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IT

iRhythm Technologies, Inc. (IRTC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $164.3M, up 24.0% YoY; gross margin expanded to 70.0% and adjusted EBITDA reached $19.3M (11.7% of revenue). GAAP diluted EPS was -$0.04; adjusted diluted EPS was $0.01 .
  • Momentum drivers: record new account onboarding, balanced volume across Zio monitor and Zio AT, stronger primary care and risk-bearing channels; Zio AT benefited from competitor disruption in Q4 .
  • 2025 guidance maintained: revenue $675–$685M and adjusted EBITDA margin 7–8%; gross margin improvement expected but largely offset by proposed tariffs (estimated 50–75 bps headwind) and low single-digit pricing pressure .
  • Catalysts to watch: Epic Aura EHR integration ramp, Zio AT share gains, Japan reimbursement decision and launch (~$2M 2025 contribution), continued FDA remediation progress; near-term headwinds include tariffs and pricing .

What Went Well and What Went Wrong

What Went Well

  • Record onboarding and balanced volume across channels; CEO: “We achieved record new account onboarding… particularly in risk-bearing, primary care settings… Zio's value… has resonated strongly” .
  • Margin execution: gross margin reached 70% on operational efficiencies; adjusted EBITDA improved with disciplined SG&A and manufacturing/clinical operations leverage .
  • Epic Aura integration delivering workflow wins: “Are you sure… It can’t be this easy…?” plus early competitive conversion tied to Aura; broad rollout continuing in 2025 .
  • Zio AT strength: mid-20s growth contemplated for 2025; Q4 benefited from competitor disruption; market share estimated ~11–12% with potential to gain 1–2 pts annually .

What Went Wrong

  • Pricing headwinds: management guides low single-digit percentage pricing pressure in 2025, including an 8% Medicare price decline for Zio AT, tempering margin expansion .
  • Tariff risk: proposed Mexico/Canada/China tariffs would be a 50–75 bps gross margin headwind if enacted; supply base includes Mexico/China components .
  • Ongoing regulatory/legal costs: FDA remediation and DOJ-related expenses totaled ~$11M in 2024 and are expected to be ~$15M in 2025 before subsiding, pressuring near-term profitability .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$148.0 $147.5 $164.3
Gross Margin %69.9% 68.8% 70.0%
Adjusted EBITDA ($USD Millions)$5.0 $(19.9) $19.3
Adjusted EBITDA Margin %3.4% -13.5% 11.7%
Net Loss ($USD Millions)$(20.1) $(46.2) $(1.3)
Diluted EPS (GAAP)$(0.65) $(1.48) $(0.04)
Adjusted Diluted EPS (non-GAAP)$(0.61) $(1.26) $0.01
Cash and Equivalents ($USD Millions)Q2 2024Q3 2024Q4 2024
Cash, Cash Equivalents & Marketable Securities$561.5 $522.0 $535.6

KPIs

KPIQ2 2024Q3 2024Q4 2024
Home Enrollment Mix (% of US volume)22% 23% 22%
New Store Growth Contribution to YoY Volume Growth40% 36% 56%
Zio AT MCT Market Share (approx.)N/AN/A~11–12%

Segment breakdown: The company does not disclose revenue by segment in the referenced Q4 materials .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025~$675–$685 (Jan prelim) $675–$685 Maintained
Adjusted EBITDA Margin %FY 2025N/A7–8% New/Specified
Gross Margin TrajectoryFY 2025N/AModest improvement, largely offset by tariffs New/Specified
Tariffs Impact (bps)FY 2025N/A50–75 bps headwind if enacted New/Specified
International ContributionFY 2025N/A~1 point of growth incl. ~$2M Japan New/Specified
Q1 Revenue SeasonalityQ1 2025N/A~22.5% of FY revenue in Q1 Specified
Adjusted EBITDA MarginQ1 2025N/ANegative low to mid-single digits Specified
Free Cash FlowFY 2025N/ASlightly FCF-negative; positive in FY 2026 Specified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/technology initiativesBioIntelliSense multi-sensor license announced; manufacturing automation started (Q3) Precision AI for risk-based monitoring; building evidence for proactive detection Expanding
Supply chain/tariffs/macroLogistics savings, one-time items in Q2 gross margin; automation phase launched Proposed tariffs could hit GM by 50–75 bps; mitigation efforts planned Headwind
Product performanceZio monitor hit 1M registrations; Zio AT largest quarter ever (Q3) Record new accounts; balanced volume; Zio AT strength and share gains Improving
Regional trends (OUS)EU launches (AT/NL/CH/ES) and UK record registrations; Japan PMDA approval (Q3) Japan reimbursement decision pending; ~$2M 2025; EU via direct/distributors Ramping
Regulatory/legal483 observations in July; AT 510(k) clearances (Oct) Monthly FDA updates; third-party audit; remediation targeted mid-2025, broader QMS by YE25 Progressing
R&D executionZio MCT submission delayed to Q3 2025 to incorporate technician scope (Q3) Timeline reiterated; submission doesn’t require remediation clearance On track
Health features (sleep apnea)Market evaluation planned in 2025; initial pilot learnings No 2025 revenue assumed; continued model work and market build Early stage
EHR/Epic AuraFirst health system live; broader rollout planned (Q3) Positive workflow feedback; pipeline of accounts going live; early competitive conversion Scaling

Management Commentary

  • CEO: “Our fourth quarter capped a transformative year… We achieved record new account onboarding… and secured strategic technology licensing agreements… Our commitment to operational discipline has yielded positive cash flow for three consecutive quarters…” .
  • CFO: “Gross margin for the fourth quarter was 70%, slightly ahead of expectations… adjusted operating expenses were $116.7M, up 2.6% YoY… Adjusted EBITDA… 11.7% of revenue” .
  • CFO on tariffs: “We anticipate modest improvements to gross margin in 2025; however… offset by proposed tariffs… 50 to 75 bps negative impact… suppliers in both Mexico and China” .
  • CEO on Epic: “It is having an absolute impact on workflow… ‘It can’t be this easy’… early competitive conversion tied to Aura” .

Q&A Highlights

  • Guidance composition: 2025 outlook balances momentum with headwinds (low single-digit pricing, ensuring innovative partner and AT disruption persist before embedding), aiming for sustained growth without getting ahead of catalysts .
  • FDA remediation: On-track against monthly commitments; mid-2025 completion for remediation-specific items; broader QMS enhancements by YE25; independent third-party audit starting in Q2 .
  • Zio MCT timeline: Still filing in Q3 2025; submission does not require remediation clearance; extended wear duration; proactively adding human factors and technician-in-system elements .
  • Epic integration: Strong workflow gains, accounts going live, early competitive conversion; watching for volume evidence before embedding in outlook .
  • OUS and Japan: EU early days; Japan expected mid-2025 launch; ~1 point of growth in 2025 including ~$2M from Japan .
  • Zio AT market share: Estimated ~11–12% MCT share; typical gains 1–2 pts/year; potential for more if Q4 share stickiness persists .
  • Tariffs sizing: Headwind largely tied to Mexico components; reiterated GM headwind estimate and SG&A cadence through 2025 .

Estimates Context

  • Consensus EPS and revenue estimates from S&P Global were unavailable due to API request limits at the time of retrieval; therefore, explicit beat/miss vs Wall Street consensus cannot be provided for Q4 2024 or FY 2025 in this recap. We compared actuals to company guidance instead [GetEstimates error].
  • Given the strong Q4 revenue and margin outcomes, sell-side models may need to reflect: higher base revenue run-rate exiting Q4, improved gross margin baseline (70%), stronger adjusted EBITDA conversion, and incorporate tariff/pricing headwinds into 2025 trajectories .

Key Takeaways for Investors

  • Execution inflection: Q4 delivered 24% YoY revenue growth, 70% gross margin, and positive adjusted EPS; operating leverage is materializing despite remediation costs .
  • Near-term trading: Watch for tariff enactment (50–75 bps GM headwind) and pricing dynamics; the stock may react to any clarity on tariffs or Medicare pricing and Zio AT share stickiness beyond Q4 .
  • Structural catalysts: Epic Aura integration and primary care/value-based channels can expand TAM and reduce friction, potentially accelerating volume and mix through 2025 .
  • Regulatory de-risking: Continued FDA remediation progress and third-party audit milestones in 2025 are key for sentiment; AT 510(k) design enhancements cleared in Oct help underpin regulatory posture .
  • International optionality: Early EU traction and Japan launch (~$2M in 2025) provide incremental growth vectors; monitor reimbursement timing and ramp pace .
  • Product roadmap: Zio MCT submission in Q3 2025 and multi-sensor trajectory (via BioIntelliSense) support medium-term thesis on category leadership and adjacent indications (e.g., sleep) .
  • Profitability path: FY 2025 adjusted EBITDA margin guided at 7–8% despite headwinds; company expects FCF to turn positive in FY 2026 as remediation spend subsides and efficiency programs scale .