IRhythm targets $735M–$740M 2025 revenue as free cash flow turns positive, driven by EHR integration and innovative channels

Earnings Call Insights: iRhythm Technologies, Inc. (IRTC) Q3 2025

MANAGEMENT VIEW

* Quentin Blackford, President and CEO, opened the call by highlighting "another quarter of strong commercial momentum, reflecting our disciplined execution and differentiated platform technology." He reported Q3 revenue of $192.9 million, a year-over-year growth of 31%, attributing this to record performance in both Zio Monitor and Zio AT, primary care expansion, innovative health channels, and a record number of new EHR integrations.
* Blackford emphasized that "76 of our top 100 customers are now EHR integrated. We now have 30 systems live with Epic Aura with an additional 65 systems in active implementation or advanced discussions. Epic Aura integrated customers typically see an average increase of nearly 25% in monitoring volume within the first 6 months of going live."
* He noted robust U.S. account expansion, stating, "Larger integrated delivery networks are increasingly choosing iRhythm for enterprise-wide solutions, recognizing the clinical and operational value of our scalable platform."
* Blackford also highlighted the expansion into primary care and the clinical evidence underpinning iRhythm’s strategy: "Recent published data further validates our approach. For every 1,000 patients with certain comorbid conditions that are diagnosed with arrhythmias earlier in the care pathway, there is potential for over $10 million in downstream cost avoidance."
* The CEO announced progress with risk-bearing and innovative channel partnerships, now at 18 active partner accounts, and described encouraging early results from the Lucem Health partnership on AI-driven arrhythmia identification.
* He reported a record for Zio AT, with unit growth more than double the corporate average, and the submission of a 510(k) filing for Zio MCT, the next-generation mobile cardiac telemetry solution.
* Blackford also signaled new adjacent market opportunities, focusing on AI-driven sleep apnea diagnostics, and described international progress in Japan and Europe, including a major trial in the UK supporting Zio’s efficacy in remote screening.
* Daniel Wilson, CFO, stated, "We delivered another quarter of strong profitable growth in the third quarter with revenue of $192.9 million, up 30.7% year-over-year, combined with an adjusted EBITDA margin of 11.2%. Volume growth was strong across both product lines, driven by continued execution in our core business, sustained Zio AT volume growth and contributions from innovative channel accounts."

OUTLOOK

* Wilson raised the full-year 2025 revenue guidance to $735 million to $740 million, representing 24% to 25% year-over-year growth. He stated, "This outlook contemplates continued strong volume growth as well as a low single-digit pricing tailwind."
* The company anticipates full-year 2025 gross margin to "slightly exceed full year 2024 gross margin" and expects a "50 basis points of negative impact to gross margin from tariffs for the full year."
* Full year adjusted EBITDA margin guidance was increased to 8.25% to 8.75% of revenues.
* iRhythm now expects to be slightly free cash flow positive for full year 2025, marking a significant milestone.

FINANCIAL RESULTS

* Q3 revenue was $192.9 million, with an adjusted EBITDA margin of 11.2%.
* Gross margin for Q3 was 71.1%, improving by 230 basis points year-over-year, attributed to volume leverage and operational efficiencies.
* Adjusted operating expenses for Q3 were $141.4 million. Adjusted net loss was $2 million, or ($0.06) per share, compared to a loss of $39.2 million, or ($1.26) per share the previous year.
* Free cash flow generation during Q3 was $20.0 million, with cash and short-term investments at $565.2 million by quarter-end.

Q&A

* Nathan Treybeck, Wells Fargo: Asked about growth drivers behind new account openings and volume growth. Blackford responded that record growth in both Monitor and AT was "driven by new accounts onboarding" and emphasized the ability to scale entire networks from day one and the trend of new accounts adopting both product lines.
* Anthony (for Joanne Wuensch), Citigroup: Inquired about the drivers of raised Q4 guidance. Wilson explained "the raise for the guidance for Q4 really primarily tied to Zio Monitor," with continued growth expected in AT and innovative channels.
* Richard Newitter, Truist: Asked about the growth cadence for MCT after potential approval. Blackford indicated planning for a launch in the back half of next year, but said expectations for 2026 would not include MCT contribution until FDA timelines are clear.
* David Saxon, Needham: Sought details on innovative channel partners. Blackford confirmed the increase to 18 partners and highlighted varied sales cycles, from 90 days to over a year, and that customer size remains consistent.
* Sam Eiber (for Marie Thibault), BTIG: Asked for updates on FDA remediation. Blackford stated, "There hasn't been a whole lot of communication through the shutdown with the FDA... we've launched the external review/audit of our quality systems by an independent third party."
* Suraj Kalia, Oppenheimer: Asked about the patient pool and durability of the innovative channel. Blackford described a focus on asymptomatic, undiagnosed populations and noted, "nearly 90% of patients who are either a type 2 diabetic, have COPD or CKD and ultimately get diagnosed with an arrhythmia... were never monitored prior to that diagnosis."
* Multiple analysts raised questions on margin trajectory, sleep diagnostics, EHR integration durability, Zio MCT launch strategy, and reinvestment priorities, with management expressing confidence in margin targets and strategic innovation investments.

SENTIMENT ANALYSIS

* Analyst questions reflected a positive and curious tone, repeatedly congratulating management on the quarter and probing for details on growth drivers, market expansion, and innovation initiatives.
* Management maintained a confident and upbeat tone in both prepared remarks and Q&A, frequently using phrases like "we are confident," "we continue to be big believers," and "we couldn't be more proud."
* Compared to the previous quarter, management’s confidence appears even stronger, especially regarding free cash flow and the expanding impact of innovative channels.
* Analysts showed slightly growing optimism, with focus shifting from risk and guidance conservatism in Q2 to execution details and upside drivers in Q3.

QUARTER-OVER-QUARTER COMPARISON

* Revenue growth accelerated from Q2's 26% to Q3's 31% year-over-year.
* Q3 marked a shift to positive free cash flow, whereas Q2 guidance anticipated a slight negative for the year.
* Guidance for full-year revenue raised from $720M–$730M in Q2 to $735M–$740M in Q3, and adjusted EBITDA margin guidance also increased.
* Management’s tone shifted from cautious optimism regarding remediation and innovation investment in Q2 to strong confidence in profitability and growth momentum in Q3.
* Analysts in Q2 focused more on structural risks (FDA, partnerships) and sustainability, while Q3 discussions centered on execution, scaling, and new growth drivers.

RISKS AND CONCERNS

* FDA remediation remains ongoing, with Blackford noting, "There's not been any communication with respect to MCT at this point in time... we were going to go above and beyond what the FDA had asked us to remediate."
* Tariffs are expected to negatively impact gross margin by approximately 50 basis points for the year.
* Timing and scale of MCT market entry depend on FDA approval, and management is not including MCT contributions in 2026 guidance until clarity is obtained.
* Variable sales cycles and scaling timelines for innovative channel partners introduce some forecasting uncertainty.

FINAL TAKEAWAY

Management emphasized that iRhythm’s Q3 2025 results reflect accelerating commercial momentum, robust execution, and expanding clinical and operational differentiation. Record-breaking revenue and positive free cash flow, along with increased full-year guidance, highlight both the scalability of the platform and the success of EHR integration and innovative channels. Ongoing FDA remediation, a disciplined approach to guidance, and continued strategic investment in AI-driven diagnostics and adjacent markets position iRhythm for sustained profitable growth into 2026 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/irtc/earnings/transcripts]

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