Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2021 Itamar Medical Ltd. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the conference over to Leigh Salvo, Investor Relations. Please go ahead.

Good afternoon, can you hear me? Operator can you hear me?

I can hear you.

Are we in a sub conference or conference?

I think we are in the conference. [Indiscernible] is at one minute.

Do you want me to start, I mean, do you have technical problems?

Yes, please stand by.

Thank you and thank you all for participating in today's call. Earlier today, Itamar Medical released financial results for the quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I would like to remind everyone that during this conference call, Itamar will make certain statements that are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company’s plans, objectives, and expectations for future operations, and are based on management’s current estimates and projections for future results or trends. Because such statements deal with future events, they are subject to various risks, uncertainties, assumptions, and actual results, expressed or implied by such forward-looking statements could differ materially from Itamar's current expectations. Factors that could cause or contribute to such differences include risks, uncertainties, and assumptions discussed from time-to-time by Itamar in reports filed with or furnished to the SEC, including the latest Annual Report on Form 20-F. Except as otherwise required by law, Itamar undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. During this call, statements may include in addition to financial results prepared in accordance with the IFRS and issued by the IASB also measures as defined by non-IFRS financial measures for operating loss and net loss, which are adjusted from results based on IFRS to exclude; one, share-based payments; two, depreciation and amortization of property and equipment and intangible assets; three, change in provisions for doubtful and bad debt; four, non-recurring expenses related to locating of production facilities to a new location; and five, other nonrecurring expenses. Management believes that the non-IFRS financial measures provided in our press release are useful to investors understanding and assessment of the company’s performance. Management uses both IFRS and non-IFRS measures when operating and evaluating the company’s business internally and therefore decided to make these non-IFRS adjustments available to investors. The presentation of this non-IFRS financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. For further details, a reconciliation of operating loss and net loss on an IFRS basis to a non-IFRS basis is provided in our earnings press release issued earlier today. And with that, I’ll turn the call over to Gilad Glick, CEO.

Thank you, Leigh. Good afternoon everyone, and thank you all for joining us for our second quarter 2021 conference call. I'm joined on the call today by Shy Basson, our CFO. Our second quarter results demonstrated further growth as our WatchPAT technology continued to gain recognition as a safe and effective method for home based sleep apnea testing. Core sleep in the U.S. continues to be our largest growth driver today, with nearly every territory in the second half growing nicely with an average growth of 50% over prior year. We are also starting to see the benefit of a significant change in the HSAT reimbursement landscape with the recent elimination of the G-code loophole by Medicare Administrative Contractors or MACs, covering roughly 60% of their Medicare population, paving the way for further WatchPAT share gains and materially enhancing our competitive market position. We expect this to deliver even greater upside in the second half of the year as more providers become aware of the change. We also grew our cardiology business and were delighted to see the American Heart Association issue a scientific statement about the importance of sleep apnea management to cardiac care. This is the first time the AHA has publicly commented on obstructive sleep apnea and the effect it has on the cardiovascular system further validating both the economic benefit and opportunity for improved care that ties these two segments together. We are very excited about our longer-term growth potential to be a meaningful part of this estimated $2.7 billion market in the U.S. Turning briefly to our financial performance, our second quarter revenue was $12.6 million representing 41% growth compared to the second quarter of 2020 and 5% growth over the first quarter of 2021. In addition, we improved our non-IFRS gross margin by 100 basis points to 73%. Based on the momentum we see heading into the second half of 2021, we have raised our full-year revenue guidance to a range of $53 million to $54 million representing growth of 29% to 32% over 2020 revenue. Commercially we saw strength in both HSAT market penetration and continued WatchPAT share gains. In core sleep WatchPAT ONE was once again our most significant growth driver with 846 customers ordering the product by the end of the second quarter, up from 725 in the prior quarter. Importantly, we continue to see WatchPAT ONE utilization gaining traction throughout the first half of the year as more patients emerge for diagnosis and treatment as pandemic restrictions were lifted. In the second quarter, we added 121 new WatchPAT ONE customers with 84 billed being new to Itamar, not just WatchPAT ONE technology. We had an average of approximately 28 new customers on boarded per month throughout the second quarter and remain very encouraged by the ramp-up in market share we're gaining as we continue our push to have our WatchPAT technology in the approximately 2000 sleep centers in the U.S. In the U.S. WatchPAT demand increased in nearly every U.S. region, with most recognizing double-digit growth averaging approximately 50% growth over the second quarter of 2020 and 19% compared to the first quarter of 2021. In the short term we have ample opportunity to expand within our current 37 territories and verticals to achieve our growth targets and we believe that a target of 43 territories by year end 2021 is within reach. Outside the U.S. in Europe, we saw some impact from restrictions associated with the COVID Delta variant. However, as we noted last quarter, the U.K. returned to pre-COVID levels and during the second quarter demonstrated increasing strength. We expect the U.K. to be a meaningful growth driver going forward. Revenue from Japan as expected was $900,000 in the second quarter in continuation of the large order of $1.4 million in the first quarter and in line with the target single digit growth anticipated for the full year. We continued to work with the government towards lowering the AHI criteria for home sleep apnea testing in a few patients with confidence that this will enable us to accelerate growth in the region. I'd like to spend few minutes discussing the reimbursement landscape and this will most likely have an important impact on our business, particularly in the second half of this year. Turning to the G-code headwind, late May Medicare Administrative Contractors, including Novitas and First Coast and followed by NGS and APS in early July collectively representing approximately 60% of the Medicare population, have effectively eliminated a decade old loophole that undermined the Medicare reimbursement advantage WatchPAT has as compared to the other leading home sleep apnea testing devices on the market. At the background, due to our differentiated WatchPAT platform, our devices are FDA cleared to measure and/or record sleep time unlike other devices in the market and therefore the use of WatchPAT qualifies providers to use the CPT 95800 code which according to CMS 2021 fee schedule pays roughly 66% more than the vast majority of other HSATs in the market qualified under CPT 95806 code. However, due to the temporary G-code which described defense service CPT code 95806 that were never eliminated by CMS despite a recommendation from the AMA in 2019, G-0399 providers in several States could use the comparative HSATs and use this G-code and get paid much higher rates, at times more than double the appropriate rates. Novitas as well as the other three MACs recognized this in their most recent decision that equalized the temporary G-0399 rate to the most updated CPT 95806, practically closing the loophole. We believe that in those States were the rates difference is significant, such as Pennsylvania and Massachusetts, Itmar will be able to capture additional market share going forward. Regarding the CMS calendar year 2022 Medicare physician fees schedule proposed ruling impacting HSAT cost was released early July. CMS proposed an approximately 10% cut to code 95800 used by WatchPAT and approximately 5% reduction for the other HSAT code 95806. The proposal noted the rationale for their judgment is due to increase in the pricing for clinical labor and then decrease the value for supplies and equipment. As a result, codes mostly dependent on supply and equipment rather than the labor like 95800 were more significantly impacted. We are disappointed with the draft proposal as we believe it does not adequately reflect the value for technology and remain steadfast in our pursuit of higher Medicare reimbursement. We're now working to deliver comments during the open comment period. It is important to note however, under the newly proposed rates [ph] reimbursement under code 95800 used with WatchPAT would remain at roughly 60% higher than alternative HSATs. Now turning to innovation in our development pipeline, our focus is on identifying opportunities to increase the funnel of patients in the digital care pathway, and ultimately reaching the 80% undiagnosed and untreated OSA patients. Recently at SLEEP 2021, we introduced our SleePath dashboard that will enable subjective data collected from the patient through a smartphone app before and after the home sleep test. The objective is to improve the experience between health professionals and their patients, and facilitate more personalized sleep diagnostics. The new product empowers sleep and cardiology clinics with customizable management tools to enable accurate, fast and comprehensive sleep evaluations, reducing paperwork, increasing direct patient interaction and streamline the diagnosis. WatchPAT with SleePath is a digital solution for sleep positions to enable accurate, automated, subjective patient data collection and analyses, integrated to the sleep report that are critical to the interpretation of sleep study results. The solution is offered via the WatchPAT smartphone app and managed via the CloudPAT platform. We expect commercial rollout late August, while in the early stages, we are hearing tremendous excitement in the market for these breakthrough technology. Lastly, we continue to make great progress on the integration of our WatchPAT technology, and Spry Loop technology. We look forward to providing additional update. Turning to our outlook for the rest of the year, we did experience some pandemic related headwinds in certain geographic regions in Europe and Asia. However, this impact diminished in recent months. Encouragingly, we've increased our inventory of both raw materials and finished goods to act as a buffer to longer supply chain and shipment times in the market. Based on the momentum, we continue to see in our core sleep business, and the market expansion opportunity from G-code loophole reductions, combined with increasing awareness among cardiologists give us the confidence to raise our full-year 2021 revenue guidance. In summary, we're making great progress towards our goal of owning the sleep patient pathway and are singularly focused on advancing home sleep medicine to benefit the 80% population of undiagnosed and untreated OSA patients. And with that, I'd like to turn the call over to Shy Basson, our CFO for a more detailed review of our first quarter 2021 financial results and guidance. Shy?

Thank you, Gilad. Revenue for the three months ended June 30 2021 was $12.6 million, a 41% increase from $8.9 million in the same period of the prior year. WatchPAT revenue was $12 million, an increase of 52% over the second quarter of 2020, and 10% over the first quarter with the sales growth occurring mainly in the U.S. U.S. WatchPAT revenue was $10.1 million, a 53% increase over the second quarter of 2020, and a 20% increase from the prior quarter, driven mainly by WatchPAT ONE as well as WatchPAT Direct sales. Sales from disposable and renewable products, including WatchPAT ONE comprised approximately 77% of WatchPAT revenue in the U.S. compared to a approximately 75% in the first quarter of 2020. Turning our attention to the rest of the P&L, for the second quarter of 2021, IFRS gross margin was 71% compared to 68% in the second quarter of 2020. In addition, our non-IFRS gross margin was 73%, a 100 basis points sequential improvement over the first quarter and in line with our expectations to reach our target of 75% by year-end 2021. Our continued gross margin improvement was once again largely due to the implementation of further cost reduction in design and production, mainly on WatchPAT ONE. IFRS-operating loss for the second quarter was $4.6 million compared to $3.2 million in the same quarter of the prior year. Non-IFRS operating loss for the second quarter of 2021 was $3.1 million, compared to $2.4 million in the same quarter of the prior year. The increase in non-IFRS operating expenses was primarily attributed to the following factors. Selling and marketing expenses due to the expansion of field force related expenses, resuming of travel and increase of consulting fees relating to reimbursement in the U.S., Australia, China and Japan, an increase of approximately $0.7 million in R&D expenses associated with SPRY technology development and an increase in personnel to support product development, mainly related for our digital health platform, and general administrative expenses, mainly associated with an increase in payroll and related expenses due to the increase in personnel, increase in directors’ and officers’ insurance premiums, as well as an increase in legal expenses, including a commercial dispute in defense of our intellectual property initiated by us. Net loss for the quarter was $4.7 million, compared to $3.2 million in the same period of the prior year. Non-IFRS net loss was $3.2 million, compared to $2.4 million in the same quarter of the prior year. Non-IFRS loss per ADS for the quarter was $0.20, compared to $0.17 in the second quarter of 2020. As of June 30 2021, we have cash and cash equivalents and short term bank deposits of $73 million. Last, we are raising our full-year revenue guidance to a range of $53 million to $54 million, representing growth of 29% to 32% over 2020 revenues. The Itamar team remains focused on and excited about the opportunities we have and Gilad and I share the greatest confidence in our future. With that, we will now open the lines up to questions. Operator?

[Operator Instructions] Our first question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Your line is now open.

Hi Gilad and Shy, how are you?

Very good Jeff, good morning.

Hey Jeff, how are you? Thank you for joining.

Just a couple from our end. First, could you talk a little bit about current composition of 301 at about one quarter and three quarters, and how that may play out into the balance of this year in 2022?

Yes thank you, Jeff. This is Shy. So the WatchPAT ONE comprised approximately 35% of our U.S. revenues. It ranges between 35% to 40% and it's taking a dominant part of our U.S. revenues. We are seeing the WatchPAT ONE revenues growing every quarter, as we've disclosed, we've added 121 new customers on the WatchPAT ONE in Q2 of 2021. The WatchPAT 300 is taking place in several places, the multiuse, one on the WatchPAT Direct service that we are providing. WatchPAT Direct is a growing segment as of us in, we said it all alone. Today we are serving about, 3500 tests a month via our WatchPAT Direct service. Second, we still face some capital sales as we disclosed our disposable sales are about 78%. So, you could do the math and get the capital sales that we're facing. So we're seeing a demand on the WatchPAT 300 as well. As we move forward to Q3 and Q4, we do believe that WatchPAT ONE will continue to gain dominant share of approximately 35% to 40% of our U.S. revenues, and the rest will be WatchPAT Direct disposables in capital.

Jeff, I would just add one forward looking statements that in anticipation of the G-code being important portion of our growth prospects in the next few quarters and given the drive for those clients in the past were reimbursement rate, it might be that we'll see a higher mix of WatchPAT 300 given the price point is somewhat lower.

Got it, that's very helpful. And then secondly for us, just Gilad could you can you kind of walk us through how you are thinking about current and future terms and then you talked about the 2000 cardiologists in the U.S., but can you give us some more flavor for revenue by segment what you're seeing, and I guess in particular I want to know more about cardiology?

Okay in terms just to make sure I'm getting the question right, you talk about total available market, right?

Yes, sir.

Okay, so, the core sleep market has been historically defined in the U.S. by roughly, and you can find it in our investment presentation, roughly 5.2 million to 5.3 million tests a year, that's including both in-lab test and home sleep test, and I think that's the best definition of the market. So if you take these 5.2 million tests at the ASP of potentially $75, you reach a kind of the term market of, I know $400 million is roughly right. So that's defined the course, equal opportunity and it's limited by the number of sleep doctors available in the U.S. Of course, adjacent to it, there is outside U.S. opportunities which we're working on, so you can make assumptions about that market size as well move upwards. From a cardiology perspective of course, those are different numbers and that's our main strategy we're pursuing that into bigger time. In our point of view, each cardiology patient needs to be evaluated for what we and the science described as independent risk factor, sleep apnea and need to be tested. The new AHA guidelines are actually calling explicitly for evaluation of each cardiovascular patient for sleep apnea, and even they are saying in their abstract portion to reconfirm therapy is effective. So this kind of opportunity with 54 million patients just in the U.S. need to be evaluated for sleep apnea annually can yield the $2.7 and higher billion dollar type opportunity. And the latest AHA scientific statement is very encouraging and that's why we have highlighted in the call.

That's perfect and then lastly if I could one more. Sorry, you mentioned reaching 75% gross margins by the end of this year, so coming out the end of the year 75 and you think that's maintainable going forward?

Yes, the answer is, that's our goal and we've presented an improvement on an IFRS basis in Q2 to 73%, and we have the path so we'll probably be in 74 and then by the end of year 75. I will give one disclaimer on the COVID-19. Obviously COVID-19 and the Delta virus will continue and there will be a closure in our production facility or generally in Israel, and we'll have to move to two shifts, like we did a year ago, that may increase our production cost and maybe a smart bit the gross margin. This is not the case at this point of time, but the Delta is spreading very fast, so I hope we don't get into closures and the status we've been last year, but at this point of time, as we stated on this script, 75% is the target, and we are on target for Q4.

Perfect. Thank you very much for taking our questions.

Thank you, Jeff.

Thank you. Our next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is now open.

Thanks for taking my questions. Gilad or Shy, can you talk about the new customer additions? I know there's an acceleration coming out of Q1, especially on the new customer side to Itamar. Those folks is it a function of the G-code, is it really more just getting access to WatchPAT ONE? What are you seeing there as far as those new customers at a larger facilities, just any color on that would be helpful, what that might mean for the back half and even into 2022?

Right, no, great question Matt, good morning. So, we practically, we see that growth that we've reported driven to a large extent by new customers. It's a mix of core sleep customers that we're penetrating into. I would say that's the biggest portion, that's historically preferred or got used to the airflow they train in the university or the medical school, or the fellowship, and really had no, it could take efforts to study and learn a new signal. The situation with COVID, but later on, I would say what I define as crossing the chasm with WatchPAT being what we believe is the number one market share position in the U.S. from unique perspective got attention. We get attention of those customers, and they are asking to be educated, and then they're getting on board. And it's a process, it takes time, and what we see is the gradual on-boarding of all those customers that you know COVID driven to expect its first experience. The second big portion is cardiology. In July, we've seen an all time high records for the number of tests that came from cardiology offices, as well direct cardiology sales force. We see very good progress in the dental market as well, recovery in the dental market. So it's really all over the place. It's the recognition of the technology. It's the fact that we have number one position in the market right now.

Got it, thanks for that. And then on the reimbursement side, you've mentioned that the change of the G-code is starting to get the attention of clinicians. Can you try to characterize that, I don't know if you can quantify it any way, but just what you're seeing as far as maybe new interest in WatchPAT and WatchPAT ONE as a result of that G-code change? And then I just want to make sure I'm clear on the proposed cut that you're seeing right now it's getting to that final, it's still a 60% premium versus all other sleep tests that are out there. So yes, it's down a little bit, but it's still a meaningful premium versus other sleep tests. Thanks so much.

Yes, great question. So I'll start with the G-code. Yes, we see really increased interest from States that the gap between the loophole G-code rate and the WatchPAT rate were big, for example in Pennsylvania. We're talking about a pre-adjustment G-code rate of $270 roughly versus a WatchPAT rate or WatchPAT service rates of $182, that's very significant. And now that that is gone, we see for example in those states in Pennsylvania, in Massachusetts, in Missouri, Louisiana, New Jersey, Washington DC, Florida, Illinois, we just see customers realizing that $60, $70 advantage for the G-code is gone, and now they're going to get not only the WatchPAT rate because it didn't use WatchPAT until now, they're going to get the airflow base rates which are much lower, it's $109, $117, $98, so they're starting to ramp up. It takes time because we need to integrate WatchPAT to their system, they need to be educated on the signals, but we see the results already in our numbers. It's not material yet, but the interest is very material. With regards to the proposed CMS reimbursement rates, yes, unfortunate but still, we don't think anything materially changed or change at all. As described, the gap of 60% in favor of WatchPAT is providing more than the price differences, and therefore it should not change behavior or decision making in any way, shape or form we can see right now.

Got it, thanks so much.

Thank you, sir.

Thank you, Matt.

Thank you. Our next question comes from the line of Josh Jennings from Cowen. Your line is now open.

Good morning Gilad and Shy. Thank you. I have a question on the reimbursement just with the decisions by the local MACs, 60% of the Medicare population. Now that you [indiscernible] closed and at how would the investors think about the remaining MACs even with 40% in Medicare population? Should we be expecting those other local MACs to follow because CMS still remains the cheaper at the national level? In 2022 should be expecting 100% Medicare population to the first G-code probably closed for the time being Medicare population?

Yes, good morning, Josh. Great question. I hope, I heard you, you were a little bit weak, but I'll just repeat the question. So you asking about the remaining 40% or 42% of the Medicare population under the remaining MACs with a G-code, is that accurate?

That's right, exactly. Yes and could CMS [indiscernible] G-code at the national level for 2022?

Okay, perfect. So, while we cannot of course determine or predict when they will make the move to correct the G-code loophole, it is very common and likely that the remaining MACs follow the leading MACs in adjusting their policies, especially when savings are readily available and they don't have to be the first to make the move. So we anticipate the remaining MACs to adjust the G-codes. Furthermore, if CMS, when they get organized after the new administration of course change will follow the AMA recommendation to actually eliminate the G-code, not only to equalize the payment rate to the right rate, but to actually make them remove their G-code as an option, which we know the AMA recommended to do, then of course it will be a national decision and G-codes will not be available, both for Medicare and commercial payers as well. So we have very high confidence that in the next few months we will see the equalization and later on the elimination of the G-code happening.

Just a follow up, can you just talk about the sales forces strategy in these regions where the G-code loophole has been closed, how aggressive have they been [indiscernible] continue to our success stories so far?

Yes, absolutely. So we've -- of course we had in some of those territories, we had, I would say first coverage, some of them even no coverage. For example, in Massachusetts we had pulled few states together because the lack of opportunity there due to GG-code. Now of course we're making sure that we on-boarding full time reps in each of those states. The opportunity is ample. We've converted few 10s of accounts already, so we believe that, we see early results, the message resonating, both with the economic stakeholders the CFOs of the accounts as well as well as doctors, especially the early adopters are the private practice, because it's your money today, but also the larger facilities, nobody likes to lose money. So when we were moving with the sales force aggressively in those six or seven states that we have identified having the largest gaps.

Okay, one last one, just on the international business and about 2022 have additional potential, probably investment decisions where they could open up France and Germany, and you were talking about Japan in your prepared remarks, but maybe just help us think about the set up for 2022 and potential positive decisions and that could occur that it could open up a couple of regions next year? What that means [indiscernible]. Thanks for taking the questions.

No great, thank you. So from a market access perspective, the way I prioritize the new countries outside the U.S. that we assume will have access to, the earliest priority is France. France is the largest home sleep test market in Europe, with roughly 600,000 home sleep tests conducted in 2019. We have no market share, zero market share in France right now, outside of some research, and the reason is that the French reimbursement guidelines require an airflow, technical airflow is a channel to qualify for reimbursement and as you know WatchPAT does not have airflow channel. We anticipate early October to launch a WatchPAT with an airflow channel in France and participate in the market. We see a very big interest from providers there to have access to our technology because of its advantages. And the fact that we will have a technical airflow channel, as far as they're concerned, they can just ignore it, but at least it will qualify for reimbursements. That's the lowest hanging fruit and it should have impact if we're going to get CE clearance in time in the fourth quarter. We also submitted reimbursement coverage request in Australia. There is no home sleep test at all coverage in Australia, but from reimbursement we are working with the agencies and the government agencies there to progress the proposal. And then of course, while we cannot determine when and what the decision would be, we're very active there and that's the next opportunity. The third opportunity is Japan. I think we described in the past the biggest problem in Japan is that SleePath reimbursement require AHI very high AHI, 40 or higher from home sleep tests to qualify for SleePath reimbursement. If AHI is less than 40 for home sleep tests, which is very minor amount of patients, patients need to go to in-lab PSG and then if the AHI is 20 or higher they qualify to SleePath. That's of course make home sleep testing very unattractive option for providers, because most patient needs to go to in-lab anyway. We work with the Heart Rhythm Society and the Cardiovascular Society in Japan to ask the government to make exception for cardiovascular patients on that limitation. And we got the Heart Rhythm to endorse the request and the Cardiovascular Society to endorse the request. So we anticipate somewhere Q2 next year for that rule to get in place. And of course, full disclaimer, we cannot guarantee or anticipate the government, but it looks positive right now.

Thanks a lot.

Thank you very much.

Thank you. Our next question comes from the line of Richard Newitter from SVB Leerink. Your line is now open.

Hi, this is Jaime on for Rich. Thanks for taking my questions. A couple from me. I'll start off with just the cardiology segment. Curious, what do you view as the most needle moving factor and really driving an inflection in this segment? Is it still more data to be published or do you see the new AHA guidelines as something that could be a tipping point?

Hi Jaime, good morning. AHA guidelines are very important because as you know, it's a formal document, scientific statement with very detailed evidence listed and strong recommendation. It's obviously very important for the providers, it's also very important for us as a reference for our sales efforts, so that should materially help and we made the point of it in our in our call today. We also believe that continuously improving our WatchPAT TurnKey offerings, which is truly a digital care pathway solution, effortless for the cardiologists. The awareness around that offering is -- it's critical for our success. Most cardiologists we call on, they understand the clinical benefits, they worry about the work that managing the patient for sleep apnea will impose on them and their practice. And once we educate them about WatchPAT TurnKey the fact that it’s really a referring program to a digital care pathway, they are open for that opportunities. At the last Heart Rhythm Society meeting few weeks ago, that was our main message and it was very well received. So those are the two factors I think, awareness of the offerings and the backup of the scientific societies and the physician associations.

Thank you. That's helpful. On just -- you've talked about the continuing momentum into I guess the second half. So I'm just curious if there's anything you'd call out in terms of a quarterly cadence and how we should be thinking about the back half ramp or is it just kind of continued sequential growth? So that's one question and then an additional follow up is just on the Philips CPAP recall, just any thoughts that you guys might have on how that might be impacting your business would be helpful? Thanks.

Hey Jaime, I'll take the first question and Gilad will take the second question. So from a cadence perspective in the second half, obviously, if you look traditionally, two, three years ago, or two, three years back, our second half is stronger than our first half. Q3 is the end of budgeted VA in other facilities and we're seeing a lot of flashes over there in definitely Q4. And well, also co-pay is coming into fruition towards the end of the year, and we're seeing much more HSTs being conducted in the second part of the year. So from a cadence perspective, we do believe that a Q3 will face a growth and also in Q4, Q4 will be stronger than Q3. But if you if you fluctuate the growth that we've seen so far, which is about a 40% and the guidance that we gave of between $53 million and $54 million, which represents approximately 30% growth, it will be a bit slower growth than we faced in Q2 and Q1 compared to 2020, just because of Q3 and Q4 of 2020 were very strong quarters post COVID-19 of last year's. So that's how you should think about cadence of growth going forward.

And with regards to the Philips recall, of course, it's a very material event in our space. From comments, publicly made both by Philips and ResMed it will take them between six and 12 months to catch up with demand, both on the replacement and new fulfillment. We of course, right now we haven't seen any impact to our business, but we -- if you ask me, what could be the risk, the risk could be this, if the shortage will persist, and providers will not get sufficient supply, they might slow down their testing rates just because of course the, I would say psychology of patient being tested and that not having access. What we do in parallel, which I think is very powerful, we create a lot of dialogues around alternative therapies and providers are very interested in alternative therapies in particular mandibular devices. There is a lot of interest in how those devices can provide the stop-gap opportunity until CPAP supply is back and running. So we hope that that will be sufficient to allow providers to continue their business as usual, as we've seen so far.

That's helpful. Thanks, guys for taking my questions.

Thank you. Our next question comes from the line of Ram Selvaraju from H.C. Wainwright. Your line is now open.

Q –Unidentified Analyst: Hi, this is Boopalan [ph] calling in for Ram Selvaraju. Thanks for taking my question. So firstly, I'd just like to hear your thoughts on enhancements to the WatchPAT product line. So what are some of the preliminary feedback and suggestions that you received from customers regarding these enhancements?

Hey, good morning, and thank you for your good questions. Yes, we indicated, the most exciting product we are rolling out as we speak is the WatchPAT, SleePath, which is an app based application on the existing WatchPAT ONE app that allows physicians to determine questionnaires, subjective questionnaires before the test is taken, read the test and after the test is completed. Today, they either don't do it at all, or doing it in paperwork, which of course in the COVID era is difficult. So both increasing the comprehensiveness of the test, like for instance, administering a questionnaire for the patient if they have insomnia, which is very critical for understanding the results. And then if they had, two servings of alcohol before the test or they exercised or smoked or took particular medication. Those are things that until today, there was no certainty for the physicians if they're going to get this information. Of course with gamified graphic user interface on an app that's increasing the likelihood of patient to participate in those questionnaires. And more importantly, it's all integrated seamlessly to the clinical reports. So it shows in context, as in part of the reports for the doctor, so a lot of interest around this. Second offering is a multi test, multi-night test we have rolled out with WatchPAT ONE. It's a niche, not because of the reimbursement challenges of course, not a lot of payers are paying for second and third nights, but technically it's available its available mostly for research and some special cases, so a lot of excitement around those.

And some more color on that. So the [indiscernible] are spreading, but at the same time the COVID restrictions are beginning to ease. So I'm just curious, what kind of impact will this have on home sleep apnea testing moving forward say for 2022? I mean end of till this year, as well as 2022?

Yes, we have not quantified the impact of the new innovation on our business, but we believe it will continue to drive both stickiness for WatchPAT ONE, because it's required an app to operate and WatchPAT ONE is the product that have an app. So that should be very important for stickiness as well as adoption of the WatchPAT ONE by providers that may be more cost sensitive. But in the particular cases that, that kind of solution will help they will administer higher ASP, higher selling price product, which is the WatchPAT ONE.

Thanks. One final one from me. So how do you expect the R&D cost to evolve for the rest of the year on for 2022? Thank you.

We believe that the R&D costs that you've seen in Q2 will continue into Q3 and Q4. We don't anticipate any material growth on the R&D. Bear in mind that Q2 was the first quarter that Spry, the asset that we've purchased and the entire team was part of R&D cost. And we also disclosed as part of this script that the cost was 700K a quarter, excluding the depreciation on the intangible assets that we've purchased. So if you take the Q2 R&D cost, and there will be maybe a slight increase in Q3 and Q4, but generally that should be the rhythm until the end of the year.

That's it from me. Thanks for your time.

Thank you very much.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Gilad Glick for closing remarks.

Thank you very much, operator. I would like to thank everybody for participating this morning and wish everybody a healthy and safe continuation of the year. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.