iRhythm Holdings, Inc.IRTC
iRhythm Holdings, Inc. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The U.S. government securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.
The Company had no transfers between levels of the fair value hierarchy of its assets measured at fair value.
The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds | $ | 142,423 | $ | — | $ | — | $ | 142,423 | |||||||||||||||
| U.S. government securities | — | 347,751 | — | 347,751 | |||||||||||||||||||
| Strategic investments | — | — | 69,913 | 69,913 | |||||||||||||||||||
| Total | $ | 142,423 | $ | 347,751 | $ | 69,913 | $ | 560,087 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Contingent consideration | — | — | 20,407 | 20,407 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 20,407 | $ | 20,407 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds | $ | 40,654 | $ | — | $ | — | $ | 40,654 | |||||||||||||||
| U.S. government securities | — | 276,524 | — | 276,524 | |||||||||||||||||||
| Strategic investments | — | — | 61,902 | 61,902 | |||||||||||||||||||
| Total | $ | 40,654 | $ | 276,524 | $ | 61,902 | $ | 379,080 | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Contingent consideration | — | — | 17,371 | 17,371 | |||||||||||||||||||
Total | $ | — | $ | — | $ | 17,371 | $ | 17,371 | |||||||||||||||
Fair Value of Strategic Investments
The Company holds strategic investments upon which it measures the fair value on a recurring basis. The carrying value of these investments are $69.9 million and $61.9 million as of December 31, 2025 and 2024, respectively.
The Company's strategic investments are with privately held companies, and as such, limited information is available. On a quarterly basis, the Company monitors information that becomes available and adjusts the carrying values of these investments if there are identified events or changes in circumstances that have a significant effect on their fair values. The strategic investments are categorized as Level 3 investments within the fair value hierarchy due to the uncertainty of the fair value measurement with respect to the use of significant unobservable inputs and included within long-term strategic investments in the Company’s consolidated balance sheets.
During the year ended December 31, 2024, the Company made an aggregate of $55.0 million in strategic loan investments in BioIntelliSense, Inc. (“BioIS”), a privately-held company. The loan investments have maturity dates ranging from April 2029 through August 2029. The loan investments can convert into preferred shares of BioIS based upon certain qualifying financing events.
The aggregate fair value of the BioIS strategic loan investments is $63.7 million and $56.4 million as of December 31, 2025 and 2024, respectively. In accordance with ASC 820, Fair Value Measurement, the Company elected to apply the fair value option to these strategic loan investments, with changes in fair value reported within other income (expense), net in the Company's consolidated statements of operations at each reporting period. During the year ended December 31, 2025 and 2024, the Company increased the fair value of the strategic loan investments by $7.3 million and $1.4 million, respectively. The fair value of the loan investments in BioIS is determined by using a probability-weighted expected return model (“PWERM”) and a discounted cash flow valuation model with scenarios that correspond to the contractual settlement events. The determination of fair value involves significant assumptions such as discount rates, volatility rates, and expected years. These unobservable inputs represent a Level 3 measurement, as they are supported by little or no market activity and reflect the Company's own assumptions in measuring fair value.
In June 2025, BioIS achieved the first of two regulatory milestones. As of December 31, 2025, BioIS and the Company are in the process of completing all required contractual conditions in order to cancel $10.0 million in strategic loan investments plus accrued and unpaid interest. Refer to Note 8, Commitments and Contingencies for further discussion.
The following table sets forth the recurring Level 3 fair value measurements of the loan investment including the significant unobservable inputs:
| December 31, 2025 | December 31, 2024 | |||||||
| Discount rate | 10.8 | % | 12.0 | % | ||||
| Equity volatility | 85.0 | % | 67.0 | % | ||||
| Expected years (range) | 2026 - 2029 | 2025 - 2029 | ||||||
During the year ended December 31, 2025, the Company made a $2.3 million strategic loan investment in a separate privately-held company. The fair value of the strategic loan investment was $2.4 million as of December 31, 2025.
During the year ended December 31, 2024, the Company made a $2.0 million strategic loan investment in a separate privately-held company. During the fourth quarter and year ended December 31, 2025, the Company recorded a full reserve against this strategic loan investment. The fair value of the strategic loan investment was nil and $2.0 million as of December 31, 2025 and December 31, 2024, respectively. The change in fair value is recorded within other income (expense), net in the Company’s consolidated statements of operations.
During the year ended December 31, 2023, the Company made a $3.0 million strategic equity investment in a separate privately-held company. During the years ended December 31, 2025 and 2024, the Company increased the fair value of this strategic equity investment by $0.3 million and $0.5 million, respectively. The carrying value of this strategic equity investment is $3.8 million and $3.5 million as of December 31, 2025 and 2024, respectively. The change in fair value is recorded within other income (expense), net in the Company’s consolidated statements of operations.
The following table sets forth the changes in the estimated fair value of the Company's strategic investments measured on a recurring basis (in thousands):
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 | |||||||||||||||
| Balance, beginning of period | $ | 61,902 | $ | 3,000 | $ | — | |||||||||||
| Additions during the period | 2,300 | 57,000 | 3,000 | ||||||||||||||
| Changes in estimated fair value | 5,711 | 1,902 | — | ||||||||||||||
| Balance, end of period | $ | 69,913 | $ | 61,902 | $ | 3,000 | |||||||||||
Contingent Consideration Liabilities
The Company established contingent consideration liabilities in conjunction with the development milestones associated with the acquisition of certain technology from BioIS. The fair value of contingent consideration liabilities is determined using PWERM, with scenarios that correspond to the contractual settlement events. There are significant inputs of such model that are not observable in the market, such as probability of achievement of stated milestones and expected term. The unobservable inputs represent a Level 3 measurement. Fair value adjustments to contingent consideration liabilities are assessed quarterly and recorded through operating expenses within acquired in-process research and development in the consolidated statements of operations. Refer to Note 8, Commitments and Contingencies, for further details relating to the BioIS contingent consideration liabilities.
The following table sets forth the recurring Level 3 fair value measurements of contingent consideration liabilities associated with the development agreement milestones including the significant unobservable inputs:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Probability of achievement (range) | 79.0% - 100.0% | 75.0% - 90.0% | |||||||||
| Expected years | 2026 | 2025 - 2026 | |||||||||
During the year ended December 31, 2025, the Company increased the probability of achievement assumptions based upon the projected achievement of a remaining future regulatory milestone. Refer to Note 8, Commitments and Contingencies, for further details relating to the BioIS regulatory milestones.
Contingent consideration liabilities for BioIS at the inception of acquisition of the licensed technology were $17.0 million. Contingent consideration liabilities were $20.4 million and $17.4 million as of December 31, 2025 and 2024, respectively, and were included in accrued liabilities in the Company’s consolidated balance sheet.
The following table sets forth the changes in the estimated fair value of the Company’s contingent consideration liabilities measured on a recurring basis (Level 3) (in thousands):
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | ||||||||||
| Balance, beginning of period | $ | 17,371 | $ | — | |||||||
| Addition during the period | — | 16,970 | |||||||||
| Changes in estimated fair value | 3,036 | 401 | |||||||||
| Balance at end of period | $ | 20,407 | $ | 17,371 | |||||||
The following table sets forth the balances of the contingent consideration liabilities (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Accrued liabilities | $ | 20,407 | $ | 9,701 | |||||||
| Other noncurrent liabilities | — | 7,670 | |||||||||
| Balance at end of period | $ | 20,407 | $ | 17,371 | |||||||
Fair Value of Senior Convertible Notes
The fair value, based on a quoted market price (Level 1), of the Company’s 2029 Notes is as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Senior Convertible Notes due 2029 | $ | 924,097 | $ | 641,214 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 4, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 31, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.