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Item 7. Management’s Discussion and Analysis

2026-02-19 compared with 2025-02-20 · 149 added, 116 removed, 234 unchanged (53% of the section changed)

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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 remote 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 Zio System combines an FDA-cleared, CE-marked and Japan PMDA-approved wire-free, patch-based, 14-day wearable biosensor that continuously records 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 eight million patients and have collected over 2 billion hours of curated heartbeat data.

Since first receiving clearance from 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 IDTFs and with our qualified technicians.

We have provided our Zio Services using our Zio Systems.

We receive revenue for the Zio 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 Zio Services from us directly.

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 Zio Services shown as a percentage of revenue:

The following are iRhythm Services shown as a percentage of revenue:

Year Ended December 31,

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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, interest income and as further adjusted for stock-based compensation expense, changes in fair value of strategic investments, impairment and restructuring charges, business transformation costs, and loss on extinguishment of debt.

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.

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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, limiting its usefulness as a comparative measure.

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):

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Stock-based compensation 88,283 75,978 77,204

Impairment and restructuring charges 641 11,078 26,608

Impairment charges 4,458 641 11,078

Business transformation costs 3,033 11,072 15,866

Intellectual property litigation expenses 2

Loss on extinguishment of debt — 7,589 —

Adjusted EBITDA $ 68,910 $ (7,748) $ (4,863)

1 Net loss for the year ended December 31, 2024 includes $32.4 million of acquired in-process research and development expense.

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.

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 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.

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.

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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 Zio 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 for our leased San Francisco headquarters resulted in an impairment of our right-of-use (“ROU”) asset and related leasehold improvements and furniture and fixtures during the years ended December 31, 2023 and 2022.

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.

The majority of our revenue is derived from provision of our Zio Services to customers in the United States.

We earn revenue from the provision of our Zio Services primarily from contracted third-party payors, CMS, and healthcare institutions.

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.

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These estimates require significant judgment by management.

In determining the amount to accrue for the Zio 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 typically experience reduced revenue during the third quarter, as well as during the year-end holiday season.

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.

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Cost of Revenue

Cost of revenue includes direct labor, material costs, equipment and infrastructure expenses, amortization of internal-use software, allocated overhead, royalties, and shipping and handling.

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 re-usable printed circuit board assemblies (“PCBAs”).

Each Zio XT patch and Zio Monitor patch includes a PCBA, and each Zio AT patch includes a PCBA and gateway board, the cost of which is amortized over the expected useful life of the board.

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 Zio 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 potential tariffs on imports (which may complicate and increase costs associated with our supply chain).

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 gross margin from 2023 to 2024, and continue to focus on improving gross margins in the future, while navigating through the macroeconomic and supply chain headwinds discussed above that we expect to face.

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

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Acquired In-Process Research and Development Expenses

Our in-process research and development 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.

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

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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

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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.

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.

Loss on Extinguishment of Debt

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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.

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 fiscal 2023 compared to fiscal 2022 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2023 Annual Report on Form 10-K, which was filed with the SEC on February 22, 2024.

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

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(dollars in thousands, except percentages)*

$ 591,839 100 % $ 492,681 100 % $ 99,158 20 %

Revenue, net $ 747,138 100 % $ 591,839 100 % $ 155,299 26 %

Cost of revenue 219,888 29 % 184,308 31 % 35,580 19 %

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Acquired in-process research and development 3,036 — % 32,371 5 % (29,335) (91) %

32,371 5 % — — % 32,371 N/M

Selling, general and administrative 492,553 66 % 418,565 71 % 73,988 18 %

Impairment and restructuring charges 641 — % 11,078

2 % (10,437) (94) %

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 (expense), net:

Interest and other income

Interest income 21,521 3 % 21,938 4 % (417) (2) %

21,938 4 % 6,353 1 % 15,585 245 %

Interest expense (13,154) (2) % (12,821) (2) % (333) 3 %

(12,821) (2) % (3,650) (1) % (9,171) 251 %

Loss on extinguishment of debt

(7,589) (1) % — — % (7,589) N/M

Other income (expense), net

1,253 — % (198) — % 1,451 (733) %

Total interest and other income (expense), net

2,781 — % 2,505 1 % 276 11 %

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) %

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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 Zio Services resulting from increased demand.

Average selling price remained relatively stable period over period.

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.

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 increase in cost of revenue was primarily due to increases in headcount-related costs associated with the increase in volume of Zio Services.

For the twelve months ended December 31, 2024, additional impacts to cost of revenue include an increase of approximately $4.0 million in amortization charges for Zio XT and Zio Monitor PCBAs in conjunction with the ongoing commercial launch of Zio Monitor, an increase of $3.4 million for freight-related charges in connection with our increased volume of Zio Services, and an increase of approximately $2.7 million in amortization charges for capitalized internal use software which support our revenue generation.

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 twelve months ended December 31, 2024 was primarily due to higher headcount-related costs (including stock-based compensation), consulting costs to support regulatory affairs, product development, and legal matters, and further development, enhancement and functionality of our current and future product offerings.

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 expense was $32.4 million during the year ended December 31, 2024.

The expense was related to the Technology License Agreement (the “License Agreement”) we entered into with BioIntelliSense, Inc.

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.

See Note 8, Commitments and Contingencies, in the notes to our Consolidated Financial Statements for further details.

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 third-party patient claims processing fees and legal fees, offset by reductions in stock-based compensation and professional fees to support scaling the organization.

During the twelve months ended December 31, 2024, we incurred $11.1 million of business transformation costs primarily related to severance, professional fees, and third-party merger and acquisition fees.

During the twelve months ended December 31, 2023, we incurred $15.9 million of business transformation costs primarily related to severance and professional fees, to drive efficiencies and streamline our global operations.

Impairment and Restructuring Charges

Impairment and restructuring expenses decreased by $10.4 million, or 94%, to $0.6 million during the year ended December 31, 2024, as compared to $11.1 million during the year ended December 31, 2023.

During the year ended December 31, 2024, we recorded an impairment charge of $0.6 million related to internal-use software in development not expected to be completed.

During the fourth quarter of 2023, we recorded an impairment of our ROU asset and related property and equipment for our headquarters in San Francisco, California, due to real estate rental market conditions within San Francisco, California, of $11.1 million for the year ended December 31, 2023.

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 increased by $15.6 million to $21.9 million during the year ended December 31, 2024, as compared to $6.4 million during the year ended December 31, 2023.

The increase was attributable to higher market interest rates earned from our cash, cash equivalents and marketable securities, as well as an increase in the average invested balances during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily as a result of the borrowing under the 2029 Notes in March 2024.

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 was primarily attributable to the $75.0 million Braidwell Term Loan Facility (as defined below) borrowed and repaid during the first quarter of 2024, as well as the $661.3 million 2029 Notes borrowed in March 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.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $7.6 million during the year ended December 31, 2024.

The increase was related to the early extinguishment of both the SVB Loan Agreement and the Braidwell Term Loan Facility during the first quarter of 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 (Expense), Net

Other income (expense), net increased by $1.5 million to $1.3 million during the year ended December 31, 2024, as compared to other income (expense), net $(0.2) million during the year ended December 31, 2023.

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

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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, which our third-party vendor engages for services relating to billing and collections.

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.

As of December 31, 2024, we have received a significant portion of our cash collections from the delayed billings.

We believe that our current cash, cash equivalents, and marketable securities balances, together with income to be derived from the sales of our Zio Services, will be sufficient to meet our liquidity requirements for at least the next 12 months.

On September 3, 2019, we entered into a Development Collaboration Agreement with Verily Life Sciences LLC, an Alphabet company (“VLS”) and Verily Ireland Limited (“VIL” and together with VLS, “Verily”) (such Development Collaboration Agreement, as amended, the “Development Agreement”).

Under the terms of the Development Agreement, we agreed to make milestone payments to Verily up to an aggregate of $12.75 million upon achievement of various development and regulatory milestones.

We have achieved milestones tied to payments totaling $11.0 million through December 31, 2024, and we are obligated to make additional milestone payments of $1.75 million, subject to the achievement of specified milestones.

On August 30, 2024, we entered into a 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 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 (ii) the parties 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 acceptance of the initial transfer of certain licensed technologies and data following the execution of the License Agreement.

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.

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 the regulatory milestones up through December 31, 2026.

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):

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2025 2024 $ Change

Net cash provided by (used in) operating activities

$ 3,390 $ (50,101) $ 53,491

Net cash provided by operating activities $ 80,863 $ 3,390 $ 77,473

Net cash used in investing activities (277,056) (122,983) (154,073)

(122,983) (1,209) (121,774)

Net cash provided by financing activities 12,607 511,381 (498,774)

511,381 8,820 502,561

Operating Activities

During the year ended December 31, 2024, cash provided by operating activities was $3.4 million, as compared to $50.1 million cash used in operating activities during the year ended December 31, 2023.

Cash provided by operating activities increased by $53.5 million primarily attributable to a reduction in our loss from operations, favorable impacts from decreases in prepaid and other current assets, and favorable impacts from a reduction in other long-term assets, primarily from lower levels of purchases of PCBAs.

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 decrease in the change in marketable securities of $59.3 million, an increase of $54.0 million related to the purchase of strategic loan investments, and the acquisition of in-process research and development from BioIS of $15.0 million.

Offsetting these increases in uses of cash was a decrease in property and equipment expenditures of $6.5 million.

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, 2024, cash provided by financing activities was $511.4 million, an increase of $502.6 million, as compared to $8.8 million provided by financing activities during the year ended December 31, 2023.

The increase was primarily attributed to $661.3 million in proceeds received from the issuance of our 2029 Notes.

The increase was offset by $37.8 million associated with the payment of the SVB Loan Agreement and related termination costs, payment of $5.6 million associated with the Braidwell Term Loan Facility debt issuance and termination costs, payment of $17.4 million associated with debt issuance costs for our 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, 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.

1.50% Senior Convertible Notes due 2029

On March 7, 2024, we completed an offering of $661.3 million aggregate principal amount of unsecured senior convertible 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 by us to the initial purchasers of the 2029 Notes to purchase up to an additional $86.3 million aggregate principal amount of notes.

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 costs directly related to the offering, were approximately $643.8 million.

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 our discretion.

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 Loan of the Braidwell Term Loan Facility (as each such term is defined 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.

These repurchases could increase (or reduce the size of any decrease in) the market price of our common stock, and could result in a higher effective conversion price for the 2029 Notes.

We intend to use the remainder of the net proceeds from the offering for general corporate purposes.

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 relating to the 2029 Notes includes customary terms and covenants, including certain events of default after which the 2029 Notes may be due and payable immediately.

In connection with the offering of the 2029 Notes, we entered into the privately negotiated capped call transactions (the “2029 Capped Calls”) with certain financial institutions.

The 2029 Capped Calls will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2029 Notes, the number of shares of our common stock that will initially underlie the 2029 Notes.

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.

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An initial tranche of $75.0 million (“Initial Loan”) was funded on the Closing Date.

An additional tranche of $75.0 million was accessible through the one-year anniversary of the Closing Date, so long as we satisfied certain customary conditions.

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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SVB Term Loan

In October 2018, we entered into the Third Amended and Restated Loan and Security Agreement (“SVB Loan Agreement”) with Silicon Valley Bank (“SVB”).

Under the SVB Loan Agreement, we had borrowed $35.0 million and had made repayments through March 2022, at which time the outstanding balance was $18.5 million.

On March 28, 2022, we entered into a Second Amendment (the “2022 Amendment”) to our SVB Loan Agreement which provided for a term loans facility in the aggregate principal amount of up to $75.0 million (the “2022 Term Loans”), of which $35.0 million was borrowed at closing and a portion of the proceeds was used to pay in full the outstanding balance of $18.5 million under the SVB Loan Agreement.

The remaining $40.0 million of 2022 Term Loans was available to be borrowed from time to time at our option, in increments of at least $10.0 million, through December 31, 2023.

The 2022 Amendment also amended the terms of the revolving credit line under the SVB Loan Agreement, which provided for an aggregate principal amount of $25.0 million.

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.

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GAAP”), which requires us to make judgments, estimates, and assumptions.

See Note 2, Summary of Significant Accounting Policies, in the notes to the Consolidated Financial Statements, which describes our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.

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.

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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 Zio 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 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 Monitor patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS algorithm.

The final step in the Zio Services is the delivery of an electronic Zio report to the prescribing physician with a summary of preliminary findings.

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 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 algorithm.

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 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 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 LTE protocol.

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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PCBA Valuation

We reuse PCBAs in each wearable Zio Monitor patch, Zio XT patch, and Zio AT patch, as well as the wireless gateway used in conjunction with the Zio AT patch.

As PCBAs are used in a wearable Zio Monitor patch, Zio XT patch, or Zio AT patch, a portion of the cost of the PCBA is recorded as a cost of revenue.

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.

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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.

The expected probability of achievement of those milestones has been estimated at 75% - 90% as of December 31, 2024.

If the milestones are achieved by their due dates, we estimate an additional $4.8 million of additional contingent consideration.

However, if the milestones are not achieved by their due dates, no contingent consideration may be due.

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

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See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements for more information.

• Debt interest and principal payments - On March 28, 2022, we entered into the 2022 Amendment to our SVB Loan Agreement which provided for a term loans facility in the aggregate principal amount of up to $75.0 million, of which $35.0 million was borrowed at closing.

On January 3, 2024, we repaid our outstanding indebtedness with SVB, and entered into the Braidwell Term Loan Facility.

The Braidwell Term Loan Facility provides for an aggregate principal borrowing amount of up to $150.0 million, of which $75.0 million was borrowed at closing.

On March 7, 2024, we repaid our outstanding indebtedness to Braidwell, and completed an offering of $661.3 million aggregate principal amount of our 2029 Notes.

• 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.

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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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis