KESTRA MEDICAL TECHNOLOGIES, LTD. earnings

Management highlights

- Clinical Progress and Adoption * The Assure system protected 18,000 at-risk patients in FY26, with over 6,300 new prescriptions in Q4 FY26, a 63% year-over-year increase. * Findings from the ACE-PASS real-world study (over 21,000 enrolled patients, 100% successful conversion of dangerous arrhythmias, low false alarm rates) were cited in a new publication in *Heart Rhythm*, endorsing WCD use for high-risk patients and entering scientific dialogue that may influence future guideline development. * Multiple abstracts and manuscripts from ACE-PASS and new product innovation are planned for publication over the next 12 months. - Commercial Expansion * Active sales territories expanded to 130 at the end of FY26, up from 80 at the end of FY25. Investments in commercial training reduced ramp time for new territory managers, accelerating productivity. * New prescribers grew 55% and ordering facilities grew 65% in FY26, with adoption expanding beyond initial heart failure service lines to additional cardiology specialties. * Key strategic initiatives include enterprise partnerships to embed Assure into standardized care pathways, fellowship education to build long-term prescriber networks, and focused penetration of high-volume, high in-network coverage geographies. - Product and Pipeline Innovation * An enhanced detection algorithm, designed to further reduce already low false alarm rates, launched in April 2026 and is now shipping to all new patients. * A co-development collaboration with BioBeat Technologies to expand diagnostic capabilities for hypertensive patients using Assure is progressing as planned. * Management expects continued pipeline innovation to further differentiate Assure from competitors and add clinical value to drive broader adoption. - Financial and Operational Improvements * Improved unit economics from the company's rental model, volume leverage, higher in-network patient mix, and cost reduction projects continue to drive gross margin expansion. * Investments in AI-powered tools and automation for revenue cycle management (RCM) are improving collections performance and driving future operating leverage.

Guidance

- Fiscal year 2027 revenue is guided to $137 million, representing 44% year-over-year growth from FY26, with growth driven by deeper account penetration, new account activation, and expanded commercial coverage. - The in-network patient mix is expected to remain in the low-mid 80% range as payer contracting and RCM improvements continue. - Sequential gross margin expansion is expected to continue throughout FY27, with a full-year year-over-year increase of approximately 700 basis points. Management reaffirms the long-term target of 70%+ gross margins within the next few years. - Revenue growth is expected to accelerate from the first half to the second half of FY27, due to the six-month ramp period for newly hired sales representatives who joined the firm in the back half of FY26. - Management expects the 2026 investments in commercial and RCM infrastructure to drive meaningful operating leverage in FY27 and FY28, even as continued controlled investments are made to capture market opportunity. - 40 additional sales representatives are planned to be added in FY27, a slightly slower pace than FY26, to expand coverage of uncovered U.S. territories and deepen penetration in existing territories.

Segment performance

Kestra Medical Technologies operates a single product segment centered on the Assure wearable cardioverter defibrillator (WCD) system for cardiac recovery patients. In Q4 FY26, the segment generated total revenue of $28.6 million, representing 66% year-over-year growth. Full-year FY26 revenue reached $95 million, a 59% increase compared to FY25. Q4 FY26 gross margin was 54.8%, expanding 1050 basis points year-over-year and 200 basis points sequentially, marking the 10th consecutive quarter of sequential gross margin growth. Full-year FY26 gross margin was 51.4%, an 1100 basis point increase year-over-year. GAAP operating expenses for Q4 FY26 were $55 million, compared to $55.8 million in the prior year period; adjusted for non-recurring costs and stock-based compensation, operating expenses were $44.7 million, up from $29.7 million year-over-year. GAAP net loss for Q4 FY26 was $38.8 million, an improvement from the $51.1 million net loss in Q4 FY25. Adjusted EBITDA loss was $26.7 million in Q4 FY26, compared to a $20.3 million loss in the prior year period. As of April 30, 2026, cash, cash equivalents and investments totaled $262 million, with net operating cash burn of $18.7 million in Q4 FY26, a $5.4 million reduction year-over-year.

Risks & headwinds

- Forward-looking statements, including guidance, are inherently uncertain, and actual outcomes may differ materially from current projections due to unforeseen risks, which are detailed in the company's SEC filings, including Form 10-K. - Competitor's fleet-based business model means any new product rollout will occur over 3-5 years, though competitive product launches could still impact market share. - Regulatory issues impacting a primary competitor's other divisions may lead to company-wide quality system reviews that could indirectly change competitive dynamics in the WCD market, though current regulatory actions are not directed at the competitor's WCD division. - Full market penetration of the underutilized WCD category depends on future guideline updates and broader physician adoption, which are gradual and uncertain processes.

Analyst Q&A

• Q: What assumptions underpin the FY27 $137 million revenue guidance, and what is the outlook for updated guideline recommendations supporting WCD use?

  A: Guidance is based on continued positive trends in prescription volume, in-network payer mix, RCM improvements, and expanded sales footprint (130 territories entering FY27, up from 80 in FY26). In-network mix is expected to hold in the low-mid 80% range. Updated guideline endorsement of WCDs will be a gradual journey; the recent Heart Rhythm publication citing ACE-PASS is an important first step, with full ACE-PASS manuscript publication as the next milestone toward formal guideline consideration. /A: What is the expected pace of share gains going forward, and why did the company pursue new non-dilutive financing with an M&A tranche? A: 2026 400 basis point share gains do not yet reflect the full benefit of 2026 sales hiring, so faster share gains are expected in FY26 as new representatives complete their ramp-up. In addition to share gains, the overall WCD market is growing in the low to mid teens, expanding the total opportunity. The primary motivation for the new term loan was to reduce the cost of capital by 24% compared to the prior loan. The company already had sufficient cash, but the facility adds optional flexibility for small tuck-in acquisitions of complementary technologies to leverage the company's existing cardiology sales channel; there are no pending acquisitions currently. /

• Q: Why is guidance lower than implied by market growth and projected share gains, and what is the outlook for operating leverage after higher FY26 SG&A investment?

  A: The conservative guidance reflects rational planning at the start of the fiscal year, as the company absorbs a large cohort of new sales representatives; 44% growth is still a very strong performance. FY26 was a foundational investment year, where the company hit its 130 territory goal early and invested in RCM and commercial support infrastructure. Even with this elevated investment, annual operating cash burn declined 5.4 million year-over-year. Investment pace will not be as fast in FY27, and clear operating leverage will emerge in FY27 and FY28 from 2026's investments. /

• Q: How many more sales territories will be added in FY27, and how does new product innovation strengthen competitive positioning?

  A: Approximately 40 more representatives will be added in FY27, a slightly slower pace than FY26, to cover remaining uncovered U.S. geographies and split overloaded existing territories to enable deeper penetration. The new enhanced detection algorithm is now shipping on all new units, delivering clear product differentiation versus competitors. The main competitor's new product is incremental rather than transformative, and will take 3-5 years to fully roll out across their existing fleet, leaving a clear window for Kestra to gain additional share.