KESTRA MEDICAL TECHNOLOGIES, LTD. Q1 FY2026 earnings call

• Kestra had a strong start to fiscal '26, with over 4,200 prescriptions written for the ASSURE system, a 51% year-over-year increase. • Highlighted the mission of protecting lives, with an example of the ASSURE system saving a patient's life. • Discussed growth drivers including expanding the sales organization, improving revenue cycle management and bringing more payers in-network, continuing to add to the device fleet, and building clinical evidence with a completed FDA post-approval study enrollment. • Gross margin is expected to continue expanding, with confidence in achieving 70% plus margins in the next few years.

In the first quarter, Kestra Medical Technologies reported total revenue of $19.4 million, a 52% year-over-year increase. Gross margin was 45.7% in the first quarter, compared to 32.9% in the prior year period, marking the seventh consecutive quarter of gross margin expansion. Revenue growth was driven by a 51% year-over-year increase in prescriptions, with higher in-network mix contributing to revenue per fit and volume leverage lowering cost per fit.

• Kestra expects revenue of $88 million for fiscal year 2026, a 47% increase compared to fiscal year 2025, up from prior guidance of $85 million. • Guidance is underpinned by expectations of strong growth in prescriptions due to market share gains with existing customers and activation of new accounts, and revenue per fit benefiting from a higher mix of in-network patients and improved revenue cycle management capabilities.

• Uncertainties related to market penetration and payer contract negotiations, as there are over 3,000 payers in the U.S. with a long tail of regional and local payers to engage. • Operational execution risks, including the challenge of onboarding new sales representatives quickly and ensuring they reach expected productivity levels.

Q: Congrats on a good quarter. Maybe to start on guidance. Nice to see a raise by more than the beat. Just helping us understand kind of what's driving the confidence to raise this much in beginning of the year and how to think about any cadence over the course of the year as we update our models?

A: Brian Webster stated they had a strong Q1 and are bullish about the rest of the year, comfortable with the guidance update and excited about the second quarter.

Q: Just kind of understanding like what you guys are doing on the ground to improve the in-network mix, where the mix can be over the course of this year and next few years and maybe to think about the impact on gross margins as well as we go forward?

A: Brian Webster mentioned in-network mix went from 70% at IPO to ~80% currently, expecting a slow incline as they add more payers, with sales territories added where there's known WCD demand and good payer coverage, positively impacting revenue per fit and gross margins.

Q: Two things I'd like to follow up on a little bit. One, actually, you just touched on in your response to Travis, Brian, this notion, and you've said it from the beginning, this notion of expanding into areas where there's greater in-network opportunity or however, I should phrase the words. Where are you in that process? And I mean, is there any way to quantify or give us a more granular understanding of like what happened in the last few months and what's going to happen now this year in terms of that kind of a move?

A: Brian Webster said payer additions aren't linear, more like a sawtooth curve, continuing to increase and benefit the business model, with Vaseem Mahboob adding conversion rate expected to increase from the high 40s to high 50s over the next couple of years.

Q: Would love to talk about the prescription number in the quarter because that was really strong, up about 300 sequentially. This time last year, we were roughly flat. So I would just love to hear about the improvements that we're seeing on the prescription side of the business. And I think I think you're now roughly annualizing to about 14% of all cases that you're going after right now. So just where can we think about the company kind of exiting the year in terms of percentage of all prescriptions being written for ASSURE.

A: Brian Webster said they track metrics for base reps and new reps, with base reps' metrics improving and new reps coming up the curve, boding well for prescription growth.

Q: Two for me. One, on the conversion rate, one back on market share. So Vaseem, what does the guidance assume for the year-over-year increase in the conversion rate? It looks relatively small, a relatively small increase is assumed for the fiscal year versus the first quarter, which looks like about 700 basis points. And secondly, if I heard correctly, in-network is now almost 80%, which is relatively high. What are the drivers to get you to that best-in-class conversion rate that I think you said on the Q4 call was 76% from 47% today?

A: Vaseem Mahboob said conversion rate expected to increase by ~2.5-3 points, driven by in-network patient mix improvement, deploying therapy managers in high prescription regions, signing regional payers, and investing in RCM team. Brian Webster talked about market share being around 12%, with over 50% U.S. territory coverage and room to grow to achieve category leadership.

Q: Brian, I want to follow up on one of your prepared remarks comments about the expanded clinical specialist role to complement certain territory managers to penetrate existing accounts. I guess can you just help us better understand, I was under the assumption you had specialists already. what's the expanded role look like what is this person doing that's different? And how are they incentivized? And is this something you expect to deploy for all territories? Or is this going to be focused on the biggest accounts?

A: Brian Webster said the expanded clinical specialist role allows sales reps to focus on new prescribers, starting with high-performing territories to expand beyond existing accounts, with strategy starting with high performers and expanding as progress is made.

Q: Key topic at last week's HRX conference was on compliance rates and that it still remains a key barrier on WCD utilization. Can you just detail a little further what you are seeing and how compliance rates are evolving across your user base as experience growth?

A: Brian Webster said compliance is a key challenge, with daily median wear time over 23 hours and patients continuing to wear the device over time, showing strong compliance.

Q: Just on the cadence of OpEx investments through the course of the year. Last quarter, we had talked about some of the investments the new commercial offer was making. We've discussed the new territory manager expansion today, but any color on the pace of those investments through the rest of the year and what those might be focused on?

A: Brian Webster said investments will be steady and measured, adding to the commercial footprint with high-quality reps to consume new territories and provide support, following a business plan with tight precision.