Exchange: NASDAQ | Sector: Healthcare | Industry: Medical Instruments Supplies
Q1 2026
Published: Sep 12, 2025
Earnings Highlights
Revenue of $19.37M up 0% year-over-year
EPS of $-0.50 increased by 0% from previous year
Gross margin of 45.7%
Net income of -25.83M
""In the first quarter, we continue to reach more patients at risk of cardiac arrest, accepting over 4,200 prescriptions written for the ASSURE system, an increase of 51% year-over-year. Revenue grew 52% year-over-year to $19.4 million."" - Brian Webster
Kestra Medical Technologies Ltd Common Stock (KMTS) QQ1 2026 Results — Revenue Growth, Margin Expansion, and Path to Profitability
Executive Summary
Kestra Medical Technologies (KMTS) delivered a strong start to fiscal 2026, reporting first-quarter revenue of $19.4 million, up 52% year over year, driven by a 51% rise in prescriptions and an expanding installer base for the ASSURE Cardiac Recovery System. The company achieved a gross margin of 45.7%, marking the seventh straight quarter of margin expansion, supported by higher in-network mix and volume-driven cost efficiencies. Management signaled confidence in continued gross-margin expansion toward a target of 70%+ as the rental device fleet scales and in-network coverage improves.
Despite robust top-line growth and margin improvement, KMTS remains in a heavy investment phase, with GAAP operating expenses of $37.7 million in the quarter (including $2.9 million of nonrecurring new public company costs), leading to a GAAP net loss of $25.8 million and an adjusted EBITDA loss of $19.4 million. The balance sheet remains healthy with $201.2 million of cash and an undrawn $15 million tranche of existing term debt. Management raised FY2026 revenue guidance to $88 million, representing ~47% growth, underpinned by stronger prescription activity, higher in-network revenue-per-fit, and ongoing revenue-cycle improvements. The company outlines four growth drivers—expanded sales footprint, enhanced payer contracting and RCM, device leasing economics, and a growing body of clinical evidence including a FDA post-approval study and an upcoming AHA late-breaker—each contributing to long-term profitability and patient outcomes. Investors should weigh the compelling growth trajectory and cash runway against the ongoing profitability pivot and payer-reimbursement evolution within a fragmented U.S. payor landscape.
Key Performance Indicators
Revenue
19.37M
QoQ: N/A | YoY:N/A
Gross Profit
8.85M
45.69% margin
QoQ: N/A | YoY:N/A
Operating Income
-28.88M
QoQ: N/A | YoY:N/A
Net Income
-25.83M
QoQ: N/A | YoY:N/A
EPS
-0.50
QoQ: N/A | YoY:N/A
Revenue Trend
Margin Analysis
Key Insights
Q1 2026 revenue: $19.4 million, up 52% YoY; prescriptions: >4,200, up 51% YoY. Gross margin: 45.7% vs 32.9% prior-year period, marking the seventh consecutive quarter of gross-margin expansion.
Operating metrics: GAAP operating expenses $37.7 million; excluding nonrecurring costs and stock-based compensation, operating expenses were $30.3 million. Net loss: $25.8 million; Adjusted EBITDA loss: $19.4 million.
Cash flow and liquidity: Net cash provided by operating activities: -$26.27 million; free cash flow: -$34.44 million; cash and equivalents: $201.21 million; undrawn term-loan tranche: $15 million (as of 7/31/2025).
In-network mix: ~80% of fittings for in-network patients (up from ~70% at IPO); higher in-network mix supports efficiency and revenue-cycle improvements.
Conversion rate: ~47% in the quarter, up from ~40% in the prior year; driven by better prescription fill rate, bill rate, and collections.
Financial Highlights
Revenue and profitability:
- Q1 2026 revenue: $19.4 million, up 52% YoY; prescriptions: >4,200, up 51% YoY. Gross margin: 45.7% vs 32.9% prior-year period, marking the seventh consecutive quarter of gross-margin expansion.
- Operating metrics: GAAP operating expenses $37.7 million; excluding nonrecurring costs and stock-based compensation, operating expenses were $30.3 million. Net loss: $25.8 million; Adjusted EBITDA loss: $19.4 million.
- Cash flow and liquidity: Net cash provided by operating activities: -$26.27 million; free cash flow: -$34.44 million; cash and equivalents: $201.21 million; undrawn term-loan tranche: $15 million (as of 7/31/2025).
Operational progress and efficiency:
- In-network mix: ~80% of fittings for in-network patients (up from ~70% at IPO); higher in-network mix supports efficiency and revenue-cycle improvements.
- Conversion rate: ~47% in the quarter, up from ~40% in the prior year; driven by better prescription fill rate, bill rate, and collections.
- Cost per foot down ~20% YoY; adjusted revenue per foot up ~20% YoY; supports ongoing gross-margin expansion.
Guidance and outlook:
- FY2026 revenue guidance raised to $88 million, up from prior guidance; implies ~47% YoY growth. Management expects continued gross-margin expansion and long-term 70%+ margins as rental-asset economics leverage volume and depreciation.
Income Statement
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Management Commentary
Key management insights from the Q1 FY2026 earnings call:
- Growth momentum and market opportunity: The team highlighted strong prescription volume, payer expansion, and a trajectory toward broader payer coverage, noting >4,200 ASSURE prescriptions in Q1 (+51% YoY) and $19.4M in revenue (+52% YoY).
- Margin and unit economics: The company emphasized multi-quarter margin expansion and the expectation of 70%+ gross margins as the rental device model scales and in-network mix improves.
- Commercial strategy and capacity: Management discussed expanding the sales footprint (roughly 80 territories at year-end '25) and the introduction of an expanded clinical specialist role to drive penetration in existing accounts and new markets.
- Revenue cycle management (RCM) and payer coverage: In-network coverage has risen to ~80%, with a long-tail payer strategy to bring more payers under contract; RCM investments are aimed at faster collections and higher conversion rates.
- Clinical evidence and market positioning: The FDA post-approval study reached enrollment and is slated for late-breaker presentation at the American Heart Association (AHA) Scientific Sessions, signifying a potential data-driven differentiator in the WCD category.
- Competitive landscape and utilization: The leadership reiterated that WCD utilization remains limited (roughly 14% of eligible patients in the U.S.), underscoring the addressable market for Kestra’s ASSURE platform and the potential for category leadership. A notable data point cited was the SCD PROTECT trial, supporting greater WCD adoption in early high-risk periods.
- Outlook and profitability path: Executives stressed steady, measured OpEx investments aligned with territory expansion and service capabilities, aiming for cash-flow breakeven and profit progression as the top line scales.
"In the first quarter, we continue to reach more patients at risk of cardiac arrest, accepting over 4,200 prescriptions written for the ASSURE system, an increase of 51% year-over-year. Revenue grew 52% year-over-year to $19.4 million."
— Brian Webster
"We remain confident in our ability to achieve 70% plus margins over the next few years."
— Vaseem Mahboob
Forward Guidance
Management guidance for FY2026 projects revenue of approximately $88 million, representing a 47% increase versus fiscal year 2025. Key drivers include sustained prescription growth with existing customers and new account activations, higher in-network revenue per fit, and ongoing revenue-cycle improvements. The guidance implicitly assumes continued expansion of payer coverage (in-network mix near 80%) and further efficiency gains from the rental model with volume and depreciation leverage. Achievability considerations include: (i) successful onboarding of new sales personnel and improved conversion rates (targetting mid-to-high 40s progressing toward the high-50s over time), (ii) continued expansion of in-network payers and Tier 2 arrangements (e.g., Oscar Health), (iii) the FDA post-approval study results and broader clinical evidence underpinning acceptance and adoption, and (iv) stability in reimbursement dynamics across key markets. Risks to the outlook include slower-than-expected payer contracting, payer mix volatility, regulatory or guideline shifts affecting WCD adoption, and potential slower adoption cadence in new territories. Investors should monitor: (1) progression of the post-approval study data and AHA presentation outcomes, (2) trajectory of payer enrollment and average revenue per fitting, (3) progression toward cash flow breakeven and sustained profitability, and (4) any changes in utilization rates among eligible WCD populations.
Competitive Position
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KMTS Focus
45.69%
N/A
N/A
N/A
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Operating Profit Margin
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P/E Ratio Comparison
Investment Outlook
Kestra enters a high-growth phase characterized by strong top-line momentum, improving gross margins, and expanding payer coverage. The company has a robust liquidity position and a clear path toward cash-flow breakeven as its rental model scales and in-network penetration increases. The key catalysts include sustained prescription growth, ongoing payer contract expansion (approaching 80%), continued gross-margin improvement, and forthcoming clinical data from the FDA post-approval study and the AHA late-breaker presentation. However, the investment thesis must weigh near-term profitability risk against the potential for meaningful margin expansion and market leadership in a multibillion-dollar WCD market. Given the current trajectory, the stock could be attractive to growth-oriented investors who tolerate near-term losses in exchange for a compelling long-term profitability path and data-driven competitive differentiation. Caution is warranted due to execution risk in rapid expansion, payer dynamics, and competitive pressures.
Key Investment Factors
Growth Potential
Large addressable market for wearable defibrillator (WCD) therapy with expanding clinical evidence and payer coverage. Q1 2026 prescriptions exceeded 4,200 (+51% YoY) and revenue expanded 52% YoY to $19.4M. In-network coverage approaching 80% supports higher efficiency and revenue per fit, contributing to expected gross-margin expansion toward 70%+ as rental-device economics scale and depreciation leverage accrues.
Profitability Risk
Key risks include ongoing operating losses during the expansion phase, reliance on payer contracting to sustain growth (despite rising in-network participation), execution risk in rapid territory expansion, competition from incumbents with entrenched market share, and potential delays in regulatory or reimbursement milestones that could affect adoption and utilization rates.
Financial Position
Solid liquidity with $201.2M in cash and equivalents and an undrawn $15M tranche of existing debt. Net debt is negative, reflecting cash sufficiency to fund operations until breakeven. However, near-term profitability remains elusive given elevated OpEx and continued investments in sales, RCM, and clinical programs. The company projects cash flow breakeven in the future as top-line growth accelerates and margin expansion persists.
SWOT Analysis
Strengths
Large addressable market for WCD therapy with a growing clinical evidence base
Rental-based asset-light model that supports scalable unit economics
Gross margin expansion (45.7% in Q1 2026) driven by higher in-network mix and volume leverage
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