Registered number: 10055682 (England and Wales)
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
iRhythm Technologies Ltd ('the Company') is a leading digital healthcare company that creates trusted solutions that detect, predict, and prevent disease. Operating in support of its parent company, iRhythm Technologies, Inc., the Company's business is designing, developing, and commercializing device-based technology to provide ambulatory cardiac monitoring services that allow clinicians to diagnose certain arrhythmias quicker and more efficiently than other services that rely on traditional technology.
The Company’s products and services, called 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. The Company has 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 FDA-cleared and CE-marked cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias (collectively, the “Zio System”). The Company currently offers three Zio System options — the Zio Monitor System, the Zio XT System, and the Zio AT System.
Profit on ordinary activities before taxation for the year ended 31 December 2023 was £612,345 (2022: £453,936). As of 31 December 2023 the net assets of the Company amount to £4,110,134 (2022: £2,715,918).
During the fiscal year total revenue remained flat year over year. Turnover is derived from providing digital healthcare services to customers and intercompany recharges to its parent company, iRhythm Technologies, Inc., 2023 digital healthcare services revenue was £2,600,628 (2022: £4,234,184) and 2023 intercompany sales was £7,824,389 (2022: £6,164,183)
The Company's short and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict or beyond the Company’s control.
Risks related to the Company’s industry include reimbursement by Medicare is highly regulated and subject to change, and the Company’s failure to comply with applicable regulations, including regulations not designed for remote diagnostic tests like Zio Services, which could prevent the Company from receiving reimbursement under the Medicare program and some commercial payors, subject to penalties, and adverse reputation, business, and results of operations. The Company’s revenue relies on Zio Services, currently the only offering. If Zio Services or future service offerings fail to gain, or lose, the business will suffer. The market for remote cardiac monitoring solutions is highly competitive. If competitors can develop or market monitoring devices and services that are more effective or gain greater acceptance in the marketplace than any services and related devices we develop, our commercial opportunities will be reduced or eliminated. 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, the Company may regularly engage in product enhancements and other iterative changes to existing products, as well as seek to develop new technology or use of technology for new indications for use. These medical device developments may trigger further regulatory reviews and the results of those reviews are unpredictable.
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company's key performance indicator is turnover. Total turnover remained consistent this year (2022: 22% increase). Digital healthcare services revenue decreased by 39%, primarily due to the ramp-down of a significant program. Intercompany revenue increased by 27% due to ramp up of sales and marketing activity with parent company iRhythm Technologies, Inc.
The Company monitors market penetration and increases in market share.
Future developments
The Company continues to innovate to create trusted solutions that detect, predict, and prevent disease. The key elements of the Company’s strategy include further penetration and expansion of the U.S. ambulatory cardiac monitoring market, pursuing international expansion opportunities, exploring adjacent market opportunities, and advancing the Company’s system portfolio and core technology offering.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
As permitted by S414c (11) certain information required to be presented in the Directors' Report has been otherwise included in the Strategic Report.
The directors who served during the year were:
The following changes to directorships were made post year end but prior to the approval of these financial statements: B A Bobzien (resigned 31 August 2024) D G Wilson (appointed 1 September 2024)
The profit for the year, after taxation, amounted to £366,146 (2022 - £366,126).
The directors have not proposed a dividend for the current year (2023: £NIL).
There are no key future developments.
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
There was one non-adjusting post balance sheet event - please see note 19.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF IRHYTHM TECHNOLOGIES LTD.
We have audited the financial statements of iRhythm Technologies Ltd. (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF IRHYTHM TECHNOLOGIES LTD. (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF IRHYTHM TECHNOLOGIES LTD. (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
∙the responsible individual ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
∙we identified the laws and regulations applicable to the Company through discussions with directors and other management, and from our commercial knowledge and experience;
∙we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the Company, including the Companies Act 2006, taxation legislation;
∙we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
∙identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
∙making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
∙considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
We identified a fraud risk in relation to revenue recognition is significant in line with ISA 240 and designed and implemented appropriate audit procedures in this area. Audit procedures included but were not limited to substantive testing from customer contracts and internal sales reports. We traced these to sales invoices and subsequent bank receipts. Lastly, we reviewed the bank for large and unusual transactions external to the normal customer base.
To address the risk of fraud through management bias and override of controls, we:
∙performed analytical procedures to identify any unusual or unexpected relationships;
∙tested journal entries to identify unusual transactions;
∙assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
∙investigated the rationale behind significant or unusual transactions.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF IRHYTHM TECHNOLOGIES LTD. (CONTINUED)
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
∙agreeing financial statement disclosures to underlying supporting documentation;
∙reading the minutes of meetings of those charged with governance;
∙enquiring of management as to actual and potential litigation and claims; and
∙reviewing correspondence with HMRC and the Company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance.
Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants and Statutory Auditors
Birchin Court
5th Floor
19-25 Birchin Lane
United Kingdom
EC3V 9DU
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
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STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 13 to 24 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
iRhythm Technologies Ltd. is a private company, limited by shares, incorporated in England. The registered office can be found on the company information page.
2.Accounting policies
The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions under FRS 101:
∙the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share-based payment
∙the requirements of IFRS 7 Financial Instruments: Disclosures
∙the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:
- paragraph 79(a)(iv) of IAS 1;
∙the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements
∙the requirements of IAS 7 Statement of Cash Flows
∙the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
This information is included in the consolidated financial statements of iRhythm Technologies, Inc. as at 31 December 2023 and these financial statements may be obtained from www.sec.gov.
The Company is in a net asset position at the balance sheet date, supported by cash reserves and an intercompany receivable. The Company has received written confirmation from its parent company, iRhythm Technologies, Inc., that it will continue to provide financial support for a period of at least 12 months from the date of signing these financial statements. For these reasons, the directors continue to adopt the going concern basis in preparing the financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Turnover is recognised as services are used by the customer. Turnover can only be recognised when each of the following criteria are met: The Company also recharges its expenditure on a cost plus basis to its parent company iRhythm Technologies, Inc., in accordance with an intercompany services agreement.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
Certain employees of the Company are entitled to stock option grants, Restricted Stock Units ("RSUs") and shares under the Employee Stock Purchase Programme ("ESPP") in iRhythm Technologies, Inc., the parent company. The share options and ESPP shares are granted at an independently determined fair value using the Black-Scholes option pricing model. The RSU shares are valued at the fair value at the grant date. Shares granted under the 2016 Equity Incentive Plan are granted at a price of not less than 100% of the fair market value of the common stock at the date of grant. Shares granted under the Employee Stock Purchase Plan are discounted at a rate of 85% of the lower of the fair market value of the Company's common stock on the first date of the offering period or on the last day of the purchase period as defined in the terms of the agreement.
An expense equivalent to the fair value of the share options granted is recognised evenly over the vesting period, with a corresponding amount being recognised in the capital contribution reserve.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Incremental borrowing rate In accordance with IFRS 16, management have been required to assess the time value of money in relation to long term liabilities. As a result, 4.75% has been identified as the Company's incremental borrowing rate, which has been based on the incremental borrowing rate obtained by the parent company, in connection with its own borrowings.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
On 24 May 2021, Finance Bill 2021 was substantively enacted. The result of this is that the main rate of corporation tax for the UK has increased to 25% from 1 April 2023.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Share premium account
Capital contribution reserve
An expense equivalent to the fair value of the share options granted is recognised evenly over the vesting period, four years, with a corresponding amount being recognised in the capital contribution reserve. On forfeiture or cancellation of an individual's share based payments, vesting is stopped and outstanding shares are transferred from the capital contribution reserve to the profit and loss reserve.
iRhythm Technologies, Inc., is the parent of the smallest group for which consolidated financial statements are drawn up of which the Company is a member. The registered office of the parent company is 699 8th Street, Suite 600, San Francisco, CA 94103.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
This is a non-adjusting post balance sheet event. There were no adjusting or other non-adjusting events occurring between the end of the reporting period and the date these financial statements were approved.
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