Kestra Medical Technologies (NASDAQ:KMTS) reported what management described as a strong third quarter of fiscal 2026, highlighted by higher prescriptions, accelerating revenue growth, and continued gross margin expansion as the company scales its wearable cardioverter defibrillator (WCD) business around the ASSURE System.
Quarterly performance driven by prescriptions and operating leverage
President and CEO Brian Webster said Kestra accepted more than 5,400 prescriptions written for the ASSURE System during the quarter. CFO Vaseem Mahboob said total revenue was $24.6 million, up 63% from the prior-year period, and attributed the increase primarily to a 58% year-over-year rise in prescriptions. Management said prescription growth reflected market share gains with existing customers, activation of new accounts, expansion of the field organization, and higher revenue per fit.
Gross margin progress and a continued long-term target
Kestra highlighted sequential gross margin improvement for the ninth straight quarter. Webster reported gross margin of 52.6%, up nine points year-over-year and 200 basis points sequentially, and reiterated management’s view that the business is on a path to 70%+ gross margins over the next few years.
During prepared remarks, Mahboob cited gross margin of 32.6% for the quarter versus 43.4% a year ago, though he also emphasized the same message of nine consecutive quarters of sequential improvement and a long-term 70%+ gross margin outlook. He said margin expansion has been driven by the unit economics of Kestra’s rental model, higher revenue per fit from a growing mix of in-network patients, and lower cost per fit from volume leverage and cost improvement projects.
On the Q&A, Mahboob said some cost improvement initiatives on the disposable side (not hardware) are beginning to show their full benefit as older inventory is worked through and newer inventory comes in at a lower cost.
Market dynamics: underutilization, growth, and guideline discussions
Management reiterated its view that WCD therapy remains underutilized, with Webster stating that six out of seven patients indicated for a WCD are not protected by one. Based on Kestra’s financial results and those of the incumbent, the company estimated the WCD market grew in the low-to-mid-teens percentage range on a dollar basis in calendar 2025.
In response to analyst questions about an apparent acceleration in market growth versus prior commentary, Webster cited several factors:
- Kestra’s expanded commercial footprint and increased “voice” in the market
- Clinical studies, including a large competitor study and Kestra’s own ACE-PAS results, highlighting elevated risk in the patient population
- An expectation that the incumbent will need to focus on expanding the overall category as Kestra takes share
When asked what it will take to materially expand the market (including “doubling” or “tripling”), Webster said it would likely require updates to clinical guidelines. He said Kestra is working to get the ACE-PAS study published and views publication as an important next step before deeper engagement with clinical societies on guideline changes.
Clinical evidence and an FDA-approved algorithm update
Kestra again discussed ACE-PAS, its FDA post-approval study that management described as the largest real-world prospective WCD study to date, enrolling and protecting more than 21,000 patients. Webster said ACE-PAS findings supported what patients experience with ASSURE, including low false alarm rates, comfort that supports higher wear-time compliance, and 100% successful conversion of dangerous arrhythmias. He also said clinicians have focused on the study’s finding that patients were at elevated risk in the first 90 days post-hospitalization.
Webster announced FDA approval of a new ASSURE algorithm update, which he said is intended to further reduce false alarms and inappropriate shocks. On the Q&A, he said the company identified opportunities for improvement after seeing data from more than 10,000 to 15,000 patients and viewed the update as a step to improve patient compliance (by lowering false alarms) and patient safety (by reducing inappropriate shocks). Webster said Kestra plans to roll out the update around the Heart Rhythm Society (HRS) meeting.
Commercial expansion, reimbursement wins, and capital position
Kestra continues to build out its sales organization, targeting geographies with high WCD prescription volumes and strong in-network payer coverage. Webster said the company ended calendar 2025 with about 100 active sales territories and is tracking toward approximately 130 territories by the end of its fiscal year in April. In the Q&A, he said the company is in its fiscal 2027 planning process and is weighing whether it can and should expand faster, noting capital is not currently the key constraint.
Webster also provided updates on market access and reimbursement:
- Florida managed Medicaid: Kestra became an approved provider and signed contracts with two of Florida’s four largest managed Medicaid plans, with efforts ongoing for the remainder. Webster said this removes a major barrier for sales reps trying to fully convert prescribers, and Mahboob noted it could also benefit gross margin in the state over time.
- Veterans Affairs: Kestra was added to the Federal Supply Schedule for the U.S. Department of Veterans Affairs. Webster said this enables reps to pursue VA hospitals more effectively and that the company has already seen early wins in the weeks following the approval.
- Medicare rate: Webster said the monthly Medicare reimbursement rate for WCDs increased 2% to $3,589 on Jan. 1.
Webster said in-network fittings have risen from about 70% at the time of the IPO to the low 80s currently, which management said improves revenue cycle efficiency and related metrics.
On profitability and cash, Mahboob reported GAAP operating expenses of $47.7 million, including $1.5 million of non-recurring professional fees tied mainly to the Biobeat transaction and a recent equity offering. GAAP net loss was $34.2 million and adjusted EBITDA loss was $21.2 million. Kestra ended the quarter with $291 million in cash and cash equivalents, which includes net proceeds from a December public equity offering. Mahboob also said the company plans to file a shelf registration statement in early April once eligible, describing it as a corporate governance best practice and stating the company has no need for additional capital at this time.
Looking ahead, Kestra raised fiscal 2026 revenue guidance to $93 million, representing 55% growth versus fiscal 2025, up from prior guidance of $91 million and its initial fiscal 2026 outlook of $85 million. Management said the updated guidance assumes continued prescription growth, further benefits to revenue per script from a higher in-network mix, and improving revenue cycle management performance.
About Kestra Medical Technologies (NASDAQ:KMTS)
We are a commercial-stage, wearable medical device and digital healthcare company focused on transforming patient outcomes in cardiovascular disease using monitoring and therapeutic intervention technologies that are intuitive, intelligent, and connected. We have developed and are commercializing our Cardiac Recovery System platform, a comprehensive and advanced system that integrates monitoring, therapeutic treatment, digital health, and patient support services into a single, unified solution. The cornerstone of our Cardiac Recovery System platform is the ASSURE WCD, a next generation wearable cardioverter defibrillator (“WCD”) used to protect patients at an elevated risk of sudden cardiac arrest (“SCA”), a major public health problem that accounts for approximately 50% of all cardiovascular deaths in the U.S.
