Kestra Medical Technologies' Q1 2026 Earnings Call: Contradictions Emerge on Market Share Strategy and Prescription Growth Projections

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $19.4M, up 52% YOY
• Gross Margin: 45.7%, compared to 32.9% in the prior-year period

Guidance:

• FY26 revenue expected to be $88M, up 47% YOY (raised from prior $85M).
• Expect strong prescription growth from share gains and new account activations.
• Revenue per fit to increase with higher in-network mix and RCM improvements.
• Gross margin expected to continue expanding in FY26; long-term target remains 70%+.
• Quarterly cadence: steady increases through the year; not back-end loaded.
• Conversion rate outlook embedded assumes ~2.5–3 point YOY improvement.
• Existing cash is sufficient to reach cash flow breakeven; $15M term-loan tranche available through July 31, 2026 (undrawn).

Business Commentary:

• Strong Financial Performance:
• Kestra Medical Technologies reported revenue of $19.4 million for Q1, an 52% increase year-over-year.

• The growth was driven by a 51% year-over-year increase in prescriptions and improvements in gross margin due to higher in-network MIPS and lower cost per fitting.

• Expansion of Sales and Market Penetration:

• The company continued to expand its sales organization, with plans to add new territories in high-prescribing regions with strong payer coverage.

• This expansion aims to further penetrate existing accounts and target new potential Assure prescribers.

• Gross Margin Expansion:

• Kestra's gross margin reached 45.7% in Q1, compared to 32.9% in the prior year period.

• This expansion was driven by improved unit economics, higher revenue per fit for more in-network patients, and reduced cost per fit through volume leverage.

• Completion of Major Clinical Study:

• Kestra concluded enrollment in its FDA post-approval study, with over 24,000 patients, marking a significant clinical milestone.
• This study is expected to present at the American Heart Association Scientific Sessions, solidifying Kestra's clinical data position against competitors.

Sentiment Analysis:

• “Revenue grew 52% year over year to $19.4 million.” “First quarter gross margin was 45.7% compared to 32.9% in the prior year period.” “We have now expanded our gross margins sequentially for seven quarters in a row.” “We expect revenue of $88 million, an increase of 47% compared to fiscal year 2025.” “In-network benefits … now approaching 80%.”

Q&A:

• Question from Travis Deed (BofA Securities): What drives the guidance raise this early and how should we think about cadence through the year?
  Response: Strong Q1 underpins the raise; management is confident but cautious early in the year and expects a steady, not back-end-loaded, top-line progression.

• Question from Travis Deed (BofA Securities): How are you improving in-network mix and what’s the impact on margins?
  Response: In-network patients rose from ~70% at IPO to ~80%; gradual further gains expected, with territory expansion focused where payer coverage is strong, lifting revenue per fit and margins.

• Question from Rick Wise (Stifel): Can you quantify progress adding in-network payers and how this supports territory expansion?
  Response: Payer adds are uneven (“sawtooth”) but trend upward; strategy is to add reps where coverage is strong so they compete on equal footing and drive conversions.

• Question from Matthew O’Brien (Piper Sandler): What drove the strong prescription growth and where could share exit the year?
  Response: Productivity is rising for seasoned reps and new hires are ramping to targets; sequential growth reflects both cohorts’ contributions.

• Question from Matthew O’Brien (Piper Sandler): Are new reps focused on converting existing high prescribers or expanding the market?
  Response: New reps prioritize top prescribers; experienced reps deepen penetration and open new accounts, expanding the market.

• Question from Lawrence Beedleson (Wells Fargo): What conversion-rate increase is assumed in guidance and how do you approach best-in-class levels?
  Response: Guidance embeds ~2.5–3 point YOY improvement; drivers are higher in-network mix, tier-2 payer adds (e.g., Oscar Health), and continued RCM process and systems investment.

• Question from Lawrence Beedleson (Wells Fargo): Current market share and path to category leadership?
  Response: Approx. 12% share today; a bit over 50% of U.S. territories covered—expanding sales coverage is the main driver, with timing dependent on the pace of footprint expansion.

• Question from Mike Pollock (Wolfe Research): What is the expanded clinical specialist role and deployment plan?
  Response: Shifting account management/service in high-performing territories to clinical specialists to free reps to win new prescribers; deploy selectively and scale based on results.

• Question from Mike Pollock (Wolfe Research): Specs and expected impact of the AHA late-breaker post-approval study?
  Response: A 24–25k-patient study with endpoints of shock success (primary), inappropriate shocks, false alarms, and compliance; intended to substantively bolster clinical evidence versus the incumbent.

• Question from Daniel Downs (Goldman Sachs): How are compliance rates evolving and sustaining over time?
  Response: Median wear exceeds 23 hours/day; after the first week, patients generally sustain usage through the prescription duration.

• Question from Daniel Downs (Goldman Sachs): What is the OpEx investment cadence for the year?
  Response: Steady, measured additions focused on quality hires and support to ensure successful territory ramp; disciplined execution rather than rapid mass hiring.