iRhythm Holdings, Inc.

We are subject to various litigation, regulatory investigations, and other legal proceedings that arise in the ordinary course of our business. We are also subject to regulatory oversight by numerous regulatory and other governmental agencies, including at the federal and state levels and internationally. Such litigation, investigations and other legal proceedings could have an adverse impact on our reputation, business, and financial condition and divert the attention of our management from the operation of our business. These matters are subject to many uncertainties and outcomes that are not predictable.

We review our lawsuits, regulatory investigations, and other legal proceedings on an ongoing basis and provide disclosure and recognize loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, we establish accruals for such matters when potential losses become probable and can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in our consolidated financial statements.

On June 3, 2026, we entered into a binding Stipulation and Agreement of Settlement (the “Securities Settlement Agreement”) to fully resolve putative class action securities litigation (the "Securities Litigation") originally filed in the United States District Court for the Northern District of California in February 2024, and subsequently amended in July and October 2024, against our wholly-owned subsidiary, iRhythm Technologies, Inc. (“iRhythm Technologies") and certain current and former officers of ours and iRhythm Technologies, alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and seeking unspecified damages purportedly sustained by the class. The Securities Settlement Agreement provides for a settlement payment of $45.0 million, inclusive of lead plaintiff’s attorneys' fees and litigation expenses in exchange for the complete dismissal with prejudice of the action and a release of all claims against the named defendants in connection with the action, without any admission of fault, liability, wrongdoing or damages by the defendants. See Note 7, Commitments and Contingencies, in the notes to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on costs and insurance reimbursements associated with the Securities Litigation.

Certain of iRhythm Technologies' current and former directors and executives were named as defendants in four complaints filed as stockholder derivative actions in the United States District Court for the District of Delaware, the United States District Court for the Northern District of California, and the Delaware Court of Chancery. iRhythm Technologies is named as a nominal defendant in the complaints. The cases make similar allegations to those in the Securities Litigation described above and the parties are evaluating next steps in light of the settlement of the Securities Litigation.

On March 26, 2021, iRhythm Technologies 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, iRhythm Technologies received a second subpoena requesting additional information. On April 4, 2023, iRhythm Technologies 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 iRhythm Technologies' products and services. We are cooperating fully on these matters.

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 against iRhythm Technologies with respect to the production of certain documentary materials which iRhythm Technologies asserts are protected by legal privileges. On May 30, 2025, following a hearing on the issue, the District Court ordered iRhythm Technologies to disclose certain of the documents, finding that iRhythm Technologies had waived its asserted legal privileges. iRhythm Technologies has appealed the District Court's order to the Ninth Circuit Court of Appeals. On July 17, 2025, the Ninth Circuit Court of Appeals stayed the District Court's production order until the appeal is resolved. Briefing on the merits was completed on February 19, 2026 but oral argument has yet to be set. We intend to continue to defend iRhythm Technologies' privilege assertions over the documents at issue. Regardless of the outcome of the appeal or the potential disclosure of the documents at issue, it is not clear what, if any, action the DOJ may take following resolution of the dispute over legal privileges. In addition, on December 12, 2025, iRhythm Technologies received a civil investigative demand from DOJ’s Civil Division’s Commercial Litigation Branch seeking information and documents related to Zio AT and iRhythm Technologies' associated claims for reimbursement. On November 4, 2026, we met with the DOJ to discuss the status of the matters and to discuss potential resolution pathways. We have, and are continuing to cooperate, fully in connection with these DOJ matters.

On February 20, 2024, Welch Allyn, Inc. ("Welch Allyn"), a subsidiary of Baxter International, Inc. ("Baxter"), filed a lawsuit against iRhythm Technologies in the United States District Court for the District of Delaware, alleging that iRhythm Technologies’ Zio devices infringed certain of Welch Allyn's patents. iRhythm Technologies filed a response denying all allegations of patent infringement and asserted defenses including patent invalidity. On December 10, 2024, Bardy Diagnostics, Inc. (“BardyDx”), a subsidiary of Baxter, filed a lawsuit against iRhythm Technologies in the United States District Court for the District of Delaware, alleging that the Zio monitor infringed BardyDx's patents and iRhythm Technologies subsequently filed a response denying all allegations of patent infringement, asserted defenses including patent invalidity, and asserted patent infringement counterclaims alleging that BardyDx’s Carnation Ambulatory Monitor patch infringed iRhythm Technologies' patents. On July 31, 2026, iRhythm Technologies entered into a settlement and license agreement (the “Baxter Settlement Agreement”) with Baxter, Welch Allyn and BardyDx (collectively, the “Baxter Parties"), to resolve all outstanding patent litigation among the parties. Under the Baxter Settlement Agreement, we paid the Baxter Parties $50.0 million on July 31, 2026. The Baxter Settlement Agreement also provides each party and its affiliates with a worldwide, royalty-free, non-exclusive, fully paid-up license under the patents asserted in the litigation and other related patents and patent applications, in each case, to exploit products and services comprising or involving certain sensors used for cardiac monitoring. Except for the $50.0 million settlement payment, the Baxter Settlement Agreement does not require either party to pay royalties or other compensation. The Baxter Settlement Agreement also includes mutual covenants not to sue for six years from the effective date of the Baxter Settlement Agreement with respect to the exploitation of licensed products and services and mutual agreements not to challenge the licensed patents and patent applications, unless such licensed patents are enforced against the applicable party or its affiliates. During the three and nine months ended September 30, 2026, we recognized the $50.0 million settlement payment within Litigation settlements on our unaudited condensed consolidated statements of operations.

In 2026, a total of seven putative class action lawsuits were filed in the U.S. District Court for the Northern District of California, San Francisco Division, alleging claims arising out of a cybersecurity incident in which a threat actor improperly obtained certain sensitive information of ours maintained on certain third-party-hosted business applications. Three of the actions were filed against both iRhythm Holdings, Inc. and iRhythm Technologies, Inc., two of the actions were filed solely against iRhythm Holdings, Inc., and two of the actions were filed solely against iRhythm Technologies, Inc. We anticipate that all of the actions will be assigned to the same judge and that the court will consolidate the cases and appoint interim lead plaintiffs' counsel to promote judicial economy. We continue to evaluate the allegations, assess potential defenses, and determine the appropriate responsive pleadings. Based on the nature of the proceedings in these cases, the outcome of these matters remains uncertain and we cannot estimate the potential impact, if any, on our business or financial statements at this time.

At this time, we are unable to predict the eventual scope, duration or outcome of the aforementioned proceedings. See also Part II, Item 1A “Risk Factors — Risks Related to Other Legal and Regulatory Matters” for more information on these matters.