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What changed in iRhythm Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of iRhythm Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+593 added−509 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in iRhythm Holdings, Inc.'s 2024 10-K

593 paragraphs added · 509 removed · 367 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

102 edited+43 added−52 removed94 unchanged
Biggest changeFailure to comply with applicable regulatory requirements can result in enforcement action by FDA, which may include any of the following sanctions: • warning letters, fines, injunctions, consent decrees, and civil penalties; • repair, replacement, refunds, recall, or seizure of our products; • operating restrictions, partial suspension, or total shutdown of production; • refusing our requests for 510(k) clearance or PMA approval of new products, new intended uses, or modifications to existing products; • withdrawing 510(k) clearance or PMA approvals that have already been granted; and • criminal prosecution. 20 Table of Contents Privacy and Security Regulation Our business is subject to foreign, federal , and state privacy and security laws concerning the collection, use, analysis, retention, storage, protection, transfer, disclosure, and/or disposal of individually identifiable information including, without limitation, the General Data Protection Regulation (“GDPR”), the Health Insurance Portability and Accountability Act of 1996, as amended by the final regulations promulgated pursuant to the Health Information Technology for Economic and Clinical Health Act (“HITECH”), found in the American Recovery and Reinvestment Act of 2009 (collectively, “HIPAA”), the Telephone Consumer Protection Act, the CAN-SPAM Act, and state privacy, consumer protection, and breach notification laws.
Biggest changeFailure to comply with applicable regulatory requirements can result in enforcement action by FDA, which may include any of the following sanctions: • warning letters, fines, injunctions, consent decrees, and civil penalties; • repair, replacement, refunds, recall, or seizure of our products; • operating restrictions, partial suspension, or total shutdown of production; • refusing our requests for 510(k) clearance or PMA approval of new products, new intended uses, or modifications to existing products; • withdrawing 510(k) clearance or PMA approvals that have already been granted; and • criminal prosecution.
It also contained registered trademarks for the mark IRHYTHM in Australia, the EU, Austria, Canada, China, Denmark, Finland, France, Germany, Japan, Italy, Norway, Sweden, Switzerland, and the UK. It further contained trademark registrations for the mark ZIO in Australia, Canada, China, the EU, Japan, Norway, and Switzerland.
It also contained registered trademarks for the mark IRHYTHM in Australia, the EU, Austria, Canada, China, Denmark, Finland, France, Germany, Japan, Italy, Norway, Sweden, Switzerland, and the UK. It further contained trademark registrations for the mark ZIO in Australia, Canada, China, the EU, Japan, Norway, Switzerland, and the UK.
We believe the principal competitive factors in our market include: • ease of use, comfort, and unobtrusiveness of the device for the patient; • quality and clinical validation of the deep-learned algorithms used to detect arrhythmias; • concise and comprehensive reports supporting efficient physician interpretation; • ease of use of service workflow for physicians and supporting clinicians; • digital tools for data management, including the myZio mobile app, website tools, and EHR integration; • contracted rates with third-party payors; • government reimbursement rates associated with our Zio Services and supporting Zio Systems; • quality of clinical data and publications in peer-reviewed journals; • size, experience, knowledge, and training of sales and marketing teams; • availability and reliability of sales representatives and customer support services; • workflow protocols for solution implementation in existing care pathways; • reputation of existing device manufacturers and diagnostic service providers; and • relationships with physicians, hospitals, administrators, and other third-party payors.
We believe the principal competitive factors in our market include: • ease of use, comfort, and unobtrusiveness of the device for the patient; • quality and clinical validation of the deep-learned algorithms used to detect arrhythmias; • concise and comprehensive reports supporting efficient physician interpretation; • ease of use of service workflow for physicians and supporting clinicians; • digital tools for data management, including the myZio mobile app, website tools, and EHR integration; • contracted rates with third-party payors; • government reimbursement rates associated with our Zio Services and supporting Zio Systems; • quality of clinical data and publications in peer-reviewed journals; 13 • size, experience, knowledge, and training of sales and marketing teams; • availability and reliability of sales representatives and customer support services; • workflow protocols for solution implementation in existing care pathways; • reputation of existing device manufacturers and diagnostic service providers; and • relationships with physicians, hospitals, administrators, and other third-party payors.
ZioSuite web portal via desktop or mobile application For our MCT services, the Zio AT patch and wireless gateway also offer the additional capability of providing actionable transmissions during the wear period to assist physicians in diagnosing and treating patients in situations where their physician has determined that there is a medical need to receive more timely, clinically actionable information.
ZioSuite web portal via desktop or mobile application For the Zio MCT Services, the Zio AT patch and wireless gateway also offer the additional capability of providing actionable transmissions during the wear period to assist physicians in diagnosing and treating patients in situations where their physician has determined that there is a medical need to receive more timely, clinically actionable information.
A Zio patch typically collects approximately 1.5 million heartbeats of data for each patient during a single wear period of up to 14 consecutive days. After we receive the Zio patch at our IDTF, the ECG data is uploaded to our secure cloud and preliminary findings are generated by our proprietary FDA-cleared deep learning algorithms.
A Zio patch typically collects approximately 1.5 million heartbeats of data for each patient during a single wear period of up to 14 consecutive days. 7 After we receive the Zio patch at our IDTF, the ECG data is uploaded to our secure cloud and preliminary findings are generated by our proprietary FDA-cleared deep learning algorithms.
This is why we strive to be open to new ideas, take intelligent risks, act with a sense of urgency, and learn from failure. • Collaborate to win. Prioritizing collective success delivers astounding results, so we aim to think holistically and strategically, develop relationships proactively, and work as one team. • Strive for better.
This is why we strive to be open to new ideas, take intelligent risks, act with a sense of urgency, and learn from failure. • Collaborate to win. Prioritizing collective success delivers astounding results, so we aim to think holistically and strategically, develop relationships proactively, and work as one team. 19 • Strive for better.
The UKCA requirement became effective on January 1, 2021 and we have obtained a UKCA mark with the BSI, which also serves as our UK Approved Body, for the Zio XT System and the Zeus System. We are also registered with the UK’s Care Quality Commission (“CQC”) to carry out diagnostic and screening procedures.
The UKCA requirement became effective on January 1, 2021, and we have obtained a UKCA mark with the BSI, which also serves as our UK Approved Body, for the Zio XT System and the Zeus System. We are also registered with the UK’s Care Quality Commission to carry out diagnostic and screening procedures.
Afib burden, or the amount of time a patient spends in Afib during the period of time the patient is wearing a heart monitor, has been identified in the clinical community as an clinically relevant measure for helping to determine appropriate and effective therapeutic interventions to manage patients with Afib and for assessing stroke risk.
Afib burden, or the amount of time a patient spends in Afib during the period of time the patient is wearing a heart monitor, has been identified in the clinical community as a clinically relevant measure for helping to determine appropriate and effective therapeutic interventions to manage patients with Afib and for assessing stroke risk.
In addition, we have entered into licenses in the ordinary course of business relating to a wide array of technologies or other intellectual property rights or assets. We hold patents and pending patent applications in the United States and other parts of the world which, in aggregate, we believe to be of importance in the operation of our business.
In addition, we have entered into licenses in the ordinary course of business relating to a wide array of technologies or other intellectual property rights or assets. 15 We hold patents and pending patent applications in the United States and other parts of the world which, in aggregate, we believe to be of importance in the operation of our business.
We employ engineering and research and development staff to focus on delivering future innovations and sustaining improvements. Our research and development activities are focused on: • Continuous improvement and extensions to existing products and services. We are continuously working to improve the Zio Services to increase patient comfort, product quality, operational scalability, and security. • International expansion .
We employ engineering and research and development staff to focus on delivering future innovations and sustaining improvements. Our research and development activities are focused on: • Continuous improvement and extensions to existing products and services. We are continuously working to improve the Zio Services to increase patient comfort, product quality, operational scalability, and security. 14 • International expansion .
The Zio patches include the following features: • patented clear, flexible, lightweight, wire-free design; • unobtrusive and inconspicuous profile; • proprietary adhesive backing designed to keep the Zio patch securely in place for the duration of the prescribed wear period; 8 Table of Contents • water-resistant functionality, allowing patients to shower, sleep, and perform normal daily activities, including moderate exercise; • hydrogel electrodes and a compliant mechanical design to deliver a clear ECG with minimal artifact from movement; • large symptom button, or patient trigger, that is easy to find and press; • indicated single application wear period of up to 14 days (for longer prescribed wear periods for MCT services, additional Zio AT patches and gateways can be provided); and • sufficient battery power for the entire wear period, without the need to recharge or replace batteries.
The Zio patches include the following features: • patented clear, flexible, lightweight, wire-free design; • unobtrusive and inconspicuous profile; • proprietary adhesive backing designed to keep the Zio patch securely in place for the duration of the prescribed wear period; • water-resistant functionality, allowing patients to shower, sleep, and perform normal daily activities, including moderate exercise; • hydrogel electrodes and a compliant mechanical design to deliver a clear ECG with minimal artifact from movement; • large symptom button, or patient trigger, that is easy to find and press; • indicated single application wear period of up to 14 days (for longer prescribed wear periods for MCT services, additional Zio AT patches and gateways can be provided); and • sufficient battery power for the entire wear period, without the need to recharge or replace batteries.
Our principal executive offices are located at 699 8th Street, Suite 600, San Francisco, California 94103, and our telephone number is (415) 632-5700. Our common stock is listed on The Nasdaq Global Select Market under the symbol “IRTC”, and we employ approximately 2,000 regular full-time employees as of December 31, 2023.
Our principal executive offices are located at 699 8th Street, Suite 600, San Francisco, California 94103, and our telephone number is (415) 632-5700. Our common stock is listed on The Nasdaq Global Select Market under the symbol “IRTC”, and we employ approximately 2,000 regular full-time employees as of December 31, 2024.
Within existing accounts, we expect to continue to introduce our Zio Service beyond cardiology and electrophysiology into other departments, including primary care, neurology, and emergency room. To enable this broader adoption within a hospital system, we have successfully interfaced the Zio ordering and report posting processes into a number of large health systems’ electronic health record (“EHR”) systems.
Within existing accounts, we expect to continue to introduce our Zio Services beyond cardiology and electrophysiology into other departments, including primary care, neurology, and emergency room. To enable this broader adoption within a hospital system, we have successfully interfaced the Zio ordering and report posting processes into a number of large health systems’ electronic health record (“EHR”) systems.
The Zio Monitor System, which provides continuous long-term ECG monitoring, is designed to be appropriate for the majority of patients that require ambulatory cardiac monitoring while the Zio AT System, which includes near real-time monitoring, is intended for more acute patients that require timely notification. We estimate our current market penetration in the United States to be approximately 30%.
The Zio Monitor System, which provides continuous long-term ECG monitoring, is designed to be appropriate for the majority of patients that require ambulatory cardiac monitoring while the Zio AT System, which includes near real-time monitoring, is intended for more acute patients that require timely notification. We estimate our current market penetration in the United States to be over 30%.
As we continue to contract with more commercial payors and the patient population ages into eligibility for the Medicare Advantage program, we believe more of our revenue will convert to commercial payer billing. Our clinical centers are enrolled in the Medicare program as IDTFs, which allows us to bill CMS directly for our Zio Services.
As we continue to contract with more commercial payors and the patient population ages into eligibility for the Medicare Advantage program, we believe more of our revenue will convert to commercial payor billing. Our clinical centers are enrolled in the Medicare program as IDTFs, which allows us to bill CMS directly for our Zio Services.
After clearance, changes made to devices must be evaluated on an ongoing basis and may trigger the need for additional 510(k) clearances or – depending on the nature of the change – might require a higher level of FDA review (through the de novo premarket approval or ("PMA") process).
After clearance, changes made to devices must be evaluated on an ongoing basis and may trigger the need for additional 510(k) clearances or – depending on the nature of the change – might require a higher level of FDA review (through the de novo premarket approval or (“PMA”) process).
Atrial Fibrillation and Stroke In 2021, it was estimated that the age-adjusted US stroke death rate as an underlying cause of death was approximately 41.1 per 100,000, and there were approximately 7.4 million deaths attributable to stroke worldwide.
In 2021, it was estimated that the age-adjusted US stroke death rate as an underlying cause of death was approximately 41.1 per 100,000, and there were approximately 7.4 million deaths attributable to stroke worldwide.
Marketing and education throughout the medical community are key to bringing awareness and communicating the strong clinical evidence backing the Zio Service. In addition, we expect to continue developing and publishing clinical evidence to demonstrate the potential advantages of the Zio Service relative to legacy and competitive monitoring technologies.
Marketing and education throughout the medical community are key to bringing awareness and communicating the strong clinical evidence backing Zio Services. In addition, we expect to continue developing and publishing clinical evidence to demonstrate the potential advantages of Zio Services relative to legacy and competitive monitoring technologies.
We plan to leverage our portfolio of products, including the Zio Monitor System and Zio AT System, and position the Zio Service as providing certainty in a single test due to high patient compliance and superior quality of uninterrupted data.
We plan to leverage our portfolio of products, including the Zio Monitor System and Zio AT System, and position Zio Services as providing certainty in a single test due to high patient compliance and superior quality of uninterrupted data.
Ambulatory Cardiac Monitoring Overview The ambulatory cardiac monitoring market is well-established in the United States with an estimated 6.4 million diagnostic tests performed annually with meaningful expansion anticipated in the coming years due to an aging population, a rising number of heart-related disorders globally, and broader acceptance of innovative medical technologies.
Ambulatory Cardiac Monitoring Overview The ambulatory cardiac monitoring (“ACM”) market is well-established in the United States with an estimated 6.5 million diagnostic tests performed annually with meaningful expansion anticipated in the coming years due to an aging population, a rising number of heart-related disorders globally, and broader acceptance of innovative medical technologies.
Our website address is http://www.iRhythmtech.com, and our investor relations website is located at https://www.investors.irhythmtech.com.
Our website address is https://www.irhythmtech.com, and our investor relations website is located at https://investors.irhythmtech.com.
This was demonstrated by the results from the Cardiac Ambulatory Monitor EvaLuation of Outcomes and Time to Events (CAMELOT) study that were published in the American Heart Journal in December 2023.
This was demonstrated by the results from the Cardiac Ambulatory Monitor EvaLuation of Outcomes and Time to Events (“CAMELOT”) study that were published in the American Heart Journal in December 2023.
The most significant of these laws for our business include the federal Anti-Kickback Statute (the “AKS”) and the federal False Claims Act (the “FCA”). 18 Table of Contents Anti-Kickback Laws Under the AKS, it is a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for purchasing, ordering, or recommending, or arranging for, the purchase or order of items or services (or referrals of the same) reimbursable by a federal healthcare program.
The most significant of these laws for our business include the federal Anti-Kickback Statute (the “AKS”) and the federal False Claims Act (the “FCA”). 16 Anti-Kickback Laws Under the AKS, it is a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for purchasing, ordering, or recommending, or arranging for, the purchase or order of items or services (or referrals of the same) reimbursable by a federal healthcare program.
The scope of the FCPA includes interactions with certain healthcare professionals and hospital administrators in many countries. 21 Table of Contents In addition, in Europe, various countries have adopted anti-bribery laws providing for severe consequences in the form of criminal penalties and significant fines for individuals or companies committing a bribery offense.
The scope of the FCPA includes interactions with certain healthcare professionals and hospital administrators in many countries. In addition, in Europe, various countries have adopted anti-bribery laws providing for severe consequences in the form of criminal penalties and significant fines for individuals or companies committing a bribery offense.
Our U.S. issued patents as of December 31, 2023 are set to expire over a range of years, from November 2028 to August 2041, subject to any extensions.
Our U.S. issued patents as of December 31, 2024 are set to expire over a range of years, from November 2028 to August 2041, subject to any extensions.
We have research and development efforts focused on exploring the use of our Zio Services or other new systems and services for the following patient populations: 13 Table of Contents • Obstructive sleep apnea patients, with an estimated prevalence of approximately 30 million in the United States.
We have research and development efforts focused on exploring the use of our Zio Services or other new systems and services for the following patient populations: • Obstructive sleep apnea patients, with an estimated prevalence of approximately 30 million in the United States.
Each report is then validated by CCTs and sent to the patient’s prescribing physician who may access the Zio report on our proprietary, web-based portal, referred to as ZioSuite, and also through our Electronic Health Record ("EHR") connections or ZioSuite mobile apps. Our technicians also notify physicians of potential urgent arrhythmias according to the ordering physician’s specified notification criteria.
Each report is then validated by qualified technicians and sent to the patient’s prescribing physician who may access the Zio report on our proprietary, web-based portal, referred to as ZioSuite, and also through our Electronic Health Record (“EHR”) connections or ZioSuite mobile apps. Our technicians also notify physicians of potential urgent arrhythmias according to the ordering physician’s specified notification criteria.
The laws and regulations govern, among other things, product design and development, preclinical and clinical testing, manufacturing, packaging, labeling, storage, recordkeeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance and associated regulatory reporting. 19 Table of Contents Most Class II devices, including the Zio patches and the ZEUS System, require 510(k) clearance from FDA in order to be marketed in the United States.
The laws and regulations govern, among other things, product design and development, preclinical and clinical testing, manufacturing, packaging, labeling, storage, recordkeeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance and associated regulatory reporting. 17 Most Class II devices, including the Zio patches and the ZEUS System, require 510(k) clearance from FDA in order to be marketed in the United States.
This is supported by more than 100 original scientific research manuscripts and a robust, growing body of clinical evidence by third-party researchers.
This is supported by more than 125 original scientific research manuscripts and a robust, growing body of clinical evidence by third-party researchers.
Our product portfolio includes patch-based solutions (utilized in the Zio Monitor System, Zio AT System, and Zio XT System) and the FDA-cleared Zio Watch that combine continuous monitoring for extended periods with accelerated notification of significant events through mobile transmission capabilities. • Customer workflow optimization .
Our product portfolio includes patch-based solutions (utilized in the Zio Monitor System, Zio AT System, and Zio XT System) and the FDA-cleared Zio Watch (not yet commercially available) that combine continuous monitoring for extended periods with accelerated notification of significant events through mobile transmission capabilities. • Customer workflow optimization .
Up to 90% of patients with Afib may also have hypertension. • Advancing our system portfolio and core technology offering . We continue to invest in building a unique, innovative system portfolio and digital platform that addresses unmet needs in the ambulatory cardiac monitoring market and adjacent markets.
Up to 90% of patients with Afib may also have hypertension. • Advancing our system portfolio and core technology offering . We continue to invest in building a unique, innovative system portfolio and digital platform that addresses unmet needs in the ACM market and adjacent markets.
For the MCT services, physicians will receive daily reports, routine reports, and notifications from CCTs if there are significant events that meet predetermined and physician-specified notification criteria.
For the MCT services, physicians will receive daily reports, routine reports, and notifications from qualified technicians if there are significant events that meet predetermined and physician-specified notification criteria.
Long-term continuous monitoring and MCT services are diagnostic medical procedures typically ordered by physicians for patients not suspected of having life-threatening arrhythmias, but who are suspected of having infrequent, difficult-to-detect, or asymptomatic arrhythmias.
Long-term continuous monitoring services (the “Zio LTCM Service”) and MCT services (the “Zio MCT Service”) are diagnostic medical procedures typically ordered by physicians for patients not suspected of having life-threatening arrhythmias, but who are suspected of having infrequent, difficult-to-detect, or asymptomatic arrhythmias.
(acquired by Baxter International, Inc.) to offer remote cardiac monitoring technology and also function as diagnostic service providers. We also compete with companies that sell traditional, 24-to-48-hour Holter monitors, including GE Healthcare, Philips Healthcare, Mortara Instrument, Inc., Spacelabs Healthcare Inc., and Welch Allyn Holdings, Inc. (acquired by Hill-Rom Holdings, Inc. which was acquired by Baxter International, Inc.).
(acquired by Baxter International, Inc.) to offer remote cardiac monitoring technology and also function as diagnostic service providers. We also compete with companies that sell traditional, 24-to-48-hour Holter monitors, including GE Healthcare, Philips Healthcare, and Spacelabs Healthcare Inc., as well as Mortara Instrument, Inc. and Welch Allyn Holdings, Inc.
Taken together, we believe that these elements are differentiators for the Zio Systems in the diagnosis and treatment of cardiac arrhythmias and can lead to improved clinical outcomes, enhanced patient experience, high physician and healthcare staff satisfaction, and reduced cost of care to healthcare systems.
The American Journal of Cardiology , 2013. 9 Taken together, we believe that these elements are differentiators for the Zio Systems in the diagnosis and treatment of cardiac arrhythmias and can lead to improved clinical outcomes, enhanced patient experience, high physician and healthcare staff satisfaction, and reduced cost of care to healthcare systems.
These CPT codes are subject to periodic change and update, which will impact the reimbursement rates for our Zio Services. For the year ended December 31, 2023, we received approximately 86% of our revenue through third-party payors, which includes approximately 25% of our total revenue from the Medicare program.
These CPT codes are subject to periodic change and update, which will impact the reimbursement rates for our Zio Services. For the year ended December 31, 2024, we received approximately 84% of our revenue through third-party payors, which includes approximately 24% of our total revenue from the Medicare program.
Since receiving FDA clearance, we have provided the Zio Services to over six million patients and have collected over 1.8 billion hours of curated heartbeat data. The Company was incorporated in the state of Delaware in September 2006.
Since receiving FDA clearance, we have provided the Zio Services to over eight million patients and have collected over 2 billion hours of curated heartbeat data. The Company was incorporated in the state of Delaware in September 2006.
We currently offer three Zio System options — the Zio Monitor System, the Zio XT System, and the Zio AT System. 6 Table of Contents The Zio Service Monitoring Solutions The Zio Monitor System is a prescription-only, remote ECG monitoring system that consists of a patch ECG monitor (the “Zio Monitor patch”) that records the electric signal from the heart continuously for up to 14 days and the Zio ECG Utilization Software (“ZEUS”) System, which supports the capture and analysis of ECG data recorded by the Zio Monitor patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS System.
The Zio Service Monitoring Solutions The Zio Monitor System is a prescription-only, remote ECG monitoring system that consists of a patch ECG monitor (the “Zio Monitor patch”) that records the electric signal from the heart continuously for up to 14 days and the Zio ECG Utilization Software (“ZEUS”) System, which supports the capture and analysis of ECG data recorded by the Zio Monitor patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS System.
We are also subject to applicable requirements relating to the environment, waste management, and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal, sale, labeling, collection, recycling, treatment, and remediation of hazardous substances. See “Regulation” below for further information.
We are also subject to applicable requirements relating to the environment, waste management, and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal, sale, labeling, collection, recycling, treatment, and remediation of hazardous substances.
We facilitate sessions around our core competencies, interview skills, and coaching practices, and we offer a toolbox on our intranet with resources for employees and managers across the employee lifecycle. 23 Table of Contents
We facilitate sessions around our core competencies, interview skills, and coaching practices, and we offer a toolbox on our intranet with resources for employees and managers across the employee lifecycle. 21
Zio AT Patch and Wireless Gateway 7 Table of Contents We support physician and patient use of our Zio Systems through our Medicare-enrolled IDTF and certified cardiographic technicians (“CCTs”), who perform the technical monitoring services associated with a physician’s order for long-term continuous monitoring or MCT monitoring services.
Zio AT Patch and Wireless Gateway We support physician and patient use of our Zio Systems through our Medicare-enrolled IDTF and qualified technicians, who perform the technical monitoring services associated with a physician’s order for long-term continuous monitoring or MCT monitoring services.
Our core competencies are the foundation for programs and tools being developed to identify top talent, prepare future managers and leaders, and provide equal access to growth opportunities. We offer a variety of training opportunities, whether focused on building vocational, management, or leadership skills.
We are investing heavily to build in-house tools and resources to support managers and employees. Our core competencies are the foundation for programs and tools being developed to identify top talent, prepare future managers and leaders, and provide equal access to growth opportunities. We offer a variety of training opportunities, whether focused on building vocational, management, or leadership skills.
The most common sustained type of arrhythmia is Afib, a condition which causes the upper chambers of the heart to beat irregularly and blood not to flow properly to the lower chambers of the heart.
The most common sustained type of arrhythmia is atrial fibrillation (“Afib ” ), a condition which causes the upper chambers of the heart to beat irregularly and blood not to flow properly to the lower chambers of the heart.
We intend to continue assessing the potential pathways for expanding indications and clinical use cases for our Zio Services and developing new systems for patient populations with unmet needs. Leading with clinical and economical evidence, we are pursuing commercialization opportunities for our Know Your Rhythm by Zio program that is focused on patients at risk for undiagnosed arrhythmias.
We intend to continue assessing the potential pathways for expanding indications and clinical use cases for our Zio Services and developing new systems for patient populations with unmet needs. Leading with clinical and economical evidence, we are pursuing commercialization opportunities for proactive monitoring strategies that are focused on patients at risk for undiagnosed arrhythmias.
The Zio Monitor patch is 72% smaller, 62% lighter, and 23% thinner than our Zio XT patch, attributes which we believe will have a positive impact on patient experience, patient satisfaction, and associated improvement in device wear times.
The Zio Monitor patch is 72% smaller, 62% lighter, and 23% thinner than our Zio XT patch, attributes which have contributed to a positive impact on patient experience, including improved patient satisfaction, and associated improvement in device wear times.
Between 15% and 20% of people who have strokes also have Afib. We believe early detection of Afib is critical to optimizing patient care, delivering earlier treatment to help avoid further adverse clinical events, managing symptoms caused by Afib, and reducing the total public health burden of treating stroke.
We believe early detection of Afib is critical to optimizing patient care, delivering earlier treatment to help avoid further adverse clinical events, managing symptoms caused by Afib, and reducing the total public health burden of treating stroke.
We offer health benefits, a 401(k) plan with company match, paid time off and family leave, an Employee Stock Purchase Plan for employees in the United States, which allows them to purchase our stock at a discount, and an employee wellness program that is generally available to employees and their families globally with a variety of support services.
We offer health benefits, a 401(k) plan with company match, paid time off and family leave, an Employee Stock Purchase Plan for employees in the United States, which allows them to purchase our stock at a discount, and an employee wellness program that is generally available to employees and their families globally with a variety of support services. 20 Workforce Development The growth and success of our employees is one of our top priorities as it impacts our overall company performance.
As of December 31, 2023, we owned, or retained an exclusive license to, forty-two issued patents from the U.S.
As of December 31, 2024, we owned, or retained an exclusive license to, 46 issued patents from the U.S.
In clinical settings, this approach could reduce the amount of misdiagnosed computerized ECG interpretations and improve the efficiency of expert human ECG interpretation by accurately triaging or prioritizing the most urgent conditions. 9 Table of Contents Long-term, continuous monitoring maximizes diagnostic yield 2,3 2 Turakhia, M. et al. Diagnostic Utility of a Novel Leadless Arrhythmia Monitoring Device.
In clinical settings, we believe that this approach could reduce the number of misdiagnosed computerized ECG interpretations and improve the efficiency of expert human ECG interpretation by accurately triaging or prioritizing the most urgent conditions. Long-term, continuous monitoring maximizes diagnostic yield 1 1, Turakhia et al. Diagnostic Utility of a Novel Leadless Arrhythmia Monitoring Device.
We are also aware of some small start-up companies entering the patch-based cardiac monitoring market. Large medical device companies may continue to acquire or form alliances with these smaller companies to diversify their product offering and participate in the digital health space.
These competitors have also developed patch-based cardiac monitors that have received FDA and foreign regulatory clearances. We are also aware of small start-up companies entering the patch-based cardiac monitoring market. Large medical device companies may continue to acquire or form alliances with these smaller companies to diversify their product offering and participate in the digital health space.
The largest ever real-world evidence study of ambulatory cardiac monitoring, it revealed that the Zio long-term continuous monitoring service (the “Zio LTCM service”) using the Zio XT System was independently associated with the highest yield of clinical arrhythmia encounter diagnosis, lowest likelihood of retest, and the lowest incremental healthcare resource utilization of all strategies examined.
The largest ever real-world evidence study of ambulatory cardiac monitoring, it revealed that the Zio LTCM Service using the Zio XT System was independently associated with the highest yield of clinical arrhythmia encounter diagnosis, lowest likelihood of retest, and the lowest incremental healthcare resource utilization of all strategies examined. Results of the CAMELOT study 1-4 1, Reynolds et al.
Conformity assessments for our products are carried out as required by Notified Bodies. If a Notified Body of one member state has issued a CE mark, the device can be distributed throughout the EU without further conformance tests being required in other member states, although certain member states may require in-country device registrations after the issuance of the CE mark.
If a Notified Body of one member state has issued a CE mark, the device can be distributed throughout the EU without further conformance tests being required in other member states, although certain member states may require in-country device registrations after the issuance of the CE mark.
We are initiating market development and market access initiatives in multiple European countries in 2024 and pursuing regulatory clearance in Japan. We estimate the total addressable market in our initial selected countries of the UK, Japan, and prioritized European countries to be at least 5 million existing ambulatory monitoring tests annually. • Exploring adjacent market opportunities.
We estimate the total addressable market in our initial selected countries of the UK, Japan, and prioritized European countries to be at least 5 million existing ambulatory monitoring tests annually. • Exploring adjacent market opportunities.
In addition, we are exploring sales opportunities and market access in Japan, Switzerland, the Netherlands, and Spain. We typically experience reduced revenue during the third quarter, as well as during the year-end holiday season. We believe this is the result of physicians and patients taking vacations and patients electing to delay our monitoring services during the summer months or holidays.
We typically experience reduced revenue during the third quarter, as well as during the year-end holiday season. We believe this is the result of physicians and patients taking vacations and patients electing to delay our monitoring services during the summer months or holidays.
We have registered our device establishments with FDA and with the UK’s Medicines & Healthcare products Regulatory Agency (“MHRA”). Additional EU registrations may be sought in 2024 in EU member states by our EU authorized representative as appropriate.
Our manufacturing facilities are also ISO certified (EN ISO 13485:2016). We have registered our device establishments with FDA and with the UK’s Medicines & Healthcare products Regulatory Agency (“MHRA”). Additional EU registrations may be sought in 2025 in EU member states by our EU authorized representative as appropriate.
The key elements of our strategy include: • Further penetrating and expanding the U.S. ambulatory cardiac monitoring market . Our goal is to be the leading provider of ambulatory cardiac monitoring for patients at risk for arrhythmias.
Our Strategy Our mission is to boldly innovate to create trusted solutions that detect, predict, and prevent disease. The key elements of our strategy include: • Further penetrating and expanding the U.S. ambulatory cardiac monitoring market . Our goal is to be the leading provider of ambulatory cardiac monitoring for patients at risk for arrhythmias.
National competent authorities (the “Competent Authorities”) in each member state oversee the implementation of the MDD and EU MDR within their jurisdiction, typically through so-called notified bodies which are certification organizations designated by a member state to conduct third-party conformity assessments (the “Notified Bodies").
National competent authorities in each member state of the EU oversee the implementation of the EU MDR within their jurisdiction, typically through so-called notified bodies which are certification organizations designated by a member state to conduct third-party conformity assessments (the “Notified Bodies”). The means for achieving the requirements for the CE mark vary according to the nature of the device.
Our Products and Services Zio Systems and Zio Services The Zio Systems and Zio Services deliver a patient-friendly design that enables between 98%-99% patient compliance with minimal ECG data noise or artifact, thereby potentially delivering superior clinical accuracy to physicians diagnosing arrhythmias and reducing the cost of care for healthcare systems by avoiding costly downstream adverse events.
Some physicians own their own ambulatory cardiac monitoring devices and provide ambulatory monitoring services directly to their patients, while others outsource these services to third-party providers, including IDTFs. 5 Our Products and Services Zio Systems and Zio Services The Zio Systems and Zio Services deliver a patient-friendly design that enables between 98%-99% patient compliance with minimal ECG data noise or artifact, thereby potentially delivering superior clinical accuracy to physicians diagnosing arrhythmias and reducing the cost of care for healthcare systems by avoiding costly downstream adverse events.
In accordance with these values, we believe that effectively managing environmental, social, and corporate governance (“ESG”) risks and opportunities drives business success, and that when fully integrated into the business, ESG can provide a competitive advantage.
In accordance with these values, we believe that effectively managing environmental, social, and corporate governance (“ESG”) risks and opportunities drives business success and that, when fully integrated into the business, ESG can provide a competitive advantage. During 2024, we refreshed our ESG priority assessment to ensure we are aligning with the issues that matter most to our business and stakeholders.
To date, our product changes have been managed within the 510(k) framework and we have not been required to provide clinical data to support these 510(k) submissions and clearances. After a device is placed on the market, numerous regulatory requirements continue to apply.
To date, our product changes have been managed within the 510(k) framework. After a device is placed on the market, numerous regulatory requirements continue to apply.
Zio Monitor Patch and Zio XT Patch The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of a patch ECG monitor (the “Zio AT patch”) that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, but which also incorporates the Zio AT wireless gateway that provides connectivity between the Zio AT patch and the ZEUS System during the patient wear period.
Furthermore, the Zio Monitor patch incorporates a breathable adhesive construct, which enhances the patient experience by removing moisture otherwise captured next to the patient’s skin, as well as Bluetooth communication capabilities and improved processing efficiency. 6 Zio Monitor Patch and Zio XT Patch The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of a patch ECG monitor (the “Zio AT patch”) that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, but which also incorporates the Zio AT wireless gateway that provides connectivity between the Zio AT patch and the ZEUS System during the patient wear period.
Using our repository of ambulatory ECG patient data, we will continue to look for ways to create value-driving opportunities in digital healthcare, such as expansion of indications for the Zio System, new therapeutic discoveries, development of an analytical engine for ambulatory consumers, other medical data and payor and provider decision support, and the potential for more complete system integration with large health systems. 16 Table of Contents We have supported clinical studies conducted by leading physicians and clinicians to explore and develop new techniques and applications for our Zio Systems, the clinically-integrated version of ZEUS for the Zio Watch, and other clinical and research activities, including healthcare economic outcomes research.
Using our repository of ambulatory ECG patient data, we will continue to look for ways to create value-driving opportunities in digital healthcare, such as expansion of indications for the Zio System, new therapeutic discoveries, development of an analytical engine for ambulatory consumers, other medical data and payor and provider decision support, and the potential for more complete system integration with large health systems.
The means for achieving the requirements for the CE mark vary according to the nature of the device. Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE mark can be placed on a product.
Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE mark can be placed on a product. Conformity assessments for our products are carried out as required by Notified Bodies.
Our research and development activities consist of software development, algorithm and product development, regulatory affairs, and clinical research. Our research and development expenses were $60.2 million, $46.6 million, and $38.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Our research and development activities consist of software development, algorithm and product development, regulatory affairs, and clinical research. Our research and development expenses (excluding in-process research and development) were $71.5 million, $60.2 million, and $46.6 million for the years ended December 31, 2024, 2023, and 2022, respectively. Technology License Agreement with BioIntelliSense, Inc.
Opportunities in Monitoring for Asymptomatic Afib Patients Currently, the Zio Services are generally ordered by physicians for patients that are experiencing symptoms, with limited provision of these services for the estimated one-third of the U.S. population that may be experiencing asymptomatic Afib, which is sometimes referred to as “silent Afib”.
Zio LTCM service refers to Zio XT and Zio Monitor service. Opportunities in Monitoring for Undiagnosed Arrhythmias Currently, the Zio Services are generally ordered by physicians for patients that are experiencing symptoms, with limited provision of these services for the estimated one-third of the U.S. population that may be experiencing undiagnosed arrhythmias, including Afib.
These employee-led ERGs are reflective of employee demographics and interests and continue to cultivate a sense of inclusion and belonging. Board and Management Oversight The Compensation and Human Capital Management Committee of our Board of Directors has oversight of human capital management, including our approach to talent recruiting, development, progression and retention, culture, human health and safety, and total rewards.
Board and Management Oversight The Compensation and Human Capital Management Committee of our Board of Directors has oversight of human capital management, including our approach to talent recruiting, development, progression and retention, culture, human health and safety, and total rewards.
By educating primary care physicians on the benefits of the Zio Service for this patient population, we believe we can expand the market and reach more patients that are candidates for ambulatory cardiac monitoring. • Pursuing international expansion opportunities.
By educating primary care physicians on the benefits of Zio Services for this patient population, we believe we can expand the market and reach more patients that are candidates for ambulatory cardiac monitoring. • Pursuing international expansion opportunities. While our initial commercial focus is the U.S. market, we have initiated efforts that will allow for future expansion into international geographies.
Due to UK’s departure from the EU, the MHRA has issued new requirements associated with the UK Conformity Assessed (“UKCA”) mark. The UKCA marking is a new UK product marking that is used for goods being placed on the market in Great Britain. It covers most goods which previously required the CE marking, including medical devices.
The UKCA marking is a new UK product marking that is used for goods being placed on the market in Great Britain. It covers most goods which previously required the CE marking, including medical devices.
Early detection of heart rhythm disorders, such as atrial fibrillation (“Afib”) and other clinically relevant arrhythmias, supports appropriate medical intervention and can help avoid more serious downstream medical events, including stroke. 1 As used throughout the text of Items 1 to 7, on Form 10-K, the term “iRhythm,”, “the Company,” “we” or “us,” refers to iRhythm Technologies, Inc., a Delaware corporation, or iRhythm Technologies Inc. and its consolidated subsidiaries, as the context requires. 4 Table of Contents As of 2008, it was estimated that the prevalence of a heart rhythm disorder, or arrhythmia, is between 1.5% and 5% in the general population in the United States.
In Europe, the prevalence of arrhythmias is also expected to continue to rise with atrial fibrillation affecting an estimated 7.6 million people over 65 in the EU in 2016 and projections indicating a surge to 9.5% of individuals over 65 by 2060. 1 As used throughout the text of Items 1 to 7, on Form 10-K, the term “iRhythm,”, “the Company,” “we” or “us,” refers to iRhythm Technologies, Inc., a Delaware corporation, or iRhythm Technologies Inc. and its consolidated subsidiaries, as the context requires. 4 Atrial Fibrillation and Stroke Early detection of heart rhythm disorders, such as Afib and other clinically relevant arrhythmias, supports appropriate medical intervention and can help avoid more serious downstream medical events, including stroke.
In May 2021, the EU MDR, a more comprehensive regulatory framework, replaced the MDD. The system of regulating medical devices operates by way of a certification for each medical device. Each certified device is marked with the CE mark which shows that the device has a certificate of conformance under the MDD or EU MDR.
Each certified device is marked with the CE mark which shows that the device has a certificate of conformance under the EU MDR. Since May 2021, the EU MDR has been the relevant regulatory framework for devices in the EU, replacing the prior Medical Device Directive.
Physicians may also prescribe implantable loop recorders, which are implanted underneath the patient’s skin in a minimally invasive, hospital-based procedure and record ECG data similar to cardiac event monitors but are intended for monitoring up to 3 years. 5 Table of Contents If the diagnosis is not definitive following the first monitoring period, physicians may prescribe a repeat traditional, 24-to-48-hour Holter monitoring test or, alternatively, event monitoring services, MCT, or implantable loop recorders.
Physicians may also prescribe implantable loop recorders, which are implanted underneath the patient’s skin in a minimally invasive, hospital-based procedure and record ECG data similar to cardiac event monitors but are intended for monitoring up to 3 years.
We have since developed the Zio® Watch (Study Watch with Irregular Pulse Monitor) with our clinically integrated ZEUS System, a new health solution that is intended to be integrated into clinical care delivery and to assist healthcare providers in identifying and monitoring Afib.
We developed the Zio ® Watch (Study Watch with Irregular Pulse Monitor) with our clinically integrated ZEUS System, a solution that is intended to be integrated into clinical care delivery and to assist healthcare providers in identifying and monitoring Afib. 8 We have what we believe to be the world’s largest repository of labelled ECG data, which we leveraged to develop our proprietary photoplethysmography (“PPG”) algorithms utilized in both the Zio Watch and the ZEUS System.
According to the AHA, stroke costs the United States an estimated $34.5 billion each year in healthcare costs and lost productivity and is a leading cause of serious long-term disability. The AHA estimates that ischemic strokes represent approximately 85% of all strokes in the United States, with an estimated 690,000 ischemic strokes per year.
According to the AHA, stroke costs the United States an estimated $34.5 billion each year in healthcare costs and lost productivity and is a leading cause of serious long-term disability. Between 15% and 20% of people who have strokes also have Afib.
With at least 12 million individuals in the United States estimated to be at risk for undiagnosed cardiac arrhythmias, we believe this could be a significant market opportunity. Initial efforts to proactively monitor this population with the Zio Monitor System, including end-to-end care pathway pilots, are planned for 2024.
With at least 12 million individuals in the United States estimated to be at risk for undiagnosed cardiac arrhythmias, we believe this could be a significant market opportunity for which we believe Zio Services are uniquely positioned to succeed.
The iRhythm Difference We believe there are strong benefits offered by our 14-day wear time, by the diagnostic yield possibly achieved through our technology, and by the clinical accuracy of our Zio report as enabled by our proprietary algorithm.
The iRhythm Difference We believe there are strong benefits offered by our 14-day wear time, by the diagnostic yield possibly achieved through our technology, and by the clinical accuracy of our Zio report as enabled by our proprietary deep-learned artificial intelligence that can help to reduce inaccuracies in computerized ECG interpretations and improve the efficiency of expert human ECG interpretation.
Diversity, Equity, and Inclusion We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment.
Inclusion and Belonging We are committed to being an equal opportunity employer and we prohibit all forms of unlawful discrimination in accordance with applicable law. We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment.
In January 2021, we established a small direct sales and clinical infrastructure in Bagshot, Surrey in England to service the UK market. We have since focused efforts on the introduction of the Zio Services using the Zio XT System into new accounts and market access efforts, in particular through orders made by NHS Trusts and Hospitals.
We have since focused efforts on the introduction of the Zio Services using the Zio XT System into new accounts and market access efforts, in particular through orders made by NHS Trusts and Hospitals. Additionally, we have built a small sales force covering Switzerland, Austria, and the Netherlands. In Japan and Spain, we intend to utilize distributor services.
This seamless integration of Zio workflow processes has proven to be a key factor in spurring growth within existing and new accounts and is an important part of our ongoing market penetration strategy.
This seamless integration of Zio workflow processes has proven to be a key factor in spurring growth within existing and new accounts and is an important part of our ongoing market penetration strategy. 11 Furthermore, we believe there is potential to increase the core symptomatic total addressable market by moving further upstream in the care pathway to the primary care physician call point.
However, our patent applications may not result in issued patents, and any patents that have been issued or might be issued may not protect our intellectual property rights.
However, our patent applications may not result in issued patents, and any patents that have been issued or might be issued may not protect our intellectual property rights. We also rely on trade secrets, technical know-how, and continuing innovation to develop and maintain our competitive position.
The CE mark is contingent upon continued compliance with the applicable regulations and the quality system requirements of the ISO 13485 standard.
The CE mark is contingent upon continued compliance with the applicable regulations and the quality system requirements of the ISO 13485 standard. Due to UK’s departure from the EU, the MHRA has issued requirements associated with the UK Conformity Assessed (“UKCA”) mark.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur international operations are, and will continue to be, subject to a number of risks, including: • multiple, conflicting, and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses; • obtaining and sustaining regulatory approvals, certifications, and regulatory compliance where required for the sale of our Zio Services in various countries; 34 Table of Contents • requirements to maintain data and the processing of that data on servers located within such countries, which requirements that may be subject to change; • complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems, as well as with participating in public tenders or procurement processes run by national healthcare systems; • logistics and regulations associated with shipping and returning our Zio patches following use; • limits on our ability to penetrate international markets if we are required to process our Zio Services locally; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the effect of local and regional financial pressures on demand and payment for our services, fluctuations in trade policy and tariff regulations, changes in international tax regulations applicable to our business, and exposure to foreign currency exchange rate fluctuations, which may reduce the reported value of our foreign currency denominated revenues, expenses, and cash flows; • decreased emphasis or enforcement of intellectual property protections in some countries outside the United States in comparison to that in the United States; • increased risk of litigation or administrative proceedings in connection with our relationships with international business partners, including litigation against persons whom we believe have infringed on our intellectual property, infringement litigation filed against us, litigation against a competitor, or litigation filed against us by distributors or service providers resulting from a breach of contract or other claim, as well as disputes regarding government and public tenders, any of which may result in substantial costs to us, adverse judgments, settlements, and diversion of our management’s attention; • natural disasters, political and economic instability, including wars and other geopolitical conflicts, terrorism, political unrest, outbreak of disease, boycotts, curtailment of trade, and other market restrictions; • regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), UK Bribery Act of 2010, and comparable laws and regulations in other countries; • compliance risks associated with the General Data Protection Regulation (the “GDPR”) (including as it applies in the UK by virtue of the Data Protection Act 2018), enacted to protect the privacy of all individuals in the EU and the UK, and which places certain restrictions on the export of personally identifiable data outside of the EU or the UK, as applicable; • compliance risks associated with the revised regulations in the EU MDR that outline the requirements for medical device CE marking; • compliance risks associated with the UK MDR, which replaces the CE marking requirements for medical devices marketed and sold in the UK with a UKCA mark following the UK’s withdrawal from the EU, and the UK government’s announcement to amend the UK MDR, in particular to create a new access pathway to support innovation and create an innovative framework for regulating software and AI as medical devices; • compliance risks associated with new or upcoming regulations associated with AI applicable to Software as a Medical Device; and • compliance risks associated with new or upcoming requirements and expectations associated with medical device cybersecurity.
Biggest changeOur international operations are, and will continue to be, subject to a number of risks, including: • multiple, conflicting, and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses; • obtaining and sustaining regulatory approvals, certifications, and regulatory compliance where required for the sale of our Zio Services in various countries or regions; • requirements to maintain and secure data and the processing of that data on servers located within such countries or regions, which requirements may be subject to change; • complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems, as well as with participating in public tenders or procurement processes run by national healthcare systems; • logistics and regulations associated with shipping and returning our Zio patches following patient use; • limits on our ability to penetrate international markets if we are required to process our Zio Services locally; 32 • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the effect of local and regional financial pressures on demand and payment for our services, fluctuations in trade policy and tariff regulations, changes in international tax regulations applicable to our business, and exposure to foreign currency exchange rate fluctuations, which may reduce the reported value of our foreign currency denominated revenues, expenses, and cash flows; • decreased emphasis or enforcement of intellectual property protections in some countries outside the United States in comparison to that in the United States; • increased risk of litigation or administrative proceedings in connection with our relationships with international business partners, including litigation against persons whom we believe have infringed on our intellectual property, infringement litigation filed against us, litigation against a competitor, or litigation filed against us by distributors or service providers resulting from a breach of contract or other claim, as well as disputes regarding government and public tenders, any of which may result in substantial costs to us, adverse judgments, settlements, and diversion of our management’s attention; • increased risk of litigation or administrative proceedings in connection with product liability claims, driven in part by a growing third-party litigation funding market in the EU as well as legal and regulatory reform across product safety and product liability such as the newly adopted EU Product Liability Directive of October 23, 2024, the proposed AI Liability Directive and further implementation of the collective redress regime which may lead to group claims in respect of medical devices; • natural disasters, political and economic instability, including wars and other geopolitical conflicts, terrorism, political unrest, outbreak of disease, boycotts, curtailment of trade, and other market restrictions; • risks associated with any shifts in economic relations between the UK and the EU, which could result in tariffs or quotas on imported goods or services moving between the UK and the EU; • regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), UK Bribery Act of 2010, and comparable laws and regulations in other countries; • compliance risks associated with the General Data Protection Regulation (the “GDPR”) (including as it applies in the UK by virtue of the Data Protection Act 2018), enacted to protect the privacy of all individuals in the EU and the UK, and which places certain restrictions on the export of personally identifiable data outside of the EU or the UK, as applicable; • compliance risks associated with the revised regulations in the EU MDR that outline the requirements for medical device CE marking; • compliance risks associated with the UK MDR, which replaces the CE marking requirements for medical devices marketed and sold in the UK with a UKCA mark following the UK’s withdrawal from the EU, and the UK government’s announcement to amend the UK MDR, in particular to create a new access pathway to support innovation and create an innovative framework for regulating software and AI as medical devices; • compliance risks associated with the Japanese PMDA; • compliance risks associated with the SMDO; • compliance risks associated with new or upcoming regulations associated with AI applicable to Software as a Medical Device, including compliance with the EU Artificial Intelligence Act; and • compliance risks associated with new or upcoming requirements and expectations associated with medical device cybersecurity.
If we are unable to develop new services and related devices, applications, or features, or improve our algorithms due to constraints, such as insufficient cash resources, high employee turnover, inability to hire personnel with sufficient technical skills, inability or delay to obtain FDA marketing authorization or regulatory clearances in the EU and the UK, or a lack of other research and development resources, we may not be able to maintain our competitive position compared to other companies.
If we are unable to develop new services and related devices, applications, or features, or improve our algorithms due to constraints, such as insufficient cash resources, high employee turnover, inability to hire personnel with sufficient technical skills, inability or delay to obtain FDA marketing authorization or regulatory clearances in the EU and the UK, or a lack of other research and development resources, we may not be able to maintain our competitive position compared 31 to other companies.
We will likely face risks, uncertainties, and disruptions associated with the integration process, including difficulties in the integration of the operations and services of any acquired company, integration of acquired technology with our Zio Services, including our Zio Systems, diversion of our management’s attention from other business concerns, the potential loss of key employees or suppliers of the acquired businesses, and impairment charges if future acquisitions are not as successful as we originally anticipated.
In addition, we will likely face risks, uncertainties, and disruptions associated with the integration process, including difficulties in the integration of the operations and services of any acquired company, integration of acquired technology with our Zio Services, including our Zio Systems, diversion of our management’s attention from other business concerns, the potential loss of key employees or suppliers of the acquired businesses, and impairment charges if future acquisitions are not as successful as we originally anticipated.
Failure to maintain these relationships, interactions, and arrangements in compliance with applicable laws and regulations, including those targeted at fraud and abuse like the federal Anti-Kickback Statute and the FCA, could expose us to significant legal and financial repercussions, including government civil and criminal investigations, civil monetary penalties, criminal penalties, and/or exclusion from federal healthcare programs.
Failure to structure and maintain these relationships, interactions, and arrangements in compliance with applicable laws and regulations, including those targeted at fraud and abuse like the federal Anti-Kickback Statute and the FCA, could expose us to significant legal and financial repercussions, including government civil and criminal investigations, civil monetary penalties, criminal penalties, and/or exclusion from federal healthcare programs.
Our failure to comply with the applicable Medicare rules and requirements could result in discontinuation of our reimbursement under the Medicare payment program, a requirement to return funds already paid to us, civil monetary penalties, criminal penalties, and/or exclusion from the Medicare program, which would have a material adverse impact on our reputation, business, and results of operations.
Our failure to comply with the applicable Medicare rules and requirements could result in discontinuation of our reimbursement under the Medicare program, a requirement to return funds already paid to us, civil monetary penalties, criminal penalties, and/or exclusion from the Medicare program, which would have a material adverse impact on our reputation, business, and results of operations.
Further, the federal healthcare programs may impose suspensions on both payment and participation in response to allegations of fraud or other noncompliance. Other controls imposed by CMS and commercial payors designed to reduce costs, commonly referred to as “utilization review,” may also affect our operations.
Further, the federal healthcare programs may impose suspensions on both payment and participation in response to allegations of fraud or other noncompliance. 25 Other controls imposed by CMS and commercial payors designed to reduce costs, commonly referred to as “utilization review,” may also affect our operations.
Accordingly, we have made certain changes and modifications to our Zio Systems in the past that we believe did not require additional clearances or approvals by FDA. Such internal decisions are, however, subject to review by FDA, and may require additional action in the event FDA questions earlier internal decision-making.
Accordingly, we have made certain changes and modifications to our Zio Systems in the past that we believe did not require additional clearances or approvals by FDA. 26 Such internal decisions are, however, subject to review by FDA, and may require additional action in the event FDA questions earlier internal decision-making.
The market price of our common stock is influenced by many factors that are beyond our control, including the following: • securities analyst coverage or lack of coverage of our common stock or changes in their estimates of our financial performance; • variations in quarterly operating results; • future sales of our common stock by our stockholders; • investor perception of us and our industry; • announcements by us or our competitors of significant agreements, acquisitions, or capital commitments or service or product launches or discontinuations; • changes in market valuation or earnings of our competitors; • negative business or financial announcements regarding our partners; • regulatory actions; 52 Table of Contents • legislation and political conditions; • cybersecurity events; • global health pandemics, such as the COVID-19 pandemic; • terrorist acts, acts of war, or periods of widespread civil unrest, including ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East; and • general economic, industry, and market conditions, including inflation, interest rate volatility, uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, potential instability in the global banking system, and fluctuating foreign currency exchange rates.
The market price of our common stock is influenced by many factors that are beyond our control, including the following: • securities analyst coverage or lack of coverage of our common stock or changes in their estimates of our financial performance; • variations in quarterly operating results; • future sales of our common stock by our stockholders; • investor perception of us and our industry; • announcements by us or our competitors of significant agreements, acquisitions, or capital commitments or service or product launches or discontinuations; • changes in market valuation or earnings of our competitors; • negative business or financial announcements regarding our partners; • regulatory actions; • legislation and political conditions; • cybersecurity events; • global health pandemics, such as the COVID-19 pandemic; • terrorist acts, acts of war, or periods of widespread civil unrest, including ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East; and • general economic, industry, and market conditions, including inflation, interest rate volatility, uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, potential instability in the global banking system, and fluctuating foreign currency exchange rates.
We are in various stages of research and development for other diagnostic screening solutions and new indications for our technology and our Zio Services; however, there can be no assurance that we will be able to successfully develop and commercialize any new services and related devices.
We are in various stages of research and development for other diagnostic and/or screening solutions and new indications for our technology and our Zio Services; however, there can be no assurance that we will be able to successfully develop and commercialize any new services and related devices.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state law provisions, limit the use of NOLs and tax credits after a cumulative change in corporate ownership of more than 50% occurs within a three-year period.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state law provisions, limit the use of NOLs and tax credits after a cumulative change in corporate ownership of more than 50% occurs within a three-year period.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. Securities class action litigation has often been brought against public companies that experience periods of volatility in the market prices of their securities.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. 51 Securities class action litigation has often been brought against public companies that experience periods of volatility in the market prices of their securities.
In the ordinary course of our business, we collect, use and store, and transmit sensitive data, such as our proprietary business information and that of our suppliers, contractors, customers, vendors and others, as well as personal information, including health information, of these parties and of our patients.
In the ordinary course of our business, we collect, use and store, and transmit confidential and sensitive data, such as our proprietary business information and that of our suppliers, contractors, customers, vendors and others, as well as personal information, including health information, of these parties and of our patients.
In addition, we are currently engaging with other third-party service providers that have resources located outside the United States, and we have established company resources in the Philippines to provide services in support our IDTFs.
In addition, we are currently engaging with other third-party service providers that have resources located outside the United States, and we have established company resources in the Philippines to provide services in support of our IDTFs.
Factors that might cause quarterly fluctuations in our operating results include: • our inability to manufacture an adequate supply of our Zio Systems to support demand for our Zio Services at appropriate quality levels and acceptable costs; • possible delays in our research and development programs or in the completion of any third-party clinical trials relating to our Zio Services; • a lack of acceptance of our Zio Services, including our Zio Systems, by physicians and potential patients; • the inability of patients to receive reimbursements from third-party payors; • the purchasing patterns of physicians and patients, including as a result of seasonality; • failures to comply with regulatory requirements, which could lead to withdrawal of our Zio Services, including our Zio Systems, from the market; • our failure to continue the commercialization of our Zio Services; • competition; • inadequate financial and other resources; and • global business, political, and economic conditions, including inflation, increasing interest rates, cybersecurity events, uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, potential instability in the global banking system, political instability, and military hostilities, including ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East.
Factors that might cause quarterly fluctuations in our operating results include: • our inability to manufacture an adequate supply of our Zio Systems to support demand for our Zio Services at appropriate quality levels and acceptable costs; • possible delays in our research and development programs or in the completion of any third-party clinical trials relating to our Zio Services; • a lack of acceptance of our Zio Services, including our Zio Systems, by physicians and potential patients; • the inability of patients to receive reimbursements from third-party payors; • the purchasing patterns of physicians and patients, including as a result of seasonality; • failures to comply with regulatory requirements, which could lead to withdrawal of our Zio Services, including our Zio Systems, from the market; • our failure to continue the commercialization of our Zio Services; • competition; • inadequate financial and other resources; and • global business, political, and economic conditions, including inflation, interest rate volatility, cybersecurity events, uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, potential instability in the global banking system, political instability, and military hostilities, including ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East.
Communication-related laws require consent prior to certain communications and provide a specified monetary damage award or fine for each violation could result in particularly significant damage awards or fines.
Communication-related laws require consent prior to certain communications and provide a specified monetary damage award or fine for each violation which could result in particularly significant damage awards or fines.
CMS has acknowledged that the IDTF regulations were designed for “traditional” IDTFs that administer tests to patients in-person, at a single point in time, and from a single location, and only recently has CMS initiated changes to the regulations to address IDTFs like iRhythm that furnish “indirect tests” that do not require in-person interaction and involve technicians performing computer analyses offsite or at another location.
CMS has acknowledged that the IDTF regulations were designed for “traditional” IDTFs that administer tests to patients in-person, at a single point in time, and from a single location, and only recently has CMS initiated changes to the regulations to address IDTFs like ours that furnish “indirect tests” that do not require in-person interaction and involve technicians performing computer analyses offsite or at another location.
Recent FDA draft guidance on communication of scientific information on unapproved uses of cleared/approved medical products with HCPs further illustrates the agency’s focus on ensuring that such communications to those in a position to order or prescribe products are consistent with available scientific data and subject to organizational controls maintaining separation and distinction from promotional marketing.
Recent FDA final guidance on communication of scientific information on unapproved uses of cleared/approved medical products with HCPs further illustrates the agency’s focus on ensuring that such communications to those in a position to order or prescribe products are consistent with available scientific data and subject to organizational controls maintaining separation and distinction from promotional marketing.
For example, as discussed further in Note 8, Commitments and Contingencies, to the consolidated financial statements included herein, in March 2021, we received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with FDA and our Zio Systems, and, in September 2021, received a subpoena requesting additional information.
For example, as discussed further in Note 8, Commitments and Contingencies, to the Consolidated Financial Statements, in March 2021, we received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with FDA and our Zio Systems, and, in September 2021, received a subpoena requesting additional information.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. 42 Table of Contents Any failure to implement and maintain effective internal control over financial reporting could cause investors to lose confidence in our reported financial and other information, adversely impact our stock price, cause us to incur increased costs to remediate any deficiencies, and attract regulatory scrutiny or lawsuits that could be costly to resolve and distract management’s attention, limit our ability to access the capital markets, or cause our stock to be delisted from The Nasdaq Global Select Market or any other securities exchange on which it is then listed.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. 41 Any failure to implement and maintain effective internal control over financial reporting could cause investors to lose confidence in our reported financial and other information, adversely impact our stock price, cause us to incur increased costs to remediate any deficiencies, and attract regulatory scrutiny or lawsuits that could be costly to resolve and distract management’s attention, limit our ability to access the capital markets, or cause our stock to be delisted from The Nasdaq Global Select Market or any other securities exchange on which it is then listed.
We are involved in legal proceedings related to securities litigation and other matters and may become involved in other legal proceedings that arise from time to time in the future.
We are involved in legal proceedings related to securities litigation, patent litigation and other matters and may become involved in other legal proceedings that arise from time to time in the future.
These cyber attacks and other incidents include unauthorized access to our network, information technology and data, and that our of contractors; compromise of employee credentials and accounts; transmission of computer viruses and other malware; phishing and spamming attacks; ransomware attacks and other acts of cyber extortion; and malicious actions by persons inside our organization and other insider threats.
These cyber-attacks and other incidents include unauthorized access to our network, information technology and data, and that of our of contractors and service providers; compromise of employee credentials and accounts; transmission of computer viruses and other malware; phishing and spamming attacks; ransomware attacks and other acts of cyber extortion; and malicious actions by persons inside our organization and other insider threats.
We are also developing alternative service delivery models that include using our Zio Monitoring System or Zio XT System to screen at-risk patient populations as part of a value-added service offered by managed care organizations, including Medicare Advantage Organizations, to qualifying participants.
We are also developing alternative service delivery models that include using our Zio Monitor System or Zio XT System to screen at-risk patient populations as part of a value-added service offered by managed care organizations, including Medicare Advantage Organizations, to qualifying participants.
In addition, realization of deferred tax assets, including NOL carryforwards, depends upon our future earnings in applicable tax jurisdictions.
In addition, realization of deferred tax assets, including NOL carryforwards, depends upon our future earnings in the applicable tax jurisdictions.
If reimbursement or other payment for our Zio Services is reduced or modified in the United States, including through cost containment measures or changes to policies with respect to coding, coverage, and pricing, our business could suffer.
If reimbursement or other payment for our Zio Services is reduced or modified in the United States or in our international markets, including through cost containment measures or changes to policies with respect to coding, coverage, and pricing, our business could suffer.
In instances where FDA or an EU/UK Notified/Approved Body disagrees with our internal analysis and decision that a new or additional approval or marketing authorization or certification is not needed for any such modifications, we may be required to recall and/or stop the distribution of the impacted Zio System and/or correct the labeling for such Zio System.
In instances where FDA, an EU/UK Notified/Approved Body, the PMDA or the Swiss regulatory body disagrees with our internal analysis and decision that a new or additional approval or marketing authorization or certification is not needed for any such modifications, we may be required to recall and/or stop the distribution of the impacted Zio System and/or correct the labeling for such Zio System.
Preventive Services Task Force (“USPSTF”) published a recommendation statement on the screening criteria for Afib screening, stating that the current evidence (including the mSToPs study) is insufficient to assess the balance of benefits and harm of Afib screening, and thus found that it could neither recommend for or against screening of adults 50 years or older without a diagnosis or symptoms of Afib and without a history of transient ischemic attack or stroke.
Preventive Services Task Force (“USPSTF”) published a recommendation statement on the screening criteria for Afib screening, stating that current evidence is insufficient to assess the balance of benefits and harm of Afib screening, and thus found that it could neither recommend for or against screening of adults 50 years or older without a diagnosis or symptoms of Afib and without a history of transient ischemic attack or stroke.
Furthermore, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the United States. 49 Table of Contents Risks Related to Privacy and Security Cybersecurity risks, including those involving network security breaches, services interruptions and other incidents affecting the confidentiality, integrity or availability of our data and systems, could result in the compromise of confidential data or critical data systems and give rise to potential harm to our patients, remediation and other expenses, expose us to liability under HIPAA, breach notification laws, consumer protection laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business and operations.
Furthermore, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the United States. 48 Risks Related to Privacy and Security Cybersecurity risks, including those involving network security breaches, services interruptions and other incidents affecting the confidentiality, integrity or availability of our data and systems, could result in the compromise of confidential data or critical systems and give rise to potential harm to our patients, remediation costs and other expenses, expose us to liability under HIPAA, breach notification laws, consumer protection laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business and operations.
Accordingly, we cannot provide assurance that our collaboration with Verily or any other third party will result in the successful development of commercially viable devices and services or result in significant additional future revenues for our company.
Accordingly, we cannot provide assurance that our collaboration with any third party will result in the successful development of commercially viable devices and services or result in significant additional future revenues for our company.
While we currently derive substantially all of our revenue and maintain substantially all of our assets in the United States, we intend to continue to pursue growth opportunities outside of the United States, especially in the Philippines, the EU, the UK and Japan, and we may increase our use of administrative and support functions from locations outside the United States, which could expose us to risks associated with international sales and operations.
While we currently derive substantially all of our revenue and maintain substantially all of our assets in the United States, we intend to continue to pursue growth opportunities outside of the United States, especially in the Philippines, the EU, th e UK, Switzerland and Japan, and we may increase our use of administrative and support functions from locations outside the United States, which could expose us to risks associated with international sales and operations.
A determination that there have been violations of the TCPA or other statutes regulating communications with patients could expose us to significant damage awards that could, individually or in the aggregate, materially harm our business. 41 Table of Contents While most of our revenue results from claims submitted to payors for diagnostic medical procedures, we offer, and are looking to expand, alternative payment and service delivery models.
A determination that there have been violations of the TCPA or other statutes regulating communications with patients could expose us to significant damage awards that could, individually or in the aggregate, materially harm our business. 40 While most of our revenue results from claims submitted to payors for diagnostic medical procedures, we offer, and are looking to expand, alternative payment and service delivery models.
Further, we recognize a portion of our revenue from non-contracted third-party commercial payors. For example, during the year ended December 31, 2023, revenue from non-contracted third-party commercial payors accounted for approximately 7% of our total revenue.
Further, we recognize a portion of our revenue from non-contracted third-party commercial payors. For example, during the year ended December 31, 2024, revenue from non-contracted third-party commercial payors accounted for approximately 7% of our total revenue.
If we have insufficient future taxable income in the applicable tax jurisdiction for any reason, including any future corporate reorganization or restructuring activities, we may be limited in our ability to utilize some or all of our net operating losses to offset such income and reduce our tax liability in that jurisdiction.
If we have insufficient future taxable income in the applicable tax jurisdiction for any reason, including as a result of any future corporate reorganization or restructuring activities, we may be limited in our ability to utilize some or all of our net operating losses to offset such income and reduce our tax liability in that jurisdiction.
These policies have included, and may in the future include: basing reimbursement policies and rates on clinical outcomes, the comparative effectiveness, and costs, of different treatment technologies and services; and other measures.
These policies have included, and may in the future include: basing reimbursement policies and rates on clinical outcomes, the comparative effectiveness, and costs, of different treatment technologies and services, as well as other measures.
The TCJA of 2017 introduced a Base Erosion and Anti-Abuse Tax ("BEAT") which imposes a minimum tax on adjusted income of corporations with average applicable gross receipt of at least $500 million for the prior three tax years and that make certain payments to related foreign persons.
The TCJA introduced a Base Erosion and Anti-Abuse Tax (“BEAT”) which imposes a minimum tax on adjusted income of corporations with average applicable gross receipt of at least $500 million for the prior three tax years and that make certain payments to related foreign persons.
We could incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period. 45 Table of Contents In addition, healthcare companies are subject to numerous investigations and inquiries by various governmental agencies.
We could incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period. In addition, healthcare companies are subject to numerous investigations and inquiries by various governmental agencies.
Risks Related to Intellectual Property We are subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected devices, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.
Risks Related to Intellectual Property We may be subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected devices, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.
In addition, climate-related events, including the increasing frequency of extreme weather events, natural disasters, or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating results, and financial condition.
Further, climate-related events, including the increasing frequency of extreme weather events, natural disasters, or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating results, and financial condition.
These difficulties include challenges supporting certain operations and activities with more than one service provider, integrating technologies (including IT systems and processes, procedures, policies and operations, and retaining key personnel). These activities may be complex and time-consuming and involve delays or additional and unforeseen expenses.
These difficulties include challenges supporting certain operations and activities with more than one service provider, integrating technologies (including IT systems and processes, procedures, policies and operations), and retaining key personnel. These activities are complex and time-consuming and involve delays or additional and unforeseen expenses.
For example, FDA applies a heightened level of scrutiny to comparative claims when applying its statutory standards for advertising and promotion, including with regard to its requirement that promotional labeling be truthful and not misleading.
In addition, FDA applies a heightened level of scrutiny to comparative claims when applying its statutory standards for advertising and promotion, including with regard to its requirement that promotional labeling be truthful and not misleading.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
We may also seek to communicate certain information with physicians and scientists or with payors and similar entities, and may rely on a range of laws, regulations, regulatory guidance governing topics, including scientific exchange, and communication of healthcare economic information and product information under the Preapproval Information Exchange Act.
We may also seek to communicate certain information with physicians and scientists and their practices and health systems or with payors and similar entities, and may rely on a range of laws, regulations, regulatory guidance governing topics, including scientific exchange, and communication of healthcare economic information and product information under the Preapproval Information Exchange Act.
This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. 53 Table of Contents Notwithstanding the foregoing, our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. Notwithstanding the foregoing, our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
As of the year ended December 31, 2022, we concluded that our remediation efforts have been successful and that the previously identified material weakness in internal control over financial reporting has been remediated.
As of the year ended December 31, 2022, we concluded that our remediation efforts had been successful and that the previously identified material weakness in internal control over financial reporting had been remediated.
If CMS or any of our key commercial payors reduce reimbursement rates for our Zio Services, our business, operating results, and prospects would be adversely affected. 24 Table of Contents CMS updates the reimbursement rates for diagnostic tests performed by IDTFs annually via the Medicare Physician Fee Schedule.
If CMS or any of our key commercial payors reduce reimbursement rates for our Zio Services, our business, operating results, and prospects would be adversely affected. 22 CMS updates the reimbursement rates for diagnostic tests performed by IDTFs annually via the Medicare Physician Fee Schedule.
In addition, the trading prices for our common stock and the common stocks of other medical service providers been highly volatile as a result of macroeconomic conditions, including inflation, rising interest rates and ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East.
In addition, the trading prices for our common stock and the common stocks of other medical service providers been highly volatile as a result of macroeconomic conditions, including inflation, interest rate volatility and ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East.
During the twelve months ended December 31, 2023, we received approximately 25% of our total revenue from the Medicare program (inclusive of Medicare Advantage). The Medicare program is administered by CMS, which imposes extensive and detailed requirements on diagnostic services providers, including IDTFs.
During the twelve months ended December 31, 2024, we received approximately 24% of our total revenue from the Medicare program (inclusive of Medicare Advantage). The Medicare program is administered by CMS, which imposes extensive and detailed requirements on diagnostic services providers, including IDTFs.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing, or obtaining additional equity capital on terms that may be onerous or highly dilutive.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. If we are not effective in addressing ESG matters affecting our business, or setting and meeting relevant ESG goals, our reputation and financial results may suffer. ITEM 1B.
In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. 55 If we are not effective in addressing ESG matters affecting our business, or setting and meeting relevant ESG goals, our reputation and financial results may suffer. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
However, such methods may not be adequate to protect us or permit us to gain or maintain a competitive advantage. 48 Table of Contents For example, our patent applications may not issue as patents in a form that will be advantageous to us, or at all.
However, such methods may not be adequate to protect us or permit us to gain or maintain a competitive advantage. For example, our patent applications may not issue as patents in a form that will be advantageous to us, or at all.
In some cases, it may be medically and logistically challenging to obtain information sufficient to definitively determine all contributing factors to an event. In some instances, we may receive initial reports of complaints from the certified cardiographic technicians (“CCTs”) or through our customer service representatives.
In some cases, it may be medically and logistically challenging to obtain information sufficient to definitively determine all contributing factors to an event. In some instances, we may receive initial reports of complaints from the qualified cardiac technicians or through our customer service representatives.
We have experienced rapid growth in our headcount and in our operations. Any growth that we experience in the future will provide challenges to our organization, requiring us to expand our sales personnel, manufacturing, clinical, customer care, and billing operations and general and administrative infrastructure.
Any growth that we experience in the future will provide challenges to our organization, requiring us to expand our sales personnel, manufacturing, clinical, customer care, and billing operations and general and administrative infrastructure.
The statutes place a formula limit on how much NOLs and tax credits a corporation can use in a tax year after a change in ownership. Avoiding an ownership change is generally beyond our control. We could experience an ownership change that might limit our use of NOLs and tax credits in the future.
Sections 382 and 383 of the Code place a formula limit on how much NOLs and tax credits a corporation can use in a tax year after a change in ownership. Avoiding an ownership change is generally beyond our control. We could experience an ownership change that might limit our use of NOLs and tax credits in the future.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty owed by any director, officer, or other employee or agent of the company to us or our stockholders; any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws; any action to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty owed to us or our stockholders by any of our directors, officers, or other employees or agents; any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws; any action to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Such production or service delays or shortfalls may be caused by many factors, including the following: • while we intend to continue to expand our manufacturing capacity, our production processes may have to change to accommodate this growth, potentially involving significant capital expenditures; • we may experience technical challenges to increasing manufacturing capacity, including in connection with equipment design, automation, validation and installation, contractor issues and delays, licensing and permitting delays or rejections, materials procurement, manufacturing site expansion, problems with production yields, and quality control and assurance; • key components of our Zio Systems are provided by a sole or single supplier or limited number of suppliers, and we do not maintain large inventory levels of these components; if we experience a shortage or quality issues in any of these components, we would need to identify and qualify new supply sources, which could increase our expenses and result in manufacturing delays; • global demand and supply factors concerning commodity components common to all electronic circuits, including Zio Systems, could result in shortages that manifest as extended lead times for circuit boards, which could limit our ability to sustain and/or grow our business; • we may experience a delay in completing validation and verification testing for new production processes and/or equipment at our manufacturing facilities; • to increase our manufacturing output significantly and scale our services, we will have to attract and retain qualified employees for our operations; and • in response to unexpectedly rapid growth of our business, clinical operations capacity may not meet demand while new resources are being recruited and trained, which could negatively impact our volume capacity for our Zio Services. 31 Table of Contents If we were unable to successfully manufacture our Zio Systems in sufficient quantities, or to maintain sufficient capacity to provide our Zio Services, it would materially harm our business.
Such production or service delays or shortfalls may be caused by many factors, including the following: • while we intend to continue to expand our manufacturing capacity, our production processes may have to change to accommodate this growth, potentially involving significant capital expenditures; • we may experience technical challenges to increasing manufacturing capacity, including in connection with equipment design, automation, validation and installation, contractor issues and delays, licensing and permitting delays or rejections, materials procurement, manufacturing site expansion, problems with production yields, and quality control and assurance; • key components of our Zio Systems are provided by a sole or single supplier or limited number of suppliers, and we do not maintain large inventory levels of these components; if we experience a shortage or quality issues in any of these components, we would need to identify and qualify new supply sources, which could increase our expenses and result in manufacturing delays; • the extent to which we become dependent upon others for the manufacture of our Zio Systems which could adversely affect our future profit margins and our ability to market our Zio Services; • global demand and supply factors concerning commodity components common to all electronic circuits, including Zio Systems, could result in shortages that manifest as extended lead times for circuit boards, which could limit our ability to sustain and/or grow our business; • we may experience a delay in completing validation and verification testing for new production processes and/or equipment at our manufacturing facilities; 29 • to increase our manufacturing output significantly and scale our services, we will have to attract and retain qualified employees for our operations; and • in response to unexpectedly rapid growth of our business, clinical operations capacity may not meet demand while new resources are being recruited and trained, which could negatively impact our volume capacity for our Zio Services.
The FTC has also released updated guidance on health claims, with a high expectation for clinical data to support these claims. 40 Table of Contents In addition, making comparative claims may draw scrutiny from our competitors.
The FTC has also released updated guidance on health claims, with a high expectation for clinical data to support these claims. 39 In addition, making comparative claims may draw scrutiny from our competitors.
Any significant delay or interruption in the supply of components or sub-assemblies, such as those that we experienced during the COVID-19 pandemic, or our inability to obtain substitute components, sub-assemblies, or materials from alternate sources at acceptable prices and in a timely manner, could impair our ability to meet the demand for our Zio Services, significantly affect our future revenue, and harm our relations and reputation with physicians, hospitals, clinics, and patients. 32 Table of Contents We also rely on certain third-party vendors in connection with the analysis we perform to create diagnostic reports for our Zio Services, which is dependent upon a recording made by each Zio System.
Any significant delay or interruption in the supply of components or sub-assemblies, or our inability to obtain substitute components, sub-assemblies, or materials from alternate sources at acceptable prices and in a timely manner, could impair our ability to meet the demand for our Zio Services, significantly affect our future revenue, and harm our relations and reputation with physicians, hospitals, clinics, and patients. 30 We also rely on certain third-party vendors in connection with the analysis we perform to create diagnostic reports for our Zio Services, which is dependent upon a recording made by each Zio System.
In addition, the Organization for Economic Cooperation and Development has proposed a global minimum tax of 15% of reported profits ("Pillar 2") that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 into their domestic tax laws.
In addition, the Organization for Economic Cooperation and Development has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon in principle by over 140 countries. Many countries have taken steps to incorporate Pillar 2 into their domestic tax laws.
Although our current Zio Systems are comprised of medical devices that have received FDA marketing authorization (510(k) clearance) as well as regulatory certifications in the EU and the UK, we may regularly engage in product enhancements and in iterative changes to existing products, as well as seek to develop new technology or use of technology for new indications for use.
Although our current Zio Systems are comprised of medical devices that have received FDA marketing authorization (510(k) clearance) as well as, with respect to certain devices, regulatory certifications in the EU , Japan, Switzerland and th e UK, we may regularly engage in exploring and implementing product enhancements and in iterative changes to existing products, as well as seek to develop new technology or use of technology for new indications for use.
Verily may use the experience and insights it develops in the course of the collaboration with us to initiate or accelerate their development of products that compete with our devices and services, which may create competitive disadvantages for us.
A third party partner may use the experience and insights it develops in the course of any collaboration with us to initiate or accelerate their development of products that compete with our devices and services, which may create competitive disadvantages for us.
For example, enforcement action such as that conveyed through the May 25, 2023 warning letter we received, as well as other digital health industry regulatory developments, may also impact the availability or viability of potential opportunities.
For example, enforc ement action such as that conveyed through the FDA warning letter we received in 2023, as well as other digital health industry regulatory developments, may also impact the availability or viability of potential opportunities.
We have limited visibility as to when we will receive payment for our Zio Services with non-contracted payors and we, XIFIN, or Omega must appeal any negative payment decisions, which often delays collections further.
We have limited visibility as to when we will receive payment for our Zio Services with non-contracted payors and we or our third party billing vendors must appeal any negative payment decisions, which often delays collections further.
Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: 38 Table of Contents • federal and state laws and regulations regarding billing and claims payment; • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; • the federal False Claims Act (the “FCA”), which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government; • federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the FCPA, the UK Bribery Act of 2010, and other local anti-corruption, anti-kickback, and transparency laws that apply to our international activities; • the federal Physician Payment Sunshine Act, or Open Payments, and its implementing regulations, which requires us to report payments or other transfers of value made to licensed physicians and certain mid-level health practitioners and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • Health Insurance Portability and Accountability Act (“HIPAA“), as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which impose certain requirements relating to the privacy, security, and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services; • the GDPR and the UK Data Protection Act 2018, which each provide legal requirements for the handling and disclosure (including across borders) of personal data collected in the EU and the UK, respectively; • the FDA’s Code of Federal Regulations, including but not limited to, 21 CFR Parts 820, 803, 806, and 801, that outlines requirements for medical device design, testing, marketing authorization, manufacturing, labeling, distribution, and post-market surveillance requirements; • the EU MDD and EU MDR that outline requirements for medical device CE marking; • the UK MDR, which, post the UK’s withdrawal from the EU, replaces the CE marking requirement for medical devices sold in the UK with a UKCA mark; and • state law equivalents of each of the above U.S. federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state and foreign laws governing the privacy and security of individually identifiable information in certain circumstances (e.g., the Telephone Consumer Protection Act, the CAN-SPAM Act, and state privacy, consumer protection, and breach notification laws), many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Federal, state and international healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • state licensure laws applicable to the manufacture, marketing, distribution, and sale of medical devices; 36 • federal and state laws and regulations regarding billing, claims payment, and enrollment for participation in government healthcare programs, including regulations requiring the timely identification and refunding of overpayments to Medicare and other federally funded healthcare programs; • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; • the federal FCA, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government; • federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the FCPA, the UK Bribery Act of 2010, and other local anti-corruption, anti-kickback, and transparency laws that apply to our international activities; • the federal Physician Payment Sunshine Act, or Open Payments, and its implementing regulations, which requires us to report payments or other transfers of value made to licensed physicians and certain mid-level health practitioners and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which impose certain requirements relating to the privacy, security, and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services; • the GDPR and the UK Data Protection Act 2018, which each provide legal requirements for the handling and disclosure (including across borders) of personal data collected in the EU and the UK, respectively; • the FDA’s Code of Federal Regulations, including but not limited to, 21 CFR Parts 820, 803, 806, and 801, that outlines requirements for medical device design, testing, marketing authorization, manufacturing, labeling, distribution, and post-market surveillance requirements; • the EU MDR that outline requirements for medical device CE marking; • the UK MDR, which, post the UK’s withdrawal from the EU, replaces the CE marking requirement for medical devices sold in the UK with a UKCA mark; • the Swiss Medical Devices Ordinance, which governs the approval and importation requirements of medical devices into Switzerland; • the PMDA, which outlines comprehensive standards for the design, evaluation, marketing approval, production, labeling, distribution, and ongoing monitoring of medical devices in Japan; and • state law equivalents of each of the above U.S. federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state and foreign laws governing the privacy and security of individually identifiable information in certain circumstances (e.g., the Telephone Consumer Protection Act, the CAN-SPAM Act, and state privacy, consumer protection, and breach notification laws), many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. 37 These laws are broad in scope and available exceptions and exemptions are narrow; it is possible that some of our activities could be subject to challenge under one or more of such laws.
The overall impact of these changes is uncertain, and our business and financial condition could be adversely affected. 46 Table of Contents In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities.
In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities.
Cyber-attacks aimed at accessing our devices and services, or related devices and services, and modifying or using them in a way inconsistent with our FDA marketing authorizations and regulatory certifications in the EU and the UK, could create risks to patients.
As such, cyber-attacks aimed at accessing our devices and services, or related devices and services, and modifying or using them in a way inconsistent with our FDA marketing authorizations and regulatory certifications in the EU and the UK, may create risks to patients and potential exposure to our company.
Our failure or inability to devote adequate research and development resources or compete effectively with the research and development programs of our competitors could harm our business. 33 Table of Contents We have entered into a development agreement with a third party, and we may explore or enter into other development or collaboration agreements with other third parties in the future.
Our failure or inability to devote adequate research and development resources or compete effectively with the research and development programs of our competitors could harm our business. We have entered into in the past, and may explore or enter into in the future, development or collaboration agreements with third parties.
For example, in 2017, the U.S. government enacted the TCJA, which made significant changes to the taxation of business entities, including the requirement to capitalize research and development expenditures and amortize such expenditures over five years for domestic expenditures and fifteen years for foreign expenditures.
For example, in 2017, the U.S. government enacted the TCJA, which made significant changes to the taxation of business entities, including the requirement to capitalize research and development expenditures and amortize such expenditures over five years for domestic expenditures and fifteen years for foreign expenditures for taxable years beginning on or after January 1, 2022.
If a patient fails to return a device, we experience financial losses, which include the cost of the device as well as the loss of potential revenue for the service that is contingent on the returned device for the submission of the associated claim. Our strategic plans include a high degree of focus on the mSToPs criteria for Afib screening.
If a patient fails to return a device, we experience financial losses, which include the cost of the device as well as the loss of potential revenue for the service that is contingent on the returned device for the submission of the associated claim. 34 Our strategic plans include a high degree of focus on the marketing of our services for proactive monitoring of undiagnosed arrhythmias, such as Afib screening.
We are currently undertaking a transformation of our revenue cycle management function and we may fail to realize the anticipated benefits of these efforts.
We are transforming our revenue cycle management function and we may fail to realize the anticipated benefits of these efforts.
Because remote cardiac monitoring technology, including the Zio System, is rapidly evolving, there is a continuing risk that relative value units assigned, and reimbursement rates set, by CMS may not adequately reflect the value and expense of this technology and associated monitoring services, and CMS may reduce these rates in the future, which would adversely affect our financial results.
Because remote cardiac monitoring technology, including the Zio System, is rapidly evolving, there is a continuing risk that relative value units assigned, and reimbursement rates set, by CMS may not adequately reflect the value and expense of this technology and associated monitoring services.
For example, as discussed further in Note 8, Commitments and Contingencies, to the consolidated financial statements included herein, a putative securities class action lawsuit has been filed against the company and certain current officers or former officers of the company alleging violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder.
For example, as discussed further in Note 8, Commitments and Contingencies, to the Consolidated Financial Statements, a putative securities class action lawsuit has been filed against us and certain of our current officers or former officers alleging violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder, and two patent lawsuits have been filed against us by companies affiliated with Baxter International.
Subsequent adjustments, if applicable, are recorded as an adjustment to revenue. Fluctuations in revenue may make it difficult for us, research analysts, and investors to accurately forecast our revenue and operating results or to assess our actual performance. If our revenue or operating results fall below expectations, the price of our common stock would likely decline.
Subsequent adjustments, if applicable, are recorded as an adjustment to revenue. Fluctuations in revenue may make it difficult for us, research analysts, and investors to accurately forecast our revenue and operating results or to assess our actual performance.
We depend on third-party vendors for the supply and manufacture of certain components of our Zio Systems, as well as for other aspects of our operations. We rely on third-party vendors for components and sub-assemblies used in our Zio Systems and in connection with certain logistical aspects of our Zio Services.
We rely on third-party vendors for components and sub-assemblies used in our Zio Systems and in connection with certain logistical aspects of our Zio Services.
Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under the Braidwell Credit Agreement and any future indebtedness we may incur and to make necessary capital expenditures.
Our business may not generate cash flow from operations in the future sufficient to service our existing indebtedness and any future indebtedness we may incur and make necessary capital expenditures.
As a result, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. Risks Related to Our Debt Increasing our financial leverage could affect our operations and profitability.
As a result, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 52 Risks Related to Our Debt Our indebtedness could adversely affect our financial health and our ability to respond to changes in our business.
In its recommendation, the USPSTF also identified research needs and gaps, including for example assurance that future research involves randomized trials of diverse patient populations and conducting research to optimize the accuracy of screening for Afib.
In its recommendation, the USPSTF also identified research needs and gaps, including for example assurance that future research involves randomized trials of diverse patient populations and conducting research to optimize the accuracy of screening for Afib. This USPSTF recommendation statement may deter some clinicians or payors from selecting patients for screening for Afib.
As we seek to gain greater efficiency, we may look for ways to expand the automated portion of our Zio Services and require productivity improvements from our CCTs, within the framework of our wide-ranging regulatory obligations. Such improvements could impact the content of our Zio reports. In addition, rapid and significant growth may strain our administrative and operational infrastructure.
As we seek to gain greater efficiency, we may look for ways to expand the automated portion of our Zio Services and require productivity improvements from our qualified cardiac technicians, within the framework of our wide-ranging regulatory obligations. Such improvements could impact the content of our Zio reports.
Such adverse consequences may include an inability to secure additional contracts with commercial payors, reluctance by physicians to order our Zio Services due to concerns that patients may face significant out-of-pocket expenses associated with an out-of-network IDTF, a decline in the amount that we are reimbursed for our services, less predictable revenue, and an increase in the efforts and resources necessary to obtain reimbursement for our services on a claim-by-claim basis. 25 Table of Contents Additionally, for our out-of-network or cash pay patients, we may be subject to state and federal surprise billing laws that impose limits on amounts that can be charged to such patients and/or the amount we can receive for out-of-network services from commercial payors.
Such adverse consequences may include an inability to secure additional contracts with commercial payors, reluctance by physicians to order our Zio Services due to concerns that patients may face significant out-of-pocket expenses associated with an out-of-network IDTF, a decline in the amount that we are reimbursed for our services, less predictable revenue, and an increase in the efforts and resources necessary to obtain reimbursement for our services on a claim-by-claim basis.
In the EU, a number of interlocking rules regulate cybersecurity for medical devices. For example, the new Cybersecurity Directive (EU) 2022/2555 (also known as the NIS 2 Directive (Network and Information Security)) entered into force in January 2023 and EU Member States have until October 17, 2024 to transpose the measures into national law.
In the EU, a number of interlocking rules regulate cybersecurity for medical devices. For example, the new Cybersecurity Directive (EU) 2022/2555 (also known as the NIS 2 Directive (Network and Information Security)) entered into force in January 2023.
We are cooperating fully in connection with these matters. Any future investigations of our executives, our managers, or our company could result in significant liabilities or penalties to us, as well as adverse publicity.
Any future investigations of our executives, our managers, or our company could result in significant liabilities or penalties to us, as well as adverse publicity.
Any of the foregoing consequences could seriously harm our business and our financial results. Changes in applicable laws or regulations or the interpretation or enforcement policies of regulators governing our IDTFs and Zio Services may constrain or require us to restructure our operations or adapt certain business strategies which may harm our revenue and operating results.
Changes in applicable laws or regulations or the interpretation or enforcement policies of regulators governing our IDTFs and Zio Services may constrain or require us to restructure our operations or adapt certain business strategies which may harm our revenue and operating results. Healthcare laws and regulations, and interpretations of the same, change frequently and may change significantly in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur VP of Cybersecurity currently leads a team of cybersecurity professionals, has held leadership roles in the Cybersecurity team since joining us in 2019, and has over fifteen years of management experience within cybersecurity teams. Our CRO has held leadership roles in internal audit and risk for over a decade, including most recently as CRO of another public company.
Biggest changeAt the management level, our Cyber Security and Risk departments work together to monitor our cybersecurity and risk programs, reporting to our CISO and CRO, respectively. Our CISO currently leads a team of cybersecurity professionals, has held leadership roles in the Cybersecurity team since joining us in 2019, and has over fifteen years of management experience within cybersecurity teams.
These processes include vetting of all service providers for security, reliability, and availability; execution of a Business Associate Agreement with each provider for compliant management, storage, or processing of PHI; and confirmation by each service provider that its SOC-2 reports, or equivalent reports, are current and available, where applicable.
These processes include vetting of service providers for security, reliability, and availability; execution of a Business Associate Agreement with each provider for compliant management, storage, or processing of PHI; and confirmation by each service provider that its SOC-2 reports, or equivalent reports, are current and available, where applicable.
The results of such internal and external assessments, audits, and reviews are reported to the audit committee and the board of directors, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews. 57 Table of Contents In addition to the assessment of internal cybersecurity risks, we have implemented processes to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers that have access to our data and systems, including payors and IDTFs.
The results of such internal and external assessments, audits, and reviews are reported to the audit committee and the board of directors, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews. 56 In addition to the assessment of internal cybersecurity risks, we have implemented processes to oversee and identify risks from cybersecurity threats associated with our use of third-party service providers that have access to our data and systems, including payors and IDTFs.
In the event a service provider does not have a current and available SOC-2 or equivalent report, we complete an in-depth review of the service provider’s cybersecurity risk management and advise relevant business stakeholders of any significant identified risks.
In the event a service provider does not have a current and available SOC-2 or equivalent report, we complete a risk-based review of the service provider’s cybersecurity risk management and advise relevant business stakeholders of any significant identified risks.
Our board of directors has an important role in the oversight of the Company’s cybersecurity risk management and strategy and has delegated certain components of such oversight related to the security of and risks related to computerized information and technology systems across the company, as well as by risk area (including privacy, data security, and cybersecurity matters), to the audit committee, which regularly interacts with our Vice President of Cybersecurity (“VP of Cybersecurity”) and Chief Risk Officer (“CRO”).
Our board of directors has an important role in the oversight of the Company’s cybersecurity risk management and strategy and has delegated certain components of such oversight related to the security of and risks related to computerized information and technology systems across the company, as well as by risk area (including privacy, data security, and cybersecurity matters), to the audit committee, which regularly interacts with our Chief Information Security Officer (“CISO") and Chief Risk Officer (“CRO”).
Our Cybersecurity department, which reports to our VP of Cybersecurity, is responsible for our cybersecurity program and our Global Risk & Integrity department, which reports to our CRO, is responsible for our privacy program as further discussed below.
Our Cybersecurity department, which reports to our CISO, is responsible for our cybersecurity program and our Global Risk & Integrity department, which reports to our CRO, is responsible for our privacy program as further discussed below.
Finally, the audit committee reports out to the larger board of directors periodically on the company’s cybersecurity risks and posture. 58 Table of Contents
Finally, the audit committee reports out to the larger board of directors periodically on the company’s cybersecurity risks and posture. 57
Risks are escalated to the CRO and other members of management in accordance with our incident response and reporting policy. Our VP of Cybersecurity reports cybersecurity-related matters twice annually to the audit committee, and promptly reports any significant cybersecurity developments or incidents to our management, who may similarly escalate to the audit committee.
Our CISO reports cybersecurity-related matters twice annually to the audit committee, and promptly reports any significant cybersecurity developments or incidents to our management, who may similarly escalate to the audit committee.
Individuals in our Cybersecurity and Global Risk & Integrity departments regularly monitor the prevention, detection, mitigation and remediation of cybersecurity incidents. We have implemented procedures by which any identified or potential cybersecurity risk is communicated to the VP of Cybersecurity promptly and discussed in regular team meetings generally held several times per week.
We have implemented procedures by which any identified or potential cybersecurity risk is communicated to the CISO promptly and discussed in regular team meetings generally held several times per week. Risks are escalated to the CRO and other members of management in accordance with our incident response and reporting policy.
Removed
At the management level, our Cyber Security and Risk departments work together to monitor our cybersecurity and risk programs, reporting to our VP of Cybersecurity and CRO, respectively.
Added
Our CRO has held leadership roles in internal audit and risk for over a decade, including most recently as CRO of another public company. Individuals in our Cybersecurity and Global Risk & Integrity departments regularly monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Primary Use Approximate Square Footage Lease Expiration Year San Francisco, California Corporate Headquarters and Clinical Center 117,600 2031 Cypress, California Corporate Office and Manufacturing Facilities 68,900 2032 Deerfield, Illinois Corporate Office and Clinical Center 44,600 2033 Manila, Philippines Corporate Office 24,000 2028 Houston, Texas Clinical Center 20,300 2027 London, U.K.
Biggest changeLocation Primary Use Approximate Square Footage Lease Expiration Year San Francisco, California Corporate Headquarters and Clinical Center 117,600 2031 Cypress, California Corporate Office and Manufacturing Facilities 68,900 2032 Deerfield, Illinois Corporate Office and Clinical Center 44,600 2033 Manila, Philippines Corporate Office 24,000 2028 Houston, Texas Clinical Center 20,300 2027 Solana Beach, California Corporate Office 16,800 2032 London, United Kingdom Corporate Office and Clinical Center 9,000 2029
ITEM 2. PROPERTIES The following table summarizes the facilities leased as of December 31, 2023, including the location and size of each principal facility and their designated use. We believe that these facilities are sufficient to meet our current and anticipated future needs.
ITEM 2. PROPERTIES The following table summarizes the facilities leased as of December 31, 2024, including the location and size of each principal facility and their designated use. We believe that these facilities are sufficient to meet our current and anticipated future needs.
Removed
Corporate Office and Clinical Center 9,000 2029 Solana Beach, California Corporate Office 8,300 2031 Encinitas, California Corporate Office 3,200 2024

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn February 6, 2024, a second putative class action lawsuit was filed in the Court alleging that we and our current Chief Executive Officer, Quentin Blackford, our current Chief Financial Officer, Brice Bobzien, and Mr. Devine violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder, and seeks unspecified damages purportedly sustained by the class.
Biggest changeDevine violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder, and seeks unspecified damages purportedly sustained by the class. On July 19, 2024, an amended complaint was filed, naming us, Mr. Blackford, Mr. Bobzien, Mr.
We believe this lawsuit is without merit and plan to defend ourselves vigorously. 59 Table of Contents At this time, we are unable to predict the eventual scope, duration or outcome of the aforementioned proceedings. See also Part I, Item 1A “Risk Factors — Risks Related to Other Legal and Regulatory Matters” for more information on these matters. ITEM 4.
We believe this lawsuit is without merit and plan to defend ourselves vigorously. At this time, we are unable to predict the eventual scope, duration or outcome of the aforementioned proceedings. See also Part I, Item 1A “Risk Factors — Risks Related to Other Legal and Regulatory Matters” for more information on these matters. ITEM 4.
On September 14, 2021, we received a second subpoena requesting additional information. On April 4, 2023, we received a Subpoena Duces Tecum from the Consumer Protection Branch, Civil Division of the U.S. Department of Justice, requesting production of various documents regarding our products and services. We are cooperating fully on these matters. On February 20, 2024, Welch Allyn, Inc.
On April 4, 2023, we received a Subpoena Duces Tecum from the Consumer Protection Branch, Civil Division of the U.S. Department of Justice (the “DOJ”), requesting production of various documents regarding our products and services. We are cooperating fully on these matters.
(“Welch Allyn”), a subsidiary of Hill-Rom Holdings, Inc. which was acquired by Baxter International, Inc., filed a lawsuit against us in the United States District Court for the District of Delaware, alleging that our Zio patches infringe certain of its patents. Welch Allyn seeks money damages and attorneys’ fees.
(“Welch Allyn”), a subsidiary of Hill-Rom Holdings, Inc. now part of Baxter International, Inc., filed a lawsuit against us in the United States District Court for the District of Delaware, alleging that our Zio devices infringe certain of its patents and that the Company’s infringement was willful.
We believe the above securities class action lawsuits to be without merit and plan to continue to defend ourselves vigorously. On March 26, 2021, we received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with the Food and Drug Administration and our products and services.
On March 26, 2021, we received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California requesting information related to communications with the Food and Drug Administration and our products and services. On September 13, 2021, we received a second subpoena requesting additional information.
MINE SAFETY DISCLOSURES Not applicable. 60 Table of Contents PART II
MINE SAFETY DISCLOSURES Not applicable. 59 PART II
These matters are subject to many uncertainties and outcomes that are not predictable. On February 1, 2021, a putative class action lawsuit was filed in the United States District Court for the Northern District of California (the “Court”) alleging that we and our former Chief Executive Officer, Kevin M.
On February 6, 2024, a putative class action lawsuit was filed in the United States District Court for the Northern District of California alleging that we and our current Chief Executive Officer, Quentin Blackford, our former Chief Financial Officer, Brice Bobzien, and our former Chief Financial Officer and former Chief Operating Officer, Mr.
Removed
King, violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder. On August 2, 2021, the lead plaintiff filed an amended complaint, and filed a further amended complaint on September 24, 2021. The amended complaint names as defendants, in addition to us and Mr. King, our former Chief Executive Officer, Michael J.
Added
These matters are subject to many uncertainties and outcomes that are not predictable.
Removed
Coyle, and former Chief Financial Officer and former Chief Operating Officer, Douglas J. Devine. The purported class in the amended complaint includes all persons who purchased or acquired our common stock between August 4, 2020 and July 13, 2021, and seeks unspecified damages purportedly sustained by the class.
Added
Devine, our Chief Commercial Officer Chad Patterson, our former Chief Technology Officer Mark Day, and our Chief Medical Officer, Chief Scientific Officer, and Executive Vice President of Product Innovation Mintu Turakhia as defendants.
Removed
On October 27, 2021, we filed a motion to dismiss, which the Court granted on March 31, 2022, entering judgment in favor of us and the other defendants. On April 29, 2022, the original named plaintiff appealed to the Ninth Circuit Court of Appeals.
Added
On October 7, 2024, a second amended complaint was filed to include events from the recent FDA inspections, but otherwise included the same claims under the Exchange Act. On December 10, 2024, the defendants filed a motion to dismiss.
Removed
On October 11, 2023, after briefing by the parties and oral argument, the Ninth Circuit dismissed the appeal for lack of jurisdiction. The appellant filed a petition for rehearing en banc, which was denied on December 6, 2023.
Added
Our board members and certain of our current and former executives were named as defendants in two complaints filed as stockholder derivative actions in the United States District Court for the District of Delaware and the United States District Court for the Northern District of California, respectively. We are named as a nominal defendant in both complaints.
Added
The cases make similar allegations to those in the securities class action complaint described above and both cases have both been stayed pending the resolution of motion to dismiss briefing in the securities class action. W e believe the above securities class action and derivative lawsuits to be without merit and plan to continue to defend ourselves vigorously.
Added
On July 1, 2024, the DOJ filed with the United States District Court for the Northern District of California a Petition for Order to Show Cause and Application for Enforcement with respect to the production of certain documentary materials which we assert are protected by legal privileges.
Added
We defended our privilege assertions over such materials in our response to the DOJ’s petition. The matter has been briefed, and oral argument is scheduled for March 6, 2025. 58 On February 20, 2024, Welch Allyn, Inc.
Added
We filed a motion to dismiss Welch Allyn’s willful infringement claims on April 11, 2024. Welch Allyn filed an amended complaint on April 24, 2024 that continued to allege that our Zio devices infringe certain of its patents and that our infringement was willful.
Added
We filed a motion to dismiss Welch Allyn’s willful infringement allegations found in the amended complaint on May 22, 2024 and a hearing on the motion to dismiss was held on January 28, 2025. After hearing arguments, the Court granted our motion and the willful infringement claims in the amended complaint were dismissed without prejudice.
Added
Welch Allyn filed a second amended complaint adding additional patent claims on February 14, 2025. The Company is preparing to file a response to the allegations found in the second amended complaint no later than March 21, 2025. Welch Allyn seeks money damages and attorneys’ fees. We believe this lawsuit is without merit and plan to defend ourselves vigorously.
Added
On December 10, 2024, Bardy Diagnostics, Inc. (“BardyDx”), a subsidiary of Hill-Rom Holdings, Inc. now part of Baxter International, Inc., filed a lawsuit against us in the United States District Court for the District of Delaware, alleging that our Zio Monitor patch infringes one of its patents.
Added
On December 26, 2024, BardyDx filed an amended complaint alleging that the Company's Zio Monitor patch infringes two of its patents. We are preparing to file a response to the allegations found in the amended complaint no later than March 3, 2025. BardyDx seeks money damages and attorneys’ fees.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 61 Table of Contents 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 iRhythm Technologies, Inc. $ 100 $ 98 $ 341 $ 169 $ 135 $ 154 NASDAQ Composite $ 100 $ 135 $ 194 $ 236 $ 158 $ 226 NASDAQ Biotechnology $ 100 $ 124 $ 156 $ 155 $ 138 $ 144 S&P Healthcare Equipment Select Industry $ 100 $ 123 $ 163 $ 169 $ 130 $ 122 Securities Authorized for Issuance under Equity Compensation Plans Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Part III, Item 12 of this Annual Report on Form 10-K.
Biggest changeThe stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 iRhythm Technologies, Inc. $ 100.00 $ 348.38 $ 172.84 $ 137.57 $ 157.20 $ 132.43 NASDAQ Composite $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.77 $ 223.87 S&P Healthcare Equipment Select Industry $ 100.00 $ 133.15 $ 137.80 $ 105.61 $ 99.63 $ 105.04 60 Securities Authorized for Issuance under Equity Compensation Plans Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Part III, Item 12 of this Annual Report on Form 10-K.
The following graph shows the total stockholder return of an investment of $100 in cash at market close on December 31, 2018, through December 31, 2023 for (i) our common stock, (ii) the NASDAQ Composite Index (U.S.), (iii) the NASDAQ Biotechnology Index and (iv) the S&P Healthcare Equipment Select Industry.
The following graph shows the total stockholder return of an investment of $100 in cash at market close on December 31, 2019, through December 31, 2024 for (i) our common stock, (ii) the NASDAQ Composite Index (U.S.), and (iii) the S&P Healthcare Equipment Select Industry.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information for Common Stock Our common stock is traded on The Nasdaq Global Select Market under the symbol “IRTC”. As of February 15, 2024, there were 353 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information for Common Stock Our common stock is traded on The Nasdaq Global Select Market under the symbol “IRTC”. As of February 13, 2025, there were 345 holders of record of our common stock.
Since the NASDAQ Biotechnology Index was presented in the prior year, it has also been presented in the current year for comparison purposes. Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our common stock to date.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our common stock to date.
Removed
For the year ended December 31, 2023, the Company has elected to present the S&P Healthcare Equipment Select Industry for its peer group comparison. The Company believes that the holdings of this index more accurately reflect its peer companies.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+47 added−26 removed46 unchanged
Biggest changeComparison of the Years Ended December 31, 2023, and 2022 Year Ended December 31, 2023 % Revenue 2022 % Revenue $ Change % Change (dollars in thousands, except percentages) Revenue $ 492,681 100 % $ 410,921 100 % $ 81,760 20 % Cost of revenue 160,875 33 % 129,289 31 % 31,586 24 % Gross profit 331,806 67 % 281,632 69 % 50,174 18 % Operating expenses: Research and development 60,244 12 % 46,610 11 % 13,634 29 % Selling, general and administrative 385,645 78 % 322,198 78 % 63,447 20 % Impairment and restructuring charges 11,078 2 % 26,608 6 % (15,530) (58) % Total operating expenses 456,967 92 % 395,416 95 % 61,551 16 % Loss from operations (125,161) (25) % (113,784) (28) % (11,377) 10 % Interest expense (3,650) (1) % (4,138) (1) % 488 (12) % Interest and other income, net 6,155 1 % 2,036 1 % 4,119 202 % Loss before income taxes (122,656) (25) % (115,886) (28) % (6,770) 6 % Income tax provision 750 — % 269 — % 481 179 % Net loss $ (123,406) (25) % $ (116,155) (28) % $ (7,251) 6 % Revenue Revenue increased $81.8 million, or 20%, to $492.7 million during the year ended December 31, 2023, as compared to $410.9 million during the year ended December 31, 2022.
Biggest changeComparison of the Years Ended December 31, 2024, and 2023 Year Ended December 31, 2024 % Revenue 2023 % Revenue $ Change % Change (dollars in thousands, except percentages)* Revenue, net $ 591,839 100 % $ 492,681 100 % $ 99,158 20 % Cost of revenue 184,308 31 % 160,875 33 % 23,433 15 % Gross profit 407,531 69 % 331,806 67 % 75,725 23 % Operating expenses: Research and development 71,459 12 % 60,244 12 % 11,215 19 % Acquired in-process research and development 32,371 5 % — — % 32,371 N/M Selling, general and administrative 418,565 71 % 385,645 78 % 32,920 9 % Impairment and restructuring charges 641 — % 11,078 2 % (10,437) (94) % Total operating expenses 523,036 88 % 456,967 92 % 66,069 14 % Loss from operations (115,505) (20) % (125,161) (25) % 9,656 (8) % Interest and other income (expense), net: Interest income 21,938 4 % 6,353 1 % 15,585 245 % Interest expense (12,821) (2) % (3,650) (1) % (9,171) 251 % Loss on extinguishment of debt (7,589) (1) % — — % (7,589) N/M Other income (expense), net 1,253 — % (198) — % 1,451 (733) % Total interest and other income (expense), net 2,781 — % 2,505 1 % 276 11 % Loss before income taxes (112,724) (19) % (122,656) (25) % 9,932 (8) % Income tax provision 565 — % 750 — % (185) (25) % Net loss $ (113,289) (19) % $ (123,406) (25) % $ 10,117 (8) % N/M - Not meaningful * Certain numbers expressed may not sum due to rounding.
Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. For healthcare institutions, the transaction price is determined based on negotiated rates, and we have historical experience collecting substantially all of these contracted rates. Historical cash collections indicate that it is probable that substantially all of the transaction price will be received.
Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. 70 For healthcare institutions, the transaction price is determined based on negotiated rates, and we have historical experience collecting substantially all of these contracted rates. Historical cash collections indicate that it is probable that substantially all of the transaction price will be received.
The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of the Zio AT patch that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, but which also incorporates the Zio AT wireless gateway that provides connectivity between the patch and the ZEUS System during the patient wear period.
The Zio AT System is a prescription-only, remote ECG monitoring system that similarly consists of the Zio AT patch that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, but which also incorporates 69 the Zio AT wireless gateway that provides connectivity between the patch and the ZEUS System during the patient wear period.
During the fourth quarter of 2023, we recorded an additional impairment of our ROU asset and related property and equipment for our headquarters in San Francisco, California, due to real estate rental market conditions within San Francisco, California, of $11.1 million for the year ended December 31, 2023.
During the fourth quarter of 2023, we recorded an impairment of our ROU asset and related property and equipment for our headquarters in San Francisco, California, due to real estate rental market conditions within San Francisco, California, of $11.1 million for the year ended December 31, 2023.
As we continue to evaluate our global real estate footprint, we may incur additional impairment charges related to real property lease agreements. Revenue The majority of our revenue is derived from provision of our Zio Services to customers in the United States.
As we continue to evaluate our global real estate footprint, we may incur additional impairment charges related to real property lease agreements. 62 Revenue The majority of our revenue is derived from provision of our Zio Services to customers in the United States.
Bank Debt In October 2018, we entered into the Third Amended and Restated Loan and Security Agreement (“SVB Loan Agreement”) with Silicon Valley Bank (“SVB”). Under the SVB Loan Agreement, we had borrowed $35.0 million and had made repayments through March 2022, at which time the outstanding balance was $18.5 million.
SVB Term Loan In October 2018, we entered into the Third Amended and Restated Loan and Security Agreement (“SVB Loan Agreement”) with Silicon Valley Bank (“SVB”). Under the SVB Loan Agreement, we had borrowed $35.0 million and had made repayments through March 2022, at which time the outstanding balance was $18.5 million.
Interest Expense Interest expense is attributable to borrowings under our loan agreements. See Note 9, Debt, in the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K (the “Consolidated Financial Statements”) for further information on our loan agreements.
Interest Expense Interest expense is attributable to borrowings under our loan agreements and 2029 Notes. See Note 9, Debt, in the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K (the “Consolidated Financial Statements”) for further information on our loan agreements.
Our hybrid work arrangements and decision to pursue a sublease for our leased San Francisco headquarters resulted in an impairment of our right-of-use (“ROU”) asset and related leasehold improvements and furniture and fixtures during the year ended December 31, 2022.
Our hybrid work arrangements and decision to pursue a sublease for our leased San Francisco headquarters resulted in an impairment of our right-of-use (“ROU”) asset and related leasehold improvements and furniture and fixtures during the years ended December 31, 2023 and 2022.
Accounts Receivable, Allowance for Doubtful Accounts, and Contractual Allowances Accounts receivable include amounts due to us from healthcare institutions, third-party payors, and government payors and our related patients as a result of our normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated allowance for doubtful accounts and contractual allowances.
Provision for Credit Losses and Contractual Allowances Accounts receivable include amounts due to us from healthcare institutions, third-party payors, government payors and our related patients as a result of our normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated provision for credit losses and contractual allowances.
We establish an allowance for doubtful accounts for estimated uncollectible receivables based on our assessment of the collectability of customer accounts and recognize the provision as a component of selling, general and administrative expenses. We record a provision for contractual allowances based on the estimated differences between contracted amounts and expected collection rates.
We establish a provision for credit losses for estimated uncollectible receivables based on our assessment of the collectability of customer accounts and recognize the provision as a component of selling, general and administrative expenses. We record a provision for contractual allowances based on the estimated differences between contracted amounts and expected collection rates.
We believe that our current cash, cash equivalents, marketable securities balances, and term loans facility (discussed below), together with income to be derived from the sales of our Zio Services, will be sufficient to meet our liquidity requirements for at least the next 12 months.
We believe that our current cash, cash equivalents, and marketable securities balances, together with income to be derived from the sales of our Zio Services, will be sufficient to meet our liquidity requirements for at least the next 12 months.
See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information. • Debt interest and principal payments - On March 28, 2022, we entered into the 2022 Amendment to our SVB Loan Agreement which provided for a term loans facility in the aggregate principal amount of up to $75.0 million, of which $35.0 million was borrowed at closing.
See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements for more information. • Debt interest and principal payments - On March 28, 2022, we entered into the 2022 Amendment to our SVB Loan Agreement which provided for a term loans facility in the aggregate principal amount of up to $75.0 million, of which $35.0 million was borrowed at closing.
For contracted and CMS portfolios, we recognize revenue, net of contractual allowances, and recognize an allowance for doubtful accounts for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and our historical experience of collecting substantially all of these contracted rates.
For contracted and CMS portfolios, we recognize revenue, net of contractual allowances, and recognize a provision for credit losses for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and our historical experience of collecting substantially all of these contracted rates.
We believe Adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operational performance across our historical financial periods. In addition, this measure is frequently used by analysts, investors, and other interested parties to evaluate and assess performance.
We believe Adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operational performance across our historical financial periods.
Our Zio Monitor services are generally billable when the Zio report is issued to the physician. 69 Table of Contents The Zio XT System is the previous generation of the Zio Monitor System and is a prescription-only, remote ECG monitoring system that consists of the Zio XT patch that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, which supports the capture and analysis of ECG data recorded by the Zio XT patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS algorithm.
The Zio XT System is the previous generation of the Zio Monitor System and is a prescription-only, remote ECG monitoring system that consists of the Zio XT patch that records the electric signal from the heart continuously for up to 14 days and the ZEUS System, which supports the capture and analysis of ECG data recorded by the Zio XT patch at the end of the wear period, including specific arrhythmia events detected by the ZEUS algorithm.
The estimated denied claims are based on historical information, and judgement includes the historical period utilized. We monitor the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur.
We monitor the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur.
As PCBAs are used in a wearable Zio Monitor patch, Zio XT patch, or Zio AT patch, a portion of the cost of the PCBA is recorded as a cost of revenue. The PCBAs are charged over a period beyond one year.
As PCBAs are used in a wearable Zio Monitor patch, Zio XT patch, or Zio AT patch, a portion of the cost of the PCBA is recorded as a cost of revenue.
See Note 2, Summary of Significant Accounting Policies, in the notes to the Consolidated Financial Statements, which describes our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.
GAAP”), which requires us to make judgments, estimates, and assumptions. See Note 2, Summary of Significant Accounting Policies, in the notes to the Consolidated Financial Statements, which describes our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.
For performance-based restricted stock units (“PRSUs”), we estimate the fair value based on the closing price of our stock on the grant date and, if the award includes a market condition, a Monte Carlo simulation model.
For performance-based restricted stock units (“PRSUs”), we estimate the fair value based on the closing price of our stock on the grant date and, if the award includes a market condition, a Monte Carlo simulation model. In addition, for PRSUs, we apply a probability assessment to determine the probable achievement of the performance-based metrics.
The final step in the Zio Services is the delivery of an electronic Zio report to the prescribing physician with a summary of findings.
The final step in the Zio Services is the delivery of an electronic Zio report to the prescribing physician with a summary of preliminary findings. Our Zio Monitor services are generally billable when the Zio report is issued to the physician.
We estimated the fair value of the ROU asset related to the vacant office lease by discounting the estimated undiscounted future cash flows using the average lease capitalization rate, plus average inflation rate, for other lease transactions in the local area during the year.
We estimated the fair value of the ROU asset related to the vacant office lease by discounting the estimated undiscounted future cash flows using the average lease capitalization rate, plus average inflation rate, for other lease transactions in the local area during the year. 71 Contingent Consideration Certain agreements we entered into involve payments that are contingent upon the achievement of milestones.
We rely on third-party billing partners to submit patient claims and collect from commercial payors, certain government agencies, and patients. 62 Table of Contents The following are Zio Services shown as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Contracted third-party payors 54 % 55 % 60 % Centers for Medicare and Medicaid 25 % 25 % 14 % Healthcare institutions 14 % 14 % 18 % Non-contracted third party payors 7 % 6 % 8 % Key Business Metric Non-GAAP Financial Measure Adjusted EBITDA is a key measure we use to assess our financial performance and it is also used for internal planning and forecasting purposes.
The following are Zio Services shown as a percentage of revenue: Year Ended December 31, 2024 2023 2022 Contracted third-party payors 53 % 54 % 55 % Centers for Medicare and Medicaid 24 % 25 % 25 % Healthcare institutions 16 % 14 % 14 % Non-contracted third party payors 7 % 7 % 6 % Key Business Metric Non-GAAP Financial Measure Adjusted EBITDA is a key measure we use to assess our financial performance and it is also used for internal planning and forecasting purposes.
See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information. • Operating leases - We lease our facilities under non-cancelable operating leases.
See Note 8, Commitments and Contingencies, to our Consolidated Financial Statements for more information. • Operating leases - We lease our facilities under non-cancelable operating leases.
We base our length of time estimates for charging a portion of the PCBAs cost by evaluating how many times a PCBA can be used in testing in research and development, device loss rates, product obsolescence, and the amount of time it takes the device to go through the manufacturing, shipping, customer shelf, and patient wear time and upload process.
We base our length of time estimates for charging a portion of the PCBAs cost through several considerations, including evaluation during product development, device loss rates, product launches and obsolescence, and the amount of time it takes the device to go through the manufacturing, shipping, customer shelf, and patient wear time and upload process.
Impairment and Restructuring Charges Impairment and restructuring expenses decreased $15.5 million, or 58%, to $11.1 million during the year ended December 31, 2023, as compared to $26.6 million during the year ended December 31, 2022.
Impairment and Restructuring Charges Impairment and restructuring expenses decreased by $10.4 million, or 94%, to $0.6 million during the year ended December 31, 2024, as compared to $11.1 million during the year ended December 31, 2023.
We expect increases to the cost of revenues due to increases to materials and electronics components pricing, labor rates, shipping rates, amortization of capitalized internal-use software, and increases in the general level of inflation, partially offset by reduced costs from obtaining volume purchase discounts for our material costs, implementing scan-time algorithms and process improvements, automating manufacturing assembly and packaging, and through software-driven and other workflow enhancements to reduce labor costs.
We expect to partially offset these increases by reduced costs from obtaining volume purchase discounts for our material costs, implementing scan-time algorithms and process improvements, automating manufacturing assembly and packaging, and through software-driven and other workflow enhancements to reduce labor costs.
We have in the past been able to increase our pricing as third-party payors become more familiar with the benefits of the Zio Services and move to contracted pricing arrangements.
Our gross margin has been and will continue to be affected by a variety of factors, including increased contracting with third-party payors and institutional providers. We have in the past been able to increase our pricing as third-party payors become more familiar with the benefits of the Zio Services and move to contracted pricing arrangements.
We expect cost of revenue to increase in absolute dollars as our revenue increases due to increased direct labor, direct materials, and variable spending, as well as amortization of internal-use software, partially offset by economies of scale in relation to fixed costs such as overhead and facilities costs. 64 Table of Contents Our gross margin has been and will continue to be affected by a variety of factors, including increased contracting with third-party payors and institutional providers.
We expect cost of revenue to increase in absolute dollars as our revenue increases due to increased direct labor, direct materials, and variable spending, as well as amortization of internal-use software, partially offset by economies of scale in relation to fixed costs such as overhead and facilities costs.
Each Zio System combines an FDA-cleared and CE-marked, wire-free, patch-based,14-day wearable biosensor that continuously records ECG data with a proprietary, FDA-cleared, CE-marked cloud-based data analytic software to help physicians monitor patients and diagnose arrhythmias. Since receiving FDA clearance, we have provided the Zio Services to over six million patients and have collected over 1.8 billion hours of curated heartbeat data.
Each Zio System combines an FDA-cleared, CE-marked and Japan PMDA-approved wire-free, patch-based, 14-day wearable biosensor that continuously records ECG data with a proprietary, FDA-cleared, CE-marked cloud-based data analytic software to help physicians monitor patients and diagnose arrhythmias.
Business transformation costs include professional services and employee termination costs to augment and restructure the organization, inclusive of both outsourced and offshore resources. Adjusted EBITDA is a non-GAAP financial measure and is presented for supplemental informational purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP.
Adjusted EBITDA is a non-GAAP financial measure and is presented for supplemental informational purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP.
In addition, for PRSUs, we apply a probability assessment to determine the probable achievement of the performance-based metrics. 71 Table of Contents Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest.
Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest.
Revenue Recognition We have developed a proprietary system that combines an FDA-cleared and CE-marked wire-free, patch-based, 14-day wearable biosensor that continuously records ECG data, with a proprietary cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias. In addition, we have received CE-mark and UKCA certification for Zio XT System and ZEUS algorithm.
Revenue Recognition We have developed proprietary systems that combine a wire-free, patch-based, 14-day wearable biosensor that continuously records ECG data, with a proprietary cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias. We currently offer three Zio System options—the Zio Monitor System, the Zio XT System, and the Zio AT System.
These contracts also impose a number of obligations regarding billing and other matters, and our noncompliance with a material term of such contracts may result in a denial of the claim.
These contracts also impose a number of obligations regarding billing and other matters, and our noncompliance with a material term of such contracts may result in a denial of the claim. We account for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue.
We expect our research and development costs to increase in absolute dollars as we hire additional personnel to develop new product and service offerings, product enhancements, and clinical evidence.
Research and development expenses include payroll-related costs, including stock-based compensation, consulting services, clinical studies, laboratory supplies, milestone payments and allocated facility overhead costs. We expect our research and development costs to increase in absolute dollars as we hire additional personnel to develop new product and service offerings, product enhancements, and clinical evidence.
We earn revenue from the provision of our Zio Services primarily from contracted third-party payors, CMS, and healthcare institutions. A small percentage of our revenue is from non-contracted third-party payors.
We earn revenue from the provision of our Zio Services primarily from contracted third-party payors, CMS, and healthcare institutions. A small percentage of our revenue is from non-contracted third-party payors. We recognize revenue on an accrual basis based on estimates of the amount that will ultimately be realized, which considers the amount submitted for payment and the amount received.
We continuously review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the current macroeconomic environment, including inflation, interest rate volatility, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, and potential instability in the global banking system.
We continuously review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the current macroeconomic environment, including inflation, interest rate volatility, and potential instability in the global banking system. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds.
See Note 9, Debt, and Note 16, Subsequent Events to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information. Recent Accounting Guidance For a description of recently issued accounting guidance that is applicable to our financial statements, see Note 2, Significant Accounting Policies, to the Consolidated Financial Statements.
Recent Accounting Guidance For a description of recently issued accounting guidance that is applicable to our financial statements, see Note 2, Significant Accounting Policies, to the Consolidated Financial Statements.
We define Adjusted EBITDA for a particular period as net loss before income tax provision, depreciation and amortization, interest expense, and interest income and as further adjusted for stock-based compensation expense, impairment and restructuring charges, and business transformation costs.
In addition, this measure is frequently used by analysts, investors, and other interested parties to evaluate and assess performance. 61 We define Adjusted EBITDA for a particular period as net loss before income tax provision, depreciation and amortization, interest expense, interest income and as further adjusted for stock-based compensation expense, changes in fair value of strategic investments, impairment and restructuring charges, business transformation costs, and loss on extinguishment of debt.
Interest and Other Income, Net Interest and other income, net consists primarily of interest income which consists of interest received on our cash and cash equivalents and marketable securities as well as realized and unrealized foreign currency exchange gains or losses. 65 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022, and 2021 For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2022 Annual Report on Form 10-K, which was filed with the SEC on February 23, 2023.
See Note 9, Debt, in the notes to our Consolidated Financial Statements for further information on our loss on extinguishment of debt. 64 Results of Operations Comparison of the Years Ended December 31, 2023, and 2022 For discussion related to the results of operations and changes in financial condition for fiscal 2023 compared to fiscal 2022 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2023 Annual Report on Form 10-K, which was filed with the SEC on February 22, 2024.
The increase in research and development expenses was primarily due to higher headcount-related costs (including stock-based compensation) and further development, enhancement, and functionality of our current and future product offerings. 66 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses increased $63.4 million, or 20%, to $385.6 million during the year ended December 31, 2023, as compared to $322.2 million during the year ended December 31, 2022.
The increase in research and development expenses during the twelve months ended December 31, 2024 was primarily due to higher headcount-related costs (including stock-based compensation), consulting costs to support regulatory affairs, product development, and legal matters, and further development, enhancement and functionality of our current and future product offerings.
As of the date of this filing, we continue to hold $8.4 million in letters of credit with SVB, securing them with cash on deposit. 68 Table of Contents Braidwell Debt On January 3, 2024, we entered into the Braidwell Credit Agreement with Braidwell, which provides for a senior secured delayed draw term loan facility in an aggregate principal amount of up to $150.0 million (the “Braidwell Term Loan Facility”).
Braidwell Debt On January 3, 2024 (the “Closing Date”), we entered into the Credit, Security and Guaranty Agreement (the “Braidwell Credit Agreement”) with Braidwell Transactions Holdings LLC – Series 5 (“Braidwell”), which provided for a senior secured term loan in an aggregate principal amount of up to $150.0 million (the “Braidwell Term Loan Facility”).
Financing Activities During the year ended December 31, 2023, cash provided by financing activities was $8.8 million, a decrease of $17.9 million, as compared to $26.7 million during the year ended December 31, 2022.
Offsetting these increases in uses of cash was a decrease in property and equipment expenditures of $6.5 million. Financing Activities During the year ended December 31, 2024, cash provided by financing activities was $511.4 million, an increase of $502.6 million, as compared to $8.8 million provided by financing activities during the year ended December 31, 2023.
Material costs include both the disposable materials costs of the Zio patches and amortization of the re-usable printed circuit board assemblies ("PCBAs"). Each Zio XT patch and Zio Monitor patch includes a PCBA, and each Zio AT patch includes a PCBA and gateway board, the cost of which is amortized over the anticipated number of uses of the board.
Each Zio XT patch and Zio Monitor patch includes a PCBA, and each Zio AT patch includes a PCBA and gateway board, the cost of which is amortized over the expected useful life of the board.
An initial tranche of $75.0 million (“Initial Loan”) was funded on the Closing Date. An additional tranche of $75.0 million will be accessible through the one year anniversary of the Closing Date, so long as we satisfy certain customary conditions.
An initial tranche of $75.0 million (“Initial Loan”) was funded on the Closing Date.
As a consequence of the financial pressures and decreased profitability, some hospitals have indicated that they are lowering their capital investment plans and tightening their operational budgets.
Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, interest rate volatility make access to credit more expensive, and unrealized losses decrease available cash reserves. As a consequence of the financial pressures and decreased profitability, some hospitals have indicated that they are lowering their capital investment plans and tightening their operational budgets.
Offsetting this reduction resulted in an increase in interest expense of $1.3 million due to higher interest rates period over period. Interest and other income, net Interest and other income, net increased by $4.1 million to $6.2 million for the year ended December 31, 2023, as compared to $2.0 million for the year ended December 31, 2022.
Other Income (Expense), Net Other income (expense), net increased by $1.5 million to $1.3 million during the year ended December 31, 2024, as compared to other income (expense), net $(0.2) million during the year ended December 31, 2023.
The following table presents a reconciliation of Net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA (in thousands): Year Ended December 31, 2023 2022 2021 Net loss $ (123,406) $ (116,155) $ (101,361) Interest expense 3,650 4,138 1,169 Interest income (6,353) (2,350) (249) Income tax provision 750 269 367 Depreciation and amortization 16,348 13,405 9,842 Stock-based compensation 77,204 57,740 54,527 Impairment and restructuring charges 11,078 26,608 — Business transformation costs 15,866 5,082 — Adjusted EBITDA $ (4,863) $ (11,263) $ (35,705) 63 Table of Contents Macroeconomic Factors Our future results of operations and liquidity could be materially adversely affected by macroeconomic factors contributing to delays in payments of outstanding receivables, supply chain disruptions, including shortages and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.
The following table presents a reconciliation of Net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA (in thousands): Year Ended December 31, 2024 2023 2022 Net loss 1 $ (113,289) $ (123,406) $ (116,155) Interest expense 12,821 3,650 4,138 Interest income (21,938) (6,353) (2,350) Changes in fair value of strategic investments (1,902) — — Income tax provision 565 750 269 Depreciation and amortization 20,715 16,348 13,405 Stock-based compensation 75,978 77,204 57,740 Impairment and restructuring charges 641 11,078 26,608 Business transformation costs 11,072 15,866 5,082 Loss on extinguishment of debt 7,589 — — Adjusted EBITDA $ (7,748) $ (4,863) $ (11,263) 1 Net loss for the year ended December 31, 2024 includes $32.4 million of acquired in-process research and development expense.
Cost of Revenue Cost of revenue increased $31.6 million, or 24%, to $160.9 million during the year ended December 31, 2023, as compared to $129.3 million during the year ended December 31, 2022.
Interest Income Interest income increased by $15.6 million to $21.9 million during the year ended December 31, 2024, as compared to $6.4 million during the year ended December 31, 2023.
Cost of Revenue Cost of revenue includes direct labor, material costs, equipment and infrastructure expenses, amortization of internal-use software, allocated overhead, and shipping and handling. Direct labor includes payroll-related costs including stock-based compensation involved in manufacturing, clinical data curation, and customer service.
Direct labor includes payroll-related costs including stock-based compensation involved in manufacturing, clinical data curation, and customer service. Material costs include both the disposable materials costs of the Zio patches and amortization of the re-usable printed circuit board assemblies (“PCBAs”).
The increase is primarily due to higher interest earned from our cash and cash equivalents and marketable securities during the year ended December 31, 2023. Liquidity and Capital Expenditures Overview As of December 31, 2023, we had cash and cash equivalents of $36.2 million, marketable securities of $97.6 million, and accounts receivable of $61.5 million.
The increase was primarily attributable to the changes in the fair value of our strategic debt and equity investments recognized during the year ended December 31, 2024. 66 Liquidity and Capital Resources Overview As of December 31, 2024, we had cash and cash equivalents of $419.6 million, marketable securities of $116.0 million, and accounts receivable of $79.9 million.
Other significant expenses include professional fees for legal and accounting services, consulting fees, recruiting fees, bad debt expense, third-party patient claims processing fees, and travel expenses. In addition, we incurred business transformation costs to scale our organization during 2022 and 2023, which are intended to achieve operational efficiencies in our administrative expenses over the long-term.
Other significant expenses include professional fees for legal and accounting services, consulting fees, recruiting fees, bad debt expense, third-party patient claims processing fees, business transformation, and travel expenses. 63 Interest Income Interest income consists of interest income received on our cash and cash equivalents and marketable securities.
We have achieved milestones tied to payments totaling $11.0 million through December 31, 2023, and anticipate making additional milestone payments of $1.75 million, subject to the achievement of specified milestones. 67 Table of Contents The following table summarizes our cash flows for the years indicated (in thousands): Year Ended December 31, 2023 2022 $ Change Net cash used in operating activities $ (50,101) $ (23,012) $ (27,089) Net cash (used in) provided by investing activities (1,209) (52,434) 51,225 Net cash provided by (used in) financing activities 8,820 26,716 (17,896) Operating Activities During the year ended December 31, 2023, cash used in operating activities was $50.1 million, an increase of $27.1 million, as compared to $23.0 million during the year ended December 31, 2022.
The following table summarizes our cash flows for the years indicated (in thousands): Year Ended December 31, 2024 2023 $ Change Net cash provided by (used in) operating activities $ 3,390 $ (50,101) $ 53,491 Net cash used in investing activities (122,983) (1,209) (121,774) Net cash provided by financing activities 511,381 8,820 502,561 Operating Activities During the year ended December 31, 2024, cash provided by operating activities was $3.4 million, as compared to $50.1 million cash used in operating activities during the year ended December 31, 2023.
The increase in revenue was primarily attributable to increases in the volume of Zio Services resulting from increased demand, partially offset by a slight decline in average selling price.
Revenue, net Revenue increased by $99.2 million, or 20%, to $591.8 million during the year ended December 31, 2024, as compared to $492.7 million during the year ended December 31, 2023. The increase in revenue was primarily attributable to increases in the volume of Zio Services resulting from increased demand. Average selling price remained relatively stable period over period.
Research and Development Expenses Research and development expenses increased $13.6 million, or 29%, to $60.2 million during the year ended December 31, 2023, as compared to $46.6 million during the year ended December 31, 2022. Our research and development expenses remained proportionately inline relative to revenue between 2023 and 2022.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $32.9 million, or 9%, to $418.6 million during the year ended December 31, 2024, as compared to $385.6 million during the year ended December 31, 2023.
The decrease was primarily attributable to a net increase in proceeds from marketable securities of $64.8 million, partially offset by increases in purchases of property and equipment of $10.6 million and the purchase of a strategic investment of $3.0 million.
The increase in cash used in investing activities was primarily attributable to a net decrease in the change in marketable securities of $59.3 million, an increase of $54.0 million related to the purchase of strategic loan investments, and the acquisition of in-process research and development from BioIS of $15.0 million.
We account for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. 70 Table of Contents We make estimates around the amount of denied claims within a reporting period, a process that requires management judgment.
We make estimates around the amount of denied claims within a reporting period, a process that requires management judgment. The estimated denied claims are based on historical information, and judgement includes the historical period utilized.
The increase in cost of revenue was primarily due to increases in headcount-related costs associated with the increase in volume of Zio Services, as well as an increase of approximately $3.1 million for excess Zio XT PCBA components, and an increase of approximately $2.7 million in amortization of Zio XT PCBAs in conjunction with the commercial launch of Zio Monitor.
Cost of Revenue Cost of revenue increased by $23.4 million, or 15%, to $184.3 million during the year ended December 31, 2024, as compared to $160.9 million during the year ended December 31, 2023. The increase in cost of revenue was primarily due to increases in headcount-related costs associated with the increase in volume of Zio Services.
Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which requires us to make judgments, estimates, and assumptions.
Upon termination of the SVB Loan Agreement, SVB’s security interest in our assets and property was released. We continue to hold $8.4 million in letters of credit with SVB, securing them with cash on deposit. Critical Accounting Policies and Estimates Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (“U.S.
Interest expense Interest expense decreased by $0.5 million to $3.7 million during the year ended December 31, 2023, as compared to $4.1 million during the year ended December 31, 2022. During the year ended December 31, 2022, we incurred financing fees of $1.75 million associated with the second amendment to the SVB Loan Agreement (as defined below).
Interest Expense Interest expense increased by $9.2 million to $12.8 million during the year ended December 31, 2024, as compared to $3.7 million during the year ended December 31, 2023.
Our net proceeds from the Initial Loan were approximately $35 million, after deducting estimated debt issuance costs, fees and expenses, and repayment of our existing term loan from Silicon Valley Bank. For additional information, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 8, 2024.
An additional tranche of $75.0 million was accessible through the one-year anniversary of the Closing Date, so long as we satisfied certain customary conditions. 68 Our net proceeds from the Initial Loan were approximately $35.0 million, after deducting costs, fees and expenses, and repayment of our existing term loan from Silicon Valley Bank, as discussed below.
Removed
Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, rising interest rates make access to credit more expensive, unrealized losses decrease available cash reserves, and fiscal stimulus programs enacted during the COVID-19 pandemic continue to wind down.
Added
Since receiving FDA clearance, we have provided the Zio Services to over eight million patients and have collected over 2 billion hours of curated heartbeat data.
Removed
In the fourth quarter of 2023, we recorded an additional impairment of our ROU asset and related leasehold improvements and furniture and fixtures on our leased San Francisco headquarters, due to a continued soft real estate rental market within the city proper San Francisco, California.
Added
We rely on third-party billing partners to submit patient claims and collect from commercial payors, certain government agencies, and patients.
Removed
We recognize revenue on an accrual basis based on estimates of the amount that will ultimately be realized, which is the difference between the amount submitted for payment and the amount received. These estimates require significant judgment by management.
Added
Business transformation costs include costs associated with professional services, employee termination and relocation, third-party merger and acquisition, integration, and other costs to augment and restructure the organization, inclusive of both outsourced and offshore resources.
Removed
Revenue may be impacted by the outcome of adjudications with contracted and non- contracted payors, as well as changes in CMS reimbursement rates like we experienced with final, lower rates being established for our Zio Services as of January 1, 2024. Clinical capacity limitations may also restrict our ability to complete the performance obligations to achieve revenue recognition.
Added
Macroeconomic Factors Our future results of operations and liquidity could be materially adversely affected by macroeconomic factors contributing to delays in payments of outstanding receivables, supply chain disruptions, including shortages and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers.
Removed
Research and Development Expenses We expense research and development costs as they are incurred. Research and development expenses include payroll-related costs, including stock-based compensation, consulting services, clinical studies, laboratory supplies, and allocated facility overhead costs. In addition, we expense milestone payments, when probable, for the Development Agreement with Verily.
Added
Climate-related events, including the increasing frequency of extreme weather events, natural disasters, or other catastrophic events may cause damage or disruption to our domestic or global customers or our operations, which could have an adverse effect on our business, operating results, and financial condition.
Removed
Our selling, general and administrative expenses remained proportionately inline relative to revenue between 2023 and 2022. The increase in selling, general and administrative expenses was primarily attributable to an increase in headcount-related costs (including stock-based compensation) to support growth in our operations, as well as for incremental headcount, including executive hires, to the organization.
Added
Revenue may be impacted by the outcome of adjudications with contracted and non-contracted payors, as well as changes in CMS reimbursement rates that are updated annually. Cost of Revenue Cost of revenue includes direct labor, material costs, equipment and infrastructure expenses, amortization of internal-use software, allocated overhead, royalties, and shipping and handling.
Removed
Additionally, business transformation costs within our selling, general and administrative expenses increased approximately $10.8 million primarily associated with global expansion to scale the organization. In 2023, we also experienced increases in legal and consulting costs to support regulatory and legal matters, as well as increases in software and hardware costs to support the growth in our infrastructure.
Added
We expect increases to the cost of revenues due to increases to materials and electronics components pricing, labor rates, shipping rates, amortization of capitalized internal-use software, along with increases in the general level of inflation and potential tariffs on imports (which may complicate and increase costs associated with our supply chain).
Removed
In the first quarter of 2022, our Board of Directors ("Board") approved a plan to reduce our leased space for our headquarters in San Francisco, California. We initiated an effort to pursue a sublease of one floor (approximately 50%) of our San Francisco, California facility.
Added
We experienced an improvement in gross margin from 2023 to 2024, and continue to focus on improving gross margins in the future, while navigating through the macroeconomic and supply chain headwinds discussed above that we expect to face. Research and Development Expenses We expense research and development costs as they are incurred.
Removed
As a result, we recorded an impairment charge associated with our right of use ("ROU") leased asset and property and equipment of $23.2 million for the year ended December 31, 2022.
Added
Acquired In-Process Research and Development Expenses Our in-process research and development acquired in an asset acquisition for use in research and development activities with no alternative future use is expensed in the consolidated statements of operations.
Removed
Additionally, in the first quarter of 2022, our Board approved a restructuring plan, which resulted in severance and other employment related costs of $3.4 million for the year ended December 31, 2022.
Added
Other Income (Expense), Net Other income (expense), net consists primarily of changes in fair value of our strategic loan and equity investments, as well as realized and unrealized foreign currency exchange gains or losses. Loss on Extinguishment of Debt Loss on extinguishment of debt reflects the losses incurred in the early repayment of debt.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe SVB Loan Agreement carried a variable interest rate based on the “Prime Rate” published by The Wall Street Journal. A hypothetical 10% change in interest rates during each of the years ended December 31, 2023 and 2022 would have resulted in an immaterial impact on our Consolidated Financial Statements.
Biggest changeAs of December 31, 2023 we had total outstanding debt of $35.0 million, net of debt issuance costs relating to the 2022 Term Loans. The SVB Loan Agreement carried a variable interest rate based on the “Prime Rate” published by The Wall Street Journal.
Such interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.
In the event our foreign currency denominated assets, liabilities, sales, or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. 73 Table of Contents
The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. In the event our foreign currency denominated assets, liabilities, sales, or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. 73
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks in the ordinary course of our business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest rate sensitivities and foreign currency exchange rate sensitivity.
A hypothetical 10% change in interest rates would have had a $0.6 million and an $0.5 million impact to interest income for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, we had total outstanding debt of $35.0 million and $34.9 million, respectively, net of debt issuance costs.
A hypothetical 10% change in interest rates would have had a $2.2 million and an $0.6 million impact to interest income for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 we had $661.3 million in outstanding aggregate principal amount of fixed rate debt relating to our 2029 Notes.
We do not utilize any forward foreign exchange contracts, although we may choose to do so in the future. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
As of December 31, 2024 and 2023, we do not consider this risk to be material. We do not utilize any forward foreign exchange contracts, although we may choose to do so in the future. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made.
These risks primarily include risk related to interest rate sensitivities and foreign currency exchange rate sensitivity. 72 Table of Contents Interest Rate Sensitivity We had cash, cash equivalents and marketable securities of $133.8 million and $213.1 million as of December 31, 2023 and 2022, respectively; which consisted of bank deposits, money market funds and U.S. government securities.
Interest Rate Sensitivity We had cash, cash equivalents and marketable securities of $535.6 million and $133.8 million as of December 31, 2024 and 2023, respectively; which consisted of bank deposits, money market funds and U.S. government securities. Such interest-earning instruments carry a degree of interest rate risk.
Foreign Currency Exchange Rate Sensitivity We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars, particularly in British Pound Sterling and in Philippine Pesos. As of December 31, 2023 and 2022, we do not consider this risk to be material.
See Note 9, Debt, in the notes to our Consolidated Financial Statements for further information on our debt. Foreign Currency Exchange Rate Sensitivity We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars, particularly in British Pound Sterling, Philippine Pesos, Euros, and Swiss Francs.
Added
Accordingly, we do not have economic interest rate exposure on the 2029 notes. However, changes in interest rates could impact the fair market value of the 2029 Notes. The estimated fair value of our 2029 Notes as of December 31, 2024 was $641.2 million.
Added
A hypothetical 10% change in interest rates during the year ended December 31, 2023 would have resulted in an immaterial impact on our Consolidated Financial Statements. 72 Market Price Sensitive Instruments The 2029 Capped Calls are expected generally to reduce potential dilution to our common stock upon conversion of the 2029 Notes and/or offset any cash payments that we could be required to make in excess of the principal amount of converted 2029 Notes, with such reduction and/or offset subject to a cap.

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