irtc-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

Form 10-Q

_______________________________________________________________________

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37918

_______________________________________________________________________

iRhythm Technologies, Inc.

(Exact Name of Registrant as Specified in its Charter)

_______________________________________________________________________

Delaware

20-8149544

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

699 8th Street Suite 600

San Francisco,

California

94103

(Address of Principal Executive Offices)

(Zip Code)

(415) 632-5700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	IRTC	The Nasdaq Stock Market LLC

_______________________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 25, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 31,104,883.

IRHYTHM TECHNOLOGIES, INC.

TABLE OF CONTENTS


			Page No
PART I. FINANCIAL INFORMATION			1

Item 1. Financial Statements (Unaudited):			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Loss			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Stockholders’ Equity			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			31

PART II. OTHER INFORMATION			32

Item 1. Legal Proceedings			32
Item 1A. Risk Factors			33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			65
Item 3. Defaults Upon Senior Securities			65
Item 4. Mine Safety Disclosures			65
Item 5. Other Information			65
Item 6. Exhibits			65

Exhibit Index			66

Signatures			67

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements concerning our plans, objectives, and expectations for our business, operations, and financial performance and condition, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would”, and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the expected impact of global business, political, and macroeconomic conditions, including inflation, interest rate volatility, cybersecurity events, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, potential instability in the global banking system, and volatile market conditions, and global events, including public health crises, and ongoing geopolitical conflicts, such as the war in Ukraine and conflict in the Middle East, on our business, operations, and financial results;

•the impact of supply chain disruptions on our operations and financial results;

•the impact of inflationary costs on our operations and financial results;

•plans to conduct further clinical studies, including any clinical trials initiated by third parties;

•our plans to modify our current systems and services, or identify and develop, or acquire, new products or services, to address additional indications;

•the expected growth of our business and our organization;

•our expectations regarding government and third-party payor coverage and reimbursement or other regulatory actions or decisions;

•our compliance with all applicable laws, rules, and regulations, including those of the U.S. Food and Drug Administration;

•our expectations regarding the size of our sales organization and expansion of our sales and marketing efforts, including in international geographies;

•our expectations regarding revenue, cost of revenue, cost of service per device, operating expenses, including research and development expense, sales and marketing expense and general and administrative expenses;

•our ability to retain and recruit key personnel, including the continued development of a sales and marketing infrastructure;

•our ability to obtain and maintain intellectual property protection for our systems and services;

•our estimates of our expenses, ongoing losses, future revenue, capital requirements, and our needs for, or ability to obtain, additional financing;

•our financial performance; and

•developments and projections relating to our competitors or our industry.

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We assume no obligation to update or revise these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, even if new information becomes available in the future.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) as exhibits to the Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

iii

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

(In thousands, except par value)


	March 31, 2024		December 31, 2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	520,421	$	36,173
Marketable securities	48,671		97,591
Accounts receivable, net	89,712		61,484
Inventory	14,873		13,973
Prepaid expenses and other current assets	13,778		21,591
Total current assets	687,455		230,812
Property and equipment, net	112,274		104,114
Operating lease right-of-use assets	48,073		49,317
Restricted cash, long-term	8,358		—
Goodwill	862		862
Other assets	52,733		48,039
Total assets	$	909,755	$	433,144
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,440	$	5,543
Accrued liabilities	70,044		83,362
Deferred revenue	3,068		3,306
Operating lease liabilities, current portion	15,289		15,159
Total current liabilities	96,841		107,370
Long-term senior convertible notes	644,076		—
Debt, noncurrent portion	—		34,950
Other noncurrent liabilities	908		1,012
Operating lease liabilities, noncurrent portion	77,640		79,715
Total liabilities	819,465		223,047
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value – 5,000 shares authorized; none issued and outstanding at March 31, 2024 and December 31, 2023	—		—
Common stock, $0.001 par value – 100,000 shares authorized; 31,326 shares issued and 31,097 shares outstanding at March 31, 2024, respectively; and 30,954 shares issued and outstanding at December 31, 2023	31		31
Additional paid-in capital	806,621		855,784
Accumulated other comprehensive loss	(89)		(112)
Accumulated deficit	(691,273)		(645,606)
Treasury stock, at cost; 229 and 0 shares at March 31, 2024 and December 31, 2023, respectively	(25,000)		—
Total stockholders’ equity	90,290		210,097
Total liabilities and stockholders’ equity	$	909,755	$	433,144

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)


	Three Months Ended March 31,
	2024		2023
(unaudited)
Revenue, net	$	131,929	$	111,436
Cost of revenue	44,413		35,755
Gross profit	87,516		75,681
Operating expenses:
Research and development	16,994		14,842
Selling, general and administrative	108,660		100,343

Total operating expenses	125,654		115,185
Loss from operations	(38,138)		(39,504)
Interest expense	(2,860)		(950)
Interest and other income, net	2,952		1,432
Loss on extinguishment of debt	(7,589)		—
Loss before income taxes	(45,635)		(39,022)
Income tax provision	32		87
Net loss	$	(45,667)	$	(39,109)
Net loss per common share, basic and diluted	$	(1.47)	$	(1.29)
Weighted-average shares, basic and diluted	31,033		30,297

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)


	Three Months Ended March 31,
	2024		2023
(unaudited)
Net loss	$	(45,667)	$	(39,109)
Other comprehensive income (loss):
Net change in unrealized (loss) gain from marketable securities	(54)		327
Cumulative translation adjustment	77		—
Comprehensive loss	$	(45,644)	$	(38,782)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)


	Three Months Ended March 31,
	2024		2023
(unaudited)
Cash flows from operating activities
Net loss	$	(45,667)	$	(39,109)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,131		3,576
Stock-based compensation	20,991		18,251
Amortization of premium and accretion of discounts, net	(908)		(1,137)
Amortization of operating lease right-of-use assets	1,244		1,365
Amortization of debt discount	578		—
Provision for doubtful accounts and contractual allowances	16,289		21,425
Loss on extinguishment of debt	7,589		—

Other	106		176
Changes in operating assets and liabilities:
Accounts receivable	(44,518)		(21,064)
Inventory	(923)		(1,404)
Prepaid expenses and other current assets	7,813		(1,053)
Other assets	(4,694)		(3,189)
Accounts payable and accrued liabilities	(12,877)		(8,966)
Deferred revenue	(238)		435
Operating lease liabilities	(1,945)		(59)
Net cash used in operating activities	(52,029)		(30,753)
Cash flows from investing activities
Purchases of property and equipment	(9,776)		(8,423)
Purchases of marketable securities	(2,426)		(33,757)

Maturities of marketable securities	52,200		46,000

Net cash provided by investing activities	39,998		3,820
Cash flows from financing activities
Payment of SVB term loan and termination costs	(37,751)		—
Proceeds from Braidwell debt	75,000		—
Payments of issuance costs for Braidwell debt	(1,803)		—
Payment of Braidwell debt and termination costs	(78,660)		—
Proceeds from issuance of 2029 Notes	661,250		—
Payments of issuance costs for 2029 Notes	(16,592)		—
Purchases of capped call transactions	(72,407)		—
Purchase of treasury stock	(25,000)		—
Proceeds from issuance of common stock in connection with employee equity incentive plans	604		905
Net cash provided by financing activities	504,641		905
Effect of exchange rate changes on cash	(4)		—
Net increase (decrease) in cash, cash equivalents, and restricted cash	492,606		(26,028)
Cash, cash equivalents, and restricted cash, beginning of period	36,173		78,832
Cash, cash equivalents, and restricted cash, end of period	$	528,779	$	52,804
Supplemental disclosures of cash flow information:
Interest paid	$	1,595	$	678
Cash taxes paid	$	11	$	8
Cash received from tenant improvement allowances	$	—	$	1,603
Non-cash investing and financing activities:
Property and equipment costs included in accounts payable and accrued liabilities	$	23	$	203

Capitalized stock-based compensation in property and equipment	$	1,649	$	1,648

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

The following table provides a breakdown of cash and cash equivalents, and restricted cash reported within the statement of cash flows:


	Three Months Ended March 31,
	2024		2023
Cash and cash equivalents	$	520,421	$	52,804
Restricted cash, long-term	8,358		—
Total cash, cash equivalents and restricted cash	$	528,779	$	52,804

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

IRHYTHM TECHNOLOGIES, INC.

Condensed Consolidated Statement of Stockholders’ Equity

(In thousands)

Common Stock

Additional

Paid-In

Capital

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Treasury Stock

Total Stockholders' Equity

Amount

(unaudited)

Balances at December 31, 2023

30,954

SEC Form 10-Q filed by iRhythm Technologies Inc.