iRhythm Technologies Touts Medicare Win, Zio Growth and AI-Driven Margin Gains

Key Points

• iRhythm said a favorable Medicare local coverage determination expanded access for its services, while the company also reported its sixth straight quarter of more than 20% growth. Management said the core Zio Monitor business remained the main driver, with the innovative channel still a key upside opportunity.
• The company highlighted improving profitability, with gross margin gains and SG&A leverage helped by automation, workflow efficiencies and scale. Executives said first-quarter adjusted EBITDA margin topped 7%, up from negative adjusted EBITDA a year earlier.
• iRhythm reaffirmed plans to launch Zio MCT in the first half of 2027 and said AI is helping reduce scan time and costs rather than threatening the business model. Management also pointed to international momentum and reiterated long-term goals of 15% adjusted EBITDA margin and 73% gross margin by 2027.

iRhythm Technologies NASDAQ: IRTC executives said the company is seeing continued business momentum after a favorable Medicare coverage update, a stronger-than-expected first quarter and progress on several product and margin initiatives.

Speaking at an investor event, Stephanie Zhadkevich, senior director of finance and investor relations at iRhythm Technologies, said the final local coverage determination, or LCD, addressed concerns raised during the comment process and ultimately landed “in a really favorable spot.”

Zhadkevich said the final language increased access rather than limiting it, citing the inclusion of additional patient indications such as systemic emboli and pre- and post-TAVR monitoring. She said iRhythm and other industry participants submitted comments to CMS and Medicare Administrative Contractors after the initial proposal included “nuances,” “complexities” and “contradictions.”

First-quarter growth led by core Zio Monitor business

Zhadkevich said iRhythm was “really pleased” with its start to the year, noting that the first quarter marked the company’s sixth consecutive quarter of more than 20% growth. She said growth was driven by several parts of the business, with the company’s core Zio Monitor in the U.S. remaining the primary contributor.

She said Zio Monitor growth was volume-led, while Zio AT grew slightly above the company average, in line with prior expectations. The company’s “innovative channel” remained its fastest-growing channel, and Zhadkevich said iRhythm continues to see a healthy pipeline there.

On guidance, Zhadkevich said the company’s approach is to avoid “getting ahead” of itself. She said iRhythm still treats the innovative channel as upside because it is newer and less predictable than the core business. She also said year-over-year growth comparisons become tougher in the back half of the year following strong growth in 2025, but added that two- and three-year stacked growth trends do not show the same deceleration.

Margin improvement tied to automation and operating leverage

Lisa Pecora, senior vice president of finance and investor relations, said iRhythm was proud of its gross margin and bottom-line progress. She cited manufacturing efficiencies from prior automation investments, leverage from clinical technicians and workflow improvements as drivers of gross margin gains.

Pecora said selling, general and administrative expenses showed about 750 basis points of year-over-year improvement in the first quarter, reflecting scale and prioritized investments. She said the quarter produced more than 7% adjusted EBITDA margin, compared with negative adjusted EBITDA in the prior-year period.

Zhadkevich added that iRhythm’s business has inherent leverage from the innovative channel’s “one-to-many” selling model, electronic health record integration and the ability to sell Zio AT into the same physician and account base as Zio Monitor.

Zio MCT launch timing reiterated for first half of 2027

Zhadkevich said iRhythm continues to expect a first-half 2027 launch for Zio MCT. She said the company decided earlier this year to move to a mobile phone gateway, requiring additional routine testing, including software verification and electronics testing. After discussions with the FDA, iRhythm plans to submit the completed data package later this year rather than on a rolling basis.

She said iRhythm currently has about 15% share in the mobile cardiac telemetry market, compared with about 72% share in long-term continuous monitoring. Zio MCT is expected to help close competitive gaps in Zio AT and accelerate share gains in a fragmented market segment, she said.

Zhadkevich also said Zio MCT could be accretive to gross margins compared with Zio AT because it will use the same platform as Zio Monitor and benefit from manufacturing automation. The product is expected to support 21 days of wear versus 14 days today, though she said that does not create incremental revenue because the company would still bill under the same MCT CPT code.

AI viewed as an efficiency driver, not a disruptor

Zhadkevich said artificial intelligence has been central to iRhythm’s business from the beginning because the company collects an average of 1.5 million heartbeats over 14 days of continuous monitoring. The company is currently using its second-generation deep learning algorithm and has submitted its third-generation algorithm to the FDA.

She said testing of the new algorithm showed meaningful reductions in the time needed to finalize reports for physicians. iRhythm has cited 50% scan-time savings and more than $100 million in cost savings over five years, with Zhadkevich describing the technology as an “enabler of scale.”

Addressing investor questions about AI commoditization and potential insourcing by customers, Zhadkevich said iRhythm views AI as an enabler rather than a disruptor. She pointed to the company’s more than 3 billion hours of curated ECG data, EHR integration, device management capabilities and two decades of operating experience as differentiators.

Zhadkevich also discussed iRhythm’s predictive AI efforts, saying the company is in its first health system deployment. The tool is designed to help identify patients at risk of undiagnosed arrhythmias using symptoms or risk factors in the medical record. She said iRhythm believes there is a patient opportunity of more than 27 million people with undiagnosed arrhythmias.

Executives cite international momentum, cash flow growth

International revenue remains a low-single-digit percentage of total revenue, but Zhadkevich said the first quarter was the company’s best international quarter in its history. The U.K. was the primary driver, particularly in the private market, while Japan is showing early adoption and a strong pipeline. She said iRhythm is seeking higher reimbursement in Japan and is working on head-to-head clinical evidence to support that effort.

On an ongoing civil investigative demand, Zhadkevich said there were no updates since December. She said iRhythm continues to work with the Department of Justice and provide context for information being supplied, but she did not speculate on timing or potential outcomes.

Pecora said iRhythm still feels good about previously stated 2027 goals of 15% adjusted EBITDA margin and 73% gross margin, citing automation, manufacturing scale and the next-generation AI algorithm. Zhadkevich said free cash flow is also a priority after the company reached positive free cash flow last year, adding that iRhythm expects meaningful growth while continuing to reinvest in the business.

About iRhythm Technologies NASDAQ: IRTC

iRhythm Technologies, Inc is a medical technology company that develops and commercializes wearable cardiac monitoring devices and associated data analytics services. Founded in 2006 and headquartered in San Francisco, California, the company's flagship product is the Zio® patch, a discreet, single-use, continuous ECG recorder designed to monitor heart rhythms for up to 14 days. iRhythm's digital diagnostics platform combines biosensor technology with proprietary algorithms to detect arrhythmias and streamline data interpretation for physicians.

The Zio service is prescribed by cardiologists and other healthcare providers to aid in the diagnosis of atrial fibrillation, bradycardia, tachycardia and other rhythm disorders.

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