iRhythm Technologies, Inc. (IRTC) Earnings

Management highlights

- Strategic Acquisition of Vital Connect • Announced the acquisition of Vital Connect, which adds a complementary platform supporting four cardiac monitoring modalities: mobile cardiac telemetry (MCT), event monitoring, long-term continuous monitoring, and short-term Holter • Vital Connect's technology is FDA-cleared for inpatient continuous patient monitoring, expanding iRhythm's capabilities beyond ambulatory monitoring across the full continuum of care • The acquisition opens access to the full $1 billion high-single-digit growing MCT market, adding 50% of the segment that was previously not addressable by iRhythm's existing offerings, representing an incremental ~$500 million market opportunity • Vital Connect's biosensor can monitor up to 11 physiological parameters, accelerating iRhythm's multivital monitoring strategy and creating new growth opportunities in inpatient monitoring, hospital-to-home programs, and remote patient monitoring (RPM) • The acquisition is expected to close by the end of 2026, with integration and commercial launch of the Vital Patch planned for early 2027 - Core Business Growth & Channel Expansion • Momentum is strong across cardiology, primary care, innovative channels, and international markets; innovative channels were the fastest-growing segment in Q2 2026 • Advanced the predictive arrhythmia solution strategy, signing two new commercial agreements via the Lucem partnership that combine predictive identification workflows with iRhythm monitoring; expanded ongoing work with Desert Oasis Healthcare using AI to identify at-risk patients • In international markets: deepening key opinion leader relationships in the Netherlands to prepare for expansion; the previously announced higher reimbursement rate in Japan went into effect June 1, 2026 • Added new clinical evidence supporting the platform's clinical and economic value, with data presented at three major medical and health economics conferences - Operational & Regulatory Milestones • Final local coverage determinations (LCDs) from three Medicare contractors removed prior ambiguity, clarified modality-specific coverage without new access restrictions, and eliminated a key source of market uncertainty • Received FDA clearance for the third-generation algorithm that will launch across the entire platform in H1 2027; it is expected to cut clinical technician review time by up to 50%, deliver $100 million in cumulative cost savings over five years, and support ongoing margin expansion • The company continues to work through the FDA warning letter remediation process: it has completed all remediation activities and a self-initiated third-party audit, and is awaiting the FDA's follow-up to close out the warning letter • A June 2026 cybersecurity incident was contained, with root cause identified; while some data was exfiltrated, there were no material impacts to products, patient care, operations, or financial results - Adjacent Market Development • Sleep apnea remains a large underpenetrated opportunity with ~40 million affected patients in the U.S., much of which overlaps with iRhythm's existing arrhythmia patient population • Early pilot programs in predictive arrhythmia detection have demonstrated over 85% accuracy in identifying patients with clinically relevant arrhythmias prior to formal diagnostic workup

Guidance

- Q3 2026 revenue is expected to be in the range of $221 million to $223 million, consistent with typical seasonality - Full-year 2026 adjusted EBITDA margin guidance was raised to 13% to 14%, representing a more than 400 basis point improvement over 2025, driven by scale benefits, disciplined expense management, and a balanced approach to growth investments - Q3 2026 adjusted EBITDA margin is expected to be 12% to 13% - The combined company is reaffirmed to achieve the previously communicated target of 15% adjusted EBITDA margin in 2027, with gross margin expected to remain above 70% post-acquisition - Full-year 2026 revenue growth will remain primarily volume-driven, with a modest positive contribution from pricing - Excluding one-time items (litigation settlements, acquisition transaction costs), 2026 full-year free cash flow is expected to increase year-over-year, with stronger cash generation in the second half of the year - Management views the proposed CMS 2027 physician fee schedule's low single-digit reimbursement increases for long-term continuous monitoring and MCT as industry validation of preventative early detection, which aligns with iRhythm's core strengths

Segment performance

iRhythm reports consolidated Q2 2026 total revenue of $224.2 million, representing 20.1% year-over-year growth, marking the seventh consecutive quarter of growth above 20%. The newly acquired Vital Connect has an annual revenue run rate of approximately $65 million as of Q2 2026, and is expected to contribute positively to consolidated revenue growth starting in 2027. No separate segment revenue breakdown was provided for existing core business segments in this call. On a consolidated basis, adjusted EBITDA for Q2 2026 was $43.3 million, equal to 19.3% of total revenue, an improvement of more than 1,000 basis points year-over-year. Consolidated GAAP net loss for Q2 2026 was $0.4 million ($0.01 per diluted share), compared to a GAAP net loss of $14.2 million ($0.44 per diluted share) in Q2 2025. Adjusted net income was $19.3 million ($0.58 per diluted share), versus an adjusted net loss of $10.2 million ($0.32 per diluted share) in the prior year period. End-of-quarter cash, cash equivalents, and marketable securities totaled $591.3 million.

Risks & headwinds

- Forward-looking statements, including acquisition-related projections and integration outcomes, are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially - The Vital Connect acquisition requires HSR/FTC regulatory review; while management expects it to be approved given the ongoing high level of competition in the MCT market, regulatory outcomes cannot be guaranteed - The company remains in remediation for an existing FDA warning letter; final closing of the matter is dependent on FDA review, which carries uncertainty around timing and outcome - Growth in newer channels such as innovative channels, direct-to-patient marketing, and international expansion may not meet expectations, and investments in these areas may not deliver projected returns - Macro and geopolitical cost pressures could impact gross margin, though management currently does not expect a material impact

Analyst Q&A

• Q: What synergies do you expect from the Vital Connect acquisition in the MCT segment, how will you position its offering against your internal ZOMCT product, and how will this accelerate iRhythm's MCT business? /

  A: Management states MCT is a $1 billion market growing at high single digits, and iRhythm's existing ZioAT product only served ~50% of the market. Vital Connect's 30-day 4-in-1 platform with live monitoring capabilities opens the remaining 50% of the market, creating an incremental $500 million opportunity for iRhythm. ZOMCT would have only added another 20-30% of the market, so the acquisition gives iRhythm full market access sooner than the internal organic roadmap. The deal is expected to close by year-end, with commercial integration planned for early 2027.

• Q: The acquisition unlocks new adjacent markets beyond MCT such as hospital-to-home and remote monitoring. Is this the right stepping stone for TAM expansion into areas like sleep apnea? /

  A: Yes, the acquisition accelerates iRhythm's existing strategic roadmap beyond MCT. Vital Connect already has FDA clearance for inpatient monitoring and existing capabilities in hospital-to-home and remote patient monitoring, both of which were already on iRhythm's long-term product roadmap. Its existing multivital biosensor platform also accelerates iRhythm's multivital strategy, opening up large new billion-dollar market opportunities beyond core cardiac monitoring.

• Q: Is iRhythm de-prioritizing its internally developed ZOMCT in favor of the acquired Vital Connect product? How will you prioritize integration? /

  A: iRhythm is not de-prioritizing ZOMCT; a dual product strategy is optimal for MCT to meet varied physician and patient preferences for feature sets. ZOMCT still offers differentiated benefits like a longer 21-day single-patch wear time, and iRhythm continues to pursue FDA clearance for ZOMCT to maintain product optionality. Because Vital Connect is expected to close by the end of 2026, the near-term top priority is scaling Vital Patch nationwide: training 200+ commercial reps and scaling supply chain and operational capacity to support the expanded national launch, rather than waiting for ZOMCT clearance.

• Q: Is strong growth in innovative channels still in early innings, or is it starting to normalize? What is the growth cadence for new partners? /

  A: Management reaffirms that innovative channels (value-based care, population health, primary care) are still in very early innings, with multiple high-potential angles for growth. Q2 2026 saw another healthy quarter of new partner additions, including iRhythm's first employer-sponsored plan sign-up, which opens a new meaningful market segment in self-insured populations. Growth remains very strong, but management maintains a measured forecasting approach to avoid overestimating near-term results as partner scaling happens at varying paces.

• Q: Will the Vital Connect acquisition accelerate long-term TAM expansion into opportunities like sleep and heart failure? How will the two platforms be integrated long-term? /

  A: Yes, the acquisition creates a much more flexible combined platform that significantly speeds up progress on long-term TAM expansion. The multi-parameter biosensor capability enables new use cases from inpatient med-surg monitoring to hospital-to-home programs that reduce readmission costs, where iRhythm's existing background IDTF monitoring capability fills an unmet need for health systems. Over time, iRhythm will combine the best technology from both companies to serve new segments including sleep and heart failure, opening significant new long-term revenue opportunities.