What iRhythm Technologies (IRTC) Said on Its Q3 Earnings Call

Key Points

• iRhythm reported Q3 revenue of $221.6 million, up 14.9%, as strong Zio monitor sales offset slower Zio AT demand. The company raised its 2026 revenue outlook to $890 million–$895 million and adjusted EBITDA margin guidance to 15.5%–16%.
• Zio AT purchases slowed as some customers waited for VitalConnect’s offering; management expects the slowdown to persist for another quarter or two. iRhythm also pushed its planned FDA submission for next-generation Zio MCT from 2026 to 2027.
• Adjusted EBITDA rose to $51.2 million, while iRhythm posted a GAAP net loss of $29.9 million, including a $50 million intellectual-property settlement charge. Excluding the settlement payment, free cash flow would have been positive $38.5 million.

iRhythm Technologies NASDAQ: IRTC raised its 2026 revenue and profitability outlook after reporting third-quarter growth driven by its core Zio monitor business, even as demand for its Zio AT telemetry product fell short of expectations.

The cardiac monitoring company reported revenue of $221.6 million, up 14.9% from a year earlier. Chief Executive Officer Quentin Blackford said Zio monitor sales exceeded internal expectations, while Zio AT revenue was roughly flat as some customers delayed purchases following the announcement of iRhythm’s VitalConnect acquisition.

Management also said it no longer plans to submit its next-generation Zio MCT product to the Food and Drug Administration in 2026. The company now expects to file in 2027 as it prioritizes integrating VitalConnect’s existing mobile cardiac telemetry offering.

Core Growth Offsets Zio AT Slowdown

Chief Financial Officer Dan Wilson said strong volumes, modest pricing gains and collections supported the core business. New accounts contributed approximately 51% of year-over-year volume growth, while innovative channels remained the company’s fastest-growing business.

Blackford said existing Zio AT accounts remained stable, but the onboarding of new accounts slowed. Some customers wanted to avoid integrating and training staff on Zio AT only to repeat the process when VitalConnect became available through iRhythm, he said.

The company closed its acquisition of VitalConnect on Oct. 5, earlier than its prior expectation of a year-end close. Blackford said integrated capabilities should begin to be available around the middle of the first quarter of 2027, though he expects the Zio AT purchasing slowdown to persist for a quarter or two.

For the fourth quarter, Blackford expects Zio AT volume to be flat year over year, but revenue to decline about 10% because a benefit recorded in the prior-year quarter will not recur.

Profitability Improves Despite GAAP Loss

Third-quarter gross margin rose to 74.2%, an increase of 310 basis points from a year earlier. The figure included roughly $3 million in one-time tariff refunds, which contributed about 140 basis points, Wilson said. Adjusted operating expenses fell 2% to $138.6 million.

Adjusted EBITDA was $51.2 million, or 23.1% of revenue, more than 1,100 basis points higher than the year-earlier margin. Adjusted net income was $27.8 million, or $0.82 per diluted share, compared with an adjusted loss of $2 million, or $0.06 per share, a year earlier.

On a GAAP basis, iRhythm reported a net loss of $29.9 million, or $0.90 per diluted share, compared with a loss of $5.2 million, or $0.16 per share, in the prior-year period. The latest result included a $50 million charge related to a previously announced intellectual-property litigation settlement.

Free cash flow was negative $11.5 million, including the settlement payment. Excluding that payment, it would have been positive $38.5 million. The company ended the quarter with $560.7 million in unrestricted cash, cash equivalents and marketable securities and obtained a $300 million revolving credit facility on Nov. 3.

Higher 2026 Outlook and 2027 Expectations

iRhythm raised its full-year revenue guidance to $890 million to $895 million, representing growth of 19% to 20%. The forecast includes approximately $16 million in fourth-quarter revenue from VitalConnect and assumes mid-teens year-over-year growth for Zio monitor.

Management also raised its 2026 adjusted EBITDA margin guidance to 15.5% to 16%, including VitalConnect. It expects fourth-quarter companywide gross margin above 70% and positive free cash flow, excluding certain one-time items.

For 2027, Wilson said the organic iRhythm business remains on track for approximately $1 billion in revenue, excluding VitalConnect. That outlook assumes mid-teens growth in Zio monitor and essentially flat Zio AT revenue. Management expects VitalConnect to grow in the mid- to high-teens range from its approximately $65 million 2026 annual run rate.

The company reiterated its expectation for a combined-company adjusted EBITDA margin of at least 15% in 2027. Wilson said formal guidance is expected at the JPMorgan Healthcare Conference in early January.

Product and Regulatory Updates

Blackford acknowledged that the Zio MCT timeline had shifted multiple times. The company is producing and testing the system in the configuration it intends to submit to the FDA, he said, while continuing verification and regulatory work. The planned product is expected eventually to replace Zio AT.

VitalConnect gives iRhythm an FDA-cleared telemetry product with capabilities including live look-in and up to 30 days of monitoring. Blackford said the company is investing to more than double VitalConnect’s inventory and operational capacity.

Separately, iRhythm submitted an FDA application for a pediatric indication for its Zio monitor. Blackford said the company has completed remediation activities related to an FDA warning letter and expects a follow-up inspection, though the timing is unknown. He also said iRhythm continues discussions with the Department of Justice and is focused on reaching an appropriate resolution.

About iRhythm Technologies (NASDAQ:IRTC)

iRhythm Technologies, Inc is a digital health company focused on the diagnosis and management of cardiac arrhythmias. The company provides ambulatory cardiac monitoring services that enable physicians to evaluate patients for conditions such as atrial fibrillation and other irregular heart rhythms.

Its principal offering is the Zio platform, which combines wearable electrocardiogram (ECG) monitoring devices with cloud-based data analysis and physician reports. Products in the platform include the Zio XT, an extended-wear monitor, and the Zio AT, which provides near-real-time monitoring capabilities.

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