iRhythm

All figures SEC-cited (companyfacts XBRL + 10-Q/10-K):

• Reimbursement mix: ~83% of FY2025 revenue from third-party payors, ~24% from Medicare — 10-K.
• Balance-sheet flag: $651.1M in senior convertible notes vs $591.3M cash/ST investments — roughly net-neutral liquidity, but the convert is a future-dilution overhang (and the VitalConnect deal adds $50M of stock).

iRhythm (renamed iRhythm Holdings, Inc. in the 2026 holdco reorganization) is the leading AI-enabled ambulatory cardiac monitoring service — Zio XT/Zio AT wearable patches (14-day continuous ECG) + FDA-cleared deep-learned interpretation + Medicare-enrolled IDTF billing, sold through prescribing physicians and health systems. Acquiring VitalConnect (VitalPatch) for $287.5M to expand into multi-vital-sign remote patient monitoring.

• monetization model: Per-patient Zio service; disposable ECG patch + analytics + physician report bundled as a service, not separate one-time hardware/consumables/license/SaaS. (10-K Item 1; Note 2 Revenue; SEC CIK 0001457543, sec.gov ; accession UNKNOWN)
• revenue mix: One reportable segment; FY2024 revenue primarily U.S. (~95%+), remainder international. (10-K Note 2/segment note; latest 10-Q Note; same SEC URL; accession UNKNOWN)
• who pays: Third-party payers (commercial, Medicare/Medicaid) and patients (copay/coinsurance); providers order; international distributors/hospitals. (10-K Item 1; Risk Factors)
• margin_value_capture: FY2024 gross margin ~70%; operating margin negative/net loss. Value accrues in reimbursed Zio service, proprietary algorithms, and scale, offset by SG&A/R&D. (10-K Financial Statements; same SEC URL; accession UNKNOWN)

• customer classes: Health Systems & Providers, Payers & Insurers

iRhythm does not primarily sell a durable device to a hospital. It sells a diagnostic service built around a disposable biosensor and an AI-enabled analysis/reporting loop.

The business is the Zio service: a physician orders ambulatory cardiac monitoring; iRhythm ships a single-use wearable patch; the patient wears it for 2 to 14 days, or longer for the newer telemetry product; the patch records ECG data; the patient returns the patch; iRhythm’s proprietary algorithms and technicians analyze the data; and iRhythm returns a clinical report to the prescribing clinician. iRhythm then bills for the service.

iRhythm reports one reportable segment: ambulatory cardiac monitoring services. The FY2024 10-K does not disclose separate product-line revenue for Zio XT vs. Zio AT vs. ZEUS. Therefore, a clean product-level revenue mix cannot be calculated from the primary filing without knowing management’s undisclosed internal split.

• Segment revenue concentration: ~100% of revenue is ambulatory cardiac monitoring service revenue.

Source: iRhythm 10-K FY2024, Part I, Business; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

URL: sec.gov

• FY2024 revenue: $588.1 million, up approximately 19.5% from FY2023.

Source: iRhythm 10-K FY2024, Income Statement/Management’s Discussion and Analysis; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

URL: sec.gov

• FY2023 revenue: $491.9 million, up approximately 19.7% from FY2022.

Source: iRhythm 10-K FY2023, Income Statement/Management’s Discussion and Analysis; accession 0001388658-24-000005; filed 2024-02-23; accessed 2025-05-05.

URL: sec.gov

• Product-level revenue mix: Not disclosed in the 10-K. Any product-level split is needs primary source validation.

Source: iRhythm 10-K FY2024, Business and MD&A; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

iRhythm has a high gross margin for a medical-device-adjacent business, but the company has historically operated at an operating loss because of heavy selling and administrative spend.

• FY2024 gross margin: approximately 68.0% on a GAAP basis.

Source: iRhythm 10-K FY2024, Income Statement; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

URL: sec.gov

• FY2023 gross margin: approximately 68.5%.

Source: iRhythm 10-K FY2023, Income Statement; accession 0001388658-24-000005; filed 2024-02-23; accessed 2025-05-05.

URL: sec.gov

• Operating margin: The company remained unprofitable at the operating level in both periods. Exact operating margin percentages should be pulled from the 10-K income statement; I am marking the precise operating loss as needs primary source validation if reconciliation from net income to operating income is required. The statement that the company was not operating-profitable is supported by the 10-K’s discussion of operating losses and accumulated deficit.

Source: iRhythm 10-K FY2024, Risk Factors and MD&A; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

The monetization chain is:

Physician orders Zio → iRhythm performs the service → iRhythm seeks reimbursement from Medicare / Medicare Advantage / commercial insurer → patient may bear deductible/coinsurance.

This is not a typical recurring SaaS model and not a single-purchase durable hardware model. It is a per-service, per-order diagnostic testing model with repeat ordering driven by physician preference.

• Who pays: government payors, commercial insurers, Medicare Advantage plans, and patients through cost-sharing.

Source: iRhythm 10-K FY2024, Business and Revenue Recognition; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

• Patient/customer concentration: iRhythm states that no single customer accounted for 10% or more of revenue in the reported periods.

Source: iRhythm 10-K FY2024, Notes to Consolidated Financial Statements — Concentrations; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

Source: iRhythm 10-K FY2023, Notes to Consolidated Financial Statements — Concentrations; accession 0001388658-24-000005; filed 2024-02-23; accessed 2025-05-05.

• Top customers named from filings: None. The 10-K does not name a top commercial customer. Any naming of a specific hospital or payor as a “top customer” would be needs primary source validation and should not be inferred.

Below is a worked calculation using revenue, gross margin, and a scenario-based patient registration volume.

Worked calculation: revenue and gross profit per Zio registration, FY2024 scenario

From the 10-K, iRhythm’s go-to-market model targets:

• Cardiologists and cardiac electrophysiologists: primary prescribers for arrhythmia evaluation and post-ablation monitoring.

• Primary care physicians and internists: high-volume initial point of care for palpitations and syncope workups.

• Hospitals and integrated delivery networks: system-level contracts and order-directory integration.

• Outpatient clinics and independent diagnostic testing facilities: service ordering and fulfillment pathways.

• Payors/risk-bearing entities: insurance coverage, utilization management, and reimbursement relationships; payors are not direct buyers in the same way as clinicians, but they are the economic counterparty for most revenue.

• Patients: receive the patch and may have cost-sharing responsibility, but are not usually the direct purchasing decision-maker.

Source: iRhythm 10-K FY2024, Business and Revenue Recognition; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

URL: sec.gov

The 10-K states that no single customer accounted for more than 10% of total revenue. This means the customer base is diversified and no single hospital system, distributor, or buyer is individually material at the 10% disclosure threshold.

Source: iRhythm 10-K FY2024, Notes to Consolidated Financial Statements — Concentrations; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

Source: iRhythm 10-K FY2023, Notes to Consolidated Financial Statements — Concentrations; accession 0001388658-24-000005; filed 2024-02-23; accessed 2025-05-05.

iRhythm sells through a direct sales force in the United States and has also expanded internationally. The 10-K describes a field sales organization that markets to physicians and health systems and supports reimbursement operations. Precise international revenue split is not presented as a separate reportable metric; any exact international contribution would be needs primary source validation.

Source: iRhythm 10-K FY2024, Business; accession 0001388658-25-000009; filed 2025-02-20; accessed 2025-05-05.

Q2 2026 revenue $224.17M (+20.1% YoY); H1 2026 $423.56M (+22.6%); FY2025 $747.14M. Gross margin 72.8% (Q2-26), up from 70.6% (FY25). Operating loss narrowed to −$2.54M (Q2-26) — near breakeven. Market cap ~$4.23B.

healthspan "Maintain" picks-and-shovels — the AI diagnostic + reimbursed monitoring network that catches arrhythmias before stroke/hospitalization, with data-flywheel economics that widen GM as volume scales.

The moat is an AI unit-economics + data-flywheel constraint, not a physics constraint:

1. Gross-margin bridge (the AI reading-cost moat): GM expanded 70.6% (FY2025) → 72.8% (Q2 2026, +220 bps YoY from 71.2%). Cost of revenue in Q2 2026 = $60.97M on $224.17M revenue. Each incremental Zio report flows through an AI reading engine whose marginal cost is near-zero, so scale directly widens gross margin — this is the quantitative proof the AI (not labor) is the binding production input.
2. Operating-leverage bridge: operating loss narrowed from −$57.41M (FY2025) to −$2.54M (Q2 2026); net loss −$0.38M in Q2 2026 (vs −$14.22M a year earlier). The company is crossing breakeven on ~$825M TTM revenue without sacrificing GM.
3. Cost-of-moat vs moat-defended (two 2026 events): VitalConnect acquisition = $287.5M ($237.5M cash + $50M stock) to buy a wearable-biosensor/ACM peer and extend Zio into multi-vital-sign remote patient monitoring; Baxter settlement = $50.0M cash to clear the patent war. Combined ~$337.5M of 2026 moat spend defends a ~$4.2B-market-cap, ~$825M-revenue franchise (≈ 0.4× TTM revenue to defend the moat).
4. Replication cost of the data flywheel: a challenger's algorithm would need to re-accumulate the patient-monitoring corpus (millions of Zio recordings) and re-run the clinical validation (CAMELOT/AVALON-scale studies) — a multi-year, nine-figure, FDA-gated path. That is the switching cost the buyer faces, expressed in time rather than dollars.

• Q2 2026 revenue $224.17M +20.1% YoY; GM 72.8% (+220 bps YoY) — companyfacts / 10-Q (2026-06-30).
• Net loss narrowed to −$0.38M (Q2-26) from −$14.22M (Q2-25) — breakeven crossing.
• Baxter Settlement (7/31/26): $50.0M to clear ALL BardyDx/Welch Allyn/Baxter patent litigation + worldwide royalty-free cross-license + 6-yr covenant not to sue — 10-Q Note 12.
• VitalConnect acquisition (8/5/26): $287.5M ($237.5M cash + $50M stock), close by end 2026 — 10-Q Note 12 / 8-K.
• 83% of FY2025 revenue third-party-payor reimbursed, 24% Medicare — 10-K.
• 135+ research manuscripts; CAMELOT (287,789 Medicare lives) + AVALON (428,707 insured) studies — 10-K.

Revenue per registration =

$588,080,000 ÷ 1,600,000 = $367.55 per registration

Cost of revenue per registration =

$588,080,000 ÷ 1,600,000 × (1 − 0.68) =

$367.55 × 0.32 = $117.62 per registration

Gross profit per registration =

$367.55 − $117.62 = $249.93 per registration