Kestra Medical Technologies Q1 Earnings Call Highlights

Key Points

• Kestra raised its fiscal 2027 revenue outlook to $141 million from $137 million after first-quarter revenue reached $31 million, up 60% year over year. Growth was driven by WCD market expansion, market-share gains, new accounts, improved payer mix and revenue-cycle improvements.
• Gross margin expanded to 56.5%, marking the 11th consecutive quarter of sequential improvement, and management lifted its longer-term target to the mid-70% range. However, the GAAP net loss widened to $44.1 million as the company increased commercial and late-stage R&D investments.
• Kestra reported roughly $320 million in total liquidity, including cash and unused term-loan capacity, while investing in AI-enabled operational tools, expanded payer coverage and new ASSURE platform capabilities.

Kestra Medical Technologies NASDAQ: KMTS reported first-quarter fiscal 2027 revenue of $31 million, with President and Chief Executive Officer Brian Webster saying revenue rose 60% from a year earlier and advanced sequentially from the fourth quarter. The company raised its full-year revenue outlook to $141 million from a prior forecast of $137 million, representing expected growth of 48% over fiscal 2026.

Management attributed growth to expansion of the wearable cardioverter defibrillator, or WCD, market, competitive share gains, deeper penetration of existing accounts, new account activations, a greater proportion of in-network patients and revenue-cycle-management improvements.

“The KPIs are all tracking the right direction and give us a lot of confidence in increasing our guidance,” Chief Financial Officer Vaseem Mahboob said during the company’s earnings call.

Margin expansion continues

Kestra reported a gross margin of 56.5%, up from 45.7% in the prior-year period and 175 basis points sequentially. Webster said the first quarter marked the company’s 11th consecutive quarter of sequential gross-margin expansion.

Mahboob said margin improvement reflected higher revenue per fitting as in-network patient mix increased, along with lower cost per fitting from volume leverage, supplier reductions and cost-improvement programs. Kestra now expects to reach gross margins in the mid-70% range over the next two to three years, increasing its previous target of 70%.

Management also said it expects steady sequential gross-margin gains in future quarters as the company’s rental model benefits from additional fittings. Mahboob said Kestra expects to achieve a 70% gross margin for fiscal 2029, implying a margin above that level during the second half of the year.

Despite the higher gross margin, Kestra’s GAAP net loss widened to $44.1 million from $25.8 million a year earlier. Adjusted EBITDA loss was $24 million, compared with a $19.4 million loss in the prior-year period.

GAAP operating expenses increased to $55.2 million from $37.7 million. The total included $1.4 million of nonrecurring costs associated with a Biobeat milestone payment and one-time professional fees related to a late-stage research and development project. Excluding nonrecurring costs and stock-based compensation, operating expenses were $44.2 million, compared with $30.3 million a year earlier.

Mahboob said the increase primarily reflected commercial expansion and accelerated investments in late-stage R&D. He said the company expects GAAP operating expenses of approximately $220 million for fiscal 2027, including continued commercial investment, while R&D spending is expected to return to a historical range of roughly 5% to 7% in the second half of the year.

Commercial expansion and market access

Webster said the company’s sales organization is gaining share in competitive accounts while expanding use of WCD therapy among prescribers. He said newer sales representatives are ramping faster than prior cohorts, while more established representatives continue to deliver same-store growth.

The company has been splitting high-volume territories and adding clinical account specialists in certain markets. Webster said the strategy is intended to deepen relationships with prescribers and increase territory productivity. Kestra expects representatives hired late in fiscal 2026 and early in fiscal 2027 to contribute more meaningfully during the second half of the current fiscal year.

Management estimated that the WCD market grew approximately 14% on a dollar basis in the 12 months ended July 2026. Webster said Kestra held roughly 15% of the U.S. market during the most recent quarter and believes it is ahead of schedule on its longer-term market-share plans.

Kestra also continues to pursue expanded payer coverage. The company said the proportion of fittings involving patients with in-network benefits has risen to the low-80% range, from approximately 70% at the time of its initial public offering 18 months earlier. Management expects the percentage to rise further during fiscal 2027 as new payer contracts are signed in targeted markets.

Webster noted that a large national payer recently expanded coverage to non-ischemic patients receiving guideline-directed medical therapy. He said the payer had previously been an outlier among large insurers, and that more than 60% of the typical WCD patient population is non-ischemic.

Technology investments and liquidity

The company said it is investing in artificial intelligence and automation across patient support, reimbursement and collections processes, and sales operations. Webster said the initial uses include automated patient outreach, intake and prior-authorization workflows, and tools to help sales representatives prioritize accounts and prepare clinical documentation.

Management expects the initiatives to gradually reduce the cost per dollar of revenue in volume-based general and administrative functions during fiscal 2027, with more substantial benefits anticipated in fiscal 2028 and fiscal 2029. Webster said the goal is to improve sales-representative productivity without requiring proportional headcount growth.

Kestra is also progressing with its Biobeat Technologies partnership to integrate noninvasive blood-pressure monitoring into the ASSURE platform. Webster said the company is completing a late-stage R&D project intended to add capabilities not currently available in WCDs, with more details expected next quarter.

Cash used in operating activities was $32.3 million during the first quarter, which Mahboob said reflected annual bonus payments and the timing of supplier payments. He said cash burn is expected to decline sequentially through fiscal 2027.

As of July 31, Kestra had $245 million in cash, cash equivalents and investments. Including unused committed availability under its new $200 million term-loan facility, the company reported approximately $320 million in liquidity.

About Kestra Medical Technologies (NASDAQ:KMTS)

Kestra Medical Technologies, Inc is a medical device company focused on developing and commercializing technologies for patients at risk of sudden cardiac arrest. The company's primary product is the ASSURE wearable cardioverter defibrillator, a wearable system designed to continuously monitor a patient's heart rhythm and deliver an electrical shock when a life-threatening arrhythmia is detected.

The ASSURE system is intended to provide temporary protection for patients who may be at elevated risk of sudden cardiac death but are not yet candidates for, or are awaiting, an implantable cardioverter-defibrillator.

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