iRhythm Technologies (NASDAQ:IRTC) reported second-quarter revenue growth of 20.1% and raised its full-year outlook, while announcing an agreement to acquire VitalConnect to broaden its cardiac monitoring portfolio and enter additional patient-monitoring markets.
Revenue for the quarter ended at $224.2 million, marking iRhythm’s seventh consecutive quarter of growth above 20%, President and Chief Executive Officer Quentin Blackford said. Growth was supported by demand for the company’s Zio ambulatory cardiac-monitoring services across cardiology, primary care, innovative channels and international markets.
Profitability Improves as Revenue Grows
Second-quarter gross margin increased 160 basis points year over year to 72.8%, driven by manufacturing automation, workflow improvements, product mix and scale benefits, Wilson said. Adjusted operating expenses were essentially flat at $145 million, compared with $145.2 million in the prior-year period.
The company reported a GAAP net loss of $0.4 million, or $0.01 per diluted share, compared with a GAAP net loss of $14.2 million, or $0.44 per diluted share, a year earlier. Adjusted net income was $19.3 million, or $0.58 per diluted share, compared with an adjusted net loss of $10.2 million, or $0.32 per diluted share, in the second quarter of 2025.
Adjusted EBITDA reached $43.3 million, or 19.3% of revenue, improving by more than 1,000 basis points from the prior-year period. Free cash flow was positive $37.5 million, which Wilson described as a company record. iRhythm ended the quarter with $591.3 million in cash equivalents and marketable securities.
- Second-quarter revenue: $224.2 million, up 20.1% year over year.
- Gross margin: 72.8%, up 160 basis points year over year.
- Adjusted EBITDA: $43.3 million, or 19.3% of revenue.
- Free cash flow: $37.5 million.
- Cash equivalents and marketable securities: $591.3 million.
VitalConnect Deal Expands Monitoring Portfolio
Blackford said VitalConnect would add a platform spanning mobile cardiac telemetry, or MCT, event monitoring, long-term continuous monitoring and short-term Holter monitoring. Its technology is also FDA-cleared for continuous patient monitoring in hospitals.
VitalConnect’s biosensor can measure up to 11 physiological parameters, including ECG, heart rate, respiratory rate and body temperature. The company said the technology could support future opportunities in inpatient monitoring, hospital-to-home programs and remote patient monitoring.
iRhythm expects VitalConnect to contribute positively to revenue growth beginning in 2027. Wilson said VitalConnect is currently operating at an approximately $65 million annual revenue run rate based on iRhythm’s revenue-recognition approach. The company expects the combined business to maintain gross margin above 70% and said it remains confident in reaching its prior target of a 15% adjusted EBITDA margin in 2027.
The transaction is expected to close by the end of 2026, subject to review. Blackford characterized it as pro-competitive, noting that the MCT market includes competitors such as BioTel and Preventice. He said iRhythm expects to prioritize integration of VitalConnect’s VitalPatch product into its national commercial organization in early 2027.
Management said it intends to maintain a multi-product MCT strategy. Zio AT, Zio MCT and VitalPatch address different physician, patient and workflow preferences, according to Blackford. While the company remains focused on obtaining FDA clearance for Zio MCT during the first half of 2027, VitalPatch will be the near-term priority for commercial integration if the acquisition closes as anticipated.
Wilson said the deal includes $50 million in equity, calculated using a 30-day volume-weighted average price, equating to a little more than 420,000 shares and less than 1.5% dilution.
Primary Care, AI and International Initiatives
iRhythm continued to target earlier identification of arrhythmias through primary care, value-based care and population-health settings. Blackford said the company estimates that at least 27 million people in the United States are at risk for arrhythmias, with many first entering the healthcare system through primary care.
During the quarter, iRhythm signed two commercial agreements through its partnership with Lucem to combine predictive identification workflows with iRhythm monitoring. It also expanded work with Desert Oasis Healthcare using AI-driven analytics to identify patients who may benefit from cardiac evaluation and monitoring.
The innovative channel was iRhythm’s fastest-growing channel during the quarter. Early pilot programs have demonstrated more than 85% accuracy in identifying patients with clinically relevant arrhythmias before they enter the diagnostic process, Blackford said. The company also began direct-to-patient educational initiatives through the PatientPoint network and said it expects to continue investing in those efforts during the second half of the year.
Approximately 60% of iRhythm’s volume now comes from EHR-integrated accounts, with nearly 80 of its top 100 customers integrated, Blackford said. Internationally, the company cited progress with the U.K.’s National Health Service, relationships with key opinion leaders in the Netherlands, and a higher reimbursement rate in Japan that took effect June 1.
Regulatory Updates and Raised Outlook
iRhythm said final local coverage determinations issued by Noridian, CGS and Palmetto clarified modality-specific coverage without adding access restrictions. Wilson also said preliminary CMS physician-fee-schedule proposals indicated reimbursement rate increases in the low-single-digit percentages for long-term continuous monitoring and MCT.
The company received FDA clearance for its third-generation algorithm, which it plans to launch across its platform in the first half of 2027. Blackford said the algorithm is expected to reduce clinical technician review time by as much as 50% and generate approximately $100 million in cumulative cost savings over five years.
iRhythm remains subject to an FDA warning letter. Blackford said the company has updated the agency on completed remediation activities and a self-initiated third-party audit, while awaiting the FDA’s further review.
The company also disclosed that it settled outstanding litigation with Baxter and its subsidiaries, Welch Allyn and Bardy Diagnostics, on July 31 for a $50 million payment. Separately, iRhythm said a June cybersecurity incident involving certain third-party-hosted business applications was contained and did not materially affect products, patient care, operations or financial results.
For 2026, iRhythm raised revenue guidance to $880 million to $890 million, representing growth of 18% to 19%. Third-quarter revenue is expected to range from $221 million to $223 million. The company increased its full-year adjusted EBITDA margin outlook to 13% to 14%, while projecting a third-quarter adjusted EBITDA margin of 12% to 13%.
About iRhythm Technologies (NASDAQ:IRTC)
iRhythm Technologies, Inc is a medical technology company that develops and commercializes wearable cardiac monitoring devices and associated data analytics services. Founded in 2006 and headquartered in San Francisco, California, the company’s flagship product is the Zio® patch, a discreet, single-use, continuous ECG recorder designed to monitor heart rhythms for up to 14 days. iRhythm’s digital diagnostics platform combines biosensor technology with proprietary algorithms to detect arrhythmias and streamline data interpretation for physicians.
The Zio service is prescribed by cardiologists and other healthcare providers to aid in the diagnosis of atrial fibrillation, bradycardia, tachycardia and other rhythm disorders.
