iRhythm Holdings, Inc. Q4 FY2025 Earnings Call

Hello, everyone. Thank you for attending today's iRhythm Holdings, Inc. Q4 2025 Earnings Conference Call. My name is William, and I will be your moderator today. At this time, I would now like to pass the conference over to our host, Stephanie Zhadkevich, Senior Director of Investor Relations with iRhythm. Stephanie?

Thank you all for participating in today's call. Earlier today, iRhythm released financial results for the fourth quarter and full year ended December 31, 2025. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. These are based upon our current estimates and various assumptions and reflect management's intentions, beliefs and expectations about future events, strategies, competition, products, operating plans and performance. These statements involve risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Our discussion today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We believe these non-GAAP financial measures provide additional information pertinent to our business performance. These non-GAAP financial measures are meant to be read together with the most directly comparable GAAP financial measures. Please refer to the tables in our earnings release and 10-K for a reconciliation of these measures to their most directly comparable GAAP financial measures. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 19, 2026. iRhythm disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I'll turn the call over to Quentin Blackford, iRhythm's President and CEO.

Thank you, Stephanie. Good afternoon, everyone, and thank you for joining us. I'm pleased to be here with Dan Wilson, our Chief Financial Officer, to discuss our fourth quarter and full year 2025 performance and how we're positioning the company for 2026 and beyond. Dan will walk through our financials shortly, but I want to begin by framing where we stand today and where we're headed. 2025 was a breakout year for iRhythm. We delivered strong volume-led revenue growth and meaningfully expanded margins as we exited the year with momentum across cardiology, primary care, innovative channels and international markets. At the same time, we strengthened the underlying platform that will fuel the next several years of value creation. Growth in the quarter and for the full year continued to be driven by volume across all channels. With growth in the fourth quarter of 27%, this marked our fifth consecutive quarter of revenue growth above 20%, reinforcing the durability of our platform and breadth of our growth drivers. Our leadership in long-term continuous monitoring remains strong with nearly 72% share in a segment growing in the high teens, supported by more than 135 scientific publications to date. On profitability, we also made great progress as we reached a key inflection point, finishing the year with positive free cash flow results for the first time in our company's history and exceeding expectations with respect to adjusted EBITDA margins. In the fourth quarter, adjusted EBITDA margins meaningfully exceeded the 15% goal that we have identified as we approach $1 billion in revenue, demonstrating the profitable scalability of our business. But this year was about more than financial milestones. It is about validating the strategic direction we've set, moving from episodic detection to proactive, integrated and increasingly predictive care. The need for long-term continuous monitoring continues to grow. Arrhythmias remain episodic, often invisible until they cause downstream complications, and they are consistently missed by short duration or symptom-driven diagnostics. Data demonstrates that nearly 65% of all arrhythmias, whether symptomatic or asymptomatic, are found after 48 hours of monitoring, reinforcing the need for longer duration. Yet nearly 2 million short duration Holter and event monitors continue to be prescribed in the U.S. market on an annual basis. We estimate that at least 27 million people in the U.S. are living with significant risk of undiagnosed arrhythmias, a staggering and costly gap in care. At the same time, the health care system is constrained. Nearly half of U.S. counties and close to 90% of rural counties have no cardiologists. Access is not improving, which means the point of arrhythmia detection must shift. In 2025, we demonstrated the power of enabling that shift. More than 1/3 of our volume originated in primary care settings, supported by our expanding footprint in integrated delivery networks, EHR integrated workflows and innovative channel partnerships. We now serve approximately 40,000 primary care physicians, creating a scalable proactive care model that aligns with the growing focus on value-based care and population health. This is not a shift away from cardiology. Rather, it expands the market for these important customers as our ability to help rule in and rule out patients can enable cardiology to focus on the highest acuity patients, while primary care becomes an effective front door for earlier detection meeting the majority of our patients where they are most often being seen. Helping to fuel this move upstream is the power of our EHR integration strategy. More than half of our volume now flows through EHR integrated accounts, and 75 of our top 100 customers are fully integrated. These integrations are not simply workflow enhancements; they create meaningful stickiness, increase prescribing consistency and drive long-term account durability. We also advanced our predictive AI capabilities significantly in 2025. With nearly 3 billion hours of curated ECG data, we're now combining internal and external data sets such as claims and EHR information to identify patients at risk of arrhythmias before diagnosis. Early pilots through our partnership with Lucem Health show more than 85% accuracy in pre-identifying patients with clinically relevant arrhythmias. While early, these programs reaffirm our conviction that iRhythm is positioned not just to detect disease but to help predict risk earlier and ultimately to help prevent it. Our initial programs focus on high-risk populations such as patients with diabetes, CKD, CAD, COPD, sleep and heart failure, where arrhythmias are common and costly. These programs are not just about diagnosing more patients; they are focused on doing so in a way that improves the efficiency, quality and cost of care delivery. Zio provides a definitive diagnosis, enabling providers to stratify risk, route patients appropriately and reduce unnecessary downstream health care utilization, resulting in early indications of better patient outcomes and reduced cost of care. As an independent diagnostic provider, iRhythm delivers objective, clinically validated results that integrate directly into existing workflows and care pathways, which helps protect providers and systems in increasingly audit sensitive risk-bearing environments. Within our MCT business, our current Zio AT offering continues to perform exceptionally well, with unit growth running more than twice the company average for the year. The strength continues to be supported by new account wins, expanding utilization within existing accounts and increased prescribing alongside Zio Monitor. This notable and sustained performance even before bringing an exciting new product to market reinforces our view that Zio AT is a durable growth driver resonating with physicians today and that we will continue to gain market share in the near term. Consistent with our prior comments, we are incredibly excited about our next-gen MCT device, featuring a 21-day wear time, an improved form factor aligned with our Zio Monitor and enhanced algorithms, which is currently under FDA review. We remain in active dialogue with the agency as we work through their questions and continue to expect to release the product in the first half of 2027. We believe the combination of a strong Zio AT offering today and a thoughtfully architected next-generation device sets us up to meaningfully expand our presence in the MCT market, where we hold roughly 15% market share compared to our 72% market share in long-term cardiac monitoring. Every 10 points of market share gains represents roughly $80 million to $100 million of incremental annual revenue. International markets continue to represent a compelling long-term growth opportunity. We are now commercial in the U.K., select EU markets and Japan, markets that collectively conduct over 3 million ambulatory cardiac monitoring tests annually and where iRhythm holds less than 1% share. In the U.K., we delivered our largest quarter of volume ever and we'll be participating in pilots under the NHS Supply Chain's Value-based Procurement Program. In Japan, we are now generating in-country evidence to support future applications to the MHLW for reimbursement reconsideration. Across all regions, our focus remains on disciplined execution, evidence generation and reimbursement progression as we scale these markets thoughtfully. We've also made encouraging progress with our sleep pilots. Early feedback continues to reaffirm the meaningful opportunity ahead as we address long-standing challenges in the sleep diagnostic market. With nearly 40 million sleep apnea patients in the U.S. and significant overlap with arrhythmia populations, we believe we are well positioned to extend our workflow-driven model into this adjacent space as care continues to shift upstream. iRhythm today sits at the intersection of several powerful trends: an aging population, increasing prevalence of arrhythmias, movement toward value-based care and growing demand for proactive health management. We believe the market opportunity ahead is significantly larger than it has historically been viewed and that our platform spanning biosensors, AI and workflow, positions us well to lead that expansion. As we enter 2026, our focus is clear and consistent: one, deliver durable volume-led growth across cardiology, primary care and innovative channels; two, expand margins through sustained operational efficiencies and scale benefits; three, advance platform innovation, including our next-generation MCT and predictive AI; four, scale international and adjacent markets with discipline and rigor; and five, maintain operational excellence and compliance in a rapidly evolving health care environment. With this focus, we are confident in our ability to execute this expansion in a way that creates long-term value for patients, physicians, providers, payers and shareholders. Finally, as the industry grapples with heightened scrutiny around medical documentation practices, including recent attention on chart scraping behaviors, we want to be explicit about our position. iRhythm operates as an independent diagnostic provider with objective clinically validated reports that integrate directly into provider workflows. Our product is prescribed directly by a physician and enables a confirmatory diagnosis. Our processes are designed to support accurate diagnosis while reducing administrative burden and audit exposure for providers and payers. We are an effective tool providing exactly what oversight bodies are asking for in terms of confirmed diagnosis and are excited about the potential tailwinds from the emerging expectations of a more accountable, audit-sensitive environment. Thank you again for joining us today. 2026 marks iRhythm's 20th anniversary and represents a very important year as we aim to become a $1 billion company in 2027, whose truest measures are lives touched, innovations delivered and transformational leadership serving the patients who are counting on us. With that, I'll now turn the call over to Dan to walk through our financial results and outlook.

Thank you, Quentin. iRhythm delivered continued strong financial performance in the fourth quarter and full year 2025, reflecting durable demand for iRhythm's Ambulatory Cardiac Monitoring Services and disciplined execution across the organization. We delivered fourth quarter 2025 revenue of $208.9 million representing 27.1% year-over-year growth and full year 2025 revenue of $747.1 million, representing 26.2% growth compared to 2024. Performance was driven primarily by sustained volume demand across our customer base, reflecting continued strength in our core business and contributions from newer growth channels. While volume remains the primary driver of growth, pricing was also favorable for full year 2025 and in the fourth quarter, including improvements with our estimated collections reserves related to our market access, contracting and collection efforts executed throughout 2025. New store growth with new store defined as accounts that have been open for less than 12 months accounted for approximately 68% of our year-over-year volume growth. Home enrollment for Zio Services in the U.S. remained consistent from prior quarters at approximately 23% of volume in the fourth quarter. Moving down the P&L. Gross margin in the fourth quarter was 70.9%, an increase of 90 basis points year-over-year and full year gross margin was 70.6%, an improvement of 170 basis points year-over-year. This sustainable improvement was driven by continued operational efficiencies, including manufacturing automation and workflow optimization as well as scale benefits from higher volumes, partially offset by product mix. Fourth quarter operating expenses were $145.8 million compared to $119.2 million in the prior year period, and operating expenses for the full year 2025 were $584.7 million, an increase of 11.8%. We invested purposefully in the business to fuel near, mid- and long-term growth while delivering strong operating leverage with revenue growing meaningfully faster than operating expenses. On the bottom line, net income for the fourth quarter was $5.6 million or $0.17 per diluted share and was the first positive quarterly net income in iRhythm's history. Net loss for the full year 2025 was $44.6 million or a loss of $1.39 per diluted share. Adjusted EBITDA for the fourth quarter was $34.3 million or 16.4% of revenue, representing a 470 basis point improvement year-over-year and a significant improvement in profitability. Full year adjusted EBITDA was $68.9 million or 9.2% of revenue, representing an improvement of more than 1,000 basis points compared to 2024 and over 500 basis points if normalizing for IP R&D expenses. We generated $14.5 million of free cash flow in the fourth quarter and $34.5 million for the full year, ending 2025 with $583.8 million in cash, cash equivalents and marketable securities and providing us with substantial flexibility to support future growth initiatives. And another milestone for iRhythm, 2025 was the first year of positive adjusted EBITDA and free cash flow in the company's history, a significant result for the company and demonstrative of the profitable growth we are focused on delivering. Looking ahead, we entered 2026 with strong momentum and a solid foundation. For the full year 2026, we expect revenue to be in the range of $870 million to $880 million, representing 16% to 18% year-over-year growth. This outlook reflects sustained demand across our core business while maintaining a disciplined approach to forecasting newer and emerging channels. On a full year basis, we expect pricing to be approximately flat overall to 2025, with revenue growth driven by continued volume growth across core Zio Monitor, Zio AT, innovative channel and international. In the first quarter of 2026, we anticipate revenue to be in the range of $193 million to $195 million, consistent with typical revenue seasonality. For gross margin, we expect the clinical operations and manufacturing efficiencies we've driven will continue to incrementally improve our gross margin profile for the full year of 2026. We believe that these sustainable improvements will continue to lower our cost to serve as we leverage our fixed cost infrastructure over a higher volume of patients over time and introduce new artificial intelligence and workflow tools. From a profitability standpoint, we expect adjusted EBITDA margin to expand meaningfully to 11.5% to 12.5% of revenue in 2026, reflecting continued gross margin improvement and operating leverage while still investing appropriately in product innovation, commercial initiatives, international expansion and platform capabilities. We continue to anticipate normal seasonality in our adjusted operating expense profile with higher expenses coming through in the earlier half of the year due to spend associated with corporate activities and payroll expenses. For the first quarter of 2026, we anticipate adjusted EBITDA margin to be between 3% and 4% of revenue. And lastly, we expect free cash flow to grow versus 2025 with free cash flow more heavily weighted in the second half of the year due to normal operating seasonality. In closing, we delivered a strong fourth quarter and a transformational year in 2025. We exited the year profitably, free cash flow positive and well positioned to continue scaling the business. Our financial performance reflects the durability of our growth model, the leverage in our operating structure and the discipline with which we are investing for the future. We believe our improving financial profile is supported not only by operating leverage but also by the growing recognition that our services can reduce downstream health care utilization, which supports durable demand and efficiency-focused care environments.

I will now turn the call back to Quentin for closing remarks. The fourth quarter capped an exceptional year for iRhythm. In 2025, we delivered strong top line growth, expanded margins and achieved profitability and free cash flow positivity for the first time in our company's history, all while continuing to invest in innovation and long-term growth. At its core, the challenge in arrhythmia detection remains clear. A reactive symptom-driven approach continues to miss patients. Arrhythmias are episodic, often asymptomatic and frequently undetected by short duration diagnostics, leaving millions undiagnosed and contributing to avoidable downstream events. At the same time, access constraints across the health care system are intensifying. With nearly half of U.S. counties lacking a cardiologist, the point of detection must move upstream. We believe these forces, rising clinical need and constrained access are fundamentally reshaping our market and play directly into iRhythm's strengths. As we enter 2026, our 20th year as a company, we do so with more momentum, scale and strategic clarity than at any point in our history. Looking ahead to 2026, we are confident in our ability to deliver another year of durable volume-led growth while continuing to expand profitability. Our focus remains on disciplined execution, expanding access through primary care and integrated networks, advancing our platform through AI and workflow innovation and investing selectively in product and international growth, all while maintaining financial discipline. We believe iRhythm is still in the early innings of unlocking a market that is far larger than historically recognized, and we are well positioned to lead that expansion in a way that creates long-term value for patients, providers, payers and shareholders. With that, we're now happy to take your questions.

Our first question comes from Joanne Wuensch with Citigroup.

I think part of what has been weighing on the stock is the language around the elimination of chart-derived diagnosis from CMS and what it might mean for Zio use? Could you please address that? And I do have a follow-up.

Joanne, thank you for your question. I’d be happy to address that. There are actually two issues related to Medicare that I want to discuss: pricing and chart-derived diagnosis. Zio effectively tackles both areas, addressing underlying concerns. When it comes to chart-derived diagnosis, Zio provides the chance to achieve a confirmatory diagnosis, which is crucial. Physicians are using our product, and patients are engaging with it, allowing us to deliver clear signals that physicians can use to confirm a diagnosis. It's essential that this integrates into workflows and patient records for review from an audit or other perspectives to validate that a diagnosis occurred. We are performing well in this regard. Additionally, I’m excited about the conversations we've had with partners that are utilizing the device in this manner, and I believe it will positively impact us. Conversely, there are concerns about the overall direction of pricing, and it seems that future increases might not be as significant as previously expected. However, we are discovering that in the programs utilizing Zio, we are actually lowering the cost of care for patients, which is becoming increasingly evident. I believe data will be published later this year from innovative channel partners demonstrating that with proactive use of Zio, the costs associated with these populations are decreasing. This is encouraging to witness, and I eagerly await the publication of this data. It underscores the ongoing movement in healthcare to reduce costs, and Zio is proving its capacity to do just that. I see both areas of concern as opportunities where Zio and iRhythm are uniquely positioned to make a significant impact.

Just as a quick follow-up and a different topic. Did you give guidance for what you think gross and operating margins may look like for 2026?

Yes. Joanne, we did give formal guidance for adjusted EBITDA. That was adjusted EBITDA margin of 11.5% to 12.5% for the full year. We also gave guidance there for Q1 of 3% to 4% for Q1 '26. On gross margin, I did comment, we expect incremental improvement relative to 2025, I can tell you we're thinking that in the range of 80 to 100 basis points of improvement relative to 2025. So hopefully, that gets you there for the '26 number.

Our next question comes from the line of Vijay Kumar with Evercore ISI.

One on the guidance kind of questions, right? Like, I know there's focus on CMS reimbursement. But I'm wondering, is the CMS proposal perhaps a tailwind if hospitals are doing chart scraping now, are they now being forced to use or should be using Zio Monitors in LTCM patches, right, to avoid chart scraping. So I'm wondering, could this be a tailwind? And along those lines, what are you assuming for international growth in fiscal '26?

Yes. Maybe I'll let Dan hit on the international assumption in the guidance. With respect to your first question, in the chart scraping comments and again, having a confirmatory diagnosis that is in the medical records, I think that is something that our partners are very focused on. Again, in the discussions with them, I think that's exactly the path that they're heading down. I'm bullish on what that has the potential to mean for iRhythm and our company. I do think that folks are going to look for ways to continue to button up and bolster sort of their evidence and documentation around anything with particular Medicare focus on it. And so I do think this ends up being a tailwind. At the same time, we did not factor anything into our forward-looking expectations around this at this point in time. I think this is one where we'll let that play out. We'll let that show up in results. And if so, we'll talk about that in a very favorable way. But early indications, early conversations, I feel very bullish around sort of how folks are talking about the way that iRhythm and Zio can be used to address some of these concerns. So we'll see how that plays out, but I'm excited about it. Dan, maybe you want to hit on the international.

Yes. Vijay, so your question on international contribution within the 2026 guide. We'll tell you that we have that growing slightly ahead of overall company growth. I would say some upside there potentially, but really just getting started in a number of those markets, 5 of the 6 that we are in were opened, call it, in the last 18 months or so. So would expect the progress we're making in '26 to really show up more meaningfully in terms of contribution as we look to '27 and beyond.

Our next question comes from the line of Allen Gong with JPMorgan.

So let me get one. I kind of want to touch on some of the AI concerns that we've seen weighing on some stocks in med tech recently. I think in the past, you've talked about maybe like 20% of the customer base will want to do some of the analysis on their own. And in that case, you're not really able to bill CMS for that analysis portion of the code. But if your providers are more willing to use AI and potentially do some of that more analysis on their own with the help of third-party providers. Is that something that you're concerned about? And how do you address that concern?

Thanks, Allen. Look, I think we're all incredibly excited about the prospects of AI and where that can go over the future years. I think at the same time, we've been doing this for 20 years. And frankly, our platform is pretty much a closed platform. But I think what sets us apart and continues to give me confidence that we're going to have success in this area is that it's more than just a software capability. It's more than just an AI capability. It starts with the data. The AI is only as good as the data coming into it. And we have very specific purpose-built hardware that allows us to capture very clean ECG data; having a clean signal is very important. If you're starting to bring together disparate data sets, ECG data sets that are very unique and different and marked in different ways, I think it's hard for that AI to truly be specific and as good as what iRhythm is able to generate and provide. You also have to keep in mind, we operate in a very highly regulated space where each of these algorithms require FDA clearance. And that clearance takes years and years of clinical validation. It takes real-world evidence, things that are measured in time frames of years, not months or quarters. There's work to be done in and around reimbursement and workflow as well that become major barriers. You look at our past. We've done the work to establish the CPT codes. We've got CMS coverage in place, national coverage decisions. We've got commercial payer contracts that are in place and importantly, I think, deep EHR integrations. Physicians don't just simply adopt algorithms and they're not going to just simply bolt on a bunch of AI algorithmic capabilities onto their existing platforms. It has to fit within their workflow. And I think that's something that we continue to build out and have a tremendous focus on. We've commented on this in the past. Over half of our volumes flow through integrated systems with our customers. And I think that ends up being a very important aspect of how AI will continue to get introduced into the future. And then just given the size, and we've got 13 million patients, we've got 3 billion hours. That data set is growing incredibly fast, which is going to give us the ability to stay ahead from an AI perspective. So I feel really good about our opportunity to continue to have success here and protect the business but also grow it really, really well, and frankly, even take advantage of the platform that we have, where we can drop in other AI capabilities as we go into the future that I think allow us to be unique and differentiated. So I like our position here, and I feel good about it, and I think we're in a unique spot here.

Our next question comes from the line of Richard Newitter with Truist.

I wanted to ask about MCT. It sounds like you are reaffirming your commitment to the upcoming commercial launch in the first half of 2027, which is great to hear. Quentin, could you walk us through what needs to be completed to finalize that? At the JPMorgan conference, you mentioned some enhancements and features that will be integrated. Could you remind us what those are, what's required, and your level of confidence in the timelines?

Yes. Look, nobody is more excited about MCT than we are. I can tell you that as well as our commercial team and even our customers. I think we're in a great spot right now. Clearly, Zio AT is performing incredibly well. I think it's demonstrating the ability to be very sustainable and durable in terms of its growth profile. We're now over a year of growth with that product line that is more than twice the rate of our total company. And in Q4, it was up sequentially another 10%. So the momentum in AT affords us to make some decisions in and around MCT that are in the right path for the long-term outcomes of the company versus the short-term speed to market. There are some things we could do to bring it to market faster, but frankly, it's not the right thing to do. And this is a category that's evolved quite a bit over the last 2 years with the FDA in terms of their expectations as well as future expectations, including even a new category code that was created within the last couple of years as well. And so I think we understand with the FDA where the future expectations are going. And one of the most notable improvements that we need to make or changes that we need to make to our MCT submission, frankly, is getting to a mobile gateway, moving away from our old gateway that's been out there for well over a decade and going ahead and making that move to a mobile gateway today, is important. That's something that we're in discussions with the FDA on right now in terms of how to update the submission. And so we're moving down that pathway, and MCT will come to market with a new gateway. We continue to feel confident in that first half of '27 time frame, and that's the right way to think about it. Excitingly, it's going to get our duration out beyond 14 days, get us to 21 days. It's going to have an enhanced algorithmic capability with it as well. With the mobile gateway, it's actually going to improve the patient's interaction and experience quite a bit, which is exciting to see as well. So better cost economics, better cost profile, better impact on gross margin over time. These are all things that are in the right long-term health of our business, and we're fortunate to be in a position where we can make those decisions versus speed to market. So feel good about it. We're excited to get MCT to market, and we're just working with the FDA now on the best way to get that done.

Our next question comes from the line of Brandon Vazquez with William Blair.

Maybe, Dan, for you, I wanted to go back to guidance real quick. I think you used the phrase disciplined approach to forecasting when you gave the guidance update. Maybe just talk to us a little bit about what that means, what is, what isn't embedded? What are the risks and opportunities as you think about the 2026 guidance frame that you gave us?

Thank you, Brandon, for your question. Let's begin. There has been no change in our approach to guidance. We aim to be thoughtful and to provide projections that we are confident we can meet. As we've mentioned before, we intentionally leave out certain upside opportunities from our guide, which allows us to exceed our initial forecasts if those opportunities materialize. Regarding the various contributions to our guidance, starting with the core U.S. monitor, it continues to drive most of our growth in terms of absolute dollar amounts. Our growth is aligning with or slightly surpassing market rates. We're seeing primary care expand and there remains a significant opportunity to shift market share from legacy technology, which gives us confidence in the sustained growth in this area. This was a source of upside in 2025, and we see similar potential for 2026. With Zio AT, as Quentin mentioned, we are experiencing momentum and strength, with the opportunity to increase our share from the current 15%. We're succeeding alongside Zio Monitor as a complete platform. We are encouraged by our progress in AT. In 2025, AT was growing at nearly double the company average, which is not what we expect in the 2026 guidance; rather, we anticipate AT will grow a bit faster than the overall company growth but not at the double rate seen in 2025. Lastly, regarding international and the innovative channel, we expect this to remain the fastest-growing segment. The guidance reflects a modest increase from the run rate we experienced at the end of 2025. Annualizing the Q4 run rate aligns with what we have planned in our guidance, and we feel positive about achieving that. There is certainly potential for upside in this channel. While it's a newer segment of our business and has less visibility than our core operations, we want to be careful with our guidance assumptions here. We also welcomed some additional partners in Q4 and Q1, placing us in a strong position to grow this part of our business. I hope this clarifies our 2026 guidance.

Our next question comes from Marie Thibault with BTIG.

Just wanted to follow up on that question about guidance and try to see if we could learn a little bit more about what's being included in that outlook for the partnerships. I wonder if you could just tell us a little bit more about the number of partners you now have that you're working with? How many might be scaling up this year after pilots last year? Just any more detail? I know it's always a focus of interest for us.

Thank you, Marie. We continue to add partners in the innovative channel business, which is starting to integrate more closely with our core operations as these partners track both symptomatic and asymptomatic patients. While we won’t provide specific numbers of partners on a quarterly basis, I can say we have successfully added more partners in Q4 and the early part of Q1. I am optimistic about the direction of this business segment. It's still early and developing, so we want to be cautious about our guidance and not rush into conclusions.

Our next question comes from the line of Nathan Treybeck with Wells Fargo.

So Quentin, just kind of as you mentioned, in this quarter, you were operating income positive. You hit 16% EBITDA margin at an annualized revenue that's below $1 billion. I guess, one when can we expect you to refresh your LRP targets? And it seems like there could be pretty significant upside to those LRP targets considering that you still have remediation costs in your cost base. And Dan, just on the OpEx, it came in considerably below my forecast. I just want to understand what's going on there? And how should we think about OpEx in '26?

Yes. I would like to discuss the $1 billion target and the long-range plan. As we approach that milestone in 2027, we'll certainly consider updating our outlook for the future. We are committed to fulfilling our promises, and as we get closer, it will be the right time to adjust expectations. I feel quite optimistic about it. Reflecting on the last four years since we set that expectation, many things have unfolded differently than we expected. We anticipated having the MCT product available a few years ago. However, the team's efforts to strengthen our core business, the success in our core monitor segment, and the developments with our innovative channel partners have been significant. Even in the MCT category, we believe we have a superior product coming. The market share potential we see is encouraging. Our findings in sleep pilots give us confidence that sleep will be a substantial contributor moving forward. I am very excited about the company's prospects and our current position. For now, let's focus on reaching $1 billion in 2027, and then we can consider how to adjust our expectations for the longer term. Regarding profitability, Dan will provide more details, but he's done an excellent job leading the team and identifying the key areas in our company. We are confident we can achieve a 15% margin and even exceed that, but I will let him elaborate further.

Thank you for the question, Nathan. I would say the approach for Q4 and 2026 is fairly similar. We aim to enhance efficiencies in gross margin and general and administrative expenses while reinvesting into the business for both commercial initiatives and various innovation projects we are pursuing. We strive to establish a balanced plan that emphasizes efficiency, particularly in gross margin, which I mentioned is expected to improve incrementally in 2026. In terms of operating expenses, we will continue to find leverage in G&A by utilizing our global footprint and the global business services center we've developed over the past few years. Several G&A functions are fixed and won't need to increase with volume. Additionally, as the FDA remediation progresses, it will become a valuable source of leverage for us. We then assess what to reinvest in the business, focusing on both sales and marketing, as well as research and development. Ultimately, we aim for a balanced plan that drives long-term value for our shareholders.

If I could just follow up with one more. Just on chart scraping, I guess how do you expect a potential tailwind could unfold? Would it be a directive from regulators to do confirmatory diagnoses or would it be more self-driven by the providers? And then just beyond the potential near-term tailwind, are you hearing any concerns from your customers that have high Medicare Advantage populations that continuing asymptomatic screening could be risky for them?

No. I would say, certainly not on the latter part of that question. As a matter of fact, in the discussions we're having with customers, and I sat with one just about 2 weeks ago, who's been a terrific partner of ours, they're expanding their program even further. Just they're starting to see real cost data accumulate now that their program has been in place for over a year that is demonstrating very clearly that they are able to reduce the cost of caring for these populations. So they'll end up, I believe, expanding that population, and that's going to be a nice opportunity for us, but I think it's indicative of even where the future of more of these partners end up heading. So I'm excited by where that goes. I think your specific question on chart scraping, I expect it's going to be much more of a self-driven behavior and change in maybe approach of some of these folks from the past. I think that they want to have the confirmatory records in the patient records, having a Zio report there that demonstrates very clearly where an arrhythmia is present or not is something that bolsters their own documentation. And from the discussions we've had, I expect this will be a tailwind for us. But again, our approach has always been around these sort of things, let them play out. As they do play out as we learn more, then we can speak more about them and even roll them into forward-looking expectations when the time is right. But I think the majority of this from what I can tell and what I expect is probably more of a self-driven change in behavior is what I would anticipate.

Our next question comes from the line of David Rescott with Baird.

Great. Congrats on all the progress in '25. Dan, you mentioned that pricing was favorable in 2025. I think you pointed to improvements in the estimated collections of reserves that were a factor there. So wondering if you could maybe just unpack exactly what's going on in that front? And when you think about 2026, I think you called out pricing as being relatively flat this year. I believe there is an uplift broadly in the reimburse rate from Medicare this year and '26. So can you help us understand maybe why pricing should be flat this year relative to the Medicare uplift and then relative to some of the pricing comments you made for 2025?

Yes, thanks, Dave. I'm happy to address those questions. We started 2025 with guidance anticipating a slight decrease in price for the year. Ultimately, the year ended up showing a slight increase in price. We exceeded our price expectations or guidance for 2025. This was influenced by several factors, including our product mix. In the fourth quarter, we reported net revenue based on our expectations of what we would ultimately collect, which is calculated as gross revenue minus contractual allowances. Throughout the collection cycle, we evaluate actual collections against our estimates and adjust accordingly. In the fourth quarter, our collections were better than anticipated, leading to a true-up in the low single-digit millions for that quarter. While this adjustment was a one-time event, I believe that the strong performance of our market access teams, payer contracting, and revenue cycle operations provides a solid foundation as we consider pricing for 2026 and beyond. We are not incorporating that into our guidance yet, but it serves as a positive factor for us. You mentioned the increase in Medicare rates for 2026, specifically related to Zio Monitor and long-term continuous monitoring. Medicare constitutes 25% of our business, and in the MCT category for AT, Medicare rates are slightly down year-over-year in 2026. However, accounting for the overall mix of products and channels, we anticipate that pricing will be flat compared to 2025. If we can surpass that, similar to our performance in 2025, that would be excellent, but we want to approach the year appropriately.

Our next question comes from Michael Polark with Wolfe Research.

I want to better understand the mobile gateway comment for next-gen MCT. How is this different than the existing gateway? Is this an app on a patient's own smartphone? Is that the illusion? Or does mobile gateway mean something different? Any color would be welcome.

Yes, Mike, thank you for your question. I'm pleased you brought it up so we can clarify. The initial version of the mobile gateway will be a smart device that only communicates directly with our Zio AT product. We will ensure this is provided every time the new Zio MCT product is shipped to a patient, allowing the Zio MCT product to communicate through that gateway. However, it will not be integrated with a patient's own smart device; it will be a locked smartphone with the option to include a Zio app. In the future, we could see a version that allows for use with a patient's smartphone, although that presents some challenges to address. We have seen this approach in other markets, like with CGM and Dexcom, but that will not be the initial plan for Zio MCT. The first iteration will be strictly a locked smartphone designed solely for the Zio MCT product.

Our next question comes from the line of David Saxon with Needham.

I wanted to ask about the timing for engaging partners in repeat monitoring through the innovative channel. Can this be standardized across the channel or tailored individually for each partner? Additionally, do you have any internal data that indicates the value of monitoring after a certain period of time?

Yes, I think it's a great question. And to be honest with you, I think with every one of these channel partners, the discussion is a little bit unique and different to their own practices. Some will talk about repeat testing every 12 months, others will talk about it every 3 years. I do think, for the most part, everybody is talking about some sort of repeat testing, but what the frequency looks like is just too early to identify just yet. I think that importantly, once you get to a confirmatory diagnosis and you start to treat that patient, you're going to want to make sure that that arrhythmia is either being addressed or if it's reappeared, you're going to want to know that, which naturally leads into why there would be repeat testing here. At the same time, I think that the further we go into this, payers are understanding sort of the cost benefit associated with these monitoring programs. And I think that annual monitoring, annual patching is something that you could see start to be used from a risk perspective to identify how they even think about pricing their programs with their patient population. So there's a lot of reasons to see this move towards more of an annual sort of monitoring program, but it's still too early to speak to exactly how that's going to play out. But those are discussions that are being had, and I think there will be some aspect to annual monitoring in these partner programs.

Our next question comes from the line of Suraj Kalia with Oppenheimer.

Quentin and Dan, congrats on a great quarter. Can you hear me all right?

Yes, we got you.

Perfect. So Quentin, many calls going on. Forgive me if you've already discussed this. Our math suggests you grew Zio AT at about 30% or more. Regarding the bridge device or the gateway device for Zio AT, I know there have been prior concerns about patient issues with the bridge device, which led to the shift to cellular for the Zio MCT product and caused this delay. Can you explain the challenge with the bridge device? So far, unless my calculations are incorrect, you have navigated this well, growing at a 30% rate and maintaining close to a 15% MCT share. Hopefully, you understand my question, Quentin.

Yes, I got it, Suraj. And thank you for the question. Just to clarify on AT and just to speak to the strength of that product, and I put this in our prepared remarks as well. It's growing at more than twice the rate of the overall company average. So for the year, our Zio AT product actually grew north of 50%. I think that's important to note just demonstrating the success in that MCT category that we're having with a product that we know will be enhanced with the new Zio MCT offering. So our momentum there is incredibly strong. To Dan's point earlier, we did not set up our guidance that way for 2026. But if you look at the last 5 quarters, we've demonstrated the ability to grow that at nearly twice the overall rate of our company. So we're bullish on the category for sure, and we're excited by it. When you think about the mobile gateway, as we were working through this with the FDA, there were some questions around cybersecurity that were certainly going to require us to design some incremental capabilities into our old gateway if we were going to address those questions. And the challenge with that was that we knew we were going to have to move to a new gateway at some point in the future. And rather than take the time today to design those incremental cybersecurity features and capability into the old gateway only to obsolete it in the next round of future innovation that we would introduce after this MCT product, we made the decision to go ahead and just bring it right into a new mobile gateway that addresses the cybersecurity concern. So this is all around making the right decisions for the long-term health of the business. We know that we can address these. We see a clear path to getting a product approval. But it does take us to a mobile gateway sooner than what we had expected, and that requires a bit of time there. So that's contemplated in all of the timelines that we've put out there, but getting to the new mobile gateway is going to address those concerns around the cybersecurity aspect that we would have had to have done in the old gateway. It just doesn't make sense to really spend the time, effort, and resources putting it into something that we knew was going to be obsoleted.

Our next question comes from the line of David Roman with Goldman Sachs.

Maybe you could talk a little bit more about the referral channel within the innovative partners and the extent to which you're seeing consumer-based devices drive patients into that channel, maybe the degree to which some of the false positives that come off of those devices are actually increasing testing volume? And then maybe if you can tie that back to some of the AI questions you got earlier, maybe it would help just complete the picture a little bit about how to think about the implications.

Yes, that's an interesting question. If you look at our business, wearable devices have been effective lead generators for us. Patients often come to their clinicians with a wearable device indicating a potential issue, such as arrhythmia, and are subsequently prescribed a Zio device to confirm a diagnosis. However, when considering our innovative channel partners, I don't see wearables significantly driving patient referrals to these programs. These partners have specific criteria for monitoring patient populations. For example, with our Lucem AI capabilities, we proactively identify patients likely to have arrhythmias by analyzing medical records and provide them with patches. We've observed accuracy rates as high as 90% in our early trials. Each partner profiles populations within their coverage area, such as patients with comorbid conditions like diabetes or COPD. The goal is to obtain a confirmed diagnosis, which the partners want documented in their records. While wearables have previously served as effective lead generators for us, the innovative channel partners are focused on specific patient targets. I'm optimistic about the data we'll release later this year, showcasing substantial cost reduction capabilities from these programs, which should help us expand our partnerships. However, I don't believe wearables are directly influencing these innovative channel partners at this stage. They seek accurate confirmed diagnoses, which is what Zio delivers, and they rely on us for that.

Our next question comes from Stephanie Piazzola with Bank of America.

I wanted to ask on Epic Aura accounts. I don't think it was discussed. Was that the 75 number that you provided in the prepared remarks? And any commentary on volume improvements that you're seeing from Aura? And is that embedded in the core company guidance expectations for 2026? Or is that another source of potential upside?

Yes. Good question. Epic continues to be a terrific partner for us and one that we continue to be excited about. Just to be clear, when I mentioned the top 75 of 100, that's all integrated systems, not just Epic systems. So just to be clear, it's across all EHR platforms, but Epic is a big part of that. Epic itself continues to perform incredibly well. I will tell you, we had a record number of Epic integrations performed in the fourth quarter. We're on pace to set another record in the first quarter of this year. So it's growing quite nicely, and the pipeline is incredibly strong, and that's going to continue to play out over the course of the year. We know that when we get integrated with these folks, our data would tell us 6 months post integration, we see roughly a 25% increase in overall prescribing volume. We're not setting up our guidance that way. Again, I think we like to be thoughtful on those things and let some of those play through before we would factor all that into guidance. But the Epic partnership and the integrations associated with it have been going very, very well and I would say, ahead of plan. And we're bullish on what Q1 and the rest of this year is going to look like. Thank you. As we close, I just want to take a moment to thank the iRhythm employees around the globe. The progress that we shared today, the strong growth, expanding profitability, the increasing impact that we're making on patients, it's only made possible by their dedication, the expertise and the relentless focus that they demonstrate each and every day on doing the right thing for our patients and our customers. It's their work ethic, it's their commitment that continues to set us apart, especially as we operate in an increasingly complex environment. And as I think ahead of entering into our 20th year, I couldn't be more proud of the team and more confident in what we're going to accomplish together. And I just want to put a big shout out to the team. Congratulations on all you've done and look forward to the future. Thank you to the folks that are on the call today. I look forward to seeing all of you guys in the near future and look forward to a great 2026. Thank you.

Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your lines.