its effect on physician prescribing patterns. Longer term, we have high confidence in our ability to change the standard of care and continue to gain market share. As I noted earlier, we're focused on the long term and managing our business accordingly with the primary goal of continuity of service for physicians and their patients.

Next, I want to spend a minute providing an update on our operations and cost containment measures. Our priority remains on health and safety of our employees and maintaining stringent safety protocols for all in-office functions and employees. We've continued to maintain full organizational capacity through a combination of work-from-home capabilities wherever possible, daily on-site operations for those groups that must work from the office and the use of virtual online tools to facilitate group projects and to provide support to our physician customers and their patients. Our field sales activity has remained primarily virtual in most regions through the country.

Regarding our cost containment measures, with the noted increase in patient registration levels during the quarter, we have now returned all previously furloughed employees, reinstated salary to pre-COVID levels and resumed hiring for key roles. We are maintaining certain other cost containment measures to preserve cash and liquidity but are making the required investments to continue to scale the business to meet the increased demand and pursue long-term growth initiatives.

Turning to reimbursement. As you likely know, CMS published the much-anticipated proposed Medicare Physician Fee Schedule Proposed Rule for 2021 earlier this week. The issuance of the proposed rule is now followed by a public comment period that closes on October 5, 2020, and will culminate in CMS's final rule expected on or around December 1 for implementation on January 1, 2021. We covered the details of this proposal and its impact on our business during a conference call this past Tuesday, which is archived and available on our website, so I won't repeat all of that information today.

On August 5, CMS published a correction to the relative value units and related information used to determine Medicare payments for the 8 new codes associated with external extended ECG monitoring. The correction increases the relative value units for technical codes, 93XX2 and 93XX6, and decreases the RVUs for the global codes, 93XX0 and 93XX4. The remaining 4 codes associated with the patient hookup activities and final interpretation were revised downward by a small percentage. This correction is incrementally more positive if applied to our 2019 revenues as described earlier in the week. After several years of collaboratively working with the American Medical Association, the Heart Rhythm Society, the American College of Cardiology and the CMS staff, we are pleased with the very positive impact the proposed outcome will have on our business and especially to have such a significant milestone successfully behind us.

Our long-term strategy remains intact. And this includes increasing market penetration with the ZIO platform, increased operating leverage through continued productivity and automation improvements and expanding the addressable market into new indications and geographies. We expect to continue planned investments to drive long-term growth and profitability for shareholders and are as confident as ever in the durability of our business.

While we're cautious on the outlook for the remainder of 2020 and would be hesitant to predict a fast recovery, we believe the future of iRhythm has never been brighter. There is a considerable potential for structural changes to how health care is delivered. And that will play to the strengths of our digital platform. We're focused on positioning iRhythm to continue to drive the standard of care in how cardiac arrhythmias are diagnosed and managed and delivering our ZIO Service to the millions.

With that, I'd like to turn the call over to Doug.

[Douglas Devine, CFO & Secretary]

Thank you, Kevin. Before I jump into my comments on the quarter, I'd first like to express how excited I am to join iRhythm and to thank Kevin and the Board for offering me the opportunity to contribute to the future growth of a great company and a great team.

The second quarter of 22020 undoubtedly goes down in the record books as one of the most challenging business environments all of us have ever experienced. iRhythm rose to the challenge rapidly and successfully shifting our business model to accommodate our physician customers and their patients. We expanded home enrollments from a single-digit percent to over 50% of volume at peak, maintained traction onboarding new accounts with evolving sales models and executed internally on many aspects of our operation in a remote environment while at the same time reducing expenses, preserving liquidity and cash.

Moving on to the financial highlights for the second quarter of 2020. Revenue declined 3% and year-over-year and was sequentially down 20% quarter-on-quarter. Gross margins were 69.6% for the quarter. We experienced continued traction and expansion of ZIO AT. And cash and short-term investments were $114.9 million at quarter end.

Taking a more detailed look at the second quarter financial results. Revenue recovered throughout the quarter from a low point in April, followed by steady improvement through May and June, exiting the quarter approximately 10% below our pre-COVID run rates. We saw that trend continue and gradually improve through July as well. As we think about individual drivers within revenue, we saw a continued strong quarter-on-quarter growth for ZIO AT. The higher ZIO AT mix, combined with improvements in revenue cycle management, led to ASP increases in the second quarter.

On an account and regional level, second quarter volumes showed material variances across regions and accounts. 50% of our accounts remained more than 10% off their Q1 run rates, offset by continued onboarding of new accounts and growth of over 10% in run rate over Q1 run rates for 25% of our existing accounts. The large number of accounts, more than 10% of Q1 run rates, indicates many accounts and regions are still well below full recovery.

As Kevin mentioned, home enrollment peaked at slightly over 50% of patient registrations early in the quarter before reducing to the end of the quarter at 36% of volume. July home enrollment levels have continued to trend downwards into just below 30%. The iRhythm team has demonstrated flexibility to support home enrollments and is well positioned moving forward to meet evolving conditions.

Turning our attention to the rest of the P&L. Gross margin for the second quarter of 2020 was 69.6%, a 5.1% decrease compared to the gross margin of 74.7% in Q1 of 2020. Second quarter gross margin was down due to lower volumes for absorption of labor and fixed costs and some higher costs associated with home enrollment, primarily outbound shipping and logistics costs and labor. Gross margins improved from a low point in April as we moved through the quarter.

Non-adjusted operating expenses for the second quarter of 2020 were $55.6 million compared to $56.6 million for the prior quarter, a decrease of 1.9%. Excluding the $3 million milestone payment to Verily, OpEx was $52.6 million or a decrease of 7.2%. Looking at cash OpEx and adjusting out both the Verily milestone and looking at the cash operating expenses, we're down $13.7 million compared to the first quarter or a decrease of 24.6%, evidencing the company's strong actions to preserve cash.

A couple of other points to note on OpEx. We partially reinstated stock compensation, resulting in a $9.5 million increase to noncash OpEx quarter-on-quarter. Also bad debt expense, a metric that we've been watching very closely in the current environment, improved $3.2 million versus the first quarter as payments trended stronger than forecasted. Finally, the net loss for the second quarter of 2020 was $20.4 million, a loss of $0.75 a share compared to a net loss of $10.7 million or $0.43 a share for the same period in the prior year.

Turning to our expectations for the remainder of 2020. While the business stabilized somewhat in June and July compared to the preceding 2.5 months, due to the current environment and heightened level of uncertainty surrounding the COVID-19 pandemic, we remain unable to estimate the magnitude or duration of specific impacts on our business. And for that reason, we will not be resuming financial guidance at this time. We do, however, want to communicate to investors the following activities and steps that we are taking to ensure long-term sustainability of the business.

First, that our ability to rapidly transit from in-clinic to home enrollment operational line remains key to maintaining meaningful registrations and revenue streams during this challenging period. Second, we took significant steps to decrease our spending run rate and preserve cash in the second quarter. And we intend to continue to take appropriate measures going forward to preserve liquidity and while balancing growing and investing in the business as volumes return. And finally, with over $114 million in cash and short-term investments on hand, we are in a strong position to weather any near-term challenges.

Kevin, Dan and I would now like to open up the call for questions. Operator?

[Operator]

[Operator Instructions]. And our first question comes from Robbie Marcus with JPMorgan.

[Lilia-Celine Breton Lozada, JPMorgan Chase & Co.]

This is actually Lili on for Robbie. Could you provide a bit of color on the use of ZIO in acute settings in the quarter? I understand you probably don't want to break out specific numbers. But how big of a benefit was the acceleration in adoption here? And are these tailwinds something that we can expect to continue to see in the back half of the year? Or will this kind of slow down as the virus abates?

[Kevin King, President, CEO & Director]

Lili, this is Kevin. What - the acute setting, are you referring to ZIO ATs used in hospital?

[Lilia-Celine Breton Lozada, JPMorgan Chase & Co.]

Yes, that's right. Sorry about that.

[Kevin King, President, CEO & Director]

Yes, for inpatients. That level has decreased. And the uptick in ZIO AT volume we're talking about is in the traditional ambulatory outpatient cases, where the likelihood or possible threat of a life-critical arrhythmia exists. Many of the patients that were in the COVID environment back in the March, April time frame, when we gave the May reporting, those numbers, too, were a little bit on the smaller side. A vast majority here is ambulatory-related traditional market. And we're extremely confident in that adoption rate that we're seeing right now. This is the core market that we're growing ourselves into.

[Lilia-Celine Breton Lozada, JPMorgan Chase & Co.]

Great. And just one quick follow-up. As you guys mentioned, there's clear benefit to ZIO over traditional Holters in this environment, given the single-wear nature of the device. So what have you been hearing on doctors on how this has impacted their adoption? And do you think that this could have lasting impacts longer term post virus?

[Kevin King, President, CEO & Director]

Yes. In a similar way to how we're seeing telemedicine become adopted due to the pandemic, we're also finding on the Holter side, this is much of an accelerant - COVID is an accelerant to adoption. In many cases, patients are refusing to wear medical devices that have been - that are reused or have been worn by others. There are staff constraints. And then of course, just the ability to do Holter monitoring via home enrollment with a device that has limited capacity or a hospital would have limited number of Holter monitors, when we have a single-use wearable with essentially limitless inventory to provide to accounts for home enrollment, there's major advantages here. And then of course, all of the demonstrated clinical superiority of ZIO is weighing in here as well in a big way.

[Operator]

And our next question comes from David Lewis with Morgan Stanley.

[Calvin Chu, Morgan Stanley]

This is Calvin on for David. Just kind of a related question, could you comment on how resurgence has impacted either June or July results in sort of either direction in terms of both the underlying demand from regular way ZIO patients as well as, to your point perhaps in the context of constrained hospital capacity and resurging hotspots, resulting in kind of an increased demand for ZIO to [indiscernible] capacity?

[Kevin King, President, CEO & Director]

Sure. Calvin, it's Kevin. Look, I think this sustained and rather spiky nature of COVID-19 has created a really, really heterogeneous market with demand levels being varied in geographic locations and in accounts. So within areas that are hotspots, we clearly see a high degree of variability in our daily and week-over-week registrations. I would say, even in recovered regions, there's nonuniformity. It's almost like a lingering effect from COVID-19. And as we stated in the prepared remarks, many accounts have not returned to full growth yet. So I think the effect of COVID-19 is really depressing demand within the marketplace overall.

That said, where there are opportunities, we do think that we are taking up a larger percentage of the markets through the benefits of our single platform, the wearable biosensor that's clinically superior to other approaches. I just mentioned this to Lili. Our ZioSuite information system is having impact on workflows as it helps accounts, especially those accounts that have reduced staffing levels due to layoffs, and our ability to deploy home enrollment via the ZioSuite application. And so in the cases where there is demand and patients are getting to the hospital, I think we're getting a disproportionate percentage of those. That said, part of the market seems to be cut off, if you will, due to the increase in spottiness and spikiness of the nature of the virus here.

I probably just may just add one comment there. I do think that accounts are better prepared now than they were in March. Many of them have put in place staff and patient safety protocols. They have limited access to accounts for us. But they have been able to deal with this qualitatively. They have been able to deal with this in a better way than they were back in the March-April time frame. And many, many accounts just completely shut down. I think that we hear less of that, it's probably more about capacity constraints right now.

[Operator]

And our next question comes from Margaret Kaczor with William Blair.

[Brandon Vazquez, William Blair & Company]

First, I just wanted to see if we could talk a little bit more about the comments on kind of gradual increases or gradual improvements as you went into July. I was wondering if you could quantify that at all a little bit, I was trying to trying to understand, I can appreciate you're going to return back to year-over-year growth. But what does that look like kind of on a sequential basis? How much above 90% of pre-COVID levels might we be at?

[Kevin King, President, CEO & Director]

Doug, do you want to comment on that?

[Douglas Devine, CFO & Secretary]

Sure. I mean July was a slight uptick from June. And then I think as we have highlighted, given the COVID situation and given that we're seeing great variabilities between our accounts. It's a - it's difficult to predict where September is going to go in this model and where August may go. So I mean I think we've led you directionally that trending slightly up from 90% and that we're viewing Q1 levels as being a reasonable level of expectation. But we're not in a position to be more specific than that at this point in time.

[Brandon Vazquez, William Blair & Company]

Okay. That's helpful. And then also, I was curious, the adoption of ZioSuite, and that sounds great and it sounds like it's getting a lot of traction. I was curious if there's any difference in utilization or growth rates in accounts that have adopted ZIO, any noticeable trends, either positive or negative, I would guess positive, that you've seen in those accounts.

[Kevin King, President, CEO & Director]

So we've spoken in the past about our innovation stack. The 4 or 5 layers of information system stack was most recently rearchitected and launched as - under the brand ZioSuite. We now have all of our accounts or nearly all of our accounts migrated to ZioSuite. And we - this is the benefit of having a digital information system platform that's cloud-based and so forth. So all of our customers or nearly all of our customers, the best of my knowledge, have migrated the ZioSuite, and we're getting really, really strong feedback on the benefits of ZioSuite relative to staff productivity.

And as I mentioned earlier, a lot of our accounts have had staff layoffs. And so they're being asked to do more with less and the ZioSuite is helping them when it comes to ordering monitoring devices, tracking where patients are, getting reporting and things of that nature. Plus it's a great productivity boost for physicians if they're working from home because of the ability to use your tablet, your desktop, your cell phone and so forth for ZIO. So I would say that it's been a great success and it's fully deployed and it's having an impact compared to what we had called ZIO Reports previously.

[Brandon Vazquez, William Blair & Company]

Great. And then one last one on my end. Any updates on kind of the high-risk market? I think we were originally thinking that we'd see some mSToPS and SCREEN AF data in 2020. Is that still the case? Or any other updates there?

[Kevin King, President, CEO & Director]

Sure. Dan? Dan can take that one for you.

[Daniel Wilson, EVP, Strategy, Corporate Development & IR]

Brandon, it's Dan. So maybe a couple to call out for you there. So mSToPS, we still expect the 3-year outcomes data potentially at AHA in November this year, so excited about that. SCREEN AF, if you recall, that was on deck to be presented at a conference earlier this year in the May time frame, which that conference got postponed, so unclear when that data will be presented. I think the investigators are trying to find the right venue or journal to present that data.

And then the third one I'd call out for you is GUARD-AF, which kicked off late last year. That trial was paused in March due to COVID but has since been restarted last month. And like our commercial business, the trial has now adopted our home enrollment service as well as some other virtual features. So that one is just getting back up and running after getting started late last year. So too early to give any potential timelines around that one. But like mSToPS, that does have stroke outcomes data. So we're excited about both of those.

[Operator]

And our next question comes from Kaila Krum with Truist.

[Kaila Krum, Truist Securities]

And welcome, Doug, to the conference call and the team. So you guys mentioned in the press release that you think that lower volumes in the quarter were in part offset by a higher ASP. So can you give us the split between volume and price if it was meaningful in the quarter? And then what contributed to that price benefit? Is it just standard business mix with XT? Or is that tied to AT? I'm trying to understand if AT is big enough today to be a meaningful contributor at this point.

[Kevin King, President, CEO & Director]

Yes. I can maybe take up on the ASP mix question and maybe Doug can take the second half. Or Doug, if you'd like to take the whole thing, go ahead.

[Douglas Devine, CFO & Secretary]

Yes. I'll go ahead and take it. So first, on the ASP, it was a healthy ASP kind of mid-single-digits type of uptick in ASP. Now as you're aware, AT has a meaningfully higher ASP than XT does. And so half of that increase was driven by the change in the mix, where we saw AT units increasing quarter-on-quarter and we saw XT units decreasing on quarter-on-quarter. So that kind of magnified the impact you were seeing from AT. And then the second piece of it is that we are seeing some more general improvements in our revenue cycle management, which led to the remainder of most of the increase.

Taking the second part of your question on the impact of AT. The impact of AT is growing. It is still well below 10% of our revenue. And we'd say directionally, as it continues to grow, which we expect it to and have strong confidence that it's going to, we will provide steadily greater detail on the breakouts of AT in the future.

[Kaila Krum, Truist Securities]

Great. Okay. That makes sense. And then it sounds like you guys are - or have been sort of looking at your long-term growth vision. I think you mentioned that Doug has already been able to provide some input there. So I imagine that's something you guys evaluate and reevaluate over time. But are there any initiatives that you now feel maybe more confident implementing that you may not have otherwise, just given the reimbursement update and expected rate increase?

[Kevin King, President, CEO & Director]

Kaila, I think we've always been confident in the reimbursement outlook, even prior to - obviously prior to this Tuesday or Monday or Tuesday's announcements or information out there. We've been - we've not altered our strategy because of the reimbursement, favorable reimbursement or potentially favorable reimbursement here.

And our confidence has remained the same, driving new indications, driving geographical expansion, driving new forms of clinical evidence that can open up new markets, like the silent atrial fibrillation markets. Platform investments, we've essentially modernized or rearchitected 3/5 of our technology platform in the last 18 months. And similar to what I just described about ZIO AT, these things are being invested, rolled out and having incremental impact and keeping our platform fresh and current and highly competitive. We're just continuing to do that, we're not taking our foot off the gas here at all nor are we really changing our strategy because of the confidence. You bet, Kaila.

[Operator]

And our next question comes from Cecilia Furlong with Canaccord Genuity.

[Cecilia Furlong, Canaccord Genuity]

I guess I wanted to follow up first on mSToPS as well as SCREEN AF. But just how you think about the rollout of this and the impact in 2021, but really specifically, your thoughts around how screening in high-risk patients plays into a post-COVID or COVID-altered world and really the ability to shift practice.

[Daniel Wilson, EVP, Strategy, Corporate Development & IR]

Cecilia, it's Dan. I would - I guess I would just start by saying we - as we've looked at what's going on in the health care environment today, our conclusion is that there's potentially more asymptomatic or undiagnosed AF in the population than there ever has been. So I think that's the first point that we're even more confident that this is a market that we should be going after and investing against. On mSToPS, that is - it is an important trial, given the outcomes data and really the first opportunity to show that targeted detection of asymptomatic AF can potentially lead to improved outcomes, including hopefully a reduction of strokes. That's been our hypothesis all along, and we have had favorable data to this point suggesting we are on the right track. But this will really be the first opportunity to see that data come together.

And we know that, that is important data from a market development standpoint, whether it be with payers, physicians or even clinical guidelines, like the USPSTF prevention screen task force. So we're really looking forward to that data later this year. SCREEN AF is important as well. And we're excited for that data to come out. And as I mentioned earlier, GUARD-AF, like mSToPS, will have stroke outcomes data as well. So we really believe things are lining up well for us in this initiative. It will take time as the clinical data comes out and we're - with that data looking to change behavior. So we're excited about it and believe we're on the right path. I think it's too early to say we'll see anything from a commercial standpoint next year. But we're absolutely moving in the right direction.

[Cecilia Furlong, Canaccord Genuity]

Great. And if I could just ask just any updates on your collaboration with Verily, ability to really start hiring people into that program again and just kind of timelines and relative to your kind of pre-COVID expectations.

[Daniel Wilson, EVP, Strategy, Corporate Development & IR]

Kevin, I can take that one. So I think we mentioned on our first call - or I'm sorry, our first quarter earnings call back in May that we had surpassed the development milestone in May. So that was an important milestone. And as we have talked about before, we're developing an end-to-end solution, combining technologies from both parties with Verily's Study Watch. Study Watch is one potential component of that solution. The collaboration has gone quite well to this point, and we continue to tick through milestones relatively on schedule, albeit with minor delays due to product development and specifically hardware development work being more difficult to do in a remote environment.

But overall, we're on schedule, give or take a quarter or two. So nothing specifically to call out in terms of next steps other than continues to move forward. There's a decent chance we'll hit another milestone later this year or early next year. And similarly to my comments on the silent AF market in general, I think it's too early to point to any kind of commercial impact from this. But again, it is moving in the right direction.

[Operator]

And our next question comes from Suraj Kalia with Oppenheimer.

[Suraj Kalia, Oppenheimer]

So first question, Kevin, for you or Doug. And Doug, forgive me, I did not follow your commentary exactly. So there was a net 5% increase in ASP. ZIO XT price was down quarter-over-quarter. But AT was up quarter-over-quarter. I guess within the context of the codes currently used, how sustainable are these price increases for ZIO AT? And am I right that the AT price increase was in double digits in the quarter? Maybe I didn't connect the dots.

[Douglas Devine, CFO & Secretary]

So first, yes, I mean, correcting a couple of points. So first, I said it was mid-single digit. I don't want to be as specific as putting a number to it on the pricing. Now ZIO AT prices were very consistent quarter-on-quarter. So what changed is that ZIO AT became a much greater fraction of our mix. And - I mean not much greater - ZIO AT units grew quarter-on-quarter. ZIO XT units declined quarter-on-quarter. ZIO AT has a significantly higher ASP than ZIO XT. And so that is accounting for half of the overall ASP on a per unit basis on the quarter. And then as you look at the other side - the other parts of the revenue cycle management, we do believe that those are sustainable. Some of it was negotiations. Some of it was just doing a better - continuously improving the reimbursement processes.

[Suraj Kalia, Oppenheimer]

Got it. Now it's clearer. And Kevin, one last and I'll hop back in queue. I presume you will be supplying the invoices for various components to CMS before the final reimbursement rule comes out.

[Kevin King, President, CEO & Director]

Sure. As I said on the call, I think it was yesterday, we provided to CMS over 500,000 invoices for our service across contracted, non-contracted, Medicare, self-pay, client bill. They have full access of all various and sundry types of payments over an extended period of time. And they have everything they can get from us.

[Operator]

And our next question comes from Marie Thibault with BTIG.

[Marie Thibault, BTIG]

Looking forward to getting to know you. I wanted to ask a question about the market share commentary you gave. It's definitely encouraging and it makes a lot of sense. Is there any way to sort of quantify what you're seeing in terms of that share shift? I understand it's very difficult in this environment. And then secondly, do you believe some of those underlying factors, which sound like they're part of a larger social trend, you believe that's sustainable to help you maintain some of that market share shift?

[Kevin King, President, CEO & Director]

Sure. So we - the data that we have is iRhythm company-specific data that we gather from our customers with very good intelligence on prescribers, prescribing patterns, prescribing mix relative to traditional Holters and event monitors and traditional MCT devices across the thousands of accounts that we have. And we can trend those over time. And through our sales operations calls that we have on a monthly basis, we get a good feeling for how things are trending.

And when we see increases in volumes and accounts, we're often asking, "Are these volumes coming from new prescribers, existing prescribers and what is the mix?" So the data is gathered internally. It's consistent, it's reliable. I would also say, compared to other companies that have reported in the category, we were down 3% year-over-year. And I think other companies who have reported were closer to 20% to 25% down year-over-year. So that would imply to us in a market that decreased that we have taken a bigger piece of it.

[Marie Thibault, BTIG]

Sure. Makes a lot of sense. And then I guess my follow-up question would be on your sales rep count in the quarter and what are your hiring plans? I think you'd hoped for 160 or so by the end of the year, whether that's being maintained or if there are any changes there.

[Kevin King, President, CEO & Director]

Yes. Obviously, we didn't do much hiring here in the second quarter. We only recently restored hiring of key positions. So really nothing meaningful in the second quarter per se and a lot [indiscernible] by what happens in Q3. I don't have a number off the top of my head. But my guess is it's probably going to end up being less than 160, just given the delay in the hiring pipeline and needing to restart that pipeline up again.

[Operator]

And our next question comes from Gene Mannheimer with Colliers.

[Eugene Mannheimer, Colliers Securities]

Congrats on the great progress here. I just had a couple of follow-ups on the reimbursement. Kevin, you said - you said that yesterday, CMS published some modifications to the RVUs that go into the payment calc, where you'll drive a small benefit. I'm just wondering if you can quantify that for us.

[Kevin King, President, CEO & Director]

Sure. So on August 5, CMS published a, I guess you'd call it, a correction. And I don't think anybody really [indiscernible] codes should equal a global code value. And initially, as reported, they did not. So the sum of the hookup and interpretation, the technical code should equal the global code. In that first pass release, it didn't. And then within the day, it was corrected and they now do. And when that happens, the technical code went up and the global code went down by almost the same amount. And then the hookup and interpretation were sort of in the fractional percentage movements downward. We reported if we calculated 2019 revenues, mix and all of the other things that the impact would have been low single digits. And now we believe it would be high single-digit impact year-over-year to the positive.

[Eugene Mannheimer, Colliers Securities]

Wow. Okay, that's great. Okay. And another question on, I guess, how things can change between now and December. Historically, does the reimbursement tend to change from the proposed rule to the final rule? And if so, has it veered very much from that proposed rule?

[Kevin King, President, CEO & Director]

I think the big factor here, I guess, is the conversion factor that all of the RVUs and the physician payment system get multiplied by to arrive at a price point. And what was proposed in the rule here was about a 10.6% decrease in conversion factor across all categories, not just the code set that we use but for everything. And my guess is that, that is going to be heavily debated. It's a fairly large decrease. And I think in prior years, it's been nowhere near that level. There is a reason for that.

And it's my understanding, I'm hoping I'm correct, but physician payment for codes that are called evaluation and management, E&M codes, went up substantially and that CMS is required to operate a balanced budget format, so they can't just pile on more expense. They have to - when something goes up, something else has to go down. And it seems like the best way that they were able to facilitate that was to just drain more water out of the pool through the conversion factor. So my suspicion is in the budgeting process, that's going to be highly debated. As far as on the code structure side, I - the process was so thorough and so complete, I'm hoping that there's not much to change. But of course, there's the comment period. And we'll see what happens.

[Eugene Mannheimer, Colliers Securities]

Okay. Great color. So last one for me then, just in terms of your home enrollment trends. So let's say that volumes did return to near-normal pre-COVID level, call it, 95% to 100%, what - where does home enrollment registration plateau in your view?

[Kevin King, President, CEO & Director]

It's a good question. We said in our prepared remarks, Gene, that we think this 30% level, slightly plus/minus a point or 2, around 30%, feels right to us. A lot of accounts are loving, if you will, the ability to order things remotely without having patients come into the office, particularly patients that have already had prior studies or exams, drug titration, follow-up to ablation, subsequent ZIO Patches, things of that nature, plus even new cases, which are being seen today. So I think that, that's here to stay.

And it's probably going to get built off the backs of what we hear about telemedicine being here to stay as well, that telemedicine had been on the kind of on the sidelines for a long time and then it got pushed to the forefront. And many physicians are really liking it. Many physicians are feeling that they're doing a very good job in seeing their patients remotely and probably won't go back. So I'd call it about 1/3 of our business, 30% of our business is probably the plateau that we're hoping for. We're able to do 100% or very close, very soon be able to do 100%. So if the COVID pandemic here spikes up - God, we hope not. But if it were, we would be able to sustain our operations all the way up to 100%.

[Operator]

And ladies and gentlemen, this concludes our Q&A portion of today's conference. I'd now like to turn the call back over to Mr. Kevin King for any closing remarks.

[Kevin King, President, CEO & Director]

Great. Thank you, operator. Thank you, everyone, for joining our call today on our Q2 2020 earnings call updates. We appreciate your continued interest and support of the company and continue to wish you great health and great safety throughout this period of time. I will look forward to talking to you later. Thank you. Bye-bye.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.