iRhythm Holdings, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. IRHYTHM TECHNOLOGIES, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ( PCAOB ID: 238 ) 81 Consolidated Balance Sheets 83 Consolidated Statements of Operations 84 Consolidated Statements of Comprehensive Loss 85 Consolidated Statements of Stockholders’ Equity 86 Consolidated Statements of Cash Flows 87 Notes to the Consolidated Financial Statements 89 80 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of iRhythm Holdings, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of iRhythm Technologies, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 81 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Contractual Allowance – Contracted Third-Party Payors As described in Note 2 to the consolidated financial statements, a large portion of the Company’s transactions are covered by third-party payors with whom there is a contractual agreement or established amount the third-party payor will pay (contracted third-party payors). These contracts impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The Company recognizes revenue from contracted third-party payors, net of contractual allowances. As of December 31, 2025, the Company’s contractual allowance balance was $46.6 million, a significant portion of which relates to revenue from services provided to patients where contracted third-party payors pay for the service on the patient's behalf. As disclosed by management, management accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price and recorded as an adjustment to revenue as a contractual allowance. The contractual allowance requires judgment by management and is based on historical collections, review of specific outstanding claims and consideration of relevant qualitative factors. The principal considerations for our determination that performing procedures relating to the contractual allowance for contracted third-party payors is a critical audit matter are (i) the significant judgment by management when developing the estimate of the contractual allowance; and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the contractual allowance based on historical collections, review of specific outstanding claims and consideration of relevant qualitative factors. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the contractual allowance for contracted third party payors. These procedures also included, among others, (i) testing management’s process for developing the estimate of the contractual allowance; (ii) testing the completeness and accuracy of the underlying data used in the estimate; (iii) testing, on a sample basis, the accuracy of revenue transactions and collections from the historical billing and collection data used in management’s analysis; and (iv) evaluating the reasonableness of adjustments made by management to contractual allowances. /s/ PricewaterhouseCoopers LLP San Jose, California February 19, 2026 We have served as the Company’s auditor since 2009. 82 IRHYTHM TECHNOLOGIES, INC. Consolidated Balance Sheets (In thousands, except par value) December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 236,012 $ 419,597 Marketable securities 347,751 115,956 Accounts receivable, net 75,706 79,941 Inventory 21,634 14,039 Prepaid expenses and other current assets 21,662 16,286 Total current assets 702,765 645,819 Property and equipment, net 151,599 125,092 Operating lease right-of-use assets 41,827 47,564 Restricted cash 8,358 8,358 Goodwill 862 862 Long-term strategic investments 69,913 61,902 Other assets 44,718 41,852 Total assets $ 1,020,042 $ 931,449 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,256 $ 7,221 Accrued liabilities 128,747 84,900 Deferred revenue 4,201 2,932 Operating lease liabilities, current portion 16,686 15,867 Total current liabilities 151,890 110,920 Long-term senior convertible notes 649,504 646,443 Other noncurrent liabilities 908 8,579 Operating lease liabilities, noncurrent portion 64,994 74,599 Total liabilities 867,296 840,541 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, $ 0.001 par value – 5,000 shares authorized; none issued and outstanding at December 31, 2025 and 2024 — — Common stock, $ 0.001 par value – 100,000 shares authorized; 32,526 shares issued and 32,297 shares outstanding at December 31, 2025, respectively; and 31,621 shares issued and 31,392 shares outstanding at December 31, 2024, respectively 32 31 Additional paid-in capital 980,757 874,607 Accumulated other comprehensive income 403 165 Accumulated deficit ( 803,446 ) ( 758,895 ) Treasury stock, at cost; 229 shares at December 31, 2025 and 2024, respectively ( 25,000 ) ( 25,000 ) Total stockholders’ equity 152,746 90,908 Total liabilities and stockholders’ equity $ 1,020,042 $ 931,449 The accompanying notes are an integral part of these consolidated financial statements. 83 IRHYTHM TECHNOLOGIES, INC. Consolidated Statements of Operations (In thousands, except per share data) Year Ended December 31, 2025 2024 2023 Revenue, net $ 747,138 $ 591,839 $ 492,681 Cost of revenue 219,888 184,308 160,875 Gross profit 527,250 407,531 331,806 Operating expenses: Research and development 84,610 71,459 60,244 Acquired in-process research and development 3,036 32,371 — Selling, general and administrative 492,553 418,565 385,645 Impairment charges 4,458 641 11,078 Total operating expenses 584,657 523,036 456,967 Loss from operations ( 57,407 ) ( 115,505 ) ( 125,161 ) Interest and other income (expense), net: Interest income 21,521 21,938 6,353 Interest expense ( 13,154 ) ( 12,821 ) ( 3,650 ) Loss on extinguishment of debt — ( 7,589 ) — Other income (expense), net 5,442 1,253 ( 198 ) Total interest and other income (expense), net 13,809 2,781 2,505 Loss before income taxes ( 43,598 ) ( 112,724 ) ( 122,656 ) Income tax provision 953 565 750 Net loss $ ( 44,551 ) $ ( 113,289 ) $ ( 123,406 ) Net loss per common share, basic and diluted $ ( 1.39 ) $ ( 3.63 ) $ ( 4.04 ) Weighted-average shares, basic and diluted 32,004 31,196 30,528 The accompanying notes are an integral part of these consolidated financial statements. 84 IRHYTHM TECHNOLOGIES, INC. Consolidated Statements of Comprehensive Loss (In thousands) Year Ended December 31, 2025 2024 2023 Net loss $ ( 44,551 ) $ ( 113,289 ) $ ( 123,406 ) Other comprehensive income (loss): Net change in unrealized gain (loss) from marketable securities 249 ( 21 ) 453 Cumulative translation adjustment ( 11 ) 298 ( 169 ) Comprehensive loss $ ( 44,313 ) $ ( 113,012 ) $ ( 123,122 ) The accompanying notes are an integral part of these consolidated financial statements. 85 IRHYTHM TECHNOLOGIES, INC. Consolidated Statements of Stockholders’ Equity (In thousands) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Shares Amount Balances at December 31, 2022 30,193 $ 28 $ 762,380 $ ( 522,200 ) $ ( 396 ) $ — $ 239,812 Issuance of common stock in connection with employee equity incentive plans, net 761 3 8,817 — — — 8,820 Stock-based compensation — — 84,587 — — — 84,587 Net loss — — — ( 123,406 ) — — ( 123,406 ) Net change in unrealized gain on marketable securities — — — — 453 — 453 Cumulative translation adjustment — — — — ( 169 ) — ( 169 ) Balances at December 31, 2023 30,954 $ 31 $ 855,784 $ ( 645,606 ) $ ( 112 ) $ — $ 210,097 Issuance of common stock in connection with employee equity incentive plans, net 667 — 8,473 — — — 8,473 Purchases of capped call transactions — — ( 72,407 ) — — — ( 72,407 ) Purchase of treasury stock ( 229 ) — — — — ( 25,000 ) ( 25,000 ) Stock-based compensation — — 82,757 — — — 82,757 Net loss — — — ( 113,289 ) — — ( 113,289 ) Net change in unrealized loss on marketable securities — — — — ( 21 ) — ( 21 ) Cumulative translation adjustment — — — — 298 — 298 Balances at December 31, 2024 31,392 $ 31 $ 874,607 $ ( 758,895 ) $ 165 $ ( 25,000 ) $ 90,908 Issuance of common stock in connection with employee equity incentive plans, net 905 1 12,606 — — — 12,607 Stock-based compensation — — 93,544 — — — 93,544 Net loss — — — ( 44,551 ) — — ( 44,551 ) Net change in unrealized gain on marketable securities — — — — 249 — 249 Cumulative translation adjustment — — — — ( 11 ) — ( 11 ) Balances at December 31, 2025 32,297 $ 32 $ 980,757 $ ( 803,446 ) $ 403 $ ( 25,000 ) $ 152,746 The accompanying notes are an integral part of these consolidated financial statements. 86 IRHYTHM TECHNOLOGIES, INC. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities Net loss $ ( 44,551 ) $ ( 113,289 ) $ ( 123,406 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 20,742 20,715 16,348 Stock-based compensation 88,283 75,978 77,204 Amortization of premium and accretion of discounts, net ( 3,127 ) ( 1,350 ) ( 5,040 ) Amortization of operating lease right-of-use assets 5,737 5,062 5,796 Amortization of debt discount 3,060 2,796 15 Change in fair value of strategic investments ( 5,711 ) ( 1,902 ) — Provision for credit losses and contractual allowances 99,666 73,463 69,628 Acquired in-process research and development 3,036 32,371 — Loss on extinguishment of debt — 7,589 — Impairment charges 4,458 641 11,078 Other 967 432 322 Changes in operating assets and liabilities: Accounts receivable ( 95,431 ) ( 91,920 ) ( 81,193 ) Inventory ( 8,512 ) ( 224 ) 979 Prepaid expenses and other current assets ( 5,380 ) 5,305 ( 11,036 ) Other assets ( 2,894 ) 3,221 ( 22,787 ) Accounts payable and accrued liabilities 28,044 ( 7,408 ) 17,325 Deferred revenue 1,269 ( 374 ) 255 Operating lease liabilities ( 8,793 ) ( 7,716 ) ( 5,589 ) Net cash provided by (used in) operating activities 80,863 3,390 ( 50,101 ) Cash flows from investing activities Purchases of property and equipment ( 46,342 ) ( 33,942 ) ( 40,424 ) Purchases of marketable securities ( 466,114 ) ( 118,241 ) ( 164,285 ) Maturities of marketable securities 237,700 101,200 206,500 Purchases of strategic investments ( 2,300 ) ( 57,000 ) ( 3,000 ) Purchase of acquired in-process research and development — ( 15,000 ) — Net cash used in investing activities ( 277,056 ) ( 122,983 ) ( 1,209 ) Cash flows from financing activities Payment of SVB term loan and termination costs — ( 37,751 ) — Proceeds from Braidwell debt — 75,000 — Payments of issuance costs for Braidwell debt — ( 2,100 ) — Payment of Braidwell debt and termination costs — ( 78,660 ) — Proceeds from issuance of 2029 notes — 661,250 — Payments of issuance costs for 2029 notes — ( 17,424 ) — Purchases of capped call transactions — ( 72,407 ) — Purchase of treasury stock — ( 25,000 ) — Proceeds from issuance of common stock in connection with employee equity incentive plans 12,607 8,473 8,820 Net cash provided by financing activities 12,607 511,381 8,820 Effect of exchange rate changes 1 ( 6 ) ( 169 ) Net increase (decrease) in cash and cash equivalents ( 183,585 ) 391,782 ( 42,659 ) Cash and cash equivalents, beginning of year 427,955 36,173 78,832 Cash and cash equivalents, end of year $ 244,370 $ 427,955 $ 36,173 87 Year Ended December 31, 2025 2024 2023 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 236,012 $ 419,597 $ 36,173 Restricted cash $ 8,358 $ 8,358 $ — Total cash, cash equivalents and restricted cash $ 244,370 $ 427,955 $ 36,173 Supplemental disclosures of cash flow information: Interest paid $ 9,919 $ 6,389 $ 2,960 Cash taxes paid $ 1,196 $ 923 $ 1,130 Cash paid for operating lease liabilities $ 15,875 $ 15,177 $ 14,105 Cash received from tenant improvement allowances $ 745 $ 736 $ 1,603 Non-cash investing and financing activities: Property and equipment costs included in accounts payable and accrued liabilities $ 407 $ 275 $ 1,888 Right-of-use assets obtained in exchange for operating lease liabilities $ — $ 4,009 $ 4,403 Capitalized stock-based compensation in property and equipment $ 5,261 $ 6,779 $ 7,383 The accompanying notes are an integral part of these consolidated financial statements. 88 IRHYTHM TECHNOLOGIES, INC. Notes to Consolidated Financial Statements 1. ORGANIZATION AND DESCRIPTION OF BUSINESS iRhythm Technologies, Inc. ("the Company") was incorporated in the state of Delaware in September 2006. On January 12, 2026, the Company implemented a corporate holding company structure that resulted in the formation of a new parent holding company (the “Holding Company Transaction”) pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) dated as of January 12, 2026, by and among the Company, iRhythm Holdings, Inc., a Delaware corporation ("iRhythm Holdings"), and LTCM Merger Sub, Inc., a Delaware corporation and a then- direct, wholly owned subsidiary of iRhythm Holdings (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of iRhythm Holdings (the “Merger”). Following the Merger, iRhythm Holdings became the successor issuer and registrant to the Company. Because the Holding Company Transaction occurred after the date of these financial stateme nts, unless expressly indicated or the context requires otherwise, for purposes of the consolidated financial statements and notes contained within, the term “the Company,” refers to iRhythm Technologies and its consolidated subsidiaries. The Company is a leading digital healthcare company that creates trusted solutions that detect, predict, and prevent disease. The Company's principal business is the design, development, and commercialization of device-based technology to provide ambulatory cardiac monitoring services that it believes 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 the Company's technology in 2009, the Company has supported physician and patient use of its technology and provided ambulatory cardiac monitoring ("ACM") services from its Medicare-enrolled independent diagnostic testing facilities (“IDTFs”) and with its qualified technicians. The Company has provided the Zio ACM services, including long-term continuous monitoring (“LTCM”), short-term continuous monitoring, and mobile cardiac telemetry (“MCT”) monitoring services (collectively, the “iRhythm Services”), using 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, CE-marked, Japan PMDA approved cloud-based data analytic software to help physicians monitor patients and diagnose arrhythmias (collectively, the “iRhythm ACM System”). LTCM services (the “Zio LTCM Service”) and MCT services (the “Zio MCT Service”) are 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. The Company is headquartered in San Francisco, California, which also serves as a clinical center. The Company has additional clinical centers in Deerfield, Illinois, Houston, Texas, and Manila, Philippines, a manufacturing facility in Cypress, California and corporate office spaces in Solana Beach, California and London, United Kingdom. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. 89 Risks and Uncertainties Macroeconomic Factors and Supply Chain Constraints The Company’s operations and performance may vary based on worldwide economic and political conditions, which have been adversely impacted by continued global economic uncertainty, political instability, and military hostilities in multiple geographies including ongoing geopolitical conflicts, such as the war in Ukraine and conflicts in the Middle East and Venezuela, domestic and global inflationary trends, interest rate volatility, potential instability in the global banking system, global supply shortages, tariffs on imports, and a tightening labor market. A severe or prolonged economic downturn or period of global political instability could drive hospitals and other healthcare professionals to tighten budgets and curtail spending, which could in turn negatively impact rates at which physicians prescribe the Company’s iRhythm Services. In addition, higher unemployment rates or reductions in employer-provided benefits plans could result in fewer commercially insured patients, resulting in a reduction in the Company’s margins and impairing the ability of uninsured patients to make timely payments. A weak or declining economy, or uncertainty surrounding tariffs, could also strain the Company’s suppliers, possibly resulting in supply delays and disruptions. There is also a risk that one or more of the Company’s current service providers, suppliers, or other partners may not survive such difficult economic times, which could directly affect the Company’s ability to attain its goals on schedule and on budget. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. The Company cannot predict the timing, strength, or duration of an economic downturn, instability, or recovery, whether worldwide, in the United States, or within its industry. The Company’s hybrid work arrangements and decision to pursue a sublease for its leased San Francisco headquarters resulted in an impairment of its right-of-use (“ROU”) asset and related leasehold improvements and furniture and fixtures during the year ended December 31, 2023. As the Company continues to evaluate its global real estate footprint, the Company may incur additional impairment charges related to real property lease agreements. The Company is continuously reviewing its liquidity and anticipated capital requirements. The Company believes it has adequate liquidity over the next 12 months to operate its business and to meet its cash requirements. The Company is in compliance with its convertible debt requirements. Reimbursement The Company receives revenue for the iRhythm 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 the Company to identify the service for which it is seeking reimbursement by using a Current Procedural Terminology (“CPT”) code set maintained by the American Medical Association. These CPT codes are subject to periodic change and update, which will impact the reimbursement rates for the Company’s iRhythm Services. Based on relative value units, CMS annually updates the reimbursement rates for diagnostic tests performed by IDTFs via the Medicare Physician Fee Schedule. CMS establishes national payment rates for the CPT codes the Company uses to report iRhythm Services performed by the Company. Because remote cardiac monitoring technology, including the iRhythm ACM System, is rapidly evolving, there is a continuing risk that relative value units assigned, and reimbursement rates set, by CMS may not adequately reflect the value and expense of this technology and associated monitoring services, and CMS may reduce these rates in the future, which would adversely affect the Company’s financial results. Third-party payors globally are increasingly challenging the utilization and overall cost for medical products and services. The containment of healthcare costs has become a priority of governments on a global basis. Third-party payors may decline to cover and reimburse claims or portions of claims. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contractual allowances, provision for credit losses, the useful lives of property and equipment, the recoverability of long-lived assets, including the estimated usage of the printed circuit board assemblies (“PCBAs”), the incremental borrowing rate for operating leases, fair value of strategic investments, accounting for income taxes, impairment of ROU assets, contingent consideration liabilities, and various inputs used in estimating stock-based compensation. Actual results may differ from those estimates. 90 Fair Value of Financial Instruments The carrying amounts of certain of the Company’s financial instruments, which include cash equivalents, marketable securities, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to their short maturities. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents consist of short-term, highly liquid investments with an original maturity from the date of purchase of three months or less. Under the terms of certain facility operating lease agreements, the Company is required to maintain a letter of credit as collateral during the term of the lease. As of December 31, 2025 and 2024, restricted cash of $ 8.4 million was pledged as collateral under the letter of credit with Silicon Valley Bank. Fair Value Option The Company elected the fair value option, Accounting Standards Codification (“ASC”) 825-10, Financial Instruments - Overall , to account for its strategic loan investments. The Company recorded the strategic loan investments at fair value within long-term strategic investments in the Company’s consolidated balance sheets with changes in fair value recorded within other income (expense), net on the consolidated statements of operations. The primary reason for electing the fair value option was for simplification and cost-benefit considerations of accounting for the strategic loan investments at fair value versus bifurcation of the embedded derivatives. Refer to Note 5, Fair Value Measurements, for further details relating to the Company's strategic investments. Contingent Consideration Certain agreements the Company entered into involve payments that are contingent upon the achievement of milestones. Contingent consideration obligations incurred in connection with acquired in-process research and development assets are recorded at fair value, with changes in fair value recorded to acquired in-process research and development expenses in the consolidated statements of operations. Marketable Securities The Company's marketable security investments consist primarily of commercial paper, corporate bonds, U.S. agency obligations and U.S. treasury securities. The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The Company's policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. The Company classifies investments as available-for-sale at the time of purchase and re-evaluates such classification as of each balance sheet date. Available-for-sale debt securities with an amortized cost basis in excess of the estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses. Allowance for credit losses on available-for-debt securities are recognized as a charge in other income (expense), net on the Company's consolidated statements of operations and any remaining unrealized gains or losses, net of taxes, are included in accumulated other comprehensive loss in accumulated deficit on the consolidated balance sheets. There were no impairment charges for any unrealized losses during the years ended December 31, 2025, 2024, and 2023. Concentrations of Risk Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. Cash balances are deposited in financial institutions which, at times, may be in excess of federally insured limits. Cash equivalents are invested in highly rated money market funds. The Company invests in a variety of financial instruments, such as, but not limited to, U.S. government securities, corporate notes, commercial paper and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many geographies. The Company does not require collateral. During the first quarter of 2024, the Company experienced a temporary delay in the billing of the Company's contracted and non-contracted payer customers, performed by the Company's third-party claims processing vendor. The delay was due to a cybersecurity incident experienced by Change Healthcare, a division of UnitedHealth Group, in which the Company's third-party vendor did engage for services relating to billing and collections. While the Company substantially cleared the billing backlog as of the end of the first quarter of 91 2024, the delay in billing resulted in a temporary delay in the Company's cash collections. The Company has received the majority of its cash collections from the delayed billings. The Company records a provision for credit losses based on the assessment of the collectability of customer accounts, considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The following table summarizes customers' accounts receivable concentration representing 10% or more of the Company’s accounts receivable, net: Payor Type December 31, 2025 December 31, 2024 December 31, 2023 CMS Centers for Medicare and Medicaid 14 % 15 % 25 % Customer A Healthcare Institutions 15 % < 10 % < 10 % Customer B Contracted third-party payors 12 % 13 % < 10 % Inflationary Risk The Company continuously monitors the effects of inflationary factors, such as increases in cost of goods sold and selling and operating expenses, which may adversely affect its results of operations. Specifically, the Company may experience inflationary pressure affecting freight costs, the cost of the components for the Company’s iRhythm Services, overhead costs relating to maintenance of the Company’s facilities, and in the wages paid to its employees due to challenging labor market conditions. Competitive and regulatory conditions may restrict the Company’s ability to fully recover these costs through price increases. As a result, it may be difficult to fully offset the impact of persistent inflation. The Company’s inability or failure to do so could have a material adverse effect on its business, financial condition, and results of operations or cause the Company to need to obtain additional capital earlier than anticipated in the future. Supply Risk The Company relies on single-source vendors to supply some of its disposable housings, instruments and other materials used to manufacture the Zio patches and the adhesive that binds the Zio patch to a patient’s body. These components and materials are critical, and there could be a considerable delay in finding alternative sources of supply. Inventory Inventory owned by the Company is valued at the lower of cost or net realizable value, on the first in, first out (“FIFO”) basis. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand. The Company also records market value-based write-downs in consideration of product lifecycle stage, technology trends, product development plans, and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years . Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterment are capitalized. The Company classifies internal-use software in property and equipment. Internal-use software costs are capitalized during the application development stage. Costs related to planning and post implementation activities are expensed as incurred. Capitalized internal-use software is amortized, and recognized as cost of revenue or selling, general and administrative expenses, on a straight-line basis over the estimated useful life generally ranging between three to seven years . 92 PCBAs The Company reuses 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. The Company bases the 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. The Company periodically evaluates and updates these estimates. PCBAs are included in other assets in the Company's consolidated balance sheets. Implementation Costs in Cloud-Computing Arrangements The Company capitalizes qualified implementation costs incurred in a hosting arrangement that is a service contract for which it is the customer in accordance with the requirements for cloud computing arrangements (“CCA”) to the extent it is incurred in the course of developing internal-use software. These capitalized implementation costs are generally amortized over the fixed, non-cancellable term of the associated hosting arrangement on a straight-line basis and are recorded in prepaid expenses and other current assets or in other noncurrent assets. Goodwill Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill amounts are not amortized, but rather tested for impairment at least annually, and more frequently when changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates its business as one reporting unit and the Company completes its annual impairment test in the fourth quarter. In the event that the Company determines that the fair value of the reporting unit is less than the reporting unit's carrying value, goodwill impairment charge will be incurred for the amount of the difference during the quarter in which the determination is made. The Company did not record any goodwill impairment charges in the years ended December 31, 2025, 2024, and 2023. Impairment of Long-Lived Assets The Company reviews long-lived assets, inclusive of internal-use software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. Any impairments to ROU assets, leasehold improvements, or other assets as a result of a sublease or other similar action are initially recognized when a decision to take such action is made and recorded as an operating expense. Similar to other long-lived assets, management tests ROU assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For ROU assets, such circumstances may include subleases that do not fully recover the costs of the associated leases or commitments to sublease a property. See Note 7, Impairment Charges , included in the notes to the consolidated financial statements . Comprehensive Income (Loss) Comprehensive income (loss) represents all changes in stockholders’ equity during the year from non-owner sources. The Company’s unrealized gains and losses on marketable securities and cumulative translation adjustment represent the only components of other comprehensive income (loss) that are excluded from the reported net loss and that are presented in the consolidated statements of comprehensive income (loss). Revenue Recognition The Company has 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. The Company currently offers 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 the ZEUS algorithm, 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 ZEUS. 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. The Company’s Zio monitor services are generally billable when the Zio report is issued to the physician. 93 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. The Company’s Zio XT services are generally billable when the Zio report is issued to the physician. The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of Zio AT that 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 Zio AT 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 placement on the patient and collects and transmits data from the Zio AT to the cloud via a long- term evolution protocol. The Zio AT service revenue is recognized under two performance obligations — the patient wear period and delivery of electronic Zio reports. The Company recognizes as revenue the amount of consideration to which it expects to be entitled in exchange for performing the service. The consideration the Company is entitled to varies by payor portfolio, as further described below, and includes estimates that require significant judgment by management. A unique aspect of healthcare is the involvement of multiple parties to the service transaction. In addition to the patient, often a third-party payor, for example a commercial or governmental payor or healthcare institution, will pay the Company for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between the Company and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered. A small portion of the Company’s transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for its service, the Company considers factors such as insurance claims which are adjudicated as allowable under the applicable policy and payment history from both payors and patient out-of-pocket costs, payor coverage, whether there is a contract between the payor or healthcare institution and the Company, historical amount received for the service, and any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A summary of the payment arrangements with third-party payors and healthcare institutions is as follows: • Contracted third-party payors – The Company has contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage. • CMS – The Company has received IDTF approval from regional Medicare Administrative Contractors and will receive reimbursement per the relevant CPT code rates for the services rendered to the patient covered by CMS. • Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which the Company has negotiated amounts for its monitoring services, including certain governmental agencies such as the Veterans Administration and U.S. Department of Defense. • Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of the Company’s historical collection experience for its non-contracted services. This rate is reviewed at least quarterly. The Company is utilizing the portfolio approach practical expedient under Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers , whereby services provided under each of the above payor types form a separate portfolio. The Company accounts for the contracts within each portfolio as a collective group, rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, the Company has concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis. For contracted and CMS portfolios, the Company recognizes revenue, net of contractual allowances, and recognizes a provision for credit losses for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and the Company has historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The 94 Company accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. The Company makes estimates around the amount of denied claims within a reporting period, a process that requires management judgment. The estimated denied claims are based on historical information and judgment includes the historical period utilized. The Company monitors the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if the Company misses the payors’ filing deadlines, which could result in a reduction in the Company’s receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that the Company bills patient co-payments and deductibles and from time to time the Company may not be able to collect such amounts due to credit risk. The Company provides for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statements of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. For healthcare institutions, the transaction price is determined based on negotiated rates, and the Company has historical experience collecting substantially all of these contracted rates. Historical cash collections indicate that it is probable that substantially all of the transaction price will be received. As such, the Company is not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense to selling, general and administrative expense in the consolidated statements of operations. For non-contracted portfolios, the Company provides an implicit price concession due to the lack of a contracted rate with the underlying payor. As a result, the Company estimates the transaction price based on historical cash collections utilizing the expected value method. All subsequent changes to the transaction price are recorded as adjustments to revenue. Leases The Company determines if an arrangement is a lease at inception. The Company's lease agreements generally contain lease and non-lease components. Payments under its lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities. The Company combines fixed payments for non-lease components with lease payments and accounts for them together as a single lease component which increases the amount of the Company’s ROU assets and lease liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the ROU assets and lease liabilities. ROU assets and lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company's incremental borrowing rate, because the interest rate implicit in its leases is not readily determinable. The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Company's lease terms include periods under options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company generally uses the base, non-cancelable, lease term when determining the ROU assets and lease liabilities. ROU assets are adjusted for any prepaid lease payments and lease incentives. 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. 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 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. 95 Research and Development The Company’s research and development costs are expensed as incurred. Research and development costs include payroll-related costs, including stock-based compensation, consulting services, clinical studies, laboratory supplies, milestone payments, and allocated facility overhead costs. Acquired In-Process Research and Development Expenses Acquired in-process research and development (“IPR&D”) assets, as a result of an asset acquisition, for use in research and development activities with no alternative future use are expensed in the consolidated statements of operations on the acquisition date. Accounting for acquisitions of IPR&D requires the Company to make certain judgments to determine if the transaction should be accounted for as an asset acquisition or a business combination, as well as assess if the IPR&D acquired has alternative future use in research and development activities. Selling, General and Administrative Expenses The Company's sales and marketing expenses consist of personnel costs, including stock-based compensation, and sales commissions. Other significant costs include travel expenses, consulting, public relations costs, direct marketing, tradeshow and promotional expenses and allocated facility overhead costs. The Company incurred $ 1.2 million, $ 1.2 million, and $ 1.1 million of advertising expense during each of the years ended December 31, 2025, 2024, and 2023, respectively, which is included in selling, general and administrative expenses. The Company’s general and administrative expenses consist primarily of personnel costs for executive, finance, legal and administrative personnel, including stock-based compensation. Other significant expenses include professional fees for legal and accounting services, consulting fees, recruiting fees, bad debt expense, third-party patient claims processing fees, business transformation, and travel expenses. Income Taxes The Company uses the asset and liability method to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits. Stock-Based Compensation The Company measures the estimated fair values of its restricted stock units (“RSUs”) based on the closing price of the Company's stock on the grant date. For performance-based restricted stock units (“PRSUs”), the Company estimates the fair value based on the closing price of its stock on the grant date and, if the award includes a market condition, a Monte Carlo simulation model. In addition, for PRSUs, the Company applies a probability assessment to determine the probable achievement of the performance-based metrics. 96 Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company's stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For restricted stock, the compensation cost for these awards is based on the closing price of the Company’s common stock on the date of grant, and is recognized as compensation expense on a straight-line basis over the requisite service period. The Company recognizes compensation expense related to its 2016 Employee Stock Purchase Plan (“ESPP”) based on the fair value at each enrollment date of the offering period using the Black-Scholes-Merton option-pricing model value. The stock-based compensation is reduced by the estimated forfeiture and is expensed on a straight-line basis over the offering period. Net Income (Loss) per Common Share Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents. Basic net loss per common share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per common share is the same as basic net loss per common share for all periods presented, since the effect of potentially dilutive securities are anti-dilutive. Potentially dilutive common shares consist of shares issuable from stock options, RSUs, PRSUs, and the Company’s senior convertible notes due 2029 (the “2029 Notes”). Potentially dilutive common shares issuable upon vesting of RSUs, PRSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of the Company's senior convertible notes are determined using the if-converted method. In periods of net losses, we exclude all potentially dilutive common shares from the computation of the diluted net loss per share for those periods as the effect would be anti-dilutive Recently adopted accounting pronouncements In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. Two primary enhancements related to this ASU include disaggregating existing income tax disclosures relating to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be applied on either a prospective or a retrospective basis. The Company adopted this ASU for the year ended December 31, 2025 on a prospective basis. Prior period disclosures have not been adjusted to reflect the new disclosure requirements. See Note 10, Income Taxes, for disclosure within the notes to the Company's consolidated financial statements. Recently issued accounting pronouncements not yet adopted In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures , which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures. In November 2024, the FASB issued ASU 2024-04, Debt-Debt with Conversion and Other Options. The ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. The ASU may be applied on either a prospective or a retrospective basis. The Company is currently evaluating this ASU to determine its impact on the Company's consolidated financial statements and related disclosures. 97 In May 2025, the FASB issued ASU 2025-03, "Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (VIE)." This standard clarifies the guidance in determining the accounting acquirer in a business combination effected primarily by exchanging equity interests when the acquiree is a VIE that meets the definition of a business. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted, and the standard is to be applied prospectively to acquisitions after the adoption date. The Company is currently evaluating the impact that the adoption of this new standard may have on the Company's consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides a practical expedient to measure credit losses on current accounts receivable and current contract assets. The practical expedient assumes that current conditions as of the balance sheet will persist through the reasonable and supportable forecast period of eligible assets. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard may have on the Company's consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting for software costs. The new guidance amends the existing standard that refers to various stages of a software development project to align better with the current software development methods, such as agile programming. The ASU is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The ASU may be applied on either a prospective or a retrospective basis. The Company is currently evaluating the impact that the adoption of this new standard may have on the Company's consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270) related to interim disclosure requirements. The amendments in this update clarify current interim disclosure requirements and provide a comprehensive list of required interim disclosures. The update also incorporates a disclosure principle that requires entities to disclose material events that occur after the end of the last annual reporting period. This update is effective for interim periods within annual periods beginning after December 15, 2027, though early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard may have on the Company's interim consolidated financial statements and related disclosures. 3. BUSINESS SEGMENT AND REVENUE Reportable Segments Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (“CODM”). The Company has one reportable and one operating segment, its global ambulatory cardiac monitoring business. The Company’s Chief Executive Officer, who is the Company’s CODM, reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and assessing financial performance. The key measure of the Company's segment profit or loss is consolidated net loss, which is reported on the Company's consolidated statements of operations. Consolidated net loss is used to measure actual results versus expectations. The measure of segment assets is reported on the consolidated balance sheets as total assets. Significant segment expenses within loss from operations, as well as within net loss, include cost of revenue, research and development, acquired in-process research and development ("IPR&D"), selling, general and administrative expenses, and impairment and restructuring charges which are each separately presented on the Company’s consolidated statements of operations. Other segment items within net loss include interest and other income (expense), net, and income tax provision. 98 Disaggregation of Revenue The Company disaggregates revenue from contracts with customers by payor type. The Company believes these categories aggregate the payor types by nature, amount, timing, and uncertainty of its revenue streams. Disaggregated revenue by payor type and major service line for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands, except percentages): Year Ended December 31, 2025 2024 2023 Amount % of Revenue Amount % of Revenue Amount % of Revenue Contracted third-party payors $ 392,234 52 % 311,605 53 % $ 267,195 54 % Centers for Medicare and Medicaid 179,350 24 % 142,389 24 % 122,414 25 % Healthcare institutions 125,613 17 % 95,115 16 % 71,001 14 % Non-contracted third-party payors 49,941 7 % 42,730 7 % 32,071 7 % Total $ 747,138 $ 591,839 $ 492,681 Revenue generated from the United States comprised substantially all of the Company's revenue. No other country or customer, with the exception of CMS, comprised 10% or greater of the Company's revenue during each of the years ended December 31, 2025, 2024, and 2023. Accounts Receivable, Provision for Credit Losses, and Contractual Allowances Accounts receivable includes amounts due to the Company from healthcare institutions, third-party payors, and government payors and their related patients, as a result of the Company's normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated provision for credit losses and contractual allowances. The Company establishes a provision for credit losses for estimated uncollectible receivables based on its assessment of the collectability of customer accounts and recognizes the provision as a component of selling, general and administrative expenses. The Company records a provision for contractual allowances, as a reduction of revenue, based on the estimated differences between contracted amounts and expected collection rates for services performed. Such provisions are based on the Company's historical experience and expected future claims denials. The Company updates the estimate for this provision each reporting period. The Company regularly reviews the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The following table presents the changes in the provision for credit losses (in thousands): Year Ended December 31, 2025 2024 2023 Balance, beginning of year $ 16,248 $ 20,289 $ 18,475 Provision for credit losses 30,835 22,583 17,105 Write-offs ( 32,448 ) ( 26,624 ) ( 15,291 ) Balance, end of year $ 14,635 $ 16,248 $ 20,289 The following table presents the changes in the contractual allowance (in thousands): Year Ended December 31, 2025 2024 2023 Balance, beginning of year $ 50,961 $ 52,689 $ 41,389 Add: provision for contractual adjustments 68,831 50,880 52,523 Less: contractual adjustments ( 70,866 ) ( 52,608 ) ( 41,223 ) Balance, end of year $ 48,926 $ 50,961 $ 52,689 99 Contract Liabilities ASC 606, Revenue from Contracts with Customers , requires an entity to present a revenue contract as a contract liability when the Company has an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer, or an amount of consideration from the customer is due and unconditional (whichever is earlier). Certain of the Company’s customers pay the Company directly for the Zio LTCM Service upon patient registration or shipment of devices. Such advance payments are recognized as deferred revenue and are recorded as revenue when Zio reports are delivered to the healthcare provider. During the years ended December 31, 2025 and 2024, $ 2.9 million and $ 3.1 million related to the contract liability balance at the beginning of 2025 and 2024 was recognized as revenue, respectively. The deferred revenue liability was $ 4.2 million and $ 2.9 million as of December 31, 2025 and 2024, respectively. Contract Costs Under ASC 340, Other Assets and Deferred Costs (“ASC 340”), the incremental costs of obtaining a contract with a customer are recognized as an asset. Incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company maintains short-term sales incentive compensation programs. As a practical expedient, ASC 340 permits the Company to immediately expense contract acquisition costs, because the asset that would have resulted from capitalizing these costs will be amortized in one year or less. 4. CASH EQUIVALENTS AND MARKETABLE SECURITIES The fair value of cash equivalents and marketable securities at December 31, 2025 and 2024, were as follows (in thousands): December 31, 2025 Amortized Cost Gross Unrealized Fair Value Gains Losses Money market funds $ 142,423 $ — $ — $ 142,423 U.S. government securities 347,467 285 ( 1 ) 347,751 Total cash equivalents and marketable securities $ 489,890 $ 285 $ ( 1 ) $ 490,174 Classified as: Cash equivalents $ 142,423 Marketable securities 347,751 Total cash equivalents and marketable securities $ 490,174 December 31, 2024 Amortized Cost Gross Unrealized Fair Value Gains Losses Money market funds $ 40,654 $ — $ — $ 40,654 U.S. government securities 276,467 57 — 276,524 Total cash equivalents and marketable securities $ 317,121 $ 57 $ — $ 317,178 Classified as: Cash equivalents $ 201,222 Marketable securities 115,956 Total cash equivalents and marketable securities $ 317,178 Unrealized gains (losses) during the years ended December 31, 2025, 2024, and 2023 were not material. As of December 31, 2025 and 2024, all marketable securities are classified as available for sale, with contractual maturities due within one year or less. The weighted average maturity for the Company's marketable securities as of December 31, 2025 and 2024 was 148 days and 211 days, respectively. 100 5. FAIR VALUE MEASUREMENTS The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows: Level 1 —Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 —Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 —Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The U.S. government securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The Company had no transfers between levels of the fair value hierarchy of its assets measured at fair value. The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands): December 31, 2025 Level 1 Level 2 Level 3 Total Assets Money market funds $ 142,423 $ — $ — $ 142,423 U.S. government securities — 347,751 — 347,751 Strategic investments — — 69,913 69,913 Total $ 142,423 $ 347,751 $ 69,913 $ 560,087 Liabilities Contingent consideration — — 20,407 20,407 Total $ — $ — $ 20,407 $ 20,407 December 31, 2024 Level 1 Level 2 Level 3 Total Assets Money market funds $ 40,654 $ — $ — $ 40,654 U.S. government securities — 276,524 — 276,524 Strategic investments — — 61,902 61,902 Total $ 40,654 $ 276,524 $ 61,902 $ 379,080 Liabilities Contingent consideration — — 17,371 17,371 Total $ — $ — $ 17,371 $ 17,371 101 Fair Value of Strategic Investments The Company holds strategic investments upon which it measures the fair value on a recurring basis. The carrying value of these investments are $ 69.9 million and $ 61.9 million as of December 31, 2025 and 2024, respectively. The Company's strategic investments are with privately held companies, and as such, limited information is available. On a quarterly basis, the Company monitors information that becomes available and adjusts the carrying values of these investments if there are identified events or changes in circumstances that have a significant effect on their fair values. The strategic investments are categorized as Level 3 investments within the fair value hierarchy due to the uncertainty of the fair value measurement with respect to the use of significant unobservable inputs and included within long-term strategic investments in the Company’s consolidated balance sheets. During the year ended December 31, 2024, the Company made an aggregate of $ 55.0 million in strategic loan investments in BioIntelliSense, Inc. (“BioIS”), a privately-held company. The loan investments have maturity dates ranging from April 2029 through August 2029. The loan investments can convert into preferred shares of BioIS based upon certain qualifying financing events. The aggregate fair value of the BioIS strategic loan investments is $ 63.7 million and $ 56.4 million as of December 31, 2025 and 2024, respectively. In accordance with ASC 820, Fair Value Measurement , the Company elected to apply the fair value option to these strategic loan investments, with changes in fair value reported within other income (expense), net in the Company's consolidated statements of operations at each reporting period. During the year ended December 31, 2025 and 2024, the Company increased the fair value of the strategic loan investments by $ 7.3 million and $ 1.4 million, respectively. The fair value of the loan investments in BioIS is determined by using a probability-weighted expected return model (“PWERM”) and a discounted cash flow valuation model with scenarios that correspond to the contractual settlement events. The determination of fair value involves significant assumptions such as discount rates, volatility rates, and expected years. These unobservable inputs represent a Level 3 measurement, as they are supported by little or no market activity and reflect the Company's own assumptions in measuring fair value. 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 in order to cancel $ 10.0 million in strategic loan investments plus accrued and unpaid interest. Refer to Note 8, Commitments and Contingencies for further discussion. The following table sets forth the recurring Level 3 fair value measurements of the loan investment including the significant unobservable inputs: December 31, 2025 December 31, 2024 Discount rate 10.8 % 12.0 % Equity volatility 85.0 % 67.0 % Expected years (range) 2026 - 2029 2025 - 2029 During the year ended December 31, 2025, the Company made a $ 2.3 million strategic loan investment in a separate privately-held company. The fair value of the strategic loan investment was $ 2.4 million as of December 31, 2025 . During the year ended December 31, 2024, the Company made a $ 2.0 million strategic loan investment in a separate privately-held company. During the fourth quarter and year ended December 31, 2025, the Company recorded a full reserve against this strategic loan investment. The fair value of the strategic loan investment was nil and $ 2.0 million as of December 31, 2025 and December 31, 2024, respectively. The change in fair value is recorded within other income (expense), net in the Company’s consolidated statements of operations. During the year ended December 31, 2023, the Company made a $ 3.0 million strategic equity investment in a separate privately-held company. During the years ended December 31, 2025 and 2024, the Company increased the fair value of this strategic equity investment by $ 0.3 million and $ 0.5 million, respectively. The carrying value of this strategic equity investment is $ 3.8 million and $ 3.5 million as of December 31, 2025 and 2024, respectively. The change in fair value is recorded within other income (expense), net in the Company’s consolidated statements of operations. 102 The following table sets forth the changes in the estimated fair value of the Company's strategic investments measured on a recurring basis (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Year Ended December 31, 2023 Balance, beginning of period $ 61,902 $ 3,000 $ — Additions during the period 2,300 57,000 3,000 Changes in estimated fair value 5,711 1,902 — Balance, end of period $ 69,913 $ 61,902 $ 3,000 Contingent Consideration Liabilities The Company established contingent consideration liabilities in conjunction with the development milestones associated with the acquisition of certain technology from BioIS. The fair value of contingent consideration liabilities is determined using PWERM, with scenarios that correspond to the contractual settlement events. There are significant inputs of such model that are not observable in the market, such as probability of achievement of stated milestones and expected term. The unobservable inputs represent a Level 3 measurement. Fair value adjustments to contingent consideration liabilities are assessed quarterly and recorded through operating expenses within acquired in-process research and development in the consolidated statements of operations. Refer to Note 8, Commitments and Contingencies, for further details relating to the BioIS contingent consideration liabilities. The following table sets forth the recurring Level 3 fair value measurements of contingent consideration liabilities associated with the development agreement milestones including the significant unobservable inputs: December 31, 2025 December 31, 2024 Probability of achievement (range) 79.0 % - 100.0 % 75.0 % - 90.0 % Expected years 2026 2025 - 2026 During the year ended December 31, 2025, the Company increased the probability of achievement assumptions based upon the projected achievement of a remaining future regulatory milestone. Refer to Note 8, Commitments and Contingencies, for further details relating to the BioIS regulatory milestones. Contingent consideration liabilities for BioIS at the inception of acquisition of the licensed technology were $ 17.0 million. Contingent consideration liabilities were $ 20.4 million and $ 17.4 million as of December 31, 2025 and 2024, respectively, and were included in accrued liabilities in the Company’s consolidated balance sheet. The following table sets forth the changes in the estimated fair value of the Company’s contingent consideration liabilities measured on a recurring basis (Level 3) (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Balance, beginning of period $ 17,371 $ — Addition during the period — 16,970 Changes in estimated fair value 3,036 401 Balance at end of period $ 20,407 $ 17,371 The following table sets forth the balances of the contingent consideration liabilities (in thousands): December 31, 2025 December 31, 2024 Accrued liabilities $ 20,407 $ 9,701 Other noncurrent liabilities — 7,670 Balance at end of period $ 20,407 $ 17,371 103 Fair Value of Senior Convertible Notes The fair value, based on a quoted market price (Level 1), of the Company’s 2029 Notes is as follows (in thousands): December 31, 2025 December 31, 2024 Senior Convertible Notes due 2029 $ 924,097 $ 641,214 6. BALANCE SHEET COMPONENTS Inventory Inventory consisted of the following (in thousands): December 31, 2025 2024 Raw materials and work-in-progress $ 10,645 $ 5,863 Finished goods 10,989 8,176 Total $ 21,634 $ 14,039 Long-term Strategic Investments Long-term strategic investments consisted of the following (in thousands): December 31, 2025 2024 Strategic loan investments $ 66,064 $ 58,407 Strategic equity investments 3,849 3,495 Total $ 69,913 $ 61,902 Other Assets Other assets consisted of the following (in thousands): December 31, 2025 2024 PCBAs $ 39,026 $ 34,698 Cloud computing arrangements 3,998 5,230 Other 1,694 1,924 Total $ 44,718 $ 41,852 The Company reuses 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. Charges to cost of revenue were $ 17.5 million, $ 13.7 million, and $ 9.0 million as of December 31, 2025, 2024, and 2023, respectively. During the year ended December 31, 2025, PCBAs increased by $ 4.3 million primarily driven by additional purchases for Zio monitor and Zio AT to support the growth in commercial volumes. The Company recorded $ 2.6 million, $ 2.7 million, and $ 1.4 million amortization expense during the years ended December 31, 2025, 2024, and 2023, respectively, related to capitalized implementation costs in the Company's cloud computing arrangements. 104 Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): December 31, Useful Life 2025 2024 Laboratory and manufacturing equipment 2 to 7 $ 17,623 $ 9,687 Computer equipment and software 3 4,232 4,227 Furniture and fixtures 2 to 5 4,180 4,181 Leasehold improvements 3 to 12 28,975 27,121 Internal-use software in service 3 to 7 91,763 79,660 Internal-use software in development - 88,950 60,797 Construction in progress - 7,068 10,638 Total property and equipment, gross 242,791 196,311 Less: accumulated depreciation and amortization ( 91,192 ) ( 71,219 ) Total property and equipment, net $ 151,599 $ 125,092 Depreciation and amortization expense for the years ended December 31, 2025, 2024 and 2023 was $ 20.7 million, $ 20.7 million and $ 16.3 million, respectively, of which amortization related to internal-use software, was $ 14.5 million, $ 14.9 million, and $ 12.2 million, for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, internal-use software both in service and in development increased by a combined $ 40.3 million, net of impairments . This increase is related to internally developed and third-party expenditures for enhancements in the Company's core technology, products, and services and artificial intelligence. Accrued Liabilities Accrued liabilities consisted of the following (in thousands): December 31, 2025 2024 Accrued payroll and related expenses $ 67,809 $ 42,293 Accrued vacation 7,906 6,914 Accrued expenses 20,464 16,044 Claims payable 1,542 2,011 Accrued employee share purchase plan contributions 662 585 Accrued income and other taxes 1,817 4,008 Accrued professional services fees 8,140 3,345 Contingent consideration liabilities 20,407 9,700 Total accrued liabilities $ 128,747 $ 84,900 105 7. IMPAIRMENT CHARGES The Company's impairment charges consisted of the following (in thousands): December 31, 2025 2024 2023 ROU asset $ — $ — $ 9,912 Leasehold improvements — — 1,067 Furniture and fixtures — — 99 Internal-use software 4,458 641 — Total $ 4,458 $ 641 $ 11,078 In February 2022, the Board approved a plan to reduce the Company’s leased space for its headquarters in San Francisco, California. The Company initiated an effort to pursue a sublease of one floor (approximately 50%) of its San Francisco, California facility. During the year ended December 31, 2023, as a result of the continued declining real estate rental market conditions within San Francisco, California, the Company recorded an impairment charge of $ 11.1 million, consisting of its ROU asset and property and equipment (inclusive of leasehold improvements and furniture and fixtures) of $ 9.9 million and $ 1.2 million, respectively. The impairment was recorded to impairment charges within the consolidated statements of operations for the year ended December 31, 2023. Significant judgment and estimates are required in assessing impairment of ROU assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, and determining appropriate discount rates. The Company has engaged a leasing broker and has formalized a marketing plan for the San Francisco office market since the first quarter of 2022. The sublease market for commercial office space is currently very challenging in the San Francisco area due to lower demand for leased office space as most companies have adjusted to allowing their employees to work from home during and after the COVID-19 pandemic. The Company believes that it is likely to be able to sublease a portion of its existing office space, but at a rate below the amount that it is currently paying. The Company estimated undiscounted future cash flows from its vacant office lease based on the Company’s intent and ability to sub-lease the vacant office space, based on the facts and circumstances discussed below, which it had ceased using and estimated future sub-lease income considering the local real estate market conditions. The Company also factored into its estimate the amount of time to identify a tenant, sublease rental market transactions within San Francisco business districts, entering into a sublease agreement, and expected rent concessions offered to future tenants. The Company estimated the fair value of the ROU asset related to the vacant office lease by discounting the estimated undiscounted future cash flows using the average lease capitalization rate, plus average inflation rate, for other lease transactions in the local area during the year. For further details on the Company's leases, refer to Note 8 . Commitments and Contingencies . During the years ended December 31, 2025 and 2024, the Company recorded an impairment charge of $ 4.5 million and $ 0.6 million, respectively, within the Company’s consolidated statements of operations related to internal-use software in development not expected to be completed and placed in-service. No impairment charge related to internal-use software has been recognized for the year ended December 31, 2023. Refer to Note 8, Commitments and Contingencies, for further details relating to the internal-use software impairment charges recognized associated with the Company's development collaboration with Verily Life Sciences LLC during the year ended December 31, 2025. 8. COMMITMENTS AND CONTINGENCIES Purchase Commitments As of December 31, 2025, the Company's purchase commitments totaled $ 71.4 million, primarily related to inventory and revenue cycle service fees and expected to be due within a year. 106 Leases The Company leases office, manufacturing, and clinical centers under non-cancelable operating leases which expire on various dates through 2033. These leases generally contain scheduled rent increases or escalation clauses and renewal options. Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The operating lease ROU assets also include any lease payments made to the lessor at or before the commencement date as well as variable lease payments which are based on a consumer price index. The Company is also subject to variable lease payments related to janitorial services and electricity which are not included in the operating lease ROU asset as they are based on actual usage. The Company recognizes operating lease expenses, generally on a straight-line basis over the lease period. In July 2023, the Company entered into an approximately seven-year facility lease in Solana Beach, California, as corporate office space (the “Solana Beach Lease”). In February 2024, the Company amended its lease to add additional space. The amended lease commenced in the fourth quarter of 2024, and extended the term of the entire facility lease by approximately one year . The amended lease provides an option to extend the term of the lease for one five-year period beyond the amended term, which the Company is not reasonably certain to exercise and therefore was not considered in determining the ROU assets and lease liabilities balance. The Company recognized $ 4.0 million in additional ROU assets and lease liabilities upon commencement of the amended lease. Total lease payments for the Solana Beach Lease approximate $ 9.6 million as of the lease commencement date. Contractual obligations under operating lease liabilities were as follows (in thousands): Year Ended December 31: 2026 $ 16,683 2027 17,096 2028 17,016 2029 17,121 2030 17,613 Thereafter 15,286 Total lease payments 100,815 Less: imputed interest ( 19,135 ) Total lease liabilities $ 81,680 Other information related to the operating leases were as follows: Year Ended December 31, 2025 2024 2023 Operating lease expense (in thousands) $ 12,045 $ 11,831 $ 12,861 Weighted average remaining lease term (years) 5.8 6.8 7.8 Weighted average discount rate (percentage) 7.2 % 7.3 % 7.3 % 107 Self-Insured Health Plan As of January 1, 2025, the Company transitioned from a fully-insured program to a self-insurance program to cover U.S. employees and their dependent health benefits. As part of the program, the Company also has stop-loss coverage from a third party which limits the exposure to large claims. The Company records a liability associated with these benefits by utilizing a third-party actuarial specialist, that includes both an estimate of claims filed and incurred but not yet reported based upon historical claims experience. As of December 31, 2025, the Company's accrued health benefits liability was $ 2.6 million which is included within accrued liabilities on the Company's consolidated balance sheets. Legal Proceedings From time to time, the Company is involved in claims and legal proceedings or investigations, that arise in the ordinary course of business. Such matters could have an adverse impact on the Company's reputation, business, and financial condition and divert the attention of its management from the operation of its business. These matters are subject to many uncertainties and outcomes that are not predictable. On February 6, 2024, a putative class action lawsuit was filed in the United States District Court for the Northern District of California alleging that the Company and the Company's current Chief Executive Officer, Quentin Blackford, its former Chief Financial Officer, Brice Bobzien, and its former Chief Financial Officer and former Chief Operating Officer, Douglas Devine, violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder, and seeks unspecified damages purportedly sustained by the class. On July 19, 2024, an amended complaint was filed, naming the Company, Mr. Blackford, Mr. Bobzien, Mr. Devine, the Company's Chief Commercial and Product Officer Chad Patterson, the Company's former Chief Technology Officer Mark Day, and the Company's Chief Medical Officer, Chief Scientific Officer, and Executive Vice President of Advanced Technologies, Mintu Turakhia, as defendants. On October 7, 2024, a second amended complaint was filed against the defendants to include events from FDA inspections, but otherwise included the same claims under the Exchange Act. On December 10, 2024, the defendants filed a motion to dismiss. On June 3, 2025, the Court granted in part the defendants’ motion to dismiss, including the dismissal of all individual defendants except for Mr. Blackford. On November 3, 2025, the plaintiff filed a motion to certify the case as a class action, which the defendants later opposed by motion. Discovery is ongoing. The Company's board members and certain of its current executives and former executives of the Company were named as defendants in two complaints filed as stockholder derivative actions in the United States District Court for the District of Delaware and the United States District Court for the Northern District of California, respectively. The Company is named as a nominal defendant in both complaints. The cases make similar allegations to those in the securities class action complaint described above and both derivative cases have been stayed pending the resolution of the securities class action. The Company believes the above securities class action and derivative lawsuits to be without merit and plans to continue to defend itself vigorously. On March 26, 2021, the Company received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with FDA and its products and services. On September 13, 2021, the Company received a second subpoena requesting additional information. On April 4, 2023, the Company received a Subpoena Duces Tecum from the Consumer Protection Branch, Civil Division of the U.S. Department of Justice (the “DOJ”), requesting production of various documents regarding the Company's products and services. The Company is cooperating fully on these matters. On July 1, 2024, the DOJ filed with the United States District Court for the Northern District of California a Petition for Order to Show Cause and Application for Enforcement against the Company with respect to the production of certain documentary materials which the Company asserts are protected by legal privileges. On May 30, 2025 following a hearing on the issue, the District Court ordered the Company to disclose certain of the documents, finding that the Company had waived its asserted legal privileges. The Company has appealed the District Court's order to the Ninth Circuit Court of Appeals. On July 17, 2025, the Ninth Circuit Court of Appeals stayed the District Court's production order until the appeal is resolved. Both parties submitted initial briefing on the merits, and the Company's reply brief to the government is due in late February 2026. The Company intends to continue to defend its privilege assertions over the documents at issue. Regardless of the outcome of the appeal or the potential disclosure of the documents at issue, it is not clear what, if any, action the DOJ may take following resolution of the dispute over legal privileges. 108 On December 12, 2025, the Company received a civil investigative demand from DOJ’s Civil Division’s Commercial Litigation Branch seeking information and documents related to Zio AT and our associated claims for reimbursement. The Company has cooperated, and is continuing to cooperate, fully in connection with these matters. On February 20, 2024, Welch Allyn, Inc. ("Welch Allyn"), a subsidiary of Hill-Rom Holdings, Inc. now part of Baxter International, Inc., filed a complaint against the Company in the United States District Court for the District of Delaware, which was amended on April 24, 2024, alleging that its Zio devices infringe certain of Welch Allyn's patents and that its infringement was willful. Thereafter, the Company successfully petitioned the District Court to dismiss the willful infringement claims without prejudice. On February 14, 2025, Welch Allyn filed a second amended complaint adding additional patent claims. On March 21, 2025, the Company filed a response to the allegations found in the second amended complaint, denying all allegations of patent infringement and asserting defenses including patent invalidity. On October 14, 2025, Welch Allyn filed a third amended complaint adding back claims for willful infringement. On October 28, 2025, the Company filed a motion to dismiss the willful infringement claims, and that motion remains pending. On December 23, 2024, the Company filed a petition with the USPTO seeking Inter Partes Review ("IPR") of the Welch Allyn patents asserted in the original complaint. The IPR petitions became subject to a new consideration for “discretionary denial” of IPRs first announced by the USPTO after the Company filed its petitions. Under this new basis, the Company's IPRs were denied institution. The Company filed a Petition for Director review, seeking to vacate the denial in July 2025, but the Petition was denied. The Company subsequently filed for Ex Parte Reexamination on four of the Welch Allyn patents being asserted, and the USPTO instituted re-examination of those four patents on January 20, 2026. Welch Allyn seeks money damages and attorneys’ fees. The Company believes this lawsuit is without merit and plans to defend itself vigorously. On December 10, 2024, Bardy Diagnostics, Inc. (“BardyDx”), a subsidiary of Hill-Rom Holdings, Inc. now part of Baxter International, Inc., filed a lawsuit against the Company in the United States District Court for the District of Delaware, alleging that its Zio monitor infringes one of its patents. On December 26, 2024, BardyDx filed an amended complaint alleging that the Company's Zio monitor infringes two of BardyDx's patents. On June 11, 2025, BardyDx filed a second amended complaint alleging that its Zio monitor infringes four of BardyDx’s patents. The Company filed responses to the allegations found in the complaint and the amended complaints, denying all allegations of patent infringement, asserting defenses including patent invalidity, and asserting patent infringement counterclaims, which allege that BardyDx’s Carnation Ambulatory Monitor patch infringes five of its patents. BardyDx filed an answer to the Company's counterclaims and filed counterclaims for declaratory judgment for non-infringement and invalidity of the patents asserted by the Company. On September 5, 2025, the Company filed a motion for leave to amend its counterclaims to allege infringement of two additional patents, and that motion remains pending. On January 22, 2026, BardyDx filed a motion to amend its pleadings to assert inequitable conduct with respect to two patents of the Company, and that motion also remains pending. Both parties seek money damages and attorneys’ fees for the alleged infringement of their patents. The Company believes BardyDx’s allegations of patent infringement are without merit and plans to defend itself vigorously. Technology License Agreement On August 30, 2024, the Company entered into a Technology License Agreement (as amended, the “License Agreement”) with BioIS, pursuant to which (i) the Company 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 the Company's 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) the Company 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 the Company 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. In connection with the License Agreement, the Company also purchased an aggregate of $ 40.0 million of convertible promissory notes from BioIS (the “Convertible Notes”), of which $ 20.0 million of the convertible promissory notes (“Milestone Notes”) were designated for satisfaction of the Company's 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. 109 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 in order to cancel $ 10.0 million in Milestone Notes plus accrued and unpaid interest. During the year ended December 31, 2025 and 2024, the Company recorded a charge of $ 3.0 million and $ 32.4 million, respectively for acquired IPR&D in the Company's consolidated statements of operations. Development Agreement On September 3, 2019, the Company 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 by Amendment No. 1 dated April 26, 2021 and Amendment No.2 dated January 24, 2022, the “Development Agreement”). The Development Agreement involves joint development and production of intellectual property between the Company and Verily. Each participant has primary responsibility for certain aspects of development and approval, with all processes to be performed at each respective party’s own cost. Costs incurred by the Company in connection with the Development Agreement will be expensed as research and development expense in accordance with ASC 730, Research and Development. Pursuant to the Development Agreement, the Company and Verily agreed to develop certain next-generation atrial fibrillation (“Afib”) screening, detection, or monitoring products, which products will involve combining Verily's and the Company’s technology platforms and capabilities. Under the terms of the Development Agreement, the Company paid Verily an upfront fee of $ 5.0 million in 2019. In addition, the Company 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. 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. Ownership of developed intellectual property will be allocated to the Company or Verily depending on the subject matter of the underlying developed intellectual property, and, for certain subject matter, shall be jointly owned. In August 2025, the Company and Verily mutually terminated the Development Agreement, subject to the Company's continued rights to a license to certain intellectual property associated with a mobile app developed under the Development Agreement. Through termination of the Development Agreement, the Company and Verily achieved milestones tied to payments totaling $ 11.0 million to date. During the year ended December 31, 2025, the Company recorded an impairment charge of $ 2.5 million associated with capitalized internal-use software in development relating to the Zio Watch with the Company's clinically integrated ZEUS system. The Company continues to expand its other development programs into other clinical-grade wearables to detect and characterize arrhythmias while integrating with clinicians' workflows. Indemnifications In the ordinary course of business, the Company enters into agreements pursuant to which it agrees to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including losses arising out of the breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by applicable law. The Company currently has directors’ and officers’ insurance. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions, and believes that the estimated fair value of these indemnification obligations is not material and it has not accrued any amounts for these obligations. 110 9. DEBT 1.50 % Senior Convertible Notes due 2029 The carrying amounts of the Company’s 2029 Notes were as follows (in thousands): December 31, 2025 2024 Principal amount $ 661,250 $ 661,250 Unamortized debt issuance costs ( 11,746 ) ( 14,807 ) Carrying amount of senior convertible notes due 2029 $ 649,504 $ 646,443 The following table summarizes the components of interest expense and the effective interest rate for the 2029 Notes for the periods shown (in thousands): Year Ended December 31, 2025 2024 2023 Contractual coupon interest $ 10,057 $ 8,266 $ — Amortized debt issuance costs 3,060 2,617 — Total interest expense recognized on senior convertible notes due 2029 $ 13,117 $ 10,883 $ — Effective interest rate 2.0 % 2.0 % — % On March 7, 2024, the Company 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 the Company 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 initial conversion rate of the 2029 Notes is 6.7927 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 147.22 per share, subject to adjustments. The 2029 Notes may be settled in cash, stock, or a combination thereof, solely at the Company's discretion. The Company used net proceeds from the offering to purchase capped calls, as well as repayment of the Company's outstanding debt which is described below. In addition, the Company also used net proceeds from the offering to repurchase shares of the Company's common stock. Refer to Note 11, Stockholders' Equity for further details relating to the Company's shares repurchase. 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 (the “Indenture”) includes customary terms and covenants, including certain events of default after which the 2029 Notes may be due and payable immediately. The Company uses the if-converted method for assumed conversion of the 2029 Notes to compute the weighted-average shares of common stock outstanding for diluted earnings per share, when applicable. Conversion Rights at the Option of the Holders Holders of the 2029 Notes who convert their notes in connection with a make-whole fundamental change (as defined in the Indenture) or convert their 2029 Notes called (or deemed called) for redemption in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the 2029 Notes may require the Company to repurchase for cash all or a portion of their notes at a price equal to 100 % of the principal amount of notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. 111 Holders of the 2029 Notes may convert all or a portion of their notes prior to the close of business on the business day immediately preceding June 1, 2029, in multiples of $ 1,000 principal amount, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2024 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price of the 2029 Notes on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $ 1,000 principal amount of the 2029 Notes for each trading day of that measurement period was less than 98 % of the product of the last reported sale price of the Company's common stock and the conversion rate of the 2029 Notes on such trading day; (3) if the Company calls any or all 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2029 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as specified in the Indenture. On or after June 1, 2029, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding September 1, 2029, holders of the notes may convert the 2029 Notes, in multiples of $ 1,000 principal amount, at their option regardless of the foregoing circumstances. As discussed in Note 1, Organization and Description of Business, on January 12, 2026, the Company completed the Holding Company Transaction. The Holding Company Transaction constitutes a Merger Event as defined under the Indenture. The Holding Company Transaction does 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 Notes at any time up through March 4, 2026, the thirty-fifth Trading Day after the effective date of the new corporate holding company. Conversion Rights at the Company's Option The Company may not redeem the 2029 Notes prior to September 5, 2027. On or after September 5, 2027 and prior to June 1, 2029, the Company may redeem at its option for cash all or any portion of the 2029 Notes, at the redemption price, if the last reported sale price of the Company's common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice. The redemption price will be equal to 100 % of the principal amount of the 2029 Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. 2029 Capped Call Transactions On March 4, 2024, in connection with the offering of the 2029 Notes, the Company entered into 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 the Company's common stock that will initially underlie the 2029 Notes. The 2029 Capped Calls are expected generally to reduce potential dilution to the Company's common stock upon conversion of the 2029 Notes and/or offset any cash payments that the Company could be required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap. The 2029 Capped Calls have an initial cap price of $ 218.10 per share, subject to adjustments, which represents a premium of 100 % over the closing price of the Company's common stock of $ 109.05 per share on the Nasdaq Global Select Market on March 4, 2024. The Company completed the purchase of the 2029 Capped Calls on March 7, 2024, for the amount of $ 72.4 million. The cost to purchase the 2029 Capped Calls was recorded as a reduction to additional paid-in capital in the Company's consolidated balance sheets, as the 2029 Capped Calls met the criteria for classification within stockholders’ equity. 112 Braidwell Debt On January 3, 2024 (the “Closing Date”), the Company entered into the Credit, Security and Guaranty Agreement (the “Braidwell Credit Agreement”) with Braidwell Transactions Holdings LLC – Series 5 (“Braidwell”), which provided for a senior secured term loan in an aggregate principal amount of up to $ 150.0 million (the “Braidwell Term Loan Facility”). An initial tranche of $ 75.0 million (“Initial Loan”) was funded on the Closing Date. In addition to the Initial Loan, the Braidwell Term Loan Facility included an additional tranche of $ 75.0 million, which was accessible by the Company through the one year anniversary of the Closing Date, so long as the Company satisfied certain customary conditions. The Braidwell Term Loan Facility had a maturity date of January 3, 2029 (the “Maturity Date”) and provided, at the Company’s election, for the option to have a portion of interest added to principal rather than paid in cash during the term of the loan, with principal and accrued interest due at the Maturity Date. On March 7, 2024, in connection with the offering of the 2029 Notes, the Company used approximately $ 80.2 million of the net proceeds for the repayment in full of the $ 75.0 million outstanding Initial Loan, as well as interest, fees and expenses associated with terminating the agreement. Interest expense for the year ended December 31, 2024 totaled $ 1.8 million, consisting of contractual coupon interest of $ 1.6 million and amortized debt issuance costs of $ 0.2 million. The Company incurred $ 5.6 million of fees and expenses relating to the repayment of the Initial Loan and the termination of the Braidwell Credit Agreement, inclusive of unamortized debt origination costs, which has been recorded within loss on extinguishment of debt in the Company's consolidated statements of operations for the year ended December 31, 2024. SVB Term Loan In October 2018, the Company entered into the Third Amended and Restated Loan and Security Agreement (“SVB Loan Agreement”) with Silicon Valley Bank (“SVB”). Under the SVB Loan Agreement, the Company 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, the Company entered into a Second Amendment (“2022 Amendment”) to its 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. None of the remaining $ 40.0 million of 2022 Term Loans was borrowed up 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, the Company used approximately $ 37.8 million of the net proceeds for the repayment in full of the $ 35.0 million outstanding principal balance as well as interest, fees and expenses associated with terminating the agreement. Upon termination of the SVB Loan Agreement, SVB's security interest in the Company's assets and property was released. In connection with the termination of the SVB term loan, interest expense, contractual coupon interest, and amortized debt issuance costs for the year ended December 31, 2024, were de minimis. For the year ended December 31, 2023 interest expense, contractual coupon interest, and amortized debt issuance costs related to the SVB term loan totaled $ 3.4 million, $ 3.0 million, and $ 0.4 million, respectively. The Company incurred $ 2.0 million of fees and expenses relating to the termination of the SVB Loan Agreement, which has been recorded within loss on extinguishment of debt in the Company's consolidated statement of operations during the year ended December 31, 2024. 10. INCOME TAXES The components of income (loss) before provision for income taxes are as follows (in thousands): Year Ended December 31, 2025 2024 2023 United States $ ( 45,602 ) $ ( 114,203 ) $ ( 122,974 ) Foreign 2,004 1,479 318 Loss before income taxes $ ( 43,598 ) $ ( 112,724 ) $ ( 122,656 ) 113 The provision for (benefit from) income taxes consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Current expense: Federal $ — $ — $ — State 622 218 401 Foreign 213 474 349 Total current tax expense 835 692 750 Deferred tax benefit: Federal — — — State — — — Foreign 118 ( 127 ) — Total deferred tax benefit 118 ( 127 ) — Total tax expense $ 953 $ 565 $ 750 As described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt ASU 2023-09. The following table is a reconciliation of the total income tax expense computed at the U.S. federal statutory rate of 21% to the Company’s total income tax expense for the year ended December 31, 2025, in accordance with ASU 2023-09 (in thousands): Year Ended December 31, 2025 Amount Percentage U.S. Federal Statutory Tax Rate $ ( 9,156 ) 21.0 % State Income Taxes, Net of Federal Benefit* 492 ( 1.1 )% Foreign Tax Effects ( 91 ) 0.2 % Nontaxable or Nondeductible Items Stock-Based Compensation 1,545 ( 3.5 )% Nondeductible Executive Compensation 100 ( 0.2 )% Other 430 ( 1.0 )% Tax Credits R&D Credits ( 3,357 ) 7.7 % Change in Valuation Allowance 10,837 ( 24.9 )% Other 153 ( 0.4 )% Provision for income taxes $ 953 ( 2.2 )% *State and local taxes in Texas, Philadelphia, and Oregon made up the majority (greater than 50 percent) of the tax effect in this category 114 The following table is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to ASU 2023-09 (in thousands): Year Ended December 31, 2024 2023 Tax at statutory federal rate $ ( 23,672 ) $ ( 25,758 ) State income taxes, net of federal benefit 307 371 Stock-based compensation 727 ( 820 ) Meals and entertainment 174 361 Section 162(m) limitation - officers compensation 5,093 5,217 Other 425 823 Tax credits ( 2,160 ) ( 2,160 ) Foreign rate differential 163 37 Change in valuation allowance 19,508 22,679 Provision for income taxes $ 565 $ 750 The components of the net deferred tax assets are as follows (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 150,672 $ 133,233 Tax credit carryforwards 24,229 19,460 Stock-based compensation 13,991 11,810 Capitalized research expenditures 11,739 24,280 Allowances and other 47,162 38,938 Lease obligation 20,558 23,011 Depreciation and amortization 8,293 4,288 Total deferred tax assets 276,644 255,020 Less: Valuation allowance ( 254,681 ) ( 242,623 ) Net deferred tax assets 21,963 12,397 Deferred tax liabilities: Capitalized Internal Use Software ( 11,387 ) — ROU assets ( 10,391 ) ( 12,094 ) Total deferred tax liabilities ( 21,778 ) ( 12,094 ) Total deferred tax assets $ 185 $ 303 The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Due to the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company has provided a full valuation allowance against its U.S. deferred tax assets, and, therefore, no benefit has been recognized for the net operating loss carryforwards and other deferred tax assets. The U.S. valuation allowance increased by $ 12.1 million, $ 24.8 million and $ 29.7 million for the years ended December 31, 2025, 2024, and 2023, respectively. 115 The valuation allowance for deferred tax assets consisted of the following activity for the years ended December 31, 2025, 2024, and 2023 (in thousands): Balance at Beginning of Year Additions Deductions Balance at End of Year Year Ended December 31, 2025 $ 242,623 $ 12,058 $ — $ 254,681 Year Ended December 31, 2024 217,779 24,844 — 242,623 Year Ended December 31, 2023 188,070 29,709 — 217,779 As of December 31, 2025, the Company had approximately $ 604.2 million of federal and $ 386.4 million of state net operating loss carryforwards available to offset future taxable income which expires in varying amounts beginning in 2031 and 2026, respectively. Federal losses incurred from 2018 can be carried forward indefinitely. As of December 31, 2025, the Company had tax credit carryforwards of approximately $ 20.3 million, and $ 14.5 million available to reduce future taxable income, if any, for both federal and California purposes, respectively. The federal tax credit carryforwards expire beginning in 2027 and the California tax credits can be carried forward indefinitely. Federal and state tax laws impose restrictions on the utilization of net operating loss carryforwards in the event of a change in our ownership as defined by the Internal Revenue Code, Sections 382. Under Section 382 of the Code, substantial changes in our ownership and the ownership of acquired companies may limit the amount of net operating loss carryforwards that are available to offset taxable income. The annual limitation would not automatically result in the loss of net operating loss carryforwards but may limit the amount available in any given future period. A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Balance at beginning of year $ 6,799 $ 5,774 $ 4,732 Additions for tax positions taken in current year 1,420 1,080 1,080 Increases in balance related to prior year tax positions 186 — — Decreases in balance related to prior year tax positions — ( 55 ) ( 38 ) Balance at end of year $ 8,405 $ 6,799 $ 5,774 The Company's policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes. Management determined that no accrual for interest or penalties was required as of December 31, 2025, 2024, and 2023. The Company files income tax returns in the U.S. and UK jurisdictions. All of the Company's tax years are open to examination by the U.S. federal and state tax authorities. The UK is open to examination for tax years starting 2017 and forward. The Company currently has no federal, state or foreign tax examinations in progress, nor has it had any federal or state examinations since inception. 116 The table below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 (in thousands): Year Ended December 31, 2025 Federal $ — States Texas 110 Oregon 74 Other 67 Foreign United Kingdom 887 Other Foreign 58 Total income taxes paid $ 1,196 iRhythm Philippines, Inc. was granted an income tax holiday by the Philippine Board of Investments, providing a 0 % income tax rate for three years, from 2025 through 2027. After such period, the subsidiary will be subject to a 5 % Special Corporate Income Tax on gross income earned for an additional ten years , through 2037. For the year ended December 31, 2025, the tax holiday reduced income tax expense by approximately $ 0.5 million. The benefit of the tax holiday on net loss per share (diluted) was $ 0.02 for 2025. A deferred tax liability has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested outside the U.S. Income taxes are generally incurred upon a repatriation of assets, a sale, or a liquidation of the subsidiary. The unrecognized deferred tax liability is not material for the periods presented. On July 4, 2025, legislation referred to as the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA makes certain provisions of the Tax Cuts and Jobs Act of 2017 permanent and makes changes to some U.S. corporate tax provisions, many of which have different effective dates. Key corporate tax provisions of the OBBBA include the restoration of 100% bonus depreciation, the introduction of new Section 174A permitting immediate expensing of domestic research and experimental expenditures, modifications to Section 163(j) interest expense limitations, and the expansion of Section 162(m) aggregation requirements. The provisions of the OBBBA did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2025. The Company continues to evaluate the impact of the OBBBA, but does not expect the OBBBA to have a material impact on its effective tax rate. 11. STOCKHOLDERS' EQUITY Common Stock As of December 31, 2025, the Company’s amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of common stock with a par value of $ 0.001 per share and 5,000,000 shares of preferred stock with a par value of $ 0.001 per share. The holders of common stock are entitled to receive dividends whenever funds and assets are legally available and when declared by the Board, subject to the prior rights of holders of all series of convertible preferred stock outstanding. No dividends were declared through December 31, 2025. 117 Treasury Shares On March 7, 2024, the Company used approximately $ 25.0 million of the net proceeds from the 2029 Notes offering to repurchase 229,252 shares of the Company's common stock at a purchase price of $ 109.05 per share via privately negotiated transactions effected through one of the initial purchasers or its affiliate. Repurchased shares of the Company's common stock are held as treasury shares until they are reissued or retired. Shares Reserved for Issuance The Company had reserved shares of common stock for issuance as follows (in thousands): December 31, 2025 2024 Options issued and outstanding 98 283 Unvested restricted stock units and performance-based restricted stock units 1 2,262 2,289 Shares available for grant under future stock plans 5,750 6,370 Shares available for future issuance 8,110 8,942 1 PRSUs are based on the maximum number of PRSUs in the key executive grant agreements. The actual number of PRSUs granted will be based on company performance criteria and relative Total Shareholder Return ("TSR"), as discussed in Note 13, Equity Incentive Plans 12. EMPLOYEE BENEFIT PLANS Defined Contribution Plans The Company has a defined contribution 401(k) retirement plan (the “401(k) Plan”) covering substantially all employees in the United States. Employees who participate in the 401(k) Plan may contribute up to 90 % of eligible compensation each year, subject to Internal Revenue Service limitations and the terms and conditions of the plan. Under the terms of the 401(k) Plan, the Company may elect to match a discretionary percentage of contributions. The Company matches contributions up to 50 % and a maximum of $ 5,000 per year. Additionally, the Company contributes to various plans for its international employees. Total matching contributions made on behalf of the Company's employees were $ 6.3 million, $ 6.2 million, and $ 5.6 million for the years ended December 31, 2025, 2024, and 2023, respectively. 13. EQUITY INCENTIVE PLANS 2016 Equity Incentive Plan In October 2016, the Company adopted the 2016 Equity Incentive Plan, (the “2016 Plan”). The 2016 Plan was approved by the Company’s stockholders and became effective on October 19, 2016. On the first day of each fiscal year starting from the year ended December 31, 2017 through November 6, 2024, the 2016 Plan authorized an annual increase in the number of shares available for issuance equal to the least of (i) 3,865,000 shares, (ii) 5 % of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year or (iii) such number of shares determined by the Board. On November 7, 2024, the Board of Directors approved an amendment to the 2016 Plan that removed the provision for annual increases. As of December 31, 2025, the Company has reserved 5.8 million shares of common stock available for issuance under the 2016 Plan. A summary of awards available for grant under the Company's 2016 Plan is as follows (in thousands): Shares Available for Grant Balance as of December 31, 2023 6,765 Awards granted 1 ( 869 ) Awards forfeited 1 474 Balance as of December 31, 2024 6,370 Awards granted 1 ( 910 ) Awards forfeited 1 290 Balance as of December 31, 2025 5,750 1 Awards granted and forfeited include PRSUs, which are based on the maximum number of PRSUs in the key executive grant agreements. The actual number of PRSUs granted will be based on company performance criteria and relative TSR, as described below. 118 Pursuant to the 2016 Plan, stock options, restricted stock, RSUs, performance units, performance shares, and stock appreciation rights may be granted to employees, consultants and directors of the Company. Stock options were not granted during the years ended December 31, 2025, 2024 and 2023. Employee Stock Purchase Plan In October 2016, the Board and stockholders approved the 2016 Employee Stock Purchase Plan (“ESPP”) which provides eligible employees of the Company with an opportunity to purchase shares of the Company's common stock at a discounted price through accumulated contributions not exceeding $ 25,000 in a given calendar year. On the first day of each fiscal year, the number of shares reserved for the ESPP increases by the least of (i) 966,062 shares, (ii) 1.5 % of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Board. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their eligible compensation, subject to any plan limitations. The ESPP provides for 12 -month offering periods that each contain two six-month purchase periods. At the end of each purchase period, employees purchase shares at 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the purchase period. If the stock price of the Company's common stock on any purchase date in an offering period is lower than the stock price on the first trading date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period. Restricted Stock Units, Performance and Market-Based Restricted Stock Units The fair value of RSUs and PRSUs are based on the Company’s closing stock price on the date of grant. A summary is as follows (in thousands, except weighted average grant date fair value): Restricted Stock Units Performance and Market-Based Restricted Stock Units Shares Underlying RSUs Weighted Average Grant Date Fair Value Shares Underlying PRSUs 1 Weighted Average Grant Date Fair Value Balance as of December 31, 2023 1,542 $ 117.90 896 $ 121.80 Granted 614 111.96 254 132.66 Vested ( 483 ) 115.33 ( 62 ) 77.50 Forfeited ( 269 ) 115.20 ( 203 ) 110.03 Balance as of December 31, 2024 1,404 116.33 885 130.44 Granted 651 114.86 259 124.10 Vested ( 502 ) 115.46 ( 145 ) 138.36 Forfeited ( 133 ) 114.28 ( 157 ) 135.31 Balance as of December 31, 2025 1,420 $ 116.15 842 $ 130.09 1 Based on the maximum number of performance-based restricted stock units in the key executive grant agreements, the actual number of units granted will be based on the annual unit volume compound annual growth rate ("CAGR") as described below. As of December 31, 2025, there was total unamortized compensation costs of $ 94.9 million, net of estimated forfeitures, related to RSUs, which the Company expects to recognize over a weighted average period of 1.6 years. Aggregate intrinsic value of the RSUs was $ 252.2 million, $ 126.6 million, and $ 165.1 million as of December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, 1.3 million shares, net of estimated forfeitures, of RSUs were expected to vest with an aggregate intrinsic value of $ 233.5 million. Total grant date fair value of vested RSUs was $ 57.9 million, $ 55.7 million, and $ 60.0 million during the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, there was total unamortized compensation costs of $ 27.4 million, net of estimated forfeitures, related to PRSUs, which the Company expects to recognize over a weighted average period of 1.1 years. Aggregate intrinsic value of the PRSUs was $ 149.3 million, $ 79.8 million, and $ 95.9 million as of December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, 0.8 million shares, net of estimated forfeitures, of PRSUs were expected to vest with an aggregate intrinsic value of $ 144.5 million. Total grant date fair value of vested PRSUs was $ 20.1 million, $ 4.8 million, and $ 2.6 million during the years ended December 31, 2025, 2024, and 2023, respectively. 119 Performance and Market-Based PRSUs The Company grants PRSUs to its key executives. PRSUs can be earned in accordance with the performance equity program for each respective grant. In February 2025, the Company granted market-based PRSUs to senior executive officers with a grant date fair value of $ 15.5 million. The number of shares to be earned subject to these PRSU awards will be based on the cumulative annual growth rate (“CAGR”) of annual revenue unit volume calculated between January 1, 2024 and December 31, 2027 and measured against performance thresholds, as well as a relative comparison of the S&P Healthcare Equipment Select Industry Index to the Company's Total Shareholder Return (“TSR”). Each PRSU award has a maximum cap of 200 % on the payout irrespective of above-median TSR performance, and maximum unit volume CAGR performance level. The grant date fair value of the PRSU awards was based on the expected term of 2.8 years, interest risk free rate of 4.0 %, implied volatility of 56.02 % and no dividend yield. These February 2025 awards are subject to the recipient senior executive officer's continued employment through the vesting date aligned with the Company's Board of Directors certifying the payout of the awards, no later than March 15, 2028. In February 2024, the Company granted market-based PRSUs to senior executive officers. The number of shares to be earned subject to these PRSU awards will be based on the cumulative annual growth rate (“CAGR”) of annual unit volume calculated between January 1, 2023 and December 31, 2026 and measured at a minimum performance thresholds, as well as a relative comparison of the S&P Healthcare Equipment Select Industry Index to the Company's Total Shareholder Return (“TSR”). Each PRSU award has a maximum cap of 200 % on the payout irrespective of above-median TSR performance, and maximum unit volume CAGR performance level. The fair value of market-based PRSUs were estimated at the date of grant using a Monte-Carlo simulation method. The grant date fair value of the PRSU awards was based on the expected term of 2.8 years, interest risk free rate of 4.4 %, implied volatility of 67.95 % and no dividend yield. These February 2024 awards are subject to the recipient senior executive officer's continued employment through the vesting date of March 16, 2027. Options The following table summarizes stock option activity: Options Outstanding Options Outstanding (in thousands) Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Life (years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2023 307 $ 42.34 3.29 $ 19,859 Options exercised ( 22 ) 52.69 Options forfeited ( 2 ) 67.55 Balance at December 31, 2024 283 41.32 2.38 13,826 Options exercised ( 185 ) 33.80 Options forfeited — 89.89 Balance at December 31, 2025 98 55.49 1.89 11,904 Options exercisable – December 31, 2025 98 55.49 1.89 11,904 Options vested and expected to vest – December 31, 2025 98 $ 55.49 1.89 $ 11,904 There have been no options granted since December 31, 2019. As of December 31, 2025, the options were fully vested. The total estimated grant date fair value of options vested during the period was nil for the years ended December 31, 2025 and 2024, and $ 0.1 million for the year ended December 31, 2023. Employee Stock Purchase Plan The Company issued approximately 74,000 , 99,000 , and 94,000 shares of common stock under the ESPP during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, approximately 1.9 million shares of the Company's common stock remained available for issuance under the ESPP. The ESPP provides for 12 -month offering periods that contain two six-month purchase periods. The Company determined the fair value of the stock purchase rights under the ESPP using the Black-Scholes option pricing model with the following assumptions for the specified periods. 120 Year Ended December 31, 2025 2024 2023 Expected Term (years) 0.5 - 1 0.5 - 1 0.5 - 1 Expected Volatility 38.9 % - 56.8 % 46.5 % - 64.1 % 48.8 % - 59.2 % Dividend Yield — % — % — % Risk-Free Interest Rate 3.6 % - 4.3 % 4.3 % - 5.4 % 5.1 % - 5.4 % As of December 31, 2025, the Company had $ 1.7 million of unrecognized compensation expense that will be recognized over a weighted average period of 0.5 years. 14. STOCK-BASED COMPENSATION The following table summarizes the total stock-based compensation expense included in the statements of operations and comprehensive loss for all periods presented (in thousands): Year Ended December 31, 2025 2024 2023 Cost of revenue $ 2,948 $ 3,092 $ 3,603 Research and development 14,591 13,932 11,391 Selling, general and administrative 70,744 58,954 62,210 Total stock-based compensation expense $ 88,283 $ 75,978 $ 77,204 Non-Employee Stock-Based Compensation On March 10, 2023, the Company’s former Chief Operating Officer (the “former COO”) resigned and entered into a Consulting Agreement (“CA”) with the Company through July 2024. Pursuant to the terms of the CA, the former COO vested in outstanding awards as long as services are provided to the Company under the CA as a non-employee consultant. In accordance with ASC 718, the Company recognized expense related to all awards vested over the duration of the CA in 2023 as an equity-severance cost because the consulting services were not substantive. The total expense related to the former COO’s non-employee stock-based compensation recognized for the year ended December 31, 2023 was $ 1.1 million. On August 31, 2024, the Company’s former Chief Financial Officer (the “former CFO”) resigned and entered into a CA with the Company through March 15, 2025. Pursuant to the terms of the CA, the former CFO continued to vest in outstanding restricted stock unit awards during the period of his CA services. In accordance with ASC 718, the Company recorded stock-based compensation expense related to the awards expected to vest over the duration of the CA, because the consulting services are substantive. The total expense related to the former CFO’s non-employee stock-based compensation recognized for each of the years ended December 31, 2025 and 2024 was $ 0.1 million and $ 0.2 million, respectively. 121 15. NET LOSS PER COMMON SHARE As the Company had net losses for the years ended December 31, 2025, 2024, and 2023, all potential common shares were determined to be anti-dilutive. The following table sets forth the computation of the basic and diluted net loss per share during the years ended December 31, 2025, 2024, and 2023 (in thousands, except per share data): Year Ended December 31, 2025 2024 2023 Numerator: Net loss $ ( 44,551 ) $ ( 113,289 ) $ ( 123,406 ) Denominator: Weighted-average shares used to compute net loss per common share, basic and diluted 32,004 31,196 30,528 Net loss per common share, basic and diluted $ ( 1.39 ) $ ( 3.63 ) $ ( 4.04 ) The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per common share for the years ended December 31, 2025, 2024, and 2023 because their inclusion would be anti-dilutive (in thousands): Year Ended December 31, 2025 2024 2023 Options to purchase common stock 98 283 307 RSUs and PRSUs 1 2,262 2,289 2,438 Senior convertible notes 4,492 4,492 — Total 6,852 7,064 2,745 1 PRSUs are based on the maximum number of PRSUs in the key executive grant agreements. The actual number of PRSUs granted will be based on company performance criteria and relative TSR, as discussed in Note 13, Equity Incentive Plan and Stock-Based Compensation. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None