iRhythm Holdings, Inc. (IRTC)
SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3841 Surgical & Medical Instruments & Apparatus
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1388658. Latest filing source: 0001388658-26-000011.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 747,138,000 | USD | 2025 | 2026-02-19 |
| Net income | -44,551,000 | USD | 2025 | 2026-02-19 |
| Assets | 1,020,042,000 | USD | 2025 | 2026-02-19 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-19. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001388658.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 64,072,000 | 99,129,000 | 147,277,000 | 214,552,000 | 265,166,000 | 322,825,000 | 410,921,000 | 492,681,000 | 591,839,000 | 747,138,000 |
| Net income | -20,903,000 | -29,740,000 | -50,378,000 | -54,568,000 | -43,830,000 | -101,361,000 | -116,155,000 | -123,406,000 | -113,289,000 | -44,551,000 |
| Operating income | -15,582,000 | -27,591,000 | -45,691,000 | -54,755,000 | -43,673,000 | -99,943,000 | -113,784,000 | -125,161,000 | -115,505,000 | -57,407,000 |
| Gross profit | 43,189,000 | 70,926,000 | 108,482,000 | 162,067,000 | 194,889,000 | 213,567,000 | 281,632,000 | 331,806,000 | 407,531,000 | 527,250,000 |
| Diluted EPS | -2.16 | -1.58 | -3.46 | -3.88 | -4.04 | -3.63 | -1.39 | |||
| Operating cash flow | -16,651,000 | -14,911,000 | -29,093,000 | -21,863,000 | -13,759,000 | -37,753,000 | -23,012,000 | -50,101,000 | 3,390,000 | 80,863,000 |
| Capital expenditures | 2,763,000 | 3,562,000 | 5,180,000 | 20,457,000 | 13,551,000 | 28,067,000 | 29,830,000 | 40,424,000 | 33,942,000 | 46,342,000 |
| Share buybacks | 0.00 | 0.00 | 25,000,000 | 0.00 | ||||||
| Assets | 138,156,000 | 133,123,000 | 117,523,000 | 306,212,000 | 511,739,000 | 462,967,000 | 448,222,000 | 433,144,000 | 931,449,000 | 1,020,042,000 |
| Liabilities | 45,594,000 | 53,570,000 | 65,386,000 | 170,803,000 | 170,127,000 | 183,452,000 | 208,410,000 | 223,047,000 | 840,541,000 | 867,296,000 |
| Stockholders' equity | 93,041,000 | 79,341,000 | 52,137,000 | 135,409,000 | 341,612,000 | 279,515,000 | 239,812,000 | 210,097,000 | 90,908,000 | 152,746,000 |
| Cash and cash equivalents | 51,643,000 | 8,671,000 | 20,023,000 | 20,462,000 | 88,628,000 | 127,562,000 | 78,832,000 | 36,173,000 | 419,597,000 | 236,012,000 |
| Free cash flow | -19,414,000 | -18,473,000 | -34,273,000 | -42,320,000 | -27,310,000 | -65,820,000 | -52,842,000 | -90,525,000 | -30,552,000 | 34,521,000 |
Ratios
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | -32.62% | -30.00% | -34.21% | -25.43% | -16.53% | -31.40% | -28.27% | -25.05% | -19.14% | -5.96% |
| Operating margin | -24.32% | -27.83% | -31.02% | -25.52% | -16.47% | -30.96% | -27.69% | -25.40% | -19.52% | -7.68% |
| Return on equity | -22.47% | -37.48% | -96.63% | -40.30% | -12.83% | -36.26% | -48.44% | -58.74% | -124.62% | -29.17% |
| Return on assets | -15.13% | -22.34% | -42.87% | -17.82% | -8.56% | -21.89% | -25.91% | -28.49% | -12.16% | -4.37% |
| Liabilities / equity | 0.49 | 0.68 | 1.25 | 1.26 | 0.50 | 0.66 | 0.87 | 1.06 | 9.25 | 5.68 |
| Current ratio | 8.98 | 5.72 | 3.44 | 3.32 | 5.75 | 3.48 | 3.24 | 2.15 | 5.82 | 4.63 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-30. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001388658.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | -0.80 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | -0.71 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -1.29 | reported discrete quarter | ||
| 2023-Q2 | 2023-03-31 | -39,109,000 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 124,130,000 | -0.61 | reported discrete quarter | |
| 2023-Q3 | 2023-06-30 | -18,482,000 | reported discrete quarter | ||
| 2023-Q3 | 2023-09-30 | 124,604,000 | -0.89 | reported discrete quarter | |
| 2023-Q4 | 2023-12-31 | 132,511,000 | -38,699,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 131,929,000 | -45,667,000 | -1.47 | reported discrete quarter |
| 2024-Q2 | 2024-03-31 | -45,667,000 | reported discrete quarter | ||
| 2024-Q2 | 2024-06-30 | 148,047,000 | -0.65 | reported discrete quarter | |
| 2024-Q3 | 2024-06-30 | -20,107,000 | reported discrete quarter | ||
| 2024-Q3 | 2024-09-30 | 147,538,000 | -1.48 | reported discrete quarter | |
| 2024-Q4 | 2024-12-31 | 164,325,000 | -1,333,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 158,677,000 | -30,700,000 | -0.97 | reported discrete quarter |
| 2025-Q2 | 2025-03-31 | -30,700,000 | reported discrete quarter | ||
| 2025-Q2 | 2025-06-30 | 186,687,000 | -0.44 | reported discrete quarter | |
| 2025-Q3 | 2025-06-30 | -14,218,000 | reported discrete quarter | ||
| 2025-Q3 | 2025-09-30 | 192,884,000 | -0.16 | reported discrete quarter | |
| 2025-Q4 | 2025-12-31 | 208,890,000 | 5,579,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 199,390,000 | -13,933,000 | -0.43 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001388658-26-000039.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Quarterly Report on Form 10-Q entitled “Risk Factors.” We are a leading digital healthcare company that creates trusted solutions that detect, predict, and prevent disease. Our principal business is the design, development, and commercialization of device-based technology to provide ambulatory cardiac monitoring services that we believe allow clinicians to diagnose certain arrhythmias quicker and with greater efficiency than other services that rely on traditional technology. Each iRhythm ACM System combines a wire-free, patch-based, 14-day wearable biosensor (FDA-cleared, CE-marked and/or Japan PMDA-approved, as applicable) that continuously records ECG data with a proprietary, cloud-based data analytic software (FDA-cleared, CE-marked, and Japan PMDA-approved) to help physicians monitor patients and diagnose arrhythmias. Since first receiving clearance from FDA for our technology in 2009, we have supported physician and patient use of this technology and provided ACM services from our Medicare-enrolled IDTFs and with our qualified technicians. We have provided our iRhythm Services using our iRhythm ACM System. Since receiving FDA clearance, we have provided the iRhythm Services via more than twelve million patient reports and have collected over 3 billion hours of curated heartbeat data. We receive revenue for our iRhythm Services primarily from third-party payors, which include contracted third-party payors and CMS. The remainder of our revenue comes from healthcare institutions, which are typically hospitals or private physician practices, who purchase the iRhythm Services from us directly. We rely on third-party billing partners to submit patient claims and collect from commercial payors, certain government agencies, and patients. The following are iRhythm Services shown as a percentage of revenue: Three Months Ended March 31, 2026 2025 Contracted third-party payors 53% 53% Centers for Medicare & Medicaid Services 26% 24% Healthcare institutions 15% 17% Non-contracted third-party payors 6% 6% Key Business Metric Non-GAAP Financial Measure Adjusted EBITDA is a key measure we use to assess our financial performance and it is also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operational performance across our historical financial periods. In addition, this measure is frequently used by analysts, investors, and other interested parties to evaluate and assess performance. We define Adjusted EBITDA for a particular period as net loss before income tax provision, depreciation and amortization, interest expense, and interest income and as further adjusted for stock-based compensation expense, changes in fair value of strategic investments, impairment charges, business transformation costs, certain intellectual property litigation expenses and settlements, and loss on extinguishment of debt. Business transformation costs include costs associated with professional services, employee termination and relocation, third-party merger and acquisition, integration, and other costs to augment and restructure the organization, inclusive of both outsourced and offshore resources. 27 Adjusted EBITDA is a non-GAAP financial measure and is presented for supplemental informational purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP. This measure has certain limitations in that it does not include the impact of certain expenses that are reflected in our unaudited condensed consolidated statements of operations that are necessary to run our business. We may identify additional charges and gains to exclude from Adjusted EBITDA that are significant in nature which may impact period to period comparability and do not represent the ongoing results of the business. Other companies, including other companies in our industry, may not use this measure or may calculate this measure differently than as presented in this Quarterly Report on Form 10-Q, limiting its usefulness as a comparative measure. The following table presents a reconciliation of Net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA (in thousands): Three Months Ended March 31, 2026 2025 Net loss1 $ (13,933) $ (30,700) Interest expense 3,290 3,273 Interest income (4,879) (4,919) Changes in fair value of strategic investments (1,447) (843) Income tax provision 500 665 Depreciation and amortization 5,042 5,210 Stock-based compensation 21,491 23,344 Business transformation costs 346 503 Intellectual property litigation expenses 3,689 832 Adjusted EBITDA $ 14,099 $ (2,635) 1 Net loss for the three months ended March 31, 2026 and 2025, includes $0.3 million of acquired in-process research and development expense. Macroeconomic Factors Our future results of operations and liquidity could be materially adversely affected by macroeconomic factors contributing to delays in payments of outstanding receivables, supply chain disruptions or shortages, commodity price increases, tariffs on imports, and inflationary pressure, uncertain or reduced demand, a tightening labor market, and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers. The current macroeconomic environment is impacting our customers, both financially and operationally. Hospitals are experiencing staffing shortages and supply chain issues that could affect their ability to provide patient care. Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, interest rate volatility make access to credit more expensive, and unrealized losses decrease available cash reserves. As a consequence of the financial pressures and decreased profitability, some hospitals have indicated that they are lowering their capital investment plans and tightening their operational budgets. Private and government payors around the world are increasingly challenging the utilization and overall cost charged for medical products and services. The containment of healthcare costs has become a priority of governments on a global basis. Private and government payors may decline to cover and reimburse for claims or portions of claims. Climate-related events, including the increasing frequency of extreme weather events, natural disasters, or other catastrophic events may cause damage or disruption to our domestic or global customers or our operations, which could have an adverse effect on our business, operating results, and financial condition. We have adapted our iRhythm Services to meet the immediate needs of physicians, customers, and patients and significantly increased the utilization of our home enrollment service, which allows patients to receive and wear the single-use Zio patch without going to a healthcare facility. Our hybrid work arrangements and decision to pursue a sublease have previously resulted in an impairment of our right-of-use asset and related leasehold improvements and furniture and fixtures. As we continue to evaluate our global real estate footprint, we may incur additional impairment charges related to real property lease agreements. 28 Revenue, net The majority of our revenue is derived from provision of our iRhythm Services to customers in the United States. We earn revenue from the provision of our iRhythm Services primarily from contracted third-party payors, CMS, and healthcare institutions. A small percentage of our revenue is from non-contracted third-party payors. We recognize revenue on an accrual basis based on estimates of the amount that will ultimately be realized, which considers the amount submitted for payment and the amount received. These estimates require significant judgment by management. In determining the amount to accrue for the iRhythm Services (including a delivered report), we consider factors such as claim payment history from both payors and patient, available reimbursement, including whether there is a contract between us and the payor or healthcare institution and historical amount received for the service, and any current developments or changes that could impact reimbursement and healthcare institution payments. We have historically experienced reduced revenue during the third quarter, as well as during the year-end holiday season. We believe this is the result of physicians and patients taking vacations and patients electing to delay our monitoring services during the summer months or holidays. Revenue may be impacted by the outcome of adjudications with contracted and non-contracted payors, as well as changes in CMS reimbursement rates that are updated annually. Cost of Revenue Cost of revenue includes direct labor, material costs, tariffs, equipment and infrastructure expenses, amortization of internal-use software, allocated overhead, royalties, and shipping and handling. Direct labor includes payroll-related costs including stock-based compensation involved in manufacturing, clinical data curation, and customer service. Material costs include both the disposable materials costs of the Zio patches and amortization of the PCBAs. Each Zio XT and Zio monitor includes a PCBA, and each Zio AT includes a PCBA and gateway board, the cost of which is amortized over the expected useful life of the board. We expect cost of revenue to increase in absolute dollars as our revenue increases due to increased direct labor, direct materials, and variable spending, as well as amortization of internal-use software, partially offset by economies of scale in relation to fixed costs such as overhead and facilities costs. Our gross margin has been and will continue to be affected by a variety of factors, including increased contracting with third-party payors and institutional providers. We have in the past been able to increase our pricing as third-party payors become more familiar with the benefits of the iRhythm Services and move to contracted pricing arrangements. We expect increases to the cost of revenues due to increases to materials and electronics components pricing, labor rates, shipping rates, amortization of capitalized internal-use software, along with increases in the general level of inflation and tariffs on imports (which may complicate and increase costs associated with our supply chain). We expect to partially offset these increases by reduced costs from obtaining volume purchase discounts for our material costs, implementing scan-time algorithms and process improvements, automating manufacturing assembly and packaging, and through software-driven and other workflow enhancements to reduce labor costs. We experienced an improvement in our gross margin from 2023 to 2025, and continue to focus on improving annual gross margins in the future, while navigating through the macroeconomic and supply c [Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes included elsewhere in Item 8 of Part II of this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Annual Report on Form 10-K entitled “Risk Factors.”
Overview
We are a leading digital healthcare company that creates trusted solutions that detect, predict, and prevent disease. Our principal business is the design, development, and commercialization of device-based technology to provide ambulatory cardiac monitoring services that we believe allow clinicians to diagnose certain arrhythmias quicker and with greater efficiency than other services that rely on traditional technology.
Each iRhythm ACM System combines a wire-free, patch-based, 14-day wearable biosensor (FDA-cleared, CE-marked and/or Japan PMDA-approved, as applicable) that continuously records ECG data with a proprietary, cloud-based data analytic software (FDA-cleared, CE-marked, and Japan PMDA-approved) to help physicians monitor patients and diagnose arrhythmias.
Since first receiving clearance from FDA for our technology in 2009, we have supported physician and patient use of this technology and provided ACM services from our Medicare-enrolled IDTFs and with our qualified technicians. We have provided our iRhythm Services using our iRhythm ACM Systems. Since receiving FDA clearance, we have provided the iRhythm Services via more than twelve million patient reports and have collected almost 3 billion hours of curated heartbeat data.
We receive revenue for our iRhythm Services primarily from third-party payors, which include contracted third-party payors and CMS. The remainder of our revenue comes from healthcare institutions, which are typically hospitals or private physician practices, who purchase the iRhythm Services from us directly. We rely on third-party billing partners to submit patient claims and collect from commercial payors, certain government agencies, and patients.
The following are iRhythm Services shown as a percentage of revenue:
Year Ended December 31,
2025
2024
2023
Contracted third-party payors
52
%
53
%
54
%
Centers for Medicare and Medicaid
24
%
24
%
25
%
Healthcare institutions
17
%
16
%
14
%
Non-contracted third party payors
7
%
7
%
7
%
66
Key Business Metric
Non-GAAP Financial Measure
Adjusted EBITDA is a key measure we use to assess our financial performance and it is also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operational performance across our historical financial periods. In addition, this measure is frequently used by analysts, investors, and other interested parties to evaluate and assess performance.
We define Adjusted EBITDA for a particular period as net loss before income tax provision, depreciation and amortization, interest expense, and interest income and as further adjusted for stock-based compensation expense, changes in fair value of strategic investments, impairment charges, business transformation costs, certain intellectual property litigation expenses and settlements, and loss on extinguishment of debt. Beginning in the first quarter of 2025, certain intellectual property litigation expenses that we have excluded from Adjusted EBITDA include third-party attorneys' fees and expenses associated with patent litigation brought against iRhythm Technologies by Welch Allyn and BardyDx. Factors we considered in arriving at this determination to exclude these patent litigation costs from our Adjusted EBITDA include frequency and complexity of the patent litigation, the counterparty involved, and the expected magnitude of patent litigation costs for this matter. Business transformation costs include costs associated with professional services, employee termination and relocation, third-party merger and acquisition, integration, and other costs to augment and restructure the organization, inclusive of both outsourced and offshore resources.
Adjusted EBITDA is a non-GAAP financial measure and is presented for supplemental informational purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP. This measure has certain limitations in that it does not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. We may identify additional charges and gains to exclude from Adjusted EBITDA that are significant in nature which may impact period to period comparability and do not represent the ongoing results of the business. Other companies, including other companies in our industry, may not use this measure or may calculate this measure differently than as presented in this Annual Report on Form 10-K, limiting its usefulness as a comparative measure.
The following table presents a reconciliation of Net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA (in thousands):
Year Ended December 31,
2025
2024
2023
Net loss1
$
(44,551)
$
(113,289)
$
(123,406)
Interest expense
13,154
12,821
3,650
Interest income
(21,521)
(21,938)
(6,353)
Changes in fair value of strategic investments
(5,711)
(1,902)
—
Income tax provision
953
565
750
Depreciation and amortization
20,742
20,715
16,348
Stock-based compensation
88,283
75,978
77,204
Impairment charges
4,458
641
11,078
Business transformation costs
3,033
11,072
15,866
Intellectual property litigation expenses2
10,070
—
—
Loss on extinguishment of debt
—
7,589
—
Adjusted EBITDA
$
68,910
$
(7,748)
$
(4,863)
1 Net loss for the year ended December 31, 2025 and 2024 includes $3.0 million and $32.4 million of acquired in-process research and development expense, respectively.
2 Excludes third-party attorneys' fees and expenses associated with patent litigation brought against the Company by Welch Allyn, Inc. and Bardy Diagnostics, Inc., subsidiaries of Baxter International, Inc.
67
Macroeconomic Factors
Our future results of operations and liquidity could be materially adversely affected by macroeconomic factors contributing to delays in payments of outstanding receivables, supply chain disruptions, including shortages, tariffs on imports, and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.
The current macroeconomic environment is impacting our customers, both financially and operationally. Hospitals are experiencing staffing shortages and supply chain issues that could affect their ability to provide patient care. Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, interest rate volatility make access to credit more expensive, and unrealized losses decrease available cash reserves. As a consequence of the financial pressures and decreased profitability, some hospitals have indicated that they are lowering their capital investment plans and tightening their operational budgets. Private and government payors around the world are increasingly challenging the utilization and overall cost charged for medical products and services. The containment of healthcare costs has become a priority of governments on a global basis. Private and government payors may decline to cover and reimburse for claims or portions of claims. Climate-related events, including the increasing frequency of extreme weather events, natural disasters, or other catastrophic events may cause damage or disruption to our domestic or global customers or our operations, which could have an adverse effect on our business, operating results, and financial condition.
We have adapted our iRhythm Services to meet the immediate needs of physicians, customers, and patients and significantly increased the utilization of our home enrollment service, which allows patients to receive and wear the single-use Zio patch without going to a healthcare facility.
Our hybrid work arrangements and decision to pursue a sublease have previously resulted in an impairment of our right-of-use asset and related leasehold improvements and furniture and fixtures. As we continue to evaluate our global real estate footprint, we may incur additional impairment charges related to real property lease agreements.
Revenue, net
The majority of our revenue is derived from provision of our iRhythm Services to customers in the United States. We earn revenue from the provision of our iRhythm Services primarily from contracted third-party payors, CMS, and healthcare institutions. A small percentage of our revenue is from non-contracted third-party payors.
We recognize revenue on an accrual basis based on estimates of the amount that will ultimately be realized, which considers the amount submitted for payment and the amount received. These estimates require significant judgment by management. In determining the amount to accrue for the iRhythm Services (including a delivered report), we consider factors such as claim payment history from both payors and patient, available reimbursement, including whether there is a contract between us and the payor or healthcare institution and historical amount received for the service, and any current developments or changes that could impact reimbursement and healthcare institution payments.
We have historically experienced reduced revenue during the third quarter, as well as during the year-end holiday season. We believe this is the result of physicians and patients taking vacations and patients electing to delay our monitoring services during the summer months or holidays. Revenue may be impacted by the outcome of adjudications with contracted and non-contracted payors, as well as changes in CMS reimbursement rates that are updated annually.
Cost of Revenue
Cost of revenue includes direct labor, material costs, tariffs, equipment and infrastructure expenses, amortization of internal-use software, allocated overhead, royalties, and shipping and handling. Direct labor includes payroll-related costs including stock-based compensation involved in manufacturing, clinical data curation, and customer service. Material costs include both the disposable materials costs of the Zio patches and amortization of the PCBAs. Each Zio XT and Zio monitor includes a PCBA, and each Zio AT includes a PCBA and gateway board, the cost of which is amortized over the expected useful life of the board. We expect cost of revenue to increase in absolute dollars as our revenue increases due to increased direct labor, direct materials, and variable spending, as well as amortization of internal-use software, partially offset by economies of scale in relation to fixed costs such as overhead and facilities costs.
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Our gross margin has been and will continue to be affected by a variety of factors, including increased contracting with third-party payors and institutional providers. We have in the past been able to increase our pricing as third-party payors become more familiar with the benefits of the iRhythm Services and move to contracted pricing arrangements. We expect increases to the cost of revenues due to increases to materials and electronics components pricing, labor rates, shipping rates, amortization of capitalized internal-use software, along with increases in the general level of inflation and tariffs on imports (which may complicate and increase costs associated with our supply chain). We expect to partially offset these increases by reduced costs from obtaining volume purchase discounts for our material costs, implementing scan-time algorithms and process improvements, automating manufacturing assembly and packaging, and through software-driven and other workflow enhancements to reduce labor costs. We experienced an improvement in our gross margin from 2023 to 2025, and continue to focus on improving annual gross margins in the future, while navigating through the macroeconomic and supply chain headwinds discussed above that we expect to face.
Research and Development Expenses
We expense research and development costs as they are incurred. Research and development expenses include payroll-related costs, including stock-based compensation, consulting services, clinical studies, laboratory supplies, milestone payments and allocated facility overhead costs. We expect our research and development costs to increase in absolute dollars as we hire additional personnel to develop new product and service offerings, product enhancements, and clinical evidence.
Acquired In-Process Research and Development Expenses
Our in-process research and development (“IPR&D”) acquired in an asset acquisition for use in research and development activities with no alternative future use is expensed in the consolidated statements of operations.
Selling, General and Administrative Expenses
Our sales and marketing expenses consist of payroll-related costs, including stock-based compensation, sales commissions, travel expenses, consulting, public relations costs, direct marketing, tradeshow and promotional expenses, and allocated facility overhead costs.
Our general and administrative expenses consist primarily of payroll-related costs for executive, finance, legal and administrative personnel, including stock-based compensation. Other significant expenses include professional fees for legal and accounting services, consulting fees, recruiting fees, bad debt expense, third-party patient claims processing fees, business transformation, and travel expenses.
Impairment Charges
Impairment charges consist of amounts recorded to write down the carrying value of long-lived assets to fair value.
Interest Income
Interest income consists of interest income received on our cash and cash equivalents and marketable securities.
Interest Expense
Interest expense is attributable to borrowings under our loan agreements and 2029 Notes. See Note 9, Debt, in the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K (the “Consolidated Financial Statements”) for further information on our loan agreements.
Loss on Extinguishment of Debt
Loss on extinguishment of debt reflects the losses incurred in the early repayment of debt. See Note 9, Debt, in the notes to our Consolidated Financial Statements for further information on our loss on extinguishment of debt.
Other Income (Expense), Net
Other income (expense), net consists primarily of changes in fair value of our strategic loan and equity investments, as well as realized and unrealized foreign currency exchange gains or losses.
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Results of Operations
Comparison of the Years Ended December 31, 2024, and 2023
For discussion related to the results of operations and changes in financial condition for the year ended December 31, 2024 compared to the year ended December 31, 2023 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 20, 2025.
Comparison of the Years Ended December 31, 2025, and 2024
Year Ended December 31,
2025
% Revenue
2024
% Revenue
$ Change
% Change
(dollars in thousands, except percentages)*
Revenue, net
$
747,138
100
%
$
591,839
100
%
$
155,299
26
%
Cost of revenue
219,888
29
%
184,308
31
%
35,580
19
%
Gross profit
527,250
71
%
407,531
69
%
119,719
29
%
Operating expenses:
Research and development
84,610
11
%
71,459
12
%
13,151
18
%
Acquired in-process research and development
3,036
—
%
32,371
5
%
(29,335)
(91)
%
Selling, general and administrative
492,553
66
%
418,565
71
%
73,988
18
%
Impairment charges
4,458
1
%
641
—
%
3,817
595
%
Total operating expenses
584,657
78
%
523,036
88
%
61,621
12
%
Loss from operations
(57,407)
(8)
%
(115,505)
(20)
%
58,098
(50)
%
Interest and other income
Interest income
21,521
3
%
21,938
4
%
(417)
(2)
%
Interest expense
(13,154)
(2)
%
(12,821)
(2)
%
(333)
3
%
Loss on extinguishment of debt
—
—
%
(7,589)
(1)
%
7,589
N/M
Other income, net
5,442
1
%
1,253
—
%
4,189
334
%
Total interest and other income
13,809
2
%
2,781
—
%
11,028
397
%
Loss before income taxes
(43,598)
(6)
%
(112,724)
(19)
%
69,126
(61)
%
Income tax provision
953
—
%
565
—
%
388
69
%
Net loss
$
(44,551)
(6)
%
$
(113,289)
(19)
%
$
68,738
(61)
%
N/M - Not meaningful
* Certain numbers expressed may not sum due to rounding.
Revenue, net
Revenue increased by $155.3 million, or 26%, to $747.1 million during the year ended December 31, 2025, as compared to $591.8 million during the year ended December 31, 2024. The increase in revenue was primarily attributable to increases in the volume of iRhythm Services resulting from increased demand. We have experienced higher volumes from larger healthcare enterprise accounts which utilize both Zio monitor and Zio AT. Additionally, during the year ended December 31, 2025, Zio AT as a proportion of our total revenue volume grew significantly compared to the prior year primarily as a result of new customer account growth. Offsetting the revenue growth from volume and product mix were higher contractual allowance reserves recognized during the year ended December 31, 2025, as compared to the year ended December 31, 2024, resulting from higher payer claims denials from revenue growth associated with our contracted third-party payors and CMS. Overall average selling price slightly increased for the year ended December 31, 2025, as compared to the prior year.
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Cost of Revenue
Cost of revenue increased by $35.6 million, or 19%, to $219.9 million during the year ended December 31, 2025, as compared to $184.3 million during the year ended December 31, 2024. The majority of our increase in cost of revenue is due to increases in headcount, component costs (inclusive of tariffs), and amortization costs related to Zio monitor and Zio AT PCBAs. Additionally, our cost of revenue increase was associated with material scrap costs and freight costs associated with the increase in volume of iRhythm Services.
Research and Development Expenses
Research and development expenses increased by $13.2 million, or 18%, to $84.6 million during the year ended December 31, 2025, as compared to $71.5 million during the year ended December 31, 2024. The increase in research and development expenses during the year ended December 31, 2025 was primarily due to higher employee-related costs (including stock-based compensation), which include supporting ongoing FDA remediation and sustaining activities, product development consulting costs, and costs to further development, enhancement, and functionality of our current and future product offerings.
Acquired In-Process Research and Development
Acquired IPR&D expenses decreased by $29.3 million, or 91%, to $3.0 million during the year ended December 31, 2025, as compared to $32.4 million during the year ended December 31, 2024. The decrease in Acquired IPR&D expense for the year ended December 31, 2025 was due to the Technology License Agreement (the “License Agreement”) that we entered into with BioIntelliSense, Inc. (“BioIS”) during the third quarter of 2024. The $32.1 million charge for acquired IPR&D in the third quarter of 2024 consisted of an upfront license acquisition fee of $15.0 million and a license acquisition fee of $17.1 million related to contingent consideration payable upon the achievement of regulatory milestones. For the year ended December 31, 2025, we recognized acquired IPR&D expenses of $3.0 million, as additional license acquisition fee related to such contingent consideration. See Note 5, Fair Value Measurements, and Note 8, Commitments and Contingencies, in the notes to our Consolidated Financial Statements for further details.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $74.0 million, or 18%, to $492.6 million during the year ended December 31, 2025, as compared to $418.6 million during the year ended December 31, 2024. The increase in selling, general and administrative expenses was primarily attributable to increases in headcount-related costs (including stock-based compensation), legal and professional fees, provisions for credit losses, and claims processing fees. Additionally, during the year ended December 31, 2025 we incurred $10.1 million related to certain intellectual property litigation costs, which were not incurred during the year ended December 31, 2024. We incurred $3.0 million of business transformation costs during the year ended December 31, 2025, as compared to $11.1 million for the year ended December 31, 2024. Our business transformation costs for both periods primarily related to severance, professional fees, and third-party merger and acquisition fees.
Impairment Charges
Impairment expenses increased by $3.8 million, or 595%, to $4.5 million during the year ended December 31, 2025, as compared to $0.6 million during the year ended December 31, 2024. During the second quarter of 2025, we recorded impairment charges of $2.5 million, associated with capitalized internal-use software in development relating to the Zio Watch with our clinically integrated ZEUS system. We do not intend to commercially launch the Zio Watch. During the fourth quarter of 2025, we recorded an additional $2.0 million of impairment charges related to capitalized internal-use software projects in development not expected to be completed and placed in-service.
Interest Income
Interest income decreased by $0.4 million to $21.5 million during the year ended December 31, 2025, as compared to $21.9 million during the year ended December 31, 2024. The decrease was attributable to lower interest rates on invested balances, as compared to the same period in 2024, offset by higher average invested balances in 2025, primarily as a result of the borrowing under the 2029 Notes in March 2024.
Interest Expense
Interest expense increased by $0.3 million to $13.2 million during the year ended December 31, 2025, as compared to $12.8 million during the year ended December 31, 2024. The increase in interest expense during the year ended December 31, 2025, is primarily attributable to the $661.3 million 2029 Notes borrowed in March 2024.
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Loss on Extinguishment of Debt
Loss on extinguishment of debt was $7.6 million during the year ended December 31, 2024. The loss was related to the early extinguishment of both the SVB Loan Agreement and the Braidwell Term Loan Facility (each as defined below) during the first quarter of 2024. See Note 9, Debt, to our Consolidated Financial Statements for more information.
Other Income, Net
Other income, net increased by $4.2 million, or 334%, to $5.4 million during the year ended December 31, 2025, as compared to $1.3 million during the year ended December 31, 2024. The increase was primarily attributable to the changes in the fair value of our strategic debt and equity investments recognized during the year ended December 31, 2025.
Income Tax Provision
Income tax provision increased by $0.4 million, or 69%, to $1.0 million, during the year ended December 31, 2025, as compared to $0.6 million during the year ended December 31, 2024. The increase was primarily attributable to the increase in state income taxes. Due to the uncertainties surrounding the realization of the U.S. deferred tax assets through future taxable income, we have provided a full valuation allowance against our deferred tax assets, and therefore, no benefit has been recognized for the U.S. net operating loss carryforwards and other deferred tax assets.
On July 4, 2025, the United States enacted tax reform legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). Included in this legislation are provisions that allow for the immediate expensing of domestic U.S. research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The provisions of the OBBBA did not have a material impact on our Consolidated Financial Statements for the year ended December 31, 2025.
Liquidity and Capital Resources
Overview
As of December 31, 2025, we had cash and cash equivalents of $236.0 million, marketable securities of $347.8 million, and accounts receivable of $75.7 million. We continuously review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the current macroeconomic environment, including inflation, interest rate volatility, and potential instability in the global banking system. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. During the first quarter of 2024, we experienced a temporary delay in the billing of our contracted and non-contracted payer customers, performed by our third-party claims processing vendor. The delay was due to a cybersecurity incident experienced by Change Healthcare, a division of UnitedHealth Group, in which our third-party vendor did engage for services relating to billing and collections. While we substantially cleared the billing backlog as of the end of the first quarter of 2024, the delay in billing resulted in a temporary delay in our cash collections. We have received the majority of our cash collections from the delayed billings. Over the course of 2025, we experienced higher levels of contractual adjustments associated with our revenue growth and gross accounts receivable. Additionally, through our revenue cycle management transformation we have focused our efforts in part on resolving payor claims denials and unpaid portions of patient-responsible balances in a more timely manner.
We believe that our current cash, cash equivalents, and marketable securities balances, together with income to be derived from the sales of our iRhythm Services, will be sufficient to meet our liquidity requirements for at least the next 12 months.
Under the terms of the Development Collaboration Agreement dated September 3, 2019, as amended, between us and Verily Life Sciences LLC ("VLS") and Verily Ireland Limited ("VIL" and together with VLS, "Verily"), we agreed to make milestone payments to Verily up to an aggregate of $12.75 million upon achievement of various development and regulatory milestones. During the year ended December 31, 2025, we formally terminated the Development Collaboration Agreement with Verily, including our obligation to make further milestone payments. Through termination of the Development Collaboration Agreement, we and Verily achieved milestones that resulted in payments from us to Verily totaling $11.0 million. In the second quarter of 2025, we recorded an impairment charge of $2.5 million associated with capitalized internal-use software in development relating to the Zio Watch with our clinically integrated ZEUS system. We continue to expand our product development program into other clinical-grade wearables to detect and characterize arrhythmias while integrating with clinicians' workflows.
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On August 30, 2024, we entered into a Technology License Agreement (as amended, the “License Agreement”) with BioIS, pursuant to which (i) we will receive a perpetual fully paid up license to certain of BioIS’ intellectual property, technology and products for research, development and commercialization of potential next generation products and services in certain fields of use, including (x) an exclusive license to develop and commercialize pulse oximetry, accelerometry, and trending non-invasive blood pressure technologies for use within our ambulatory cardiac monitoring products and services, and (y) a limited, non-exclusive license to develop and commercialize products and services for use in unattended, home-based diagnostic testing and assessment of central and obstructive sleep apnea, and (ii) iRhythm and BioIS agreed to negotiate in good faith a supply agreement for pulse oximetry hardware.
Under the terms of the License Agreement, during the third quarter of 2024 we paid BioIS an upfront fee of $15.0 million in cash consideration. In connection with the License Agreement, we also purchased an aggregate of $40.0 million of convertible promissory notes from BioIS of which $20.0 million of the convertible promissory notes (“Milestone Notes”) were designated for satisfaction of our regulatory milestone payment obligations. The Milestone Notes, plus accrued and unpaid interest, if any, shall be cancelled, if outstanding, upon the achievement of these regulatory milestones up through December 31, 2026. In June 2025, BioIS achieved the first of two regulatory milestones. As of December 31, 2025, we and BioIS are in the process of completing all required contractual conditions to cancel $10.0 million in Milestone Notes plus accrued and unpaid interest.
The following table summarizes our cash flows for the years indicated (in thousands):
Year Ended December 31,
2025
2024
$ Change
Net cash provided by operating activities
$
80,863
$
3,390
$
77,473
Net cash used in investing activities
(277,056)
(122,983)
(154,073)
Net cash provided by financing activities
12,607
511,381
(498,774)
Operating Activities
During the year ended December 31, 2025, cash provided by operating activities was $80.9 million, as compared to $3.4 million cash provided by operating activities during the year ended December 31, 2024. Cash provided by operating activities increased by $77.5 million, primarily due to reductions in our net loss driven by our revenue growth, timing of cash collections associated with our accounts receivable, and timing of accruals and payments associated with our accrued compensation and third-party vendor expenditures within our accrued liabilities. These increases in cash provided by operating activities were offset by increases to inventory and prepaid expenses and other current assets, supporting growth in our operations and securing additional inventory stock.
Investing Activities
During the year ended December 31, 2025, cash used in investing activities was $277.1 million, an increase of $154.1 million as compared to cash used in investing activities of $123.0 million during the year ended December 31, 2024. The increase in cash used in investing activities was primarily attributable to a net increase in the change in marketable securities of $211.4 million, primarily from an increase in the purchases of marketable securities of $347.9 million offset by an increase in maturities of marketable securities of $136.5 million. Additionally, our purchases of property and equipment increased by $12.4 million, primarily due to an increase in capitalized internal use software. These increases were offset by a decrease of $54.7 million in cash used for the purchases of strategic investments, as well as a reduction of cash used of $15.0 million for purchases of acquired in-process research and development from BioIS during the year ended December 31, 2024.
Financing Activities
During the year ended December 31, 2025, cash provided by financing activities was $12.6 million, a decrease of $498.8 million, as compared to $511.4 million provided by financing activities during the year ended December 31, 2024. The decrease was primarily attributed to $661.3 million in proceeds from the issuance of the 2029 Notes during the year ended December 31, 2024. The decrease was offset by $37.8 million associated with the payment of the SVB Loan Agreement and related termination costs, payment of $5.8 million associated with the Braidwell Term Loan Facility debt issuance and termination costs, payment of $17.4 million associated with debt issuance costs for the 2029 Notes, payment of $72.4 million for the purchase of the 2029 Capped Calls, and payment of $25.0 million for the repurchase of shares of our common stock during the year ended December 31, 2024.
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1.50% Senior Convertible Notes due 2029
On March 7, 2024, iRhythm Technologies completed an offering of $661.3 million aggregate principal amount of 2029 Notes with a stated interest rate of 1.50% and a maturity date of September 1, 2029. The proceeds include the full exercise of the option granted to the initial purchasers of the 2029 Notes to purchase up to an additional $86.3 million aggregate principal amount of notes. Interest on the 2029 Notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2024. The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related to the offering, were $643.8 million. The initial conversion rate of the 2029 Notes is 6.7927 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $147.22 per share, subject to adjustments. The 2029 Notes may be settled in cash, stock, or a combination thereof, solely at the discretion of iRhythm Technologies.
We used approximately $72.4 million of the net proceeds from the offering to pay the cost of the 2029 Capped Calls, as described below. In addition, we used approximately $80.2 million of the net proceeds from the offering for the repayment in full of the indebtedness outstanding from the Initial Tranche of the Braidwell Term Loan Facility (as each such term is defined below). We also used approximately $25.0 million of the net proceeds from the offering to repurchase 229,252 shares of our common stock at a purchase price of $109.05 per share in privately negotiated transactions effected through one of the initial purchasers or its affiliate.
No principal payments are due on the 2029 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the Indenture includes customary terms and covenants, including certain events of default after which the 2029 Notes may be due and payable immediately.
On January 12, 2026, we implemented the Holding Company Transaction. The Holding Company Transaction constituted a Merger Event as defined under the Indenture. The Holding Company Transaction did not constitute a Fundamental Change or a Make-Whole Fundamental Change as defined under the Indenture. As a result of the Holding Company Transaction, pursuant to Section 4.01(f) of the Indenture, holders may convert their 2029 Notes at any time up through March 4, 2026, the thirty-fifth trading day after the effective date of the Holding Company Transaction. As of the filing date of our annual report on Form 10-K, there have been no conversions.
On January 12, 2026, in connection with the Holding Company Transaction, we entered into a supplemental indenture to the Indenture (the “First Supplemental Indenture”) in order to (a)(i) provide that the right to convert each $1,000 principal amount of 2029 Notes into shares of iRhythm Technologies common stock was changed to a right to convert such principal amount of 2029 Notes into shares of our common stock; (ii) iRhythm Technologies shall continue to have the right to determine the form of consideration to be paid or delivered, as the case may be, upon conversion of the 2029 Notes; (iii) any amount payable in cash upon conversion of the 2029 Notes in accordance with the Indenture shall continue to be payable in cash; (iv) any shares of common stock of iRhythm Technologies that iRhythm Technologies would have been required to deliver upon conversion shall instead be deliverable in shares of our common stock; and (v) the Daily VWAP (as defined in the Indenture) shall be calculated based on the value of a share of our common stock; and (b) provide for the full and unconditional guarantee by us of the obligations of iRhythm Technologies under the 2029 Notes and the Indenture.
In connection with the offering of the 2029 Notes, iRhythm Technologies entered into the privately negotiated capped call transactions (the “2029 Capped Calls”) with certain financial institutions. The 2029 Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2029 Notes, the number of shares of our common stock that underlie the 2029 Notes. The 2029 Capped Calls are expected generally to reduce potential dilution to our common stock upon conversion of the 2029 Notes and/or offset any cash payments that we could be required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap. The 2029 Capped Calls have an initial cap price of $218.10 per share, subject to adjustments, which represents a premium of 100% over the closing price of our common stock of $109.05 per share on the Nasdaq Global Select Market on March 4, 2024. We completed the purchase of the 2029 Capped Calls on March 7, 2024, for the amount of $72.4 million.
Braidwell Debt
On January 3, 2024 (the “Closing Date”), we entered into the Credit, Security and Guaranty Agreement (the “Braidwell Credit Agreement”) with Braidwell Transactions Holdings LLC – Series 5 (“Braidwell”), which provided for a senior secured term loan in an aggregate principal amount of up to $150.0 million (the “Braidwell Term Loan Facility”). An initial tranche of $75.0 million (“Initial Loan”) was funded on the Closing Date.
Our net proceeds from the Initial Loan were approximately $35.0 million, after deducting costs, fees and expenses, and repayment of our existing term loan from Silicon Valley Bank, as discussed below.
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On March 7, 2024, in conjunction with the issuance of the 2029 Notes, we used approximately $80.2 million of the net proceeds for the repayment in full of the $75.0 million outstanding Initial Loan and $5.2 million for interest, fees and expenses associated with terminating the Braidwell Credit Agreement.
SVB Term Loan
On January 3, 2024, in connection with the entry into the Braidwell Credit Agreement, we used approximately $37.8 million of the net proceeds for the repayment in full of the $35.0 million outstanding principal balance as well as interest, fees and expenses associated with terminating the agreement. Upon termination of the SVB Loan Agreement, SVB’s security interest in our assets and property was released. We continue to hold $8.4 million in letters of credit with SVB, securing them with cash on deposit.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which requires us to make judgments, estimates, and assumptions. See Note 2, Summary of Significant Accounting Policies, in the notes to our Consolidated Financial Statements, which describes our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. The methods, estimates, and judgments that we use in applying our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates include:
•Revenue recognition;
•Provision for credit losses and contractual allowances;
•PCBA valuation;
•Stock-based compensation;
•Lease impairment; and
•Contingent consideration.
Revenue Recognition
We have developed proprietary systems that combine a wire-free, patch-based, 14-day wearable biosensor that continuously records ECG data, with a proprietary cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias. We currently offer three iRhythm ACM System options—the Zio monitor System, the Zio XT System, and the Zio AT System.
The Zio monitor System is a prescription-only, remote ECG monitoring system that consists of the Zio monitor that records the electric signal from the heart continuously for up to 14 days and ZEUS, which supports the capture and analysis of ECG data recorded by the Zio monitor at the end of the wear period, including specific arrhythmia events detected by the ZEUS algorithm. The final step in the iRhythm Services is the delivery of an electronic Zio report to the prescribing physician with a summary of preliminary findings. Our Zio monitor services are generally billable when the Zio report is issued to the physician.
The Zio XT System is the previous generation of the Zio monitor System and is a prescription-only, remote ECG monitoring system that consists of the Zio XT that records the electric signal from the heart continuously for up to 14 days and ZEUS, which supports the capture and analysis of ECG data recorded by the Zio XT at the end of the wear period, including specific arrhythmia events detected by the ZEUS algorithm. Our Zio XT services are generally billable when the Zio report is issued to the physician.
The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of Zio AT which records the electric signal from the heart continuously for up to 14 days and ZEUS, but which also incorporates the Zio AT wireless gateway that provides connectivity between the patch and ZEUS during the patient wear period. The wireless gateway, slightly larger than a smart phone, is provided to the patient at the time of Zio AT application and collects and transmits data from the Zio AT to the cloud via a LTE protocol. The Zio AT service revenue is recognized under two performance obligations — the patient wear period and delivery of electronic Zio reports.
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We recognize as revenue the amount of consideration to which we expect to be entitled in exchange for performing our service. The consideration we are entitled to varies by payor portfolio, as further described below, and includes estimates that require significant judgment by management. A unique aspect of healthcare is the involvement of multiple parties to the service transaction. In addition to the patient, often a third-party payor, for example a commercial or governmental payor or healthcare institution will pay us for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between us and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered.
A small portion of our transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for our service, we consider factors such as insurance claims which are adjudicated as allowable under the applicable policy and payment history from both payors and patient out-of-pocket costs, payor coverage, whether there is a contract between the payor or healthcare institution and us, historical amount received for the service, and any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
A summary of the payment arrangements with third-party payors and healthcare institutions is as follows:
•Contracted third-party payors – We have contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage.
•CMS - We have received IDTF approval from regional Medicare Administrative Contractors and will receive reimbursement per the relevant CPT code rates for the services rendered to the patient covered by CMS.
•Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which we have negotiated amounts for our monitoring services, including certain governmental agencies such as the Veterans Administration and U.S. Department of Defense.
•Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of our historical collection experience for our non-contracted services. This rate is reviewed at least quarterly.
We are utilizing the portfolio approach practical expedient under Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers, whereby services provided under each of the above payor types form a separate portfolio. We account for the contracts within each portfolio as a collective group, rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, we have concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis.
For contracted and CMS portfolios, we recognize revenue, net of contractual allowances, and recognize a provision for credit losses for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and our historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and our noncompliance with a material term of such contracts may result in a denial of the claim. We account for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue.
We make estimates around the amount of denied claims within a reporting period, a process that requires management judgment. The estimated denied claims are based on historical information, and judgement includes the historical period utilized. We monitor the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if we miss the payors’ filing deadlines, which could result in a reduction in our receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that we bill patient co-payments and deductibles and from time to time we may not be able to collect such amounts due to credit risk. We provide for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statements of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense.
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For healthcare institutions, the transaction price is determined based on negotiated rates, and we have historical experience collecting substantially all of these contracted rates. Historical cash collections indicate that it is probable that substantially all of the transaction price will be received. As such, we are not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense to selling, general and administrative expense in the consolidated statements of operations.
For non-contracted portfolios, we provide an implicit price concession due to the lack of a contracted rate with the underlying payor. As a result, we estimate the transaction price based on historical cash collections utilizing the expected value method. All subsequent changes to the transaction price are recorded as adjustments to revenue.
Provision for Credit Losses and Contractual Allowances
Accounts receivable include amounts due to us from healthcare institutions, third-party payors, government payors and our related patients as a result of our normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated provision for credit losses and contractual allowances.
We establish a provision for credit losses for estimated uncollectible receivables based on our assessment of the collectability of customer accounts and recognize the provision as a component of selling, general and administrative expenses. We record a provision for contractual allowances based on the estimated differences between contracted amounts and expected collection rates. Such provisions are based on our historical experience and are reported as a reduction of revenue.
We regularly review the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.
PCBA Valuation
We reuse PCBAs in each wearable Zio monitor, Zio XT, and Zio AT, as well as the wireless gateway used in conjunction with Zio AT. As PCBAs are used in a wearable Zio monitor, Zio XT, or Zio AT, a portion of the cost of the PCBA is recorded as a cost of revenue. We base our length of time estimates for charging a portion of the PCBAs cost through several considerations, including evaluation during product development, device loss rates, product launches and obsolescence, and the amount of time it takes the device to go through the manufacturing, shipping, customer shelf, and patient wear time and upload process. We periodically evaluate and update these estimates. PCBAs are included in other assets in our consolidated balance sheets.
Stock-Based Compensation
We measure the estimated fair values of our restricted stock units (“RSUs”) based on the closing price of our stock on the grant date. For performance-based restricted stock units (“PRSUs”), we estimate the fair value based on the closing price of our stock on the grant date and, if the award includes a market condition, a Monte Carlo simulation model. In addition, for PRSUs, we apply a probability assessment to determine the probable achievement of the performance-based metrics.
Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, our stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For restricted stock, the compensation cost for these awards is based on the closing price of our common stock on the date of grant, and is recognized as compensation expense on a straight-line basis over the requisite service period.
We recognize compensation expense related to our 2016 Employee Stock Purchase Plan (“ESPP”) based on the fair value at each enrollment date of the offering period using the Black-Scholes-Merton option-pricing model value. The stock-based compensation is reduced by the estimated forfeiture and is expensed on a straight-line basis over the offering period.
Lease Impairment
We account for the impairment of long-lived assets in accordance with ASC 360, Impairment or Disposal of Long-Lived Assets. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying value. If an asset is determined to be impaired, the impairment is measured by the amount that the carrying value of the asset exceeds its fair value.
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We estimated undiscounted future cash flows from our vacant office lease based on our intent and ability to sub-lease the vacant office space which we had ceased using and estimated future sub-lease income considering the local real estate market conditions. We also factored into the estimate the amount of time to identify a tenant and to enter into an agreement. We estimated the fair value of the ROU asset related to the vacant office lease by discounting the estimated undiscounted future cash flows using the average lease capitalization rate, plus average inflation rate, for other lease transactions in the local area during the year.
Contingent Consideration
Certain agreements we entered into involve payments that are contingent upon the achievement of milestones. Contingent consideration obligations incurred in connection with acquired in-process research and development assets are recorded at fair value, with changes in fair value recorded to acquired in-process research and development expenses in the consolidated statements of operations.
As of December 31, 2025, we held $20.4 million of contingent consideration liabilities related to development milestones from the acquisition of licensed technologies from BioIS. In June 2025, BioIS achieved the first of two regulatory milestones. As of December 31, 2025, BioIS and the Company are in the process of completing all required contractual conditions to cancel $10.0 million in Milestone Notes plus accrued and unpaid interest.
The expected probability of achievement of the remaining milestone is estimated to be approximately 80% as of December 31, 2025. If the remaining milestone is to be achieved by its due date, and all required contractual conditions were completed by the end of 2026, we estimate that we would be obligated to pay up to an additional $2.4 million of contingent consideration. However, no contingent consideration is due until all milestones and all required contractual conditions are achieved by their due dates.
Material Cash Requirements
Our material cash requirements include the following contractual and other obligations.
•Purchase commitments - From time to time in the ordinary course of business, we enter into a variety of purchase arrangements including but not limited to, purchase arrangements related to components used in manufacturing our products. See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements for more information.
•Operating leases - We lease our facilities under non-cancelable operating leases. See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements for more information.
•Debt interest and principal payments - On March 7, 2024, we completed an offering of $661.3 million aggregate principal amount of the 2029 Notes. See Note 9, Debt, to our Consolidated Financial Statements for more information.
Recent Accounting Guidance
For a description of recently issued accounting guidance that is applicable to our financial statements, see Note 2, Significant Accounting Policies, to the Consolidated Financial Statements.
Guarantor Information
In connection with the Holding Company Transaction, on January 12, 2026, we, as guarantor, iRhythm Technologies, and U.S. Bank Trust Company, National Association, entered into the First Supplemental Indenture. As of December 31, 2025, there was $661.3 million aggregate principal amount of issued and outstanding 2029 Notes of iRhythm Technologies that, as of January 12, 2026, are fully and unconditionally guaranteed by us. Accordingly, pursuant to Rule 3-10 of Regulation S-X, separate consolidated financial statements of iRhythm Technologies have not been presented. As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded summarized financial information for iRhythm Technologies because the assets, liabilities and results of operations of iRhythm Technologies are not materially different than the corresponding amounts in our Consolidated Financial Statements.