iRhythm (NASDAQ:IRTC) Surprises With Strong Q1, Full-Year Sales Guidance is Optimistic

Yahoo

01-05-2025

Medical technology company iRhythm Technologies (NASDAQ:IRTC) reported Q1 CY2025 results beating Wall Street's revenue expectations , with sales up 20.3% year on year to $158.7 million. The company's full-year revenue guidance of $695 million at the midpoint came in 2% above analysts' estimates. Its non-GAAP loss of $0.95 per share was 1.5% below analysts' consensus estimates.
Is now the time to buy iRhythm? Find out in our full research report.
Revenue: $158.7 million vs analyst estimates of $153.6 million (20.3% year-on-year growth, 3.3% beat)
Adjusted EPS: -$0.95 vs analyst expectations of -$0.94 (1.5% miss)
Adjusted EBITDA: -$2.64 million vs analyst estimates of -$5.03 million (-1.7% margin, 47.6% beat)
The company lifted its revenue guidance for the full year to $695 million at the midpoint from $680 million, a 2.2% increase
Operating Margin: -20.5%, up from -28.9% in the same quarter last year
Market Capitalization: $3.41 billion
"The first quarter of 2025 demonstrated continued commercial momentum, with revenue growth exceeding 20% year-over-year, driven by upstream expansion in the patient care pathway and strength in our Zio AT business," said Quentin Blackford, President and Chief Executive Officer of iRhythm.
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
A company's long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, iRhythm's 21.9% annualized revenue growth over the last five years was excellent. Its growth beat the average healthcare company and shows its offerings resonate with customers.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. iRhythm's annualized revenue growth of 19.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.
This quarter, iRhythm reported robust year-on-year revenue growth of 20.3%, and its $158.7 million of revenue topped Wall Street estimates by 3.3%.
Looking ahead, sell-side analysts expect revenue to grow 14.4% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is commendable and indicates the market is baking in success for its products and services.
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iRhythm's high expenses have contributed to an average operating margin of negative 23.9% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It's hard to trust that the business can endure a full cycle.
On the plus side, iRhythm's operating margin rose by 4.7 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its recent improvements as the company's margin has increased by 6.6 percentage points on a two-year basis.
In Q1, iRhythm generated a negative 20.5% operating margin. The company's consistent lack of profits raise a flag.
Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
iRhythm's earnings losses deepened over the last five years as its EPS dropped 5.5% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, iRhythm's low margin of safety could leave its stock price susceptible to large downswings.
In Q1, iRhythm reported EPS at negative $0.95, up from negative $1.23 in the same quarter last year. Despite growing year on year, this print slightly missed analysts' estimates. Over the next 12 months, Wall Street expects iRhythm to improve its earnings losses. Analysts forecast its full-year EPS of negative $2.80 will advance to negative $1.47.
We enjoyed seeing iRhythm beat analysts' revenue and EBITDA expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street's estimates. On the other hand, its EPS slightly missed. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 4.6% to $114.01 immediately following the results.
iRhythm put up rock-solid earnings, but one quarter doesn't necessarily make the stock a buy. Let's see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it's free.