iRhythm Holdings, Inc. 10-K

ITEM 1: BUSINESS Company Background iRhythm Technologies Inc. 1 is 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. Since first receiving clearance from the U.S. Food and Drug Administration (“FDA”) for our technology in 2009, we have supported physician and patient use of our technology and provided ambulatory cardiac monitoring services from our Medicare-enrolled independent diagnostic testing facilities (“IDTFs”) and with our qualified technicians. We have provided our Zio ambulatory cardiac monitoring services, including long-term continuous monitoring, short-term continuous monitoring, and mobile cardiac telemetry (“MCT”) monitoring services (collectively, the “Zio Services”), using our Zio Systems (as defined below). Each Zio System combines an FDA-cleared and CE-marked, wire-free, patch-based, 14-day wearable biosensor that continuously records electrocardiogram (“ECG”) data with a proprietary, FDA-cleared, CE-marked cloud-based data analytic software to help physicians monitor patients and diagnose arrhythmias. Since receiving FDA clearance, we have provided the Zio Services to over six million patients and have collected over 1.8 billion hours of curated heartbeat data. The Company was incorporated in the state of Delaware in September 2006. Our principal executive offices are located at 699 8th Street, Suite 600, San Francisco, California 94103, and our telephone number is (415) 632-5700. Our common stock is listed on The Nasdaq Global Select Market under the symbol “IRTC”, and we employ approximately 2,000 regular full-time employees as of December 31, 2023. Our website address is http://www.iRhythmtech.com, and our investor relations website is located at https://www.investors.irhythmtech.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are available free of charge on our investor relations website as soon as reasonably practicable after we file such material with the SEC. iRhythm investors and others should note that we announce material information to the public about our company, products, and services, and other issues through a variety of means – including via our website, our investor relations website, press releases, SEC filings, and public conference calls – to achieve broad, non-exclusionary distribution of information to the public and to comply with our disclosure obligations under Regulation FD. We encourage our investors and others to review the information we make public in these locations as such information could be deemed material. Please note that this information may be updated from time to time. Cardiac Arrhythmias and the Ambulatory Cardiac Monitoring Market Cardiac Arrhythmias Every year, millions of patients experience symptoms potentially associated with cardiac arrhythmias, a condition in which the electrical impulses that coordinate heartbeats do not occur properly, causing the heart to beat too quickly, too slowly, or irregularly. Early detection of heart rhythm disorders, such as atrial fibrillation (“Afib”) and other clinically relevant arrhythmias, supports appropriate medical intervention and can help avoid more serious downstream medical events, including stroke. 1 As used throughout the text of Items 1 to 7, on Form 10-K, the term “iRhythm,”, “the Company,” “we” or “us,” refers to iRhythm Technologies, Inc., a Delaware corporation, or iRhythm Technologies Inc. and its consolidated subsidiaries, as the context requires. 4 Table of Contents As of 2008, it was estimated that the prevalence of a heart rhythm disorder, or arrhythmia, is between 1.5% and 5% in the general population in the United States. The most common sustained type of arrhythmia is Afib, a condition which causes the upper chambers of the heart to beat irregularly and blood not to flow properly to the lower chambers of the heart. The prevalence of atrial fibrillation in the United States is estimated to increase from approximately 5.2 million in 2010 to 12.1 million in 2030, and it is estimated that more than 50 million patients worldwide have Afib with at least one-third of these patients presenting as asymptomatic at the time of their diagnosis. More than 450,000 hospitalizations occur each year in the United States because of Afib, and the condition contributes to an estimated 350,000 deaths globally each year. Since Afib is more common among people over the age of 60, these numbers are expected to increase as the U.S. population ages. Atrial Fibrillation and Stroke In 2021, it was estimated that the age-adjusted US stroke death rate as an underlying cause of death was approximately 41.1 per 100,000, and there were approximately 7.4 million deaths attributable to stroke worldwide. Afib is the leading risk factor for stroke because Afib can cause blood to collect in the heart and potentially form a clot, which can then travel to the brain possibly resulting in an ischemic stroke. While individuals with Afib are approximately five times more likely to suffer a stroke, the American Stroke Association (“ASA”) estimated in 2022 that up to 80% of second clot-related strokes may be preventable. According to the AHA, stroke costs the United States an estimated $34.5 billion each year in healthcare costs and lost productivity and is a leading cause of serious long-term disability. The AHA estimates that ischemic strokes represent approximately 85% of all strokes in the United States, with an estimated 690,000 ischemic strokes per year. Between 15% and 20% of people who have strokes also have Afib. We believe early detection of Afib is critical to optimizing patient care, delivering earlier treatment to help avoid further adverse clinical events, managing symptoms caused by Afib, and reducing the total public health burden of treating stroke. The AHA and ASA have published treatment guidelines for patients diagnosed with Afib to manage heart rhythm and rate and to support stroke prevention. These early treatments include medications such as oral anticoagulants, treatment with anti-arrhythmic drugs, and interventions such as cardiac ablation therapy to help control heart rhythm and rate. Afib burden, or the amount of time a patient spends in Afib during the period of time the patient is wearing a heart monitor, has been identified in the clinical community as an clinically relevant measure for helping to determine appropriate and effective therapeutic interventions to manage patients with Afib and for assessing stroke risk. We believe the calculated Afib burden is only as good as the data available for analysis during the monitoring period. Since the most common type of Afib occurs intermittently, we believe that long-term continuous monitoring with patch-based technology, such as with the Zio patch technology that is part of our Zio Systems, can more accurately measure Afib burden as it captures the patient’s heartbeat data is captured continuously through the wear period. Ambulatory Cardiac Monitoring Overview The ambulatory cardiac monitoring market is well-established in the United States with an estimated 6.4 million diagnostic tests performed annually with meaningful expansion anticipated in the coming years due to an aging population, a rising number of heart-related disorders globally, and broader acceptance of innovative medical technologies. Traditional ambulatory cardiac monitoring devices used by physicians for diagnosing patients with suspected arrhythmias – such as traditional, 24-to-48-hour Holter and cardiac event monitors – are constrained by short-term monitoring times, non-continuous data collection and reporting, cumbersome equipment, and/or lower patient compliance. For example, patients often remove traditional monitors when sleeping, showering, or exercising, which can lead to a failure to capture critical data and result in incomplete diagnoses and repeat testing, which in turn can result in suboptimal patient care and higher costs to the health system. Arrhythmia symptoms are generally monitored either in a physician’s office or healthcare facility, or with the ambulatory cardiac monitoring services. Typically, physicians will administer a resting ECG test in their offices to record and analyze the electrical impulses of patients’ hearts. If physicians determine that patients require monitoring for a longer wear period to generate a diagnosis, they have historically prescribed an ambulatory cardiac monitoring device such as a traditional Holter monitor, which is a non-invasive, battery powered device that typically records data continuously for 24 to 48 hours. For longer term (i.e., up to 30 days) event driven monitoring, physicians may prescribe ambulatory cardiac event monitoring services, including MCT services, which record ECG data upon auto-detection (i.e., asymptomatic events) and/or patient activation (i.e., symptomatic events) and may transmit such data wirelessly to a monitoring center like an IDTF. Physicians may also prescribe implantable loop recorders, which are implanted underneath the patient’s skin in a minimally invasive, hospital-based procedure and record ECG data similar to cardiac event monitors but are intended for monitoring up to 3 years. 5 Table of Contents If the diagnosis is not definitive following the first monitoring period, physicians may prescribe a repeat traditional, 24-to-48-hour Holter monitoring test or, alternatively, event monitoring services, MCT, or implantable loop recorders. Physicians use frequency and acuity of symptoms to determine which monitoring device to prescribe. Some physicians own their own ambulatory cardiac monitoring devices and provide ambulatory monitoring services directly to their patients, while others outsource these services to third-party providers, including IDTFs. Our Products and Services Zio Systems and Zio Services The Zio Systems and Zio Services deliver a patient-friendly design that enables between 98%-99% patient compliance with minimal ECG data noise or artifact, thereby potentially delivering superior clinical accuracy to physicians diagnosing arrhythmias and reducing the cost of care for healthcare systems by avoiding costly downstream adverse events. We have developed a proprietary system that combines an FDA-cleared and CE-marked wire-free, patch-based, 14-day wearable biosensor that continuously records ECG data, with a proprietary FDA-cleared and CE-marked cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias (collectively, the “Zio System”). We currently offer three Zio System options — the Zio Monitor System, the Zio XT System, and the Zio AT System. 6 Table of Contents The Zio Service Monitoring Solutions The Zio Monitor System is a prescription-only, remote ECG monitoring system that consists of a patch ECG monitor (the “Zio Monitor patch”) that records the electric signal from the heart continuously for up to 14 days and the Zio ECG Utilization Software (“ZEUS”) System, which supports the capture and analysis of ECG data recorded by the Zio Monitor patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS System. 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 a patch ECG monitor (the “Zio XT patch”) that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, which supports the capture and analysis of ECG data recorded by the Zio XT patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS System. The Zio Monitor patch is 72% smaller, 62% lighter, and 23% thinner than our Zio XT patch, attributes which we believe will have a positive impact on patient experience, patient satisfaction, and associated improvement in device wear times. Furthermore, the Zio Monitor patch incorporates a breathable adhesive construct, which enhances the patient experience by removing moisture otherwise captured next to the patient’s skin, as well as Bluetooth communication capabilities and improved processing efficiency. Zio Monitor Patch and Zio XT Patch The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of a patch ECG monitor (the “Zio AT patch”) that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, but which also incorporates the Zio AT wireless gateway that provides connectivity between the Zio AT patch and the ZEUS System 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 patch application and collects and transmits data from the Zio AT patch to the cloud via a long-term evolution (“LTE”) cellular protocol. Zio AT Patch and Wireless Gateway 7 Table of Contents We support physician and patient use of our Zio Systems through our Medicare-enrolled IDTF and certified cardiographic technicians (“CCTs”), who perform the technical monitoring services associated with a physician’s order for long-term continuous monitoring or MCT monitoring services. Long-term continuous monitoring and MCT services are diagnostic medical procedures typically ordered by physicians for patients not suspected of having life-threatening arrhythmias, but who are suspected of having infrequent, difficult-to-detect, or asymptomatic arrhythmias. When physicians order long-term continuous monitoring services with our Zio System, our biosensor technology collects an uninterrupted, long-term continuous recording of ECG data for up to 14 days and delivers a comprehensive end-of-wear report, which includes specific arrhythmia events detected by the ZEUS algorithm upon return of the Zio Monitor patch or Zio XT patch (and with the Zio AT patch, each, a “Zio patch”) and analysis of the stored data by qualified technicians. A Zio patch typically collects approximately 1.5 million heartbeats of data for each patient during a single wear period of up to 14 consecutive days. After we receive the Zio patch at our IDTF, the ECG data is uploaded to our secure cloud and preliminary findings are generated by our proprietary FDA-cleared deep learning algorithms. Each report is then validated by CCTs and sent to the patient’s prescribing physician who may access the Zio report on our proprietary, web-based portal, referred to as ZioSuite, and also through our Electronic Health Record ("EHR") connections or ZioSuite mobile apps. Our technicians also notify physicians of potential urgent arrhythmias according to the ordering physician’s specified notification criteria. ZioSuite web portal via desktop or mobile application For our MCT services, the Zio AT patch and wireless gateway also offer the additional capability of providing actionable transmissions during the wear period to assist physicians in diagnosing and treating patients in situations where their physician has determined that there is a medical need to receive more timely, clinically actionable information. For the MCT services, physicians will receive daily reports, routine reports, and notifications from CCTs if there are significant events that meet predetermined and physician-specified notification criteria. While wearing a Zio patch, patients can mark when symptoms occur by pressing a trigger button on the device and separately recording contextual data like activities and circumstances in a written symptom diary or digitally via the myZio application. This allows physicians to match symptoms and activity with ECG-based findings. The Zio patches are not available for sale outside of use with our Zio Services. The Zio patches include the following features: • patented clear, flexible, lightweight, wire-free design; • unobtrusive and inconspicuous profile; • proprietary adhesive backing designed to keep the Zio patch securely in place for the duration of the prescribed wear period; 8 Table of Contents • water-resistant functionality, allowing patients to shower, sleep, and perform normal daily activities, including moderate exercise; • hydrogel electrodes and a compliant mechanical design to deliver a clear ECG with minimal artifact from movement; • large symptom button, or patient trigger, that is easy to find and press; • indicated single application wear period of up to 14 days (for longer prescribed wear periods for MCT services, additional Zio AT patches and gateways can be provided); and • sufficient battery power for the entire wear period, without the need to recharge or replace batteries. Zio Watch We believe a clinical need and an opportunity exists to expand our Zio platform into clinical grade wrist-worn wearables to detect and characterize Afib while integrating with clinicians’ workflows. As part of this expansion strategy, we partnered with Verily (see “Collaboration with Verily” below) to develop their Verily Study Watch wearable device into a clinical platform. We have since developed the Zio® Watch (Study Watch with Irregular Pulse Monitor) with our clinically integrated ZEUS System, a new health solution that is intended to be integrated into clinical care delivery and to assist healthcare providers in identifying and monitoring Afib. We have what is believed to be the world’s largest repository of labelled ECG data, which we leveraged to develop our proprietary photoplethysmography (PPG) algorithms utilized in both the Zio Watch and the ZEUS System. In July 2022, we received FDA clearance on the clinically integrated ZEUS System, the AI algorithm and solution component of the Zio Watch. Also in July 2022, Verily received FDA clearance for the Zio Watch (Study Watch with Irregular Pulse Monitor). In addition to Zio Watch, we are evaluating potential opportunities to leverage our PPG algorithms and ZEUS System with other PPG based wrist-worn wearables and intend to initiate market evaluation or clinical studies with one or more wearables in 2024. The iRhythm Difference We believe there are strong benefits offered by our 14-day wear time, by the diagnostic yield possibly achieved through our technology, and by the clinical accuracy of our Zio report as enabled by our proprietary algorithm. This is supported by more than 100 original scientific research manuscripts and a robust, growing body of clinical evidence by third-party researchers. A retrospective study by Turakhia et al, published in The American Journal of Cardiology in August 2013, analyzed data from 26,751 patients using the Zio XT System for the first time between January 1, 2011, and December 31, 2011. The study results showed that among the 16,142 patients with detected, clinically relevant arrhythmias, over 50% of the first-diagnosed symptomatic arrhythmias occurred after 48 hours of monitoring, suggesting that these arrhythmias could have been missed by traditional Holter monitoring during the typical maximum prescribed monitoring time. This data suggests that detection of infrequent arrhythmias requires longer monitoring times and ECG signal of consistent quality. For the Zio XT System, other published clinical literature has routinely reflected a high level of compliance with 14-day wear time and a high percentage of analyzable time (i.e., the proportion of the ECG signal recording which is free from artifact and of sufficient fidelity to enable rhythm analysis). Mean or median patient wear times have ranged for the Zio XT patch reported in the literature, and Kaura et al. reported that the majority of 56 subjects randomized to the Zio XT System achieved the full 14-day wear time. Publications which include assessment of percentage analyzable time report rates between 94% and 99.6% (i.e., mean or median percent analyzable data across all subjects). Our Zio Services utilize advanced FDA-cleared artificial intelligence (“AI”) with a deep-learned algorithm to detect arrhythmias. As published in Nature Medicine in 2019, Hannun et al. used data from the Zio XT Service to develop a deep-neural network capable of diagnosing arrhythmias at a high diagnostic performance similar to that of expert cardiologists. The deep-neural network model met or exceeded the performance of cardiologists for 12 types of arrhythmia classes and recapitulated the misclassifications made by cardiologists. In clinical settings, this approach could reduce the amount of misdiagnosed computerized ECG interpretations and improve the efficiency of expert human ECG interpretation by accurately triaging or prioritizing the most urgent conditions. 9 Table of Contents Long-term, continuous monitoring maximizes diagnostic yield 2,3 2 Turakhia, M. et al. Diagnostic Utility of a Novel Leadless Arrhythmia Monitoring Device. The American Journal of Cardiology, 2013. 3 Tsang, J.P. et al. Benefits of monitoring patients with mobile cardiac telemetry (MCT) compared with the Event or Holter monitors. Medical Devices: Evidence and Research, 2014. Taken together, we believe that these elements are differentiators for the Zio Systems in the diagnosis and treatment of cardiac arrhythmias and can lead to improved clinical outcomes, enhanced patient experience, high physician and healthcare staff satisfaction, and reduced cost of care to healthcare systems. This was demonstrated by the results from the Cardiac Ambulatory Monitor EvaLuation of Outcomes and Time to Events (CAMELOT) study that were published in the American Heart Journal in December 2023. The largest ever real-world evidence study of ambulatory cardiac monitoring, it revealed that the Zio long-term continuous monitoring service (the “Zio LTCM service”) using the Zio XT System was independently associated with the highest yield of clinical arrhythmia encounter diagnosis, lowest likelihood of retest, and the lowest incremental healthcare resource utilization of all strategies examined. Using claims data from the full Medicare fee-for-service database (inclusive of part A, part B and part D claims), the authors performed a retrospective analysis of patients with first-time ambulatory cardiac monitoring between 2017 and 2018. Within long-term continuous monitoring, they identified use of the Zio LTCM service from National Provider Identifier codes. The authors evaluated 90-day diagnostic yield (arrhythmia diagnosis), 180-day retest (use of an additional ambulatory cardiac monitor) and 90-day health care utilization among a cohort of 287,789 patients. Patients with Zio LTCM service had the highest diagnostic yield (adjusted odds ratio of new diagnosis for Holter vs. Zio LTCM reference: 0.50 [0.47-0.53], p < 0.001) and lowest retest (adjusted odds ratio of retest for Holter vs. Zio LTCM reference 1.35 [1.20-1.52], p < 0.001), even when compared to other long-term continuous monitoring or MCT. As a category, long-term continuous monitoring was associated with the lowest one-year incremental health care expenditures (mean Δ$10,159), followed by Holter ($10,755), ambulatory event monitors ($11,462), and MCT ($12,532). 10 Table of Contents Results of the CAMELOT study 4 4 Reynolds, M. R., et al. Comparative effectiveness and healthcare utilization for ambulatory cardiac monitoring strategies in Medicare beneficiaries, American Heart Journal, 2023. Opportunities in Monitoring for Asymptomatic Afib Patients Currently, the Zio Services are generally ordered by physicians for patients that are experiencing symptoms, with limited provision of these services for the estimated one-third of the U.S. population that may be experiencing asymptomatic Afib, which is sometimes referred to as “silent Afib”. We see a future opportunity in supporting physicians in the proactive assessment of the approximately 12 million patients who are at high risk of asymptomatic Afib or other clinically-actionable arrhythmia to identify those with the illness. To that end, iRhythm has established the “Know Your Rhythm” program with the goal of increasing proactive screening of undiagnosed arrhythmias in the asymptomatic population. We are offer the Know Your Rhythm program with the Zio Monitor System to patients that meet specified risk criteria. We intend to initiate commercial pilots and gather additional data in 2024 for the Know Your Rhythm program with the aim to validate our belief that these screenings may be able to reduce certain healthcare costs over time. We believe this opportunity is clinically appropriate and economically supported, as informed by our interpretation of several key studies: • SCREEN-AF: Home-based Screening for Early Detection of Atrial Fibrillation (“SCREEN-AF”), a study examining early detection of Afib using the Zio XT System in high-risk patients, was published in the Journal of the American Medical Association (“JAMA”) Cardiology in February 2021. This randomized control trial recruited 856 participants 75 years or older with hypertension and no known Afib from 48 primary care clinics across Canada and Germany between 2015 and 2019. The intervention group included remote screening for Afib for two weeks with the Zio Service utilized at baseline and again at three months, in addition to standard care for six months. The results showed Afib was newly diagnosed in the screening group in 5.3% of subjects at six months compared to 0.5% in the standard of care control group. A secondary outcome showed oral anticoagulant therapy was prescribed for 75% of participants who had screen-detected Afib. We believe that proactive screening and monitoring using the Zio Services could increase Afib detection 10-fold over standard of care, potentially prompting oral anticoagulant use. 11 Table of Contents • mSToPs: The mHealth Screening to Prevent Strokes (“mSToPS”) study, led by researchers at the Scripps Research Translational Institute in collaboration with Aetna Inc., Healthagen LLC, Janssen Research and Development, LLC, and Johnson & Johnson, utilized a web-based platform to remotely recruit 5,214 eligible patients from the Aetna Commercial Fully Insured and Medicare Advantage programs. Women over the age of 65 and men over 55 with certain risk factors were selected to participate based on information derived from claims data that placed them at a potentially increased risk of undiagnosed asymptomatic Afib. Four peer-reviewed articles were published on the mSToPS study between 2018 and 2023. The study design was published in the JAMA in July 2018 while the one-year results were published in Heart Rhythm O2 in December 2020 and the three-year follow-up analysis was published in PLOS One in October 2021. Additionally, cost-effectiveness data of the study was published in Circulation: Cardiovascular Quality and Outcomes in November 2023. The results showed that, at one year, Afib was newly diagnosed in 6.6% of patients who were actively monitored by the Zio Service versus 2.4% in the observational control group receiving routine care. In addition to this primary endpoint to evaluate the difference in new Afib diagnoses, active monitoring in an asymptomatic, moderate-risk population with the Zio Service was associated with an increase in cardiology outpatient visits but also significantly lower rates of emergency department visits and hospitalizations over the one year following monitoring. At three years, screening for AFib was associated with a lower rate of clinical events and improved outcomes relative to the matched cohort. Over the three years following the initiation of screening, AFib was newly diagnosed in 11.4% of screened participants versus 7.7% of observational controls, and for individuals whose Afib was first diagnosed clinically, 6.6% experienced a stroke, 10.2% were newly diagnosed with heart failure, 9.2% had a myocardial infarction, and 1.5% had systemic emboli. For those diagnosed via screening, none experienced a stroke, myocardial infarction or systemic emboli in the period surrounding their AF diagnosis, and only 1 person (2.3%) had a new diagnosis of heart failure. Finally, as demonstrated in the cost-effectiveness analysis published in November 2023, assessing the health economic value over the lifetime of the patient showed that proactive monitoring for Afib in individuals prescribed Zio patch monitors over the three-year period was associated with high economic value based on willingness to pay thresholds. • GUARD-AF: We also hope that additional informative data will be generated in the GUARD-AF study. In November 2019, we announced our participation in the “ReducinG stroke by screening for UndiAgnosed atRial fibrillation in elderly inDividuals” (“GUARD-AF”) study, a randomized, controlled study sponsored by the Bristol-Myers Squibb-Pfizer Alliance. This ongoing study seeks to determine if earlier detection of Afib through screening in previously undiagnosed men and women ultimately impacts the rate of stroke compared to usual standard medical care. The GUARD-AF study population includes men and women at least 70 years of age visiting their primary care physician for usual follow-up care, and the screening arm utilizes the Zio XT Service. Though trial enrollment was limited to 11,931 participants due to the impact of the COVID-19 pandemic on enrollment, GUARD-AF is the largest randomized trial in Afib screening to use a long-term continuous patch ECG monitor. The primary outcome measures will be stroke and bleeding events leading to hospitalization. The trial is designed to identify outcome events using insurance claims from a healthcare claims database, which is subject to certain limitations, and is expected to provide evidence on health outcomes associated with Afib detection intervention that may help inform future clinical practice guidelines. Initial findings from the 5,713 patients who wore the Zio XT patch in the GUARD-AF study were presented at The American College of Cardiology’s 71st Annual Scientific Session & Expo in April 2022 and the trial’s design and rationale were published by Singer et al. in the American Heart Journal in July 2022. Initial findings demonstrated that in the older primary care population, 0.5% of screened participants had persistent Afib and 4% had paroxysmal Afib (“PAF”) detected within two weeks of monitoring. In those with PAF, the average Afib burden was low but more than 25% had an episode of ≥4.6 hours of continuous Afib, suggesting increased stroke risk. In addition to the primary outcome measures, the study is designed to generate important information to inform clinical decisions regarding the need for stroke-preventive interventions – including anticoagulants – for screen-detected PAF. 12 Table of Contents Our Strategy Our mission is to boldly innovate to create trusted solutions that detect, predict, and prevent disease. The key elements of our strategy include: • Further penetrating and expanding the U.S. ambulatory cardiac monitoring market . Our goal is to be the leading provider of ambulatory cardiac monitoring for patients at risk for arrhythmias. We intend to expand our market penetration by targeting the large existing ambulatory cardiac monitoring market in the United States and driving broader awareness of its advantages. We plan to leverage our portfolio of products, including the Zio Monitor System and Zio AT System, and position the Zio Service as providing certainty in a single test due to high patient compliance and superior quality of uninterrupted data. The Zio Monitor System, which provides continuous long-term ECG monitoring, is designed to be appropriate for the majority of patients that require ambulatory cardiac monitoring while the Zio AT System, which includes near real-time monitoring, is intended for more acute patients that require timely notification. We estimate our current market penetration in the United States to be approximately 30%. Marketing and education throughout the medical community are key to bringing awareness and communicating the strong clinical evidence backing the Zio Service. In addition, we expect to continue developing and publishing clinical evidence to demonstrate the potential advantages of the Zio Service relative to legacy and competitive monitoring technologies. Within existing accounts, we expect to continue to introduce our Zio Service beyond cardiology and electrophysiology into other departments, including primary care, neurology, and emergency room. To enable this broader adoption within a hospital system, we have successfully interfaced the Zio ordering and report posting processes into a number of large health systems’ electronic health record (“EHR”) systems. This seamless integration of Zio workflow processes has proven to be a key factor in spurring growth within existing and new accounts and is an important part of our ongoing market penetration strategy. We believe there is potential to increase the core symptomatic total addressable market by moving further upstream in the care pathway to the primary care physician call point. We estimate that 15 million patients in the United States visit a primary care physician annually with palpitations due to suspected cardiac disease. By educating primary care physicians on the benefits of the Zio Service for this patient population, we believe we can expand the market and reach more patients that are candidates for ambulatory cardiac monitoring. • Pursuing international expansion opportunities. While our initial commercial focus is the U.S. market, we have initiated efforts that will allow for future expansion into international geographies. We have a presence in the UK with efforts underway to pursue national reimbursement. In September 2020, we were named a winner of the Artificial Intelligence in Health and Care Award run by the Accelerated Access Collaborate as part of the National Health Service (“NHS”) AI Lab. This funding will bring the Zio Service to selected NHS sites over a three-year program measuring clinical, pathway, and economic outcomes. We also received positive guidance from the National Institute for Health and Care Excellence (“NICE”) in December 2020 for the adoption of the Zio XT Service which may facilitate future support of the Zio Service through the MedTech Funding Mandate. We are also conducting diligence and prioritizing other geographies based on market size, regulatory pathway, and reimbursement opportunity. We are initiating market development and market access initiatives in multiple European countries in 2024 and pursuing regulatory clearance in Japan. We estimate the total addressable market in our initial selected countries of the UK, Japan, and prioritized European countries to be at least 5 million existing ambulatory monitoring tests annually. • Exploring adjacent market opportunities. We intend to continue assessing the potential pathways for expanding indications and clinical use cases for our Zio Services and developing new systems for patient populations with unmet needs. Leading with clinical and economical evidence, we are pursuing commercialization opportunities for our Know Your Rhythm by Zio program that is focused on patients at risk for undiagnosed arrhythmias. With at least 12 million individuals in the United States estimated to be at risk for undiagnosed cardiac arrhythmias, we believe this could be a significant market opportunity. Initial efforts to proactively monitor this population with the Zio Monitor System, including end-to-end care pathway pilots, are planned for 2024. In addition, we are actively exploring opportunities in adjacent markets beyond ambulatory cardiac monitoring. We have research and development efforts focused on exploring the use of our Zio Services or other new systems and services for the following patient populations: 13 Table of Contents • Obstructive sleep apnea patients, with an estimated prevalence of approximately 30 million in the United States. Approximately 50% to 80% of patients with Afib may also have sleep apnea compared with 30% to 60% in control groups, and there is a large prevalence of patients with undiagnosed sleep apnea. • Heart failure patients, with an estimated prevalence of over 8 million in the United States by the year 2030. Atrial fibrillation and heart failure share many antecedent risk factors, and approximately 40% of people with either Afib or heart failure will develop the other condition. Total cost for heart failure in the U.S. are expected to reach $70 billion by 2030. • Patients with hypertension, with an estimated prevalence of over 120 million in the United States. Up to 90% of patients with Afib may also have hypertension. • Advancing our system portfolio and core technology offering . We continue to invest in building a unique, innovative system portfolio and digital platform that addresses unmet needs in the ambulatory cardiac monitoring market and adjacent markets. We will continue to invest in research and development efforts to further differentiate our biosensor, data analytics, and reporting, our information system, and our digital platform. Sales and Marketing We directly market our Zio Services in the United States to healthcare professional through our internal organization comprised of sales representatives, field billing specialists, and customer experience representatives. Our sales team focuses on initial introduction of the Zio Services to those participants that are instrumental to the decision-making process for ambulatory cardiac monitoring, which include physician practices and healthcare systems. We also focus on continuing efforts to ensure healthcare professionals are knowledgeable about the clinical benefits and economic value of the Zio Services. We continue to invest in our sales force and focus on ensuring we optimize the structure of our U.S. sales organization to expand the current customer account base and support adoption of the Zio Services. We market our Zio Services to a variety of physician specialties including general cardiologists, electrophysiologists, primary care physicians, neurologists, and other physician specialists who diagnose and manage care for patients with arrhythmias. We have found success focusing on integrated delivery networks (“IDNs”), in which large networks of facilities and providers work together to offer a continuum of care to a specific geographic area or market. Focusing on sales to IDNs gives us the opportunity to conduct a holistic sale for health systems interested in making value-based purchasing decisions. In January 2021, we established a small direct sales and clinical infrastructure in Bagshot, Surrey in England to service the UK market. We have since focused efforts on the introduction of the Zio Services using the Zio XT System into new accounts and market access efforts, in particular through orders made by NHS Trusts and Hospitals. In addition, we are exploring sales opportunities and market access in Japan, Switzerland, the Netherlands, and Spain. We typically experience 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. Competition The market for remote cardiac monitoring is competitive, characterized by rapid change resulting from technological advances, scientific discoveries, and other market activities of industry participants. In providing our Zio Services, we compete with BioTelemetry, Inc. (acquired by Royal Philips), Preventice Solutions, Inc. (acquired by Boston Scientific, Inc.), and Bardy Diagnostics, Inc. (acquired by Baxter International, Inc.) to offer remote cardiac monitoring technology and also function as diagnostic service providers. We also compete with companies that sell traditional, 24-to-48-hour Holter monitors, including GE Healthcare, Philips Healthcare, Mortara Instrument, Inc., Spacelabs Healthcare Inc., and Welch Allyn Holdings, Inc. (acquired by Hill-Rom Holdings, Inc. which was acquired by Baxter International, Inc.). Many of our competitors have substantially greater financial, manufacturing, marketing, and technical resources than we do. Furthermore, many of our competitors have well-established brands, widespread distribution channels, broader product offerings, and an established customer base. 14 Table of Contents These competitors have also developed patch-based cardiac monitors that have received FDA and foreign regulatory clearances. We are also aware of some small start-up companies entering the patch-based cardiac monitoring market. Large medical device companies may continue to acquire or form alliances with these smaller companies to diversify their product offering and participate in the digital health space. These competitors and potential competitors may introduce new products and services that more directly compete with our Zio Services and Zio Systems. Future competition may also come from manufacturers of wearable fitness products or large information technology companies focused on general health and wellness. For example, in 2021 and 2022, Apple Inc. and Fitbit each respectively added capabilities on their watch platform to measure non-continuous ECG and to alert users to the potential presence of irregular heartbeats suggestive of asymptomatic Afib. We believe the principal competitive factors in our market include: • ease of use, comfort, and unobtrusiveness of the device for the patient; • quality and clinical validation of the deep-learned algorithms used to detect arrhythmias; • concise and comprehensive reports supporting efficient physician interpretation; • ease of use of service workflow for physicians and supporting clinicians; • digital tools for data management, including the myZio mobile app, website tools, and EHR integration; • contracted rates with third-party payors; • government reimbursement rates associated with our Zio Services and supporting Zio Systems; • quality of clinical data and publications in peer-reviewed journals; • size, experience, knowledge, and training of sales and marketing teams; • availability and reliability of sales representatives and customer support services; • workflow protocols for solution implementation in existing care pathways; • reputation of existing device manufacturers and diagnostic service providers; and • relationships with physicians, hospitals, administrators, and other third-party payors. Manufacturing and Quality Assurance We currently manufacture our Zio Systems, including the Zio Monitor System and Zio AT System, in our leased facility in Cypress, California. This manufacturing facility is approximately 34,000 square feet and provides space for our manufacturing and production operations, including inspection, assembly, testing, packaging, labeling, storage, and shipping. We believe this manufacturing facility has the capacity to meet our manufacturing needs for at least the next five years. Outside suppliers are the source for components and sub-assemblies in the production of the Zio Systems. Any significant supplier of a critical component, such as the circuit boards for the Zio Systems provided by contract electronic manufacturers, is managed through our manufacturing team that is focused on reducing supply chain risk. These suppliers are evaluated, approved, and monitored by our quality team to ensure conformity with the specifications, policies, and procedures applicable to our devices. Our manufacturing operations are subject to regulatory requirements of FDA’s Quality System Regulation (“QSR”) for medical devices authorized for manufacturing and sale in the United States (set forth under 21 CFR Part 820), the Medical Devices Directive 93/42/EEC (“MDD”) and the Medical Devices Regulation 2017/745 of the European Parliament and of the Council (“EU MDR”), which is required for doing business in the EU, and the UK Medical Device Regulations 2002 (as amended) (“UK MDR”). We are also subject to applicable requirements relating to the environment, waste management, and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal, sale, labeling, collection, recycling, treatment, and remediation of hazardous substances. See “Regulation” below for further information. We purchase certain components and materials used in manufacturing from single sources due to quality considerations, costs, or constraints resulting from regulatory or other requirements. As of December 31, 2023, those single sources include suppliers of application-specific integrated circuits used in our transmitters, seals used for the applicators, and certain polymers used to synthesize polymeric membranes for our sensors. 15 Table of Contents Our manufacturing facilities are also ISO certified (EN ISO 13485:2016). We have registered our device establishments with FDA and with the UK’s Medicines & Healthcare products Regulatory Agency (“MHRA”). Additional EU registrations may be sought in 2024 in EU member states by our EU authorized representative as appropriate. Third-Party Reimbursement We receive revenue for the Zio Services primarily from third-party payors, which include commercial payors and government agencies, such as the Centers for Medicare & Medicaid Services (“CMS”). Third-party payors require us to identify the service for which we are seeking reimbursement by using a Current Procedural Terminology (“CPT”) code set maintained by the American Medical Association (“AMA”). These CPT codes are subject to periodic change and update, which will impact the reimbursement rates for our Zio Services. For the year ended December 31, 2023, we received approximately 86% of our revenue through third-party payors, which includes approximately 25% of our total revenue from the Medicare program. As we continue to contract with more commercial payors and the patient population ages into eligibility for the Medicare Advantage program, we believe more of our revenue will convert to commercial payer billing. Our clinical centers are enrolled in the Medicare program as IDTFs, which allows us to bill CMS directly for our Zio Services. To maintain enrollment, we must meet the CMS IDTF supplier standards, including having an independent medical director for oversight and qualified technicians who support the analysis of ECG data captured by the Zio patches as part of our Zio Services. For additional information on third-party reimbursement, please see our Risk Factor titled “If reimbursement or other payment for our Zio Services is reduced or modified in the United States, including through cost containment measures or changes to policies with respect to coding, coverage, and pricing, our business could suffer.” Research and Development We focus our research and development efforts on improvement of our Zio System and Zio Services in alignment with our strategy. We employ engineering and research and development staff to focus on delivering future innovations and sustaining improvements. Our research and development activities are focused on: • Continuous improvement and extensions to existing products and services. We are continuously working to improve the Zio Services to increase patient comfort, product quality, operational scalability, and security. • International expansion . We are working on building our infrastructure and ensuring global compliance as we identify appropriate opportunities for international growth. • Advancing our technology offering. Our product portfolio includes patch-based solutions (utilized in the Zio Monitor System, Zio AT System, and Zio XT System) and the FDA-cleared Zio Watch that combine continuous monitoring for extended periods with accelerated notification of significant events through mobile transmission capabilities. • Customer workflow optimization . We have initiatives that aim to increase customer productivity by optimizing workflow through easier patient enrollment, report access, and interpretation, in addition to integrating the reports from our Zio Services directly into EHRs. • Data analytics. We are focused on improving and enhancing our back-end, deep-learning analytic platform, building on our core competency in data analytics. • Developing clinical evidence . We frequently provide support to third parties conducting clinical studies that further support the benefits of the Zio System, including clinical research in areas such as obstructive sleep apnea, hypertension, predictive features, and patient wearables. • Continuing to solidify our footprint in digital healthcare. Using our repository of ambulatory ECG patient data, we will continue to look for ways to create value-driving opportunities in digital healthcare, such as expansion of indications for the Zio System, new therapeutic discoveries, development of an analytical engine for ambulatory consumers, other medical data and payor and provider decision support, and the potential for more complete system integration with large health systems. 16 Table of Contents We have supported clinical studies conducted by leading physicians and clinicians to explore and develop new techniques and applications for our Zio Systems, the clinically-integrated version of ZEUS for the Zio Watch, and other clinical and research activities, including healthcare economic outcomes research. Our research and development activities consist of software development, algorithm and product development, regulatory affairs, and clinical research. Our research and development expenses were $60.2 million, $46.6 million, and $38.7 million for the years ended December 31, 2023, 2022, and 2021, respectively. Collaboration with Verily On September 3, 2019, we entered into a Development Collaboration Agreement with Verily Life Sciences LLC, an Alphabet Company (“VLS”) and Verity Ireland Limited (“VIL,” and together with VLS, “Verily”) (such Development Collaboration Agreement, as amended by Amendment No.1 dated April 26, 2021 and Amendment No.2 dated January 24, 2022, the “Development Agreement”). The Development Agreement involves collaboration development and production of intellectual property between us and Verily. Each party has primary responsibility for certain aspects of development and approval, with all processes to be performed at each respective party’s own cost. The parties agreed to develop certain next-generation Afib screening, detection, or monitoring products pursuant to the Development Agreement, which products will involve combining Verily’s and our technology platforms and capabilities. Under the terms of the Development Agreement, we paid Verily an upfront fee of $5.0 million in 2019. In addition, we agreed to make additional milestone payments to Verily up to an aggregate of $12.75 million upon achievement of various development and regulatory milestones over the term of the Development Agreement. We have achieved milestones tied to payments totaling $11.0 million to date and expect to make additional payments over the term of the Development Agreement of $1.75 million, subject to the achievement of specified milestones. The Development Agreement provides each party with licenses to use certain intellectual property of the other party for development activities in the field of Afib screening, detection, or monitoring, together with perpetual non-exclusive licenses to certain shared know-how (which licensed shared know-how excludes certain technology or intellectual property, such as patent rights). Ownership of developed intellectual property is allocated to us or Verily depending on the subject matter of the underlying developed intellectual property, and, for certain subject matter, is jointly owned. Intellectual Property To establish and protect our proprietary and other intellectual property rights, we rely on a combination of trademark, copyright, patent, trade secret, and other intellectual property laws, and employment, non-disclosure and invention assignment agreements, and other protective contractual provisions with our employees, contractors, consultants, suppliers, partners, outside scientific collaborators, and advisors, and other third parties. In addition, we have entered into licenses in the ordinary course of business relating to a wide array of technologies or other intellectual property rights or assets. We hold patents and pending patent applications in the United States and other parts of the world which, in aggregate, we believe to be of importance in the operation of our business. As of December 31, 2023, we owned, or retained an exclusive license to, forty-two issued patents from the U.S. Patent Office (“USPTO”), ten issued patents from the Japanese Patent Office, three issued patents from the Australian Patent Office, four issued patents from the Canadian Patent Office, six issued patents from the European Patent Offices, five issued patents from the Korean Patent Office, and two issued patents from the Chinese Patent Office. Our U.S. issued patents as of December 31, 2023 are set to expire over a range of years, from November 2028 to August 2041, subject to any extensions. As of December 31, 2023, we had forty-eight pending patent applications globally, including eleven in the United States, seven in the European Patent Office, seven in Japan, two Patent Cooperation Treaty ("PCT") international applications, six in Australia, four in each of Korea, China, and India, and three in Canada. Our patents and patent applications seek to protect aspects of our core technologies and our product concepts for ambulatory cardiac monitoring. We believe that our patent position provides us with sufficient rights to protect our current and proposed commercial products and services. However, our patent applications may not result in issued patents, and any patents that have been issued or might be issued may not protect our intellectual property rights. We also rely on trade secrets, technical know-how, and continuing innovation to develop and maintain our competitive position. 17 Table of Contents As of December 31, 2023, our trademark portfolio contained U.S. trademark registrations for the marks MyZIO, ZIO, ZIO SUITE, ZIO AT, and IRHYTHM and pending U.S. trademark applications for the marks KNOW YOUR RHYTHM BY ZIO, KNOW YOUR RHYTHM, ZIO and ZIO MCT. It also contained registered trademarks for the mark IRHYTHM in Australia, the EU, Austria, Canada, China, Denmark, Finland, France, Germany, Japan, Italy, Norway, Sweden, Switzerland, and the UK. It further contained trademark registrations for the mark ZIO in Australia, Canada, China, the EU, Japan, Norway, and Switzerland. It also contained trademark registrations for the mark MYZIO in Canada, the UK, and the EU, trademark registrations for the mark ZIO MCT in the UK and the EU, and trademark registrations for the mark ZIOSUITE in the UK and the EU. Regulation Based on the nature of the services we provide, the medical devices used to deliver our services, and the ways in which payment is available for our services, we are subject to a complex spectrum of intersecting laws and regulatory frameworks. Our facilities in Illinois, California, and Texas are enrolled in the Medicare program as IDTFs, defined by CMS as entities independent of a hospital or physician’s office in which diagnostic tests are performed by licensed or certified non-physician personnel under appropriate physician supervision. CMS has set certain performance standards that every IDTF must meet in order to obtain or maintain its billing privileges. We are also regulated as a medical device manufacturer because of our role in the design, development, and manufacturing of the Zio Systems used in our Zio Services. The United States has historically been the primary focus of the delivery of our services, but based on our operations we are subject to a range of laws and regulations outside the United States, and we expect the complexity of the global regulatory landscape to which we are subject to continue to increase. U.S. Fraud and Abuse Laws and Other Healthcare Compliance Requirements Medicare is a federal healthcare program administered by CMS that is available to individuals age 65 or over, and certain other individuals. The Medicare program provides, among other things, healthcare benefits that cover most medically necessary care for such individuals, subject to certain deductibles and co-payments. CMS has established guidelines for the coverage and reimbursement of certain products, supplies, and services, including ambulatory cardiac monitoring services. In general, Medicare will only reimburse ambulatory cardiac monitoring services, such as our Zio Services, that are reasonable and necessary for the diagnosis or treatment of patients. CMS also administers the Medicaid program, a cooperative federal/state program that provides medical assistance benefits to qualifying low income and medically needy persons. State participation in Medicaid is optional, and each state is given discretion in developing and administering its own Medicaid program, subject to certain federal requirements. All CMS programs are subject to statutory and regulatory changes, retroactive and prospective rate adjustments, administrative rulings, interpretations of policy, intermediary determinations, and government funding restrictions, all of which may materially increase or decrease the rate of program payments to healthcare facilities and other healthcare providers, including those paid for our Zio Services. Because of the significant federal funding involved, the government actively enforces a number of laws and regulations to eliminate fraud and abuse in federal healthcare programs. Our business is subject to compliance with these laws. The most significant of these laws for our business include the federal Anti-Kickback Statute (the “AKS”) and the federal False Claims Act (the “FCA”). 18 Table of Contents Anti-Kickback Laws Under the AKS, it is a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for purchasing, ordering, or recommending, or arranging for, the purchase or order of items or services (or referrals of the same) reimbursable by a federal healthcare program. The AKS imposes criminal liability for both the party that provides or offers such remuneration and the party that receives or solicits such remuneration. Courts and enforcement agencies interpret the AKS broadly, such that it may be implicated whenever anything of value is provided to a party in a position to generate federal healthcare program business where any one purpose of an arrangement involving remuneration is to induce referrals. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment, and possible exclusion from Medicare, Medicaid, and other federal healthcare programs. Many states have adopted laws similar to the AKS. Some of these state prohibitions apply to referral of recipients for healthcare products or services reimbursed by any source, not only CMS programs. The Physician Payments Sunshine Act requires transparency around certain transfers of value and ownership interests that may raise parallel scrutiny of the appropriateness of financial relationships. Notably, some kickback allegations are also interpreted as violations of the FCA. False Claims Act The FCA prohibits: (i) knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval and (ii) knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim. Importantly, the FCA provides for “whistleblower” or qui tam actions, which allow a private individual to bring actions on behalf of the federal government alleging that the defendant has violated the FCA and to share in any monetary recovery. The federal government has used the FCA to assert liability on the basis of inadequate care, kickbacks, and other improper referrals, and improper use of CMS billing numbers, as well as allegations of off-label promotion of products, and activities relating to the reporting of discount and rebate information. The FCA is the federal government’s preferred enforcement vehicle for addressing a variety of alleged misconduct and provides for treble damages and civil money penalties ranging from $13,508 to approximately $27,018 per claim, as well as exclusion from participation in federal healthcare programs and potential criminal penalties, including imprisonment and criminal fines. Additionally, as part of any settlement, the government will often require the entity to enter into a corporate integrity agreement, which imposes certain ongoing compliance, certification, and reporting obligations. In addition, various states have enacted false claims laws analogous to the FCA, and many of these state laws apply where a claim is submitted to any third-party payor and not only a federal healthcare program. Healthcare Reform Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt commercialization of our current and future solutions. The Affordable Care Act (“ACA”) substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts our industry. Any changes to, or repeal of, the ACA may have a material adverse effect on our results of operations. Additionally, for out-of-network or cash pay patients, we may be subject to state and federal surprise billing laws that impose limits on amounts that can be charged to such patients and/or the amount we can receive for out-of-network services from commercial payors. One such law, the federal No Surprises Act, requires covered providers to provide “good faith estimates” to patients and establishes a detailed and potentially costly independent dispute resolution process governing fee disputes with those patients. These laws and regulations may change, and additional implementation regulations are expected for the No Surprises Act, and we anticipate these requirements may apply to our business in the future. We are subject to risks related to the U.S. fraud and abuse laws and other healthcare compliance requirements described above, as well as others that are or may be adopted in future. For further details on these risks, see “Risk Factors,” below. U.S. Food and Drug Administration Because we develop and manufacture the medical device technology used in the Zio Services (the hardware and software elements that FDA regulates as “devices”), we are subject to extensive and ongoing regulation by FDA under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) and its implementing regulations, as well as other federal and state regulatory bodies in the United States. The laws and regulations govern, among other things, product design and development, preclinical and clinical testing, manufacturing, packaging, labeling, storage, recordkeeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance and associated regulatory reporting. 19 Table of Contents Most Class II devices, including the Zio patches and the ZEUS System, require 510(k) clearance from FDA in order to be marketed in the United States. A 510(k) submission must demonstrate that the device is substantially equivalent to a device legally in commercial distribution in the United States. After clearance, changes made to devices must be evaluated on an ongoing basis and may trigger the need for additional 510(k) clearances or – depending on the nature of the change – might require a higher level of FDA review (through the de novo premarket approval or ("PMA") process). To date, our product changes have been managed within the 510(k) framework and we have not been required to provide clinical data to support these 510(k) submissions and clearances. After a device is placed on the market, numerous regulatory requirements continue to apply. These include: • the FDA’s QSR, which requires manufacturers, including their suppliers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of the product lifecycle, including the manufacturing process; • labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved, or off-label uses, including parameters around manufacturer communications with payors and healthcare professionals; • medical device reporting regulations, which require that manufacturers report to FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • medical device recalls, which require that manufacturers report to FDA any recall of a medical device, provided the recall was initiated to either reduce a risk to health posed by the device, or to remedy a violation of the FD&C Act caused by the device that may present a risk to health; and • post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. After a device receives 510(k) clearance or PMA, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, performance, or functionality may require a new clearance or approval. FDA requires each manufacturer to make this determination initially, but FDA can review any such decision and can disagree with a manufacturer’s determination. If FDA disagrees with the determination not to seek a new 510(k) clearance or PMA approval, the FDA may retroactively require a new 510(k) clearance or PMA approval. FDA could also require a manufacturer to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, and other enforcement actions, such as warning letters. We have registered appropriate facilities with FDA as a medical device specification developer, manufacturer, or designated complaint handling unit. We have also obtained a manufacturing license from the California Department of Public Health (“CDPH”). FDA and the CDPH have broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by FDA and the Food and Drug Branch of CDPH to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers. Failure to comply with applicable regulatory requirements can result in enforcement action by FDA, which may include any of the following sanctions: • warning letters, fines, injunctions, consent decrees, and civil penalties; • repair, replacement, refunds, recall, or seizure of our products; • operating restrictions, partial suspension, or total shutdown of production; • refusing our requests for 510(k) clearance or PMA approval of new products, new intended uses, or modifications to existing products; • withdrawing 510(k) clearance or PMA approvals that have already been granted; and • criminal prosecution. 20 Table of Contents Privacy and Security Regulation Our business is subject to foreign, federal , and state privacy and security laws concerning the collection, use, analysis, retention, storage, protection, transfer, disclosure, and/or disposal of individually identifiable information including, without limitation, the General Data Protection Regulation (“GDPR”), the Health Insurance Portability and Accountability Act of 1996, as amended by the final regulations promulgated pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), found in the American Recovery and Reinvestment Act of 2009 (collectively, “HIPAA”), the Telephone Consumer Protection Act, the CAN-SPAM Act, and state privacy, consumer protection, and breach notification laws. We are subject to risks related to privacy and security regulation. For further details on these risks, see “Risk Factors,” below. European Union and United Kingdom The Zio XT patch is currently regulated in the EU as a Class IIa medical device pursuant to the MDD. The MDD sets out the basic regulatory framework for medical devices in the EU. In May 2021, the EU MDR, a more comprehensive regulatory framework, replaced the MDD. The system of regulating medical devices operates by way of a certification for each medical device. Each certified device is marked with the CE mark which shows that the device has a certificate of conformance under the MDD or EU MDR. National competent authorities (the “Competent Authorities”) in each member state oversee the implementation of the MDD and EU MDR within their jurisdiction, typically through so-called notified bodies which are certification organizations designated by a member state to conduct third-party conformity assessments (the “Notified Bodies"). The means for achieving the requirements for the CE mark vary according to the nature of the device. Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE mark can be placed on a product. Conformity assessments for our products are carried out as required by Notified Bodies. If a Notified Body of one member state has issued a CE mark, the device can be distributed throughout the EU without further conformance tests being required in other member states, although certain member states may require in-country device registrations after the issuance of the CE mark. The CE mark is contingent upon continued compliance with the applicable regulations and the quality system requirements of the ISO 13485 standard. Our CE mark for the Zio XT System was issued by the National Standards Authority of Ireland under the MDD and is replaced by our new CE mark under the EU MDR issued by the British Standards Institution (“BSI”) on December 15, 2023 for the Zio Monitor System and the Zeus System. Due to UK’s departure from the EU, the MHRA has issued new requirements associated with the UK Conformity Assessed (“UKCA”) mark. The UKCA marking is a new UK product marking that is used for goods being placed on the market in Great Britain. It covers most goods which previously required the CE marking, including medical devices. The UKCA requirement became effective on January 1, 2021 and we have obtained a UKCA mark with the BSI, which also serves as our UK Approved Body, for the Zio XT System and the Zeus System. We are also registered with the UK’s Care Quality Commission (“CQC”) to carry out diagnostic and screening procedures. Additionally, the EU Notified Body and UK Approved Body regularly audit our manufacturing, design, and operational facilities to ensure ongoing ISO 13485 and EU MDR compliance and periodically audit technical design files in accordance with the EU MDR in order to maintain our CE mark or issue a CE mark or UKCA mark for new or updated devices. Anti-Bribery and Anti-Corruption Laws The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar laws in foreign jurisdictions generally prohibit any U.S. corporations and their representatives from offering, promising, authorizing, or making payments, gifts, or transfers of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to obtain or retain business. The scope of the FCPA includes interactions with certain healthcare professionals and hospital administrators in many countries. 21 Table of Contents In addition, in Europe, various countries have adopted anti-bribery laws providing for severe consequences in the form of criminal penalties and significant fines for individuals or companies committing a bribery offense. Violations of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations, and reputation. For instance, in the UK, under the U.K. Bribery Act 2010, a bribery occurs when a person offers, gives, or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also falls within the scope of the U.K. Bribery Act 2010. An individual found in violation of the U.K. Bribery Act 2010 faces imprisonment of up to 10 years. In addition, the individual can be subject to an unlimited fine, as can commercial organizations for failure to prevent bribery. Sustainability To best serve our various stakeholders – including patients, caregivers, employees, investors, and communities – we believe in operating in a sustainable manner according to five core values. These principles guide how we accomplish our mission to drive the success of our business and enable long-term value creation. • Lead with integrity. We believe that building trust, holding ourselves to the highest standards of ethics, acting with transparency, and being accountable forms the foundation of who we are as a company. • Solve for the patient. Improving the lives of patients is our passion, so with everything we do, we put patients first, aim to deliver high-quality results, and consider customer needs. • Think big, go fast. Achieving our vision requires bold action without compromising quality. This is why we strive to be open to new ideas, take intelligent risks, act with a sense of urgency, and learn from failure. • Collaborate to win. Prioritizing collective success delivers astounding results, so we aim to think holistically and strategically, develop relationships proactively, and work as one team. • Strive for better. We believe that immense possibility exists at iRhythm, so we are open to embracing change and pursuing opportunities for growth, and we seek diverse perspectives in that pursuit. In accordance with these values, we believe that effectively managing environmental, social, and corporate governance (“ESG”) risks and opportunities drives business success, and that when fully integrated into the business, ESG can provide a competitive advantage. In 2022, we set out on a journey to develop iRhythm’s approach to ESG by conducting an ESG Priority Assessment to identify the ESG priority topics that are important to internal and external stakeholders and operationalizing ESG within the organization by forming an ESG Steering Committee and multiple ESG Working Groups, which focus on specific ESG substantive areas or workstreams. Additionally, in 2023, we established formal board oversight of ESG by revising the charters of two committees of our Board of Directors – the Nominating and Corporate Governance Committee and the Compensation and Human Capital Management Committee. Our 2022 ESG report, issued in 2023 (available on our website), outlines these efforts and we continue to work within our organization to advance our strategic ESG roadmap by pursuing ESG workstreams. We intend to update our ESG report in 2025. Human Capital As of December 31, 2023, we had approximately 2,000 employees globally. While the COVID-19 pandemic initially disrupted how and where we work, our employees demonstrated resilience, flexibility, and camaraderie and we transitioned to a hybrid work model. In our hybrid work model, our positive company culture has ensured that we performed well financially, long-term productivity was maintained, and employee engagement remained high. The Compensation and Human Capital Management Committee of our Board of Directors has oversight of our culture and human capital management, including diversity, equity, and inclusion with respect to our employees. Diversity, Equity, and Inclusion We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment. As of December 31, 2023, our workforce was comprised of more than 55% female employees and more than 44% of employees identified as ethnically diverse. 22 Table of Contents To further build on our commitment to diversity, equity, and inclusion (“DEI”), we have formed a DEI Counsel that is led by our Chief Risk Officer to support strategic initiatives, partnerships, advocacy, and educational programs to foster a more diverse, equitable, and inclusive culture. We value our differences, recognizing that from those differences comes our strengths, and we are committed to continuing to build a culture of diversity, equity, and inclusion. Over the course of 2023, we also launched three new Employee Resource Groups (“ERGs”). These employee-led ERGs are reflective of employee demographics and interests and continue to cultivate a sense of inclusion and belonging. Board and Management Oversight The Compensation and Human Capital Management Committee of our Board of Directors has oversight of human capital management, including our approach to talent recruiting, development, progression and retention, culture, human health and safety, and total rewards. We are committed to nurturing our workforce and have also established a Global Leadership Forum that is led by our Executive Leadership Team to ensure broader alignment across our organization's leadership on key corporate initiatives, company culture, and transformation objectives. Health and Safety We believe that to date we have materially complied with applicable health, safety, and environmental laws as well as related company policies and procedures and provide necessary training as appropriate by role and location. During 2023, we published internally our Environmental, Health, and Safety Policy Statement demonstrating our ongoing commitment to the highest standards of environmental, health, and safety performance. We consistently track and evaluate recordable incident rates associated with our various facilities locations. We believe that by integrating sound environmental, health, and safety management practices into all elements of our business and operations, we will consistently deliver innovative and trusted solutions for the patients that we serve, as well as sustain higher standards of employee safety. Total Rewards We believe that we employ a fair and merit-based total compensation system, and we evaluate our compensation programs regularly to help ensure that our employees are compensated fairly for their work while fostering a pay-for-performance culture that is aligned with the interests of our stockholders. We believe that we offer our employees competitive benefits that follow industry standards and support physical, mental, and financial wellness. We offer health benefits, a 401(k) plan with company match, paid time off and family leave, an Employee Stock Purchase Plan for employees in the United States, which allows them to purchase our stock at a discount, and an employee wellness program that is generally available to employees and their families globally with a variety of support services. Workforce Development The growth and success of our employees is one of our top priorities as it impacts our overall company performance. We are investing heavily to build in-house tools and resources to support managers and employees. Our core competencies are the foundation for programs and tools being developed to identify top talent, prepare future managers and leaders, and provide equal access to growth opportunities. We offer a variety of training opportunities, whether focused on building vocational, management, or leadership skills. We facilitate sessions around our core competencies, interview skills, and coaching practices, and we offer a toolbox on our intranet with resources for employees and managers across the employee lifecycle. 23 Table of Contents