iRhythm recently released its latest 10-Q report. The company designs and sells ambulatory cardiac monitoring services and related software used to detect arrhythmias, centered on its Zio patch-based systems and cloud analytics. Its business is concentrated in the United States, with revenue tied mainly to third-party payors, Medicare, and healthcare institutions; it also has a development collaboration with BioIS for additional sensor technologies.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
iRhythm said its first-quarter 2026 revenue rose to $199.4 million from $158.7 million a year earlier, an increase of $40.7 million, or 26%. The company attributed the gain primarily to higher service volume, with total revenue volume for both Zio Monitor and Zio AT increasing as existing and new accounts expanded across third-party payors, CMS, and healthcare institutions. It also said larger healthcare enterprise accounts that use both products contributed to the increase.
Gross profit climbed to $141.4 million from $109.2 million, up $32.1 million, or 29%. Cost of revenue increased to $58.0 million from $49.5 million, a rise of $8.6 million, or 17%.
Research and development expense was essentially flat at $21.4 million, compared with $21.5 million in the prior-year quarter. Selling, general and administrative expense rose to $135.9 million from $120.0 million, an increase of $15.9 million, or 13%.
Total operating expenses were $157.5 million, up from $141.8 million. Loss from operations narrowed to $16.2 million from $32.6 million.
Interest and other income, net, totaled $2.8 million, compared with $2.5 million a year earlier. Interest income was $4.9 million, interest expense was $3.3 million, and other income, net was $1.2 million.
Loss before income taxes narrowed to $13.4 million from $30.0 million. After a $500,000 income tax provision, net loss was $13.9 million, compared with $30.7 million in the prior-year quarter.
Adjusted EBITDA improved to $14.1 million from a loss of $2.6 million. The company’s reconciliation shows that net loss was adjusted for $3.3 million of interest expense, $4.9 million of interest income, a $1.4 million gain from changes in the fair value of strategic investments, $500,000 of income tax provision, $5.0 million of depreciation and amortization, $21.5 million of stock-based compensation, $346,000 of business transformation costs, and $3.7 million of intellectual property litigation expenses.
Revenue mix shifted modestly. For the three months ended March 31, 2026, contracted third-party payors accounted for 53% of revenue, unchanged from 53% a year earlier. CMS rose to 26% from 24%, healthcare institutions fell to 15% from 17%, and non-contracted third-party payors remained at 6%.
The company said it continues to rely on third-party billing partners to submit claims and collect from commercial payors, certain government agencies, and patients. It also said its revenue estimates depend on claim payment history, reimbursement levels, contract status, and current developments that could affect collections.
On costs, iRhythm said cost of revenue includes direct labor, materials, tariffs, equipment and infrastructure expenses, software amortization, overhead, royalties, and shipping. It said direct labor includes payroll-related costs in manufacturing, clinical data curation, and customer service, while material costs include disposable Zio patch components and amortization of PCBAs used in Zio XT, Zio Monitor, and Zio AT.
The company said it expects cost of revenue to rise in absolute dollars as revenue grows, driven by higher direct labor, materials, variable spending, and software amortization. It also pointed to materials and electronics pricing, labor rates, shipping, inflation, and tariffs as pressure points, while noting offsetting efforts such as volume discounts, scan-time algorithms, process improvements, automation, and workflow enhancements.
For research and development, iRhythm said spending is expensed as incurred and includes payroll, consulting, clinical studies, lab supplies, milestone payments, and facility overhead. It expects R&D to increase as it hires more personnel for new product and service offerings, product enhancements, and clinical evidence.
Selling and marketing expense includes payroll, commissions, travel, consulting, public relations, direct marketing, trade shows, and promotional spending. General and administrative expense includes executive, finance, legal, and administrative payroll, along with professional fees, recruiting, bad debt, third-party patient claims processing, business transformation, and travel.
The company said the current macroeconomic environment could affect receivables, supply chains, commodity prices, tariffs, inflation, demand, labor availability, and customer initiatives. It specifically cited hospital staffing shortages, supply chain issues, rising operating costs, interest rate volatility, and tighter capital budgets among healthcare customers. The market has reacted to these announcements by moving the company's shares 0.73% to a price of $122.35. Check out the company's full 10-Q submission here.
