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iRhythm(IRTC) - 2025 Q4 - Earnings Call Transcript

2026-02-19 22:30

Financial Data and Key Metrics Changes - iRhythm reported Q4 2025 revenue of $208.9 million, a 27.1% year-over-year growth, and full year 2025 revenue of $747.1 million, reflecting a 26.2% increase compared to 2024 [17][18] - Gross margin for Q4 was 70.9%, up 90 basis points year-over-year, while full year gross margin was 70.6%, an improvement of 170 basis points [18] - The company achieved its first positive net income in Q4 2025, amounting to $5.6 million, or $0.17 per diluted share, while the full year net loss was $44.6 million [19] - Adjusted EBITDA for Q4 was $34.3 million, representing 16.4% of revenue, and for the full year, it was $68.9 million, or 9.2% of revenue, marking a significant improvement [20] Business Line Data and Key Metrics Changes - Growth in Q4 was driven by sustained volume demand across all channels, with new store growth accounting for approximately 68% of year-over-year volume growth [17][18] - The Zio AT offering performed exceptionally well, with unit growth running more than twice the company average for the year [10][11] - The company holds a 15% market share in the MCT market, compared to a 72% share in long-term cardiac monitoring [12] Market Data and Key Metrics Changes - iRhythm serves approximately 40,000 primary care physicians, with more than one-third of volume originating from primary care settings [8] - The company is now commercial in the U.K., select E.U. markets, and Japan, where it holds less than 1% market share [12] - In the U.K., iRhythm delivered its largest quarter of volume ever and is participating in NHS pilots [12] Company Strategy and Development Direction - The company aims to shift from episodic detection to proactive, integrated, and predictive care, addressing the growing need for long-term continuous monitoring [7][14] - iRhythm's strategy includes expanding margins through operational efficiencies, advancing platform innovation, and scaling international markets [14][26] - The company is focused on maintaining operational excellence and compliance in a rapidly evolving healthcare environment [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver durable, volume-led growth while expanding profitability in 2026 [26] - The company anticipates revenue for 2026 to be in the range of $870 million to $880 million, representing 16%-18% year-over-year growth [21] - Management highlighted the importance of addressing the challenges in arrhythmia detection and the need for proactive care models [25] Other Important Information - 2025 marked the first year of positive adjusted EBITDA and free cash flow in the company's history [20][21] - The company is actively working on its next-generation MCT device, which is currently under FDA review and expected to be released in the first half of 2027 [11][12] Q&A Session Summary Question: Concerns about chart-derived diagnosis elimination from CMS - Management addressed concerns about chart-derived diagnosis, emphasizing that Zio provides confirmatory diagnoses, which is crucial for integration into workflows and patient records [30][31] Question: Guidance on gross and operating margins for 2026 - Management provided guidance for adjusted EBITDA margin of 11.5%-12.5% for 2026 and expected gross margin improvement of 80-100 basis points relative to 2025 [35][37] Question: Potential tailwind from CMS proposal regarding chart scraping - Management indicated that the confirmatory diagnosis from Zio could serve as a tailwind, as providers seek to bolster documentation in patient records [39][40] Question: AI concerns and customer willingness to perform analysis - Management expressed confidence in their unique data and regulatory position, stating that their platform's closed nature and established workflows would protect against potential AI competition [45][46] Question: Updates on MCT product timeline and enhancements - Management confirmed confidence in the MCT product's timeline for the first half of 2027, highlighting necessary enhancements and the transition to a mobile gateway [51][56] Question: Guidance on partnerships and their scaling - Management noted the addition of incremental partners and emphasized a cautious approach to guidance for the innovative channel business, which is still emerging [65][66]