Kestra Medical (KMTS) Q4 2026 Earnings Call Transcript

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DATE

Tuesday, July 14, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Vice President of Investor Relations - Neil Bhalodkar
• President and Chief Executive Officer - Brian Webster
• Chief Financial Officer - Vaseem Mahboob

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TAKEAWAYS

• Revenue -- $28.6 million in the fourth quarter, representing 66% growth driven by market share gains and wearable cardioverter defibrillator category expansion.
• Fiscal Year Revenue -- $95.1 million, an increase of 59% compared to fiscal 2025 reflecting higher prescription volume and improved revenue cycle management.
• Gross Margin -- 54.8% for the quarter, expanding 10.5 percentage points year over year due to unit economics of the rental model and volume leverage.
• Fiscal Year Gross Margin -- 51.4%, an increase of approximately 11 percentage points compared to the prior year.
• Prescriptions -- 6,357 units written for the ASSURE system in the fourth quarter, growing 63% compared to the prior year period.
• Fiscal Year Prescriptions -- 20,720 units, representing a 57% increase compared to fiscal 2025.
• Fiscal 2027 Revenue Guidance -- $137 million, a projected 44% increase over fiscal 2026 totals.
• Sales Territories -- 130 active territories at fiscal year end, up from 80 at the end of the previous fiscal year.
• Commercial Expansion -- 40 additional representatives planned for fiscal 2027 to address uncovered U.S. markets and split high-volume accounts.
• New Prescriber Growth -- 55% increase in the number of new prescribers for ASSURE during the fiscal year.
• Ordering Facilities -- 65% growth in the number of facilities ordering the system during fiscal 2026.
• GAAP Net Loss -- $38.8 million for the fourth quarter, compared to a loss of $51.1 million in the same period last year.
• Adjusted EBITDA Loss -- $26.7 million in the fourth quarter, compared to a loss of $20.3 million in the prior year period.
• Operating Cash Burn -- $18.7 million used in operating activities during the fourth quarter, a reduction from $24.1 million in the prior year period.
• Total Liquidity -- $357 million, including $262.2 million in cash and investments plus unused availability under a new term loan.
• Debt Refinancing -- $75 million funded from a new $200 million facility with Pharmakon, reducing the company's cost of capital by 24%.
• Market Share -- Estimated gain of approximately 4 percentage points within the wearable cardioverter defibrillator category during fiscal 2026.
• In-Network Payer Mix -- Expected to remain in the low- to mid-80% range for fiscal 2027 as the company expands insurance coverage.
• Adjusted Operating Expenses -- $44.7 million in the fourth quarter, up from $29.7 million due to commercial team expansion and support resources.
• Market Utilization -- Management reported that 6 out of 7 indicated patients are currently unprotected by a wearable cardioverter defibrillator.

SUMMARY

Management reported fiscal 2026 included the expansion of the commercial footprint and the clinical evidence base for **Kestra Medical Technologies, Ltd.** (NASDAQ:KMTS). The company increased its sales presence to 130 territories and reported double-digit growth in prescriptions and facilities. Financial results showed sequential gross margin expansion for the 10th consecutive quarter, alongside a reduction in operating cash burn. Strategic initiatives included a new $200 million financing facility to replace existing debt and a collaboration with Biobeat Technologies to enhance diagnostic capabilities for hypertensive patients.

• CEO Webster noted that a recent heart failure paper in the journal Heart Rhythm cited the company's ACE PAS study as evidence of "persistent ventricular arrhythmia risk among patients with ischemic and non ischemic cardiomyopathy."
• The company released an enhanced ASSURE detection algorithm in April 2026, which management projects will further reduce the false alarm rate for all new patients.
• Regarding the wearable cardioverter defibrillator (WCD) market, CEO Webster stated, "we estimate the WCD market grew in the low- to mid-teens" and indicated the category is in the early stages of becoming a multibillion-dollar market.
• Management identified a 24% reduction in the cost of capital following the refinancing of its term loan facility with Pharmakon.
• CFO Mahboob stated, "We are starting the fiscal year with a 130 sales territories," noting a six-month ramp period for new representatives to reach full productivity.
• A case study from a Southeast cardiovascular organization showed a 40% increase in prescribing following the integration of ASSURE into heart failure care pathways.
• The company entered a co-development project with BioBeat Technologies in mid-Jan. 2026 to expand diagnostic insights for patients with hypertension.

INDUSTRY GLOSSARY

• ASSURE WCD: A wearable cardioverter defibrillator designed to protect patients at risk of sudden cardiac arrest.
• Sudden Cardiac Arrest (SCA): A medical emergency where the heart suddenly stops beating.
• ACE PAS: Kestra's post-approval study evaluating the real-world performance of the ASSURE system.
• Ventricular Arrhythmia: An abnormal heart rhythm originating in the lower chambers of the heart.
• Revenue Cycle Management (RCM): The financial process used by healthcare facilities to track patient care episodes from registration to final payment.
• In-Network Mix: The percentage of patients covered by insurance providers that have formal payment contracts with the company.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to Kestra Medical Technologies fourth quarter fiscal 2 thousand 26 Earnings Conference Call. This conference call is being recorded for replay purposes. We will be facilitating a question-and-answer session following prepared remarks from management. At this time, all participants are in a listen-only mode. I would now like to turn the call over to Neil Bhalodkar, Vice President of Investor Relations, for introductory comments.

Neil Bhalodkar: Thank you, Carmen. Good afternoon. Thank you for joining TESSCO's fourth quarter fiscal 26 earnings call. With me today are Brian Webster, President and Chief Executive Officer and Vaseem, Chief Financial Officer. This call includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. Statements made on this call that do not relate to matters of historical fact should be considered forward looking statements. These statements are based on Kestra's current expectations, forecasts, and assumptions, which are subject to inherent uncertainties, risks, and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results, performance, or achievements expressed or implied by the forward looking statements due to various factors.

Please review Kestra's most recent filings with the SEC particularly the risk factors described in our Form 10-K for additional information. Any forward looking statements provided during this call including projections of future performance, are based on management's expectations as of today. Kestra undertakes no obligation to update these statements except as required by applicable law. During today's call, we will also discuss non GAAP financial measures, These non GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Please refer to our earnings release for a reconciliation of these measures to their most directly comparable GAAP financial measures.

With that, I will turn the call over to Brian.

Brian Webster: Thanks, Neil. Good afternoon, and thank you for joining us on today's conference call. We are excited to discuss the details of our strong performance in the fourth quarter and the significant progress Kestra made in fiscal 26. As always, I would like to begin the call by focusing on what truly differentiates Kestra. That is the lives we protect, each day and the patients, families, and clinicians we serve. The reality of cardiac recovery is that risk does not always resolve when a patient leaves the hospital. For some patients, the journey to recovery is far more complex than anyone anticipates. Every patient is prescribed ASSURE with the hope that his protection will never be needed.

Unfortunately, cardiac recovery does not always unfold that way. 1 patient recently reminded us of that in a very profound way. The patient was a 43 year old woman recovering from a recent heart attack and living with advanced heart disease. Like many patients beginning recovery, she was prescribed ASSURE while her care team monitored her progress and evaluated long term treatment options. 72 days after her initial prescription, the system detected a life-threatening arrhythmia and delivered life-saving therapy For many patients that would have marked the end of the event. For her, it was only the beginning. As she was rushed to the hospital, the arrhythmias did not stop.

Through ambulance transport, hospitalization, and every cardiac episode ASSURE remained with her. Delivering therapy each time it was needed. By the time physicians could provide stabilizing treatment, the system had delivered 12 successful therapies protecting her through a prolonged and unpredictable period of instability. Every patient's recovery is different, and some emergencies are far more complex than anyone could predict. In this case, the patient required 12 separate interventions before she could be stabilized. That level of sustained protection is not simply a feature. It reflects a deliberate design philosophy centered on supporting patients through even the most demanding clinical scenarios. This is just 1 patient story In fiscal 26, our 18 thousand patients at risk of sudden cardiac arrest.

We remain thankful and humbled by this responsibility entrusted to us by prescribers, their patients, and their families. Now turning to our financial performance, we concluded fiscal 26 with another strong quarter We continue to reach more patients at risk of cardiac arrest. Accepting over 6.3 thousand prescriptions written for the ASSURE system. Revenue was $28.6 million, with growth of 66% compared to the prior year period. For the year, Kestra generated $95 million of revenue resulting in growth of 59% compared to FY 2025. Gross margin of 54.8% expanded by over 10 percentage points year over year and 2 percentage points sequentially, reflecting the attractive unit economics of our rental model.

This was our 10th quarter in a row of sequential gross margin expansion. Our full year gross margin of 51.4% increased by approximately 11 percentage points compared to FY 2025. We remain confident that Kestra is on a path to 70%+ gross margins over the next few years. Although FY 2026 was a year of investment, with the strong revenue growth that KESTER is generating, we continue to see improving operating leverage in our business. This growing leverage supports the investments we are making in the company's key growth drivers, to take advantage of the large and attractive market opportunity we see.

The investments that we believe will drive significant near and long term value for Kestra include: expanding our commercial team, enhancing our revenue cycle management capabilities, growing our fleet of devices, innovating to extend our product advantages, and growing the body of clinical evidence supporting the ASSURE system. 1 such example was the investment we made at the start of FY 26 to meaningfully enhance our commercial training and onboarding capability. This has reduced how long it takes a new territory manager to reach a key sales ramp productivity milestone. This accelerated Salesforce productivity strengthens operating leverage and positions us to more effectively capture the significant growth opportunity in the WCD market.

We continue to expand our sales organization with the goal of further penetrating existing accounts as well as calling on new potential ASSURE prescribers. As we have discussed previously, we are targeting geographies in which a high volume of WCD prescriptions are being written and where we also have strong in network payer coverage. As planned, we ended fiscal 26 with approximately 130 sales territories, up from approximately 80 at the end of fiscal 25. The impact of this is clear.

Our commercial team is winning in the marketplace with the number of new prescribers for ASSURE growing by 55% in fiscal 26, while the number of ordering facilities grew by 65%. it is exciting to see that some of these new ASSURE customers are in fact new prescribers of WCDs. As a category. Turning to the WCD market, we have previously noted that despite the overwhelming evidence that an extra defibrillation shock is effective at terminating dangerous cardiac rhythms, WCD therapy remains underutilized with 6 out of 7 patients that are indicated for WCD not being protected by 1. We believe the innovation and clinical evidence we have brought to the category started to change this in fiscal 26.

Based on our financials and that of the incumbent, we estimate the WCD market grew in the low- to mid-teens. We are still in the early innings of market and we see this category growing into a multibillion dollar market in the years ahead. I wanted to illustrate this last point with a few examples of strategy strategies we are employing across various geographies. The first case study is a leading, academic medical center in the Southwest that demonstrates how our commercial model drives sustained account expansion. When KESTRA entered the institution in March 2025, it had never prescribed the ASSURE system.

15 months later, utilization has grown to more than 60 prescriptions with 40 unique prescribers activated across multiple specialties. That growth has been driven not only by commercial execution, but by repeated clinical validation in our service delivery model. A recent example of this institution highlights that dynamic. A patient experienced ventricular fibrillation while wearing ASSURE, the system delivered a life-saving therapy and our proprietary ASSURE Assist feature alerted emergency medical services even before the patient's spouse completed a 9-1-1 call. Within minutes, the treating physician had been notified enabling rapid coordination of care as the patient was airlifted for advanced treatment. The event reinforced the value of the entire ASSURE platform.

Not just the therapy, but the speed of emergency response clinical communication, and continuity of care. That experience translated directly into broader physician adoption Within 1 week, 4 additional ASSURE systems were ordered by physicians who had never previously prescribed our platform. Adoption in this system has since expanded beyond the initial heart service line with electrophysiologists beginning to prescribe ASSURE after observing its clinical performance, patient experience, and integrated support. This account reflects a pattern we are seeing repeat across the country. While clinical outcomes accelerate adoption within an institution, physician education creates robust prescribing networks that continue to expand long after the initial engagement.

The second case study is a territory in the Midwest that illustrates the long term impact that strategy. When the territory was established, the hospital had previously generated approximately 20 WCD prescriptions annually. Through focused engagement with the heart failure program, fellow education, and ongoing clinical support, utilization more than doubled to 50 during FY26. Growth accelerated through a combination of physician champions, and clinical education, expanding assure adoption among both existing and new prescribers, A key driver was the team's investment in fellowship education. 6 of the program's 8 fellows became active ASSURE prescribers during training. As those physicians entered independent practice, they carried that experience with them.

Prescribing ASSURE at other hospitals-- excuse me-- rather than expanding a single account, our team is building a growing network of experienced ASSURE prescribers that continue to drive adoption beyond the original institution. Our strategy also extends to enterprise health where we are working to integrate ASSURE directly into standardized care paths. The third case study is 1 of the nation's largest independent cardiovascular organizations in the Southeast. That is working with our team to integrate the ASSURE into standardized heart failure care pathways across its physician network. Working alongside physician leadership, advanced practice providers, and clinical operations teams, we are embedding ASSURE into workflows that support patients from hospital discharge through outpatient recovery.

This collaboration began shortly after presentation of the ASSURE post approval study data at last November. Since that time, prescribing within the organization has increased by approximately 40%, reflecting growing adoption supported by both clinical evidence and operational integration. Today, that organization includes approximately 120 providers. Creating an opportunity to expand this care pathway model across multiple affiliated practices and regional markets. This represents another important driver of sustainable long term growth as we partner to embed ASSURE into standardized clinical workflows. These examples demonstrate how clinical evidence physician education, and enterprise partnerships are working together to accelerate market adoption. Turning to clinical evidence.

On prior earnings calls, we discussed the results of our ACE PAS, the largest real world perspective WCD study to date with over 21 thousand enrolled and protected. The study's findings corroborated what patients experience every day with the ASSURE system. Low false alarm rates comfort that drives higher wear time compliance, and a 100% successful conversion of dangerous arrhythmias. I am pleased to highlight a newly published paper focused on the future of sudden cardiac death prevention that cites the ACE PASS study as contemporary evidence demonstrating persistent ventricular arrhythmia risk among patients with ischemic and non ischemic cardiomyopathy.

The paper was published in the journal, Heart Rhythm, which is a heart rhythm society publication specifically highlights observed ventricular arrhythmia event rates. The HRS recommendations state that clinicians should consider WCD use after myocardial infarction or a new heart failure diagnosis while guideline directed medical therapy is being optimized and better risk stratification tools are being developed. The paper further identifies WCDs as potential strategy to reduce sudden cardiac death in patients not yet eligible for an ICD. From a strategic perspective, this is a meaningful endorsement.

The paper was developed through an HRS-led think tank that included many of the field's leading experts The inclusion of ACE PAS demonstrates that our data is being incorporated into the broader scientific dialogue around risk stratification sudden death prevention, and the role of temporary protection for high risk patients, areas that may ultimately influence guideline development. Regarding our clinical evidence strategy, we plan to publish multiple abstracts and manuscripts over the next 12 months highlighting compelling data from ACE-PAS or our new enhanced algorithm, and new innovation in our pipeline. We believe this growing body of evidence will support increased share capture and expanded WCD adoption.

On the product development front, we continue to pursue innovation that benefits patients and clinicians. In mid January, we announced a strategic collaboration with BioBeat Technologies to expand diagnostic insight for hypertensive patients prescribed the Assured WCD. That co development project is progressing as planned. In April, we released an enhanced assure detection algorithm, which we project will further reduce our already low false alarm rate. This new algorithm is now shipping to all patients. Our team has some other exciting projects in progress intended to further extend our clinical advantage with the performance of the ASSURE system and also bring new first in category capabilities to the market.

Over time, we believe this will help us accelerate market growth and win additional market share by further differentiating our product from the incumbent. And more importantly, by providing additional clinical value and diagnostic insights to physicians, we believe it will result in them prescribing WCDs to more of their patients that heretofore had gone unprotected. In conclusion, the fundamentals of the Kestra story and business remain strong. The clinical evidence of the ASSURE system is compelling, We like our competitive product position and an expanding WCD market Kestra is delivering premium revenue growth while significantly expanding gross margin and we have fortified our balance sheet to facilitate investment in that growth.

Our execution has been crisp across all elements of the business and the foundation we have built positions Kestra for strong and durable growth for years to come. I would like to thank our incredible team in the field and also here at the home office in Kirkland for their passion and commitment to the Kestra mission. Now I will turn it over to Vaseem, who will discuss fourth quarter financial results in more detail and provide our fiscal year 2027 revenue guidance. Vaseem?

Vaseem Mahboob: Thank you, Brian, and good afternoon, everyone. We had a strong financial performance across the board in the fourth quarter. Total revenue was $28.6 million an increase of 66% compared to the prior year period. Revenue growth was driven by a 63% year over year increase in prescriptions, reflecting market share gains with existing customers activation of new accounts, and expansion of our field team. We are also continuing to see improvements in all 3 key drivers of our revenue model. Our prescription bill rate, our bill rate, and our collections performance.

As we continue to bring more payers in network and enhance our revenue cycle management capabilities, we expect to see benefits in revenue growth, gross margin, and our profitability profile. We are investing in revenue cycle AI tools and other automation projects that will drive operating leverage as we scale the business. Turning to gross margin, our margins increased to 54.8% in the fourth quarter versus 44.3% in the prior year period. As Brian mentioned, we have now expanded our gross margin sequentially 10 consecutive quarters in a row.

This continued expansion in gross margin was driven by the unit economics inherent in Kestra's business model an increase in our revenue per fit from more in network patients and a decline in our cost per fit, driven by volume leverage and cost improvement projects. In the quarters ahead, you should expect to see steady and consistent increases in our gross margin as our rental model benefits from the volume leverage. We remain confident in our ability to achieve 70% plus gross margins in the next few years. GAAP operating expenses were $55 million in the fourth quarter compared to $55.8 million in the prior year period.

Excluding nonrecurring costs and stock based compensation, operating expenses were $44.7 million in the fourth quarter of fiscal year 2020 6, compared to $29.7 million in the prior year period. The increase was primarily attributable to investments in our commercial organization including support resources and revenue cycle management capabilities, to capitalize on the large and expanding WCD market opportunity. GAAP net loss was $38.8 million in the fourth quarter compared to a GAAP net loss of $51.1 million in the prior period. Adjusted EBITDA loss was $26.7 million in the fourth quarter compared to an adjusted EBITDA loss $20.3 million in the prior year period. Cash, cash equivalents and investments totaled $262 million as of April 30.

It is important to highlight that our operating cash burn in the fourth quarter declined on a year over year basis. Specifically, cash used in operating activities was $18.7 million a reduction from $24.1 million in the prior year period. We expect this trend to continue each year going forward. This afternoon we also issued a press release about our new $200 million term loan facility that we have entered into with Pharmakon. This nondilutive financing was a great outcome for Kestra. It fortifies our balance sheet, reduces our cost of capital, and provides a significant financial flexibility to invest in our commercial strategies and expand our fleet. To drive durable, best in class growth for years to come.

Only $75 million of the facility has been funded at closing a large portion of which was used to retire our existing term loan. Included unused unavailability under the new term loan agreement and excluding the uncommitted M&A tranche Kestra has a total liquidity of approximately $357 million In summary, 2026 was a foundational year for Kestra. We delivered top tier revenue growth, significant expansion in our gross margin, and fortified our balance sheet with a follow on offering in December and today's nondilutive financing. Our investments in the field team and RCM capabilities position Kestra to drive durable revenue growth. With meaningful operating leverage for years to come.

And for our fiscal year 2020 7 guidance, We expect revenue of $137 million an increase of 44% compared to fiscal year 2020 6. We expect prescription growth to be driven by deeper penetration within existing accounts and the activation of new accounts as we invest in regional coverage. We expect higher revenue per fit to be driven by a higher mix of in network patients and continued improvements in our revenue cycle management capabilities. We expect Kestra to generate significant operating leverage over the next several years. Even as we continue to invest in our business to capitalize on the large, growing, and underpenetrated WCD market opportunity.

With that, operator, we have concluded our prepared remarks and are ready to proceed to the Q&A portion of the call.

Operator: Thank you so much. And to ask a question, please press 11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again. We ask that you please keep your questions to 1 related follow-up. 1 moment for our first question, please. It comes from Marie Thibault with BTIG. Please proceed.

Marie Thibault: Hi. Good afternoon. Thanks, for taking the questions, and congrats on a really strong finish to the fiscal year. Apologies in advance if there is any background noise. I am in an airport. But I wanted to start here by asking for a little more detail, the theme, on sort of what the are behind the fiscal 2027 guidance. Certainly, you are prescription growth has been tremendous. It sounds like you are seeing a lot of nice momentum following ACE PAS. And, of course, the conversion rate has continued to move higher with all the revenue cycle management improvements.

So if there is any details you can give us on how you are thinking about that $137 million, the assumptions behind it, that would be very helpful.

Vaseem Mahboob: Sure, Marie. Thank you for the question. Our revenue growth has historically been driven by prescription and volume growth. In network mix. Revenue cycle management improvements, and quite frankly, the growth of our field team. These KPIs are all tracking in the right direction and give us confidence in guiding to 44% growth in fiscal year 2020 7. Higher prescriptions will be driven by winning new accounts, going deeper in existing accounts, and quite frankly, as Brian mentioned, expanding the market. And we expect to continue the in network mix to be in the low mid 80s we continue to make progress on the payer side.

And also the significant improvements that we will make and have made on the revenue cycle management process. So we are starting the fiscal year with a 130 sales territories, which is up from 80 from the start of fiscal year 2020. So we are very confident in the guide that we are putting out. And we will continue to give you updates as we go through the year.

Marie Thibault: Okay. that is that is very helpful. And I guess as a back follow-up question here, certainly encouraging to see the heart rhythm publication. The recognition of ACE PAS. What are your latest thoughts on guideline recommendations, stronger support from societies? Is that something we start to see more of this fiscal year? Thanks for the question.

Brian Webster: Yeah. Thanks, Marie. This is Brian. I think it is going to be a journey. The papers like this are the start of that journey. We will be publishing our manuscript for ACE-PAS soon. That will be the next milestone, and then we will continue to work with our clinical advisers to get on the docket for this conversation about guidelines I do think that you know, what is also meaningful about that recent paper is the insight they had into not just the typical WCD patient who is a post MI patient, but also the heart failure patient population.

So really good news in that, and really good news in that was a parallel activity that a body of really high caliber physicians took on to step back away from the evidence and look and say, hey, What should we be doing to improve sudden cardiac death rates? And so I think that is really positive for us.

Operator: 1 moment for our next question. It comes from Travis Steed with Bank of America Securities. Please proceed.

Travis Steed: Hey, thanks for taking the question, and congrats on a good quarter. I guess, maybe I would ask a question about just kind of the share gains that you have been getting, I think, you are thinking about 4 base 4 points a share in the market over the last year. Is that kind of the steady state that we should think about going forward? Or is there ways you can accelerate the share gain capture, you know, in 2027 as you expand territories and build up coverage. Yeah, thanks for the question, Travis.

Brian Webster: You know, I think that the share gain we saw in 2026 it does not fully get the benefit of a lot of the hiring we did in 2026. So I would expect that we will see even more share gain, in particular, in those territories where we were not in before adding new reps. And so as those reps come up the curve, I think we will see that share gain start to grow. Now, of course, the other the other good news is it is not just about share capture; it is about market growth.

And we are seeing, you know, pretty exciting market growth occurring and we will continue to push for that as we do our market development of a WCD category. Okay. that is helpful.

Travis Steed: And then I want to follow-up on the financing. You know, why raise money, either the equity offering last year? Why more money now? And then why the structure of this deal little unique with different tranches available? And 1 of the tranches mentioned availability for acquisitions. Is this a sign that you are gonna be a little more acquisitive going forward?

Operator: So let me start, and maybe Brian can also go ahead with some color So we when we started the refinancing conversation was purely to go out and seek lower cost of capital.

Vaseem Mahboob: If you remember that term loan that we had with Percepta was you know, 3 years ago when we were private company. Quite frankly, what we were able to achieve in our cost was a 24% reduction, from what we were paying, you know, Percepta. So that was the impetus for going out and looking into the market. But as we kind of went through the conversation, you know, we decided that we should have and retain the financial flexibility continues to allow us to invest in our business and gives us the optionality to do different things. So I would say we did not need more cash.

Like I said, we finished the quarter at $262 million of cash on the balance sheet. This was just purely being opportunistic, working with a great partner now. And having the flexibility to do BIOD type tuck in deals to do more M&A. So that is really it from a structure and a deal. Brian, I do not if you want to comment on that.

Brian Webster: Yeah, I would just add that M&A tranche is a prospective 1. it is there is not there is not something right in front of us there, but we do continue to be very interested. We are building a first class direct to cardiology sales force and we want to take advantage of that channel. And if there is new technologies that we can bring to the table that can be additive for our clinical partners, we are going to be very interested in that. I think the other thing it should demonstrate is we are pretty bullish on our story. You know?

We want to make sure we have financial flexibility to be able to invest in the assets to continue to grow the market and with the market growth showing the way it is, we are leaning in to the Kestra story in the WCD category. And this just provides us a little bit more financial flexibility as we look forward.

Travis Steed: Great. Makes sense. Thanks a lot.

Operator: Thank you. Thank you. Our next question is from Matthew O'Brien with Piper Sandler. Please proceed.

Matthew O'Brien: Good afternoon. Thanks for taking the questions. To follow-up a little bit on Travis and Marie's question on guidance. When I do the math on the growth rate in the market that you guys are accelerating plus your share taking, which Travis is right, it is 4 percentage points last year. But if it is up to 5 percentage points this year or whatever it may be, I am getting script numbers that are at least 10%, and more like 12 to 13% higher than kind of where you are guiding roughly. So what is it that we are missing, especially with all these new reps? And all this momentum that you are seeing?

That would, you know, you know, put the guide into the 37 range versus something higher Is there something competitively, something else just in terms of adding all these reps at once, something else like that we should really be considering And then I do have a follow-up.

Brian Webster: Well, I would say very clearly that there is not a competitive dynamic to that is driving that. I think it is us just being a rational management team. it is the start of the year. We want to make sure that as we get the year kicked off and we do absorb a lot of these new sales reps, that we set ourselves up for success. And so I think 44% growth as an initial guide is pretty darn fantastic. And we are excited about the year ahead. Okay. Fair enough, Brian. 44% is great.

Vaseem Mahboob: Vaseem, on the profitability side, I know you said the operating cash burn came down by about $5.5 million year over year, but the revenue number was up about $11 million So and when I look at the SG&A per new script, it is the lowest it is-- you know, the lowest the highest amount of SG&A per script that we have seen in several quarters. So how do we think about the profitability on the on the EBITDA side trending or maybe even on the operating cash burn trending throughout, fiscal 2027? Because from a revenue perspective, it seems like you are about a year ahead.

A profitability perspective, you seem like you are kind of on track or maybe a little bit behind. You think this is a year where we see a bigger catch up as far as profitability goes? Thanks so much.

Matthew O'Brien: Yeah.

Vaseem Mahboob: No, that is a great question, Matthew. I think, you know, fiscal year 2020 6 was a foundational year, as we have talked about from an investment perspective. Right? We hired the 130 TM goal. We got there sooner. We invested in regional leadership with commercial support resources by clinical specialists to really help form those accounts and see the prescription trend that you saw. Our prescriptions grew 17%. In the fourth quarter, a thousand higher than you know, than the previous quarter. And quite frankly, if even beat our own internal expectation in the fourth quarter. And we have invested in our revenue cycle management capability.

And this really positions us to drive durable growth in fiscal year 2020 7 and beyond. Now having said that, with even this level of investment, our operating cash burn declined by $5 million So you should look at that, right? So our operating burn was down $5 million. So we will continue to invest in 2027 but maybe not at the same pace in 2026. Really, you should start to see some good operating leverage in 2027, and 2028 as we continue to drive the top line higher based on the investments that we made in 2026.

Operator: 1 moment for our next question. it is from Rick Wise with Stifel. Please proceed.

Frederick Wise: Good afternoon, and I will add my congratulation. Congratulations on the excellent finish to the year. Brian. I thought maybe you could expand on your comments a little bit about your sales territory goals. You know, obviously, 130 to finish the year up from 80. that is a big expansion. And you have always been very clear about the metrics that you want to see related to reimbursement, etcetera. How many more ideal or optimal opportunities are there? And do we see similar expansion in numbers for the year ahead, is that the right way to think about it?

Brian Webster: Yeah, Rick. Thank you for the question. I think that as we are sitting here today, looking at f y 2027, we are probably thinking that we will add another 40 or so reps in the fiscal year, so maybe a little bit slower than FY 2026, but not a lot more. We still have, uncovered territories in the U.S. And even more importantly, we have territories where we have a rep who is assigned to certain accounts but that rep might have 15 or 18 accounts and we need to put we need to go deeper and split some of those territories.

So we will be adding additional horsepower here in a in a pretty balanced way throughout the year. I do not I do not think we are going to front load it. And because we are we are still kind of absorbing the big income ads that we added at the, you know, the back half of FY 2026. But it will be another year of expanding the commercial footprint. And with that, not only territory managers, but also clinical account specialists Gotcha.

Frederick Wise: And I wanted to touch on both innovation, some of your innovation commentary and the competitive dynamics. I mean, obviously, you are taking share. Obviously, you are growing faster than market. But I was hoping you would update us on just whatever your incremental thinking perspectives are on the competitive dynamics generally. But how innovation is tying into those dynamics the shipping of the new algorithm, clearly differentiates your, you know, your product from the competitor's. But maybe talk about how that manifests itself in the P and L in terms of volume or margin. Are there any implications beyond just that broad statement about differentiation, which is meaningful? Obviously. Thank you.

Brian Webster: Yeah, thank you for that question as well. I love talking about innovation. They will not always let me talk about innovation, but I love to talk about You know, I think I think our goal with the new algorithm update was to just really make that algorithm bulletproof and give us that just really clear differentiation of the market. We have accomplished that. And that product is now every product is going out within the algorithm. We continue to invest in new innovation. That you will see over the next 12 months, and we are excited about that. On the other hand, you know, the question always comes, well, what is your competitor doing?

When it comes to answering that? And we feel like the competitor has shown their cards They have, you know, launched a product last year that they are starting to roll out. And remember, in this business, it is a fleet Right? So you do not have the opportunity to replace your entire fleet all at the same time, And so they will be rolling out their new product that we view as being incremental and not transformative. And so we have view that they will be rolling that out over the next 3 to 5 years. 3 at the most aggressive, more likely 5 years. And so we kind of know what we are playing against.

We love our positioning from a product competitiveness. And we love the pipeline that we have and we are really excited about where we are going with future innovation at Kestra.

Frederick Wise: Thank you very much.

Operator: Thank you. Our next question comes from the line of Michael Pollard with Wolfe Research. Please proceed.

Michael Polark: Hey, good afternoon. Thank you for taking the questions. I have a question on your primary competitor. There was news of a warning letter that firm received public in June, dated late April. I do not see any specific mentions related to the wearable defibrillator product, but there were focus items on the AEDs, electrode components, and other similar inputs. So my question for you, Brian and the team is, is there something going on here with your competitor that might strengthen your position? Or do you view that letter as primarily noise as it relates to your business?

Brian Webster: Yes, Mike, thanks for the question. I think anytime that there is regulatory actions in the industry, you would be wise to pay attention, and we are certainly paying attention. My understanding of that particular situation is it is it was directed at a different part of their business. Having said that, you know, most med tech companies try and standardize their quality systems across divisions. And so I am sure that our competitor is evaluating in even in their life vest business, evaluating their quality of to make sure that let's say, that contagion does not spread. And so I am sure they are looking at that.

But my understanding right now is that was not direct at that particular division. It was it was directed at their AED and ventilator business. Very helpful.

Michael Polark: Maybe for the follow-up, a short term modeling question perhaps for Vaseem. Just the current July quarter, it is almost the end of July, so you are about to finish the first quarter. Should we take the full year revenue growth of 44% and just kind of have that as the year on year growth rate throughout the 4 quarters? Or should we consider something different about phasing? Can you help level set models for the current July quarter?

Brian Webster: Thank you.

Vaseem Mahboob: Yes, obviously, we cannot comment on the first quarter Nice try. But, I think, based on our guidance, the 44% reflects the total year. But same thing, as we said last year, if you remember, we were hiring reps, and as you know, they have a 6-month ramp period for those reps, so you should start to see some accelerating growth. From the first half to the second half. You know, as Brian said, we brought in those 130 TMs sooner and they are all kind of in the journey of their ramp up, and we should start to see some really exciting growth here in the second half versus the first half.

But regardless, we feel really optimistic and comfortable with the guide that we have provided out there. And as Brian said, you know, our credibility is our biggest asset, and we continue to have a repeat of fiscal year 2025 and 2026 and 2027. Thank you.

Operator: 1 moment for our next question. It comes from Larry Biegelsen with Wells Fargo. Please proceed.

Larry Biegelsen: Good afternoon. Thanks for taking the question. And congrats on the strong finish here. Basim, maybe just 2 modeling questions for me. 1, on gross margin, I think it was up 11 percentage points year over year in 2026. Any color on the cadence to expect for 2027 And the conversion rate it looks like it was relatively flat year over year in fiscal 26. But why is that, and how do we think about that going forward?

Vaseem Mahboob: Sure. So Larry, on the conversion rate, you know, as we have said in the past, you know, we will continue to see acceleration on an annual basis. We finished the year at about 46 percent, which was up actually slightly over 2 points compared to year end fiscal year 2025 to 2020. So we are well on our conversion rate journey You continue to see you know, all of our KPIs, you know, the fill rate, our in network mix, our collections performance, they are all trending in the right direction. And quite frankly, in the in the fourth quarter, the conversion rate was slightly lower, but that was because of the massive prescription intake that we had.

Our prescriptions were up 17%, as I said earlier. And a lot of that came in the third month. So as you guys know, that the third month will translate into revenue here in the first quarter. So we feel really good about that. And then on the gross margin, again, we are really, really excited about our gross margin trending. As I said, 10 consecutive quarters in a row of gross margin expansion, and we continue to expect to see that gross margin progression through the year And that is really a testament to the model as we are now demonstrated multiple quarters in a row.

So you should expect to see sequential improvement on our gross margins all through this year. And we think that for the full year, it is gonna be in the 7 percentage point range and increase year over year.

Larry Biegelsen: that is helpful. Brian, I just want to ask 1 on the revenue growth. We have seen an acceleration I think, now 4 quarters in a row. Could you put a finer point on what you think is really driving the acceleration if there are a couple of things you would point to Thanks.

Brian Webster: Yeah, thanks Larry. I appreciate the question. I think it is a combination, as we have said. You know, we are we have a higher mix of in network patients because of our insurance contracting success, and so that leads to higher revenue per fit. We also have more sales territories opening up, so that is just Salesforce math. And then I think we have as we have gotten experience with some of our existing sales territories, and then you put really great clinical data into the field, that just gives them the ability to further penetrate those accounts.

And so we are seeing nice account penetration and expanding the existing accounts it is a combination of all 3 of those things. And, you know, we have some of the top tier in our vernacular last year was platinum sales territory, so we continue to have people moving off into the platinum sales territories as they drive significant volume. Thank you very much.

Larry Biegelsen: Okay.

Operator: Thank you. And our last question comes from David Roman with Goldman Sachs. Please proceed.

David Roman: Thank you. Good afternoon, everyone. I wanted to just follow-up and some of the commercial comments that were made earlier in the call. I think Brian, in response to 1 of the questions, you talked about building out a general cardiology sales force. But can you maybe talk about just at which customer the sales force expansion is targeted, cardiology, versus EP and where you see the opportunity either? Is it in the upstream referral channel? Is it in market share capture on downstream prescribing? And then I had 1 follow-up.

Brian Webster: Sure. Thanks, David. I appreciate the question. Yeah, when I say we are building a direct to cardiac, I am using that in fairly general term because in reality, our reps are calling on EPs. An EP generally will not do a lot of the writing of the prescriptions, but they will sort of give us a license to hunt in terms of the technology. And so our reps end up spending a lot of their time all the way back into the cath lab as the patient is revascularized and moving up to general cardiology and also heart failure.

So when we are looking at reps, that we are putting in the field, we are not just going after those reps who have 1 specialty and relationships there. We are really looking across the whole board when it comes to the cardiology suite.

David Roman: Okay. And then maybe just related follow-up on the commercial side. You talked about having territories that are not covered at this point in time. Can you give us any framework to think about what percentage of relevant territories you have covered? Is the right way to look at it. As prevalence of heart failure patients by territory or some other metric to help us think about what you have covered today versus where the remaining gaps are and how long it takes for you to get to whatever your definition is of full coverage.

Brian Webster: Yeah. When we talk about full coverage, what we are talking about is what percentage of the WCD prescribing universe, if you will, is does not have a Kestra rep have assigned to them. And so you might have as an example, you might have a rep who is in, you put your first rep in the city of Chicago. Well, in the city of Chicago, that 1 rep might have 20 accounts, which they cannot possibly service. And so although we count that as coverage, we have got a rep in Chicago, so they are covered.

So when we are talking about coverage, we think that with the 130 that we landed on at the end of the year, we think that gets us somewhere around 70% geographic coverage. But do not mistake that for full penetration coverage where in that Chicago example, we might end up with 5 or 6 reps as we get to a more manageable level of accounts. So I think it is reasonable to think that over the next 2 years, we probably would get to a pretty good level of what we would call full coverage. In the market.

And we will pace that according to you know, how well we are doing when it comes to ramping up reps and how well we continue to progress against our plans.

David Roman: Great. Thanks for taking the questions.

Brian Webster: You bet. Thanks, David.

Operator: And this will conclude our Q&A session. I will pass it back to Brian Webster for closing comments.

Brian Webster: Thank you very much. And thanks again, everybody, for joining us. Again, very proud to announce our results today. FY 2026 was indeed a year of investment for Kestra. We think FY 2027 affords us new opportunities for investment as we see the opportunity to win. We see the market growing. We have got a really, really great product, and most importantly, we have got a team of incredibly committed people. So we could not be more excited about the future of the category and the future of Kestra. And we are looking forward to a really strong f y 2027. Thank you all for joining the call today.

Operator: And this concludes our conference. Thank you for participating and you may now disconnect.

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