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Good afternoon. Welcome to KESTRA MEDICAL TECHNOLOGIES, LTD. 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.

Thank you, Victor. Good afternoon. Thank you for joining KESTRA MEDICAL TECHNOLOGIES, LTD.'s third quarter fiscal 2026 earnings call. With me today are Brian Webster, President and Chief Executive Officer, and Vaseem Mahboob, Chief Financial Officer. This call includes forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. 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 MEDICAL TECHNOLOGIES, LTD.'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 MEDICAL TECHNOLOGIES, LTD.'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 MEDICAL TECHNOLOGIES, LTD. undertakes no obligation to update these statements except as required by applicable law. With that, I will now turn the call over to Brian.

Thanks, Neil. Good afternoon, and thank you for joining us on today's conference call. Happy Saint Patrick's Day to all of our friends in Ireland. We are an Irish-domiciled company, so we are happy to celebrate along with them. We are excited to discuss the strong financial performance we had in the third quarter and the continued progress we are making on our key operational objectives. I would like to begin, though, by grounding us again in the KESTRA MEDICAL TECHNOLOGIES, LTD. mission: the lives we help protect each day and the patients, families, and clinicians we serve. The reality in cardiac care is that risk does not always resolve when a patient leaves the hospital. For many patients, vulnerability persists, and care needs evolve. During periods when risk remains elevated, a 64-year-old man with severe heart failure and a cardiac output measurement of only 10% to 15% was prescribed the Assure system. In the weeks that followed, a pattern of escalating clinical risk began to emerge. Over the course of about 20 days, the Assure system detected many episodes of SVT, which is a heart condition characterized by a rapid resting heart rate stemming from issues in the upper chambers of the heart. Automated KESTRA MEDICAL TECHNOLOGIES, LTD. CareStation alerts were generated for each episode, and the KESTRA MEDICAL TECHNOLOGIES, LTD. team stayed closely engaged with both the patient and the clinic. The physician responded to the alerts by promptly adjusting the patient's medications. Despite this, the arrhythmias persisted. During the Christmas holidays, the Assure system detected a severe ventricular arrhythmia and delivered a lifesaving shock. Immediately, the KESTRA MEDICAL TECHNOLOGIES, LTD. team coordinated with the emergency department, spoke directly with the on-call physician, and transmitted rhythm strips to facilitate informed clinical decision-making. After stabilization, this patient's situation required transfer to a higher-acuity hospital. During helicopter transport, the Assure system detected another life-threatening arrhythmia and delivered a second shock, protecting the patient at a critical moment while en route to advanced care. Because early detection was matched with clinician engagement, and because protection traveled with them across every transition of care, this vulnerable patient survived a rapidly declining clinical episode. This story represents more than a single intervention and illustrates how the cardiac recovery system supports patients across the recovery journey. What differentiates KESTRA MEDICAL TECHNOLOGIES, LTD. is not just the therapy we deliver, but the system we surround it with: intelligent detection and protection, clinical insight, and human engagement working together. In 2026, our team and technology supported many similar moments of intervention. As always, we remain mindful of the trust placed in us by clinicians, patients, and their families every day.

I would now like to turn to our recent financial performance. In the third quarter, we continued to reach more patients at risk of cardiac arrest, accepting over 5,400 prescriptions written for the Assure system. Revenue was $24,600,000, with growth of 63% compared to the prior-year period. Gross margin of 52.6% was up nine points year-over-year and 200 basis points sequentially, reflecting the attractive unit economics of our business model. This was the ninth quarter in a row of sequential gross margin expansion. We remain confident that KESTRA MEDICAL TECHNOLOGIES, LTD. is on a path to 70% plus gross margins over the next few years. With the strong revenue growth and margin expansion that KESTRA MEDICAL TECHNOLOGIES, LTD. is generating, we are seeing nice operating leverage in our business. This leverage supports the investments we are making in the company's key growth drivers that we believe will yield significant long-term value for KESTRA MEDICAL TECHNOLOGIES, LTD. and its stakeholders. Turning to the WCD market, we have previously noted that despite the overwhelming evidence that an external defibrillation shock is effective at terminating dangerous cardiac rhythms, WCD therapy remains underutilized. Six out of seven patients that are indicated for a WCD are not being protected by one. We believe the innovation and clinical evidence we have brought to the category is beginning to change this. Based on our recent financials and that of the incumbent, we estimate the WCD market grew in the low- to mid-teens on a dollar basis in calendar year 2025. We are still in the early innings of market expansion, and we see this category growing into a multibillion-dollar market in the years ahead.

On last quarter's earnings call, we discussed the results from ACE PAS, our FDA post-approval study, which was presented in November. As a reminder, ACE PAS was the largest real-world prescribed prospective WCD study to date, with over 21,000 patients 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 100% successful conversion of dangerous arrhythmias. ACE PAS continues to be a major topic of conversation with clinicians, articulating the study's finding that patients were at elevated risk during the first 90 days post-hospitalization. Clinicians now have robust clinical data that shows the risk level of their patients is higher than they understood it to be, particularly early in the recovery and treatment journey.

We have also continued to learn from the body of data generated from the ACE PAS study, and we are pleased to announce today the FDA approval of our latest innovation, a new Assure algorithm update. This update further strengthens the performance of the Assure system. With this new update, we expect to see an even lower rate of false alarms and inappropriate shocks, which are critical measures of both patient experience and clinical performance. Enhancements like this are an important part of how we continue to improve the system and further differentiate KESTRA MEDICAL TECHNOLOGIES, LTD.'s technology in the wearable defibrillator market.

In mid-January, we announced another innovation, a strategic collaboration with BioBeat Technologies to expand diagnostic insight for patients prescribed the Assure WCD. The agreement is anchored by an exclusive license and co-development arrangement and included a $5,000,000 equity investment in MyoV. By way of background, BioBeat has developed the only clinically validated, FDA-cleared cuffless patch-worn ambulatory blood pressure monitoring device. It delivers continuous noninvasive blood pressure measurement over a 24-hour period for hypertension diagnosis and management in the outpatient cardiac recovery setting. KESTRA MEDICAL TECHNOLOGIES, LTD. intends to integrate BioBeat’s technology into our product portfolio to make ABPM data available for patients prescribed the Assure WCD. Hypertension affects approximately 120,000,000 Americans, and results from ACE PAS underscore the clinical relevance of the collaboration. As you may recall, 72% of the 21,000 patients studied in ACE PAS were hypertensive, highlighting the complexity of managing blood pressure during cardiac recovery, particularly during guideline-directed medical therapy optimization. Over time, we believe this collaboration will help us win additional market share, 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 than heretofore have gone unprotected.

Moving on to other updates, 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. We ended calendar year 2025 with about 100 active sales territories and are tracking towards our goal of having about 130 sales territories by the end of our fiscal year in April.

I would also like to share a few updates on market access and reimbursement. First of all, as you may know, Florida is one of our largest states by patient fittings and also one of the states in which we have our highest market share. We have accomplished this despite not having a managed Medicaid provider number to utilize with Florida's managed Medicaid payers. Managed Medicaid plans cover nearly 90% of Florida's Medicaid enrollees. I am very pleased to share that we recently became an approved Florida managed Medicaid provider and have subsequently signed contracts with two of the state's four largest managed Medicaid plans. We are considering contracts with all the remaining managed Medicaid plans in Florida. Second, KESTRA MEDICAL TECHNOLOGIES, LTD. has recently been added to the Federal Supply Schedule for the U.S. Department of Veterans Affairs. The VA is the largest integrated health care network in the U.S. and covers 9,000,000 members, nearly 50% of whom are over the age of 65. We are honored to have the opportunity to protect veterans that are at risk of sudden cardiac arrest. And third, the monthly Medicare reimbursement rate for WCDs increased 2% up to $3,589 a month on January 1.

As you can see, we continue to bring more payers in network while also making progress on improving our RCM capabilities. At the time of our IPO twelve months ago, approximately 70% of our billings were for patients with in-network benefits. This figure is now in the low eighties. The higher in-network mix meaningfully increases our team's efficiency and positively impacts all of our revenue cycle management metrics. It is important to note that there are over 3,000 payers in the U.S., so there will still be a long tail of regional and local payers we are working to bring under contract. In conclusion, the fundamentals of KESTRA MEDICAL TECHNOLOGIES, LTD.'s story and business remain strong. The WCD market is expanding, KESTRA MEDICAL TECHNOLOGIES, LTD.'s revenue growth accelerated to over 60%, gross margin has increased meaningfully, and we have fortified our balance sheet. In the twelve months since our IPO, our execution has been strong across all elements of the business. The foundation we have built positions KESTRA MEDICAL TECHNOLOGIES, LTD. for strong and durable growth for years to come. I would like to thank our incredible team in the field and here at the home office in Kirkland for their passion and commitment to the KESTRA MEDICAL TECHNOLOGIES, LTD. mission. With that, I will now turn it over to Vaseem, who will discuss third quarter financial results in more detail and provide our updated fiscal year 2026 revenue guidance.

Thank you, Brian, and good afternoon, everyone. Total revenue was $24,600,000 in the third quarter, an increase of 63% compared to the prior-year period. Revenue growth was driven by a 58% year-over-year increase in prescriptions, reflecting market share gains with existing customers, activation of new accounts, expansion of our field team, and higher revenue per fit. Gross margin was 52.6% in the third quarter compared to 43.4% in the prior-year period. As Brian mentioned, we have now expanded our gross margin sequentially nine quarters in a row. The continued expansion in gross margin was driven by the attractive unit economics inherent in KESTRA MEDICAL TECHNOLOGIES, LTD.'s rental model, an increase in revenue per fit from more in-network patients, and a decline in 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 significantly from volume and depreciation leverage. We remain confident in our ability to achieve 70% plus gross margins in the next few years.

We are also continuing to see improvements in all three key drivers of our conversion rate: our prescription fill rate, our BIN rate, and our collections performance. Our conversion rate in the third quarter was approximately 46%, up from an adjusted conversion rate of 43% in the prior-year period. 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 continue to help improve all three elements of our conversion rate and drive operating leverage as we scale the business.

GAAP operating expenses were $47,700,000 in the third quarter and included $1,500,000 of nonrecurring costs from professional fees and expenses primarily related to the BioV transaction and our recent equity offering. GAAP operating expenses were $27,100,000 in the prior-year period. Excluding nonrecurring costs and stock-based compensation, operating expenses were $36,100,000 in 2026 compared to $24,800,000 in the prior-year period. The increase was primarily attributable to investments in commercial expansion and public company costs. GAAP net loss was $34,200,000 in the third quarter compared to a GAAP net loss of $21,800,000 in the prior-year periods. Adjusted EBITDA loss was $21,200,000 in the third quarter compared to an adjusted EBITDA loss of $16,300,000 in the prior-year period. Cash and cash equivalents totaled $291,000,000 as of January 31, which includes the net proceeds from our public equity offering in December.

Before I turn to guidance, one housekeeping item. At March, it will be twelve full months since we completed our IPO. As such, we will be eligible to file a shelf registration statement. While we have no need for additional capital at this time, corporate governance best practice is to file the shelf once eligible, and we plan on doing so in early April. I will now provide an updated fiscal year 2026 guidance. We are increasing revenue guidance to $93,000,000, representing growth of 55% compared to fiscal year 2025. This compares to prior guidance of $91,000,000 and our initial fiscal year 2026 guidance of $85,000,000. Underpinning this guidance is our expectation that we will continue to see strong growth in prescriptions as we increase market share with existing customers and activate new accounts. We expect revenue per fit to continue to benefit from a higher mix of in-network patients and improvements in our revenue cycle management capabilities. With that, operator, we have concluded our prepared remarks and are ready to proceed to the Q&A portion of the call.

Thank you. Operator?

Thank you. We will now open for questions. To ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Please limit yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Travis Steed from Bank of America Securities. Your line is open.

Hey, congrats on the good quarter. I guess first, just kind of curious as you look into next year and think about early 2027 thoughts and the puts and takes you would talk about on the model from a high level, and if you are comfortable with the $133,000,000 that the Street is modeling for in consensus today.

Thanks for the question, Travis. We had a fantastic quarter, so thank you for that. As you know, our policy is only to comment about the full-year guidance for 2027 at the end of the Q4 call. But we can tell you that today, with our initial planning and process, we feel very confident that we can deliver top-tier medtech growth in 2027 and beyond. We will be happy to provide more color in the next earnings call.

Alright, great. That makes sense. And I did want to ask about the WCD market accelerating. I think you said low to mid-teens this year. Last quarter, I think it was close to 11%. So you are seeing a real acceleration. Any color you can give on the ground on what you are seeing that drives this acceleration and the durability of the higher market growth rate going forward?

Yes, thanks for that question, Travis. At the time of the IPO twelve months ago, we had the market growth on a dollar basis at about 8%. Then, as you just indicated on our last call, we had it somewhere closer to 11%. Now we are seeing it accelerate. I think what we are seeing is a couple of dynamics that are driving that. First of all, you have KESTRA MEDICAL TECHNOLOGIES, LTD. increasing the size of our commercial team, so we just have a bigger footprint. We have more voice out there in the market telling our story. And then you have clinical results that are driving the discussion, both from our competitor who released a big clinical study six months ago or so that pointed to elevated risk in this patient population, and then that was corroborated by our even bigger study that we released, which also pointed to higher risk in this patient population than many thought. So I think what we are seeing is a couple of clinical studies that are really identifying risks in the population, then you are seeing the expansion of the KESTRA MEDICAL TECHNOLOGIES, LTD. commercial team really driving that voice, and we are seeing our competitor coming to the realization that if they want to grow their business, they are going to have to expand the market because we are going to be taking a bunch of their share. So I think it is a combination of all those things that is leading to that market growth. We believe that we will continue to see the market growth as we continue to grow our commercial footprint and drive the clinical messages out into the market.

One moment for our next question. Our next question will come from the line of Matthew O'Brien from Piper Sandler.

Afternoon. Thanks so much for taking the question. First one is on the sequential bump that we saw in prescriptions. That is the best that you have done, I think, the last couple of years in terms of the data that we have had. I know, Brian, you talked a little bit about these different areas that are contributing from the new sales force to market expansion. Can you deconstruct where that improvement came from? Are you really accelerating the market, or is it more share shift right now versus market, and with everything that is going on, the market benefits maybe come over the next couple of years?

Thanks, Matt. When we deconstruct where the prescription growth is coming from, the good news for us is that we are seeing it come not just from productivity improvements in our base territory managers, but we are also seeing the new territory managers that we have been bringing on come up our productivity curve very consistently with our model. We are glad to see both of those dynamics. As we look at where that prescription growth is coming from, our math points to about 70% to 75% of that coming from installed base or current market share shift as we win market share, and about 25% of it coming from actual new prescribers. So we are seeing the early days of the benefit of the market expansion, but very clearly, Matt, with a market this big and an incumbent this large, most of the opportunity in the early days here is coming from winning current customers that are prescribing WCDs.

Okay. Makes sense. As a follow-up, I would love to ask about gross margin because that was really good in the quarter. I am looking at the stock down a little bit in the aftermarket, and it might just be tech-related specifically, but I think it might have to do with the guide for the full year. Given all the momentum and the conversion rates, prescriptions are so strong. I think maybe some had been expecting a little bit more here for the full year. Can you talk about anything that is going on competitively or pricing-wise that could be a headwind here in fiscal Q4 versus just traditional conservatism on your part?

Thank you. Pricing is predictable. There are no headwinds in pricing. The competitive environment is one we know extremely well. From our perspective, we have grown the business in the mid-50% over the first few quarters of the year. We think as a starting point for the fourth quarter, that is a reasonable place to be. We are excited about growing our business by the mid-50% year over year. That is a significant achievement. We feel really good about that, and we feel really good about the trajectory we are on. I do not think there are any tailwinds other than we are just out there competing every day. It is a daily run-rate business, and we are focused on winning every day out in the market.

Thank you. One moment for our next question. Our next question will come from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Hi, this is Nathan Trayback on for Larry. Thanks for taking the question. Can you talk about what you are seeing from competition in the market? Just a follow-up to that, are your reps seeing any greater difficulty in taking share after ZOLL's recent upgrade to their WCD?

Thanks, Nathan. We are not hearing anything related to ZOLL's new larger WCD that they launched. I think they are in a slow launch of that product. They are not going to replace that massive fleet that they have overnight, and my guess is that only a fraction of the patients out there are even being offered that product at this point. We are not really hearing that as an obstacle or an issue. The competitive landscape remains the same in that you have an entrenched competitor who is trying to leverage their time in the seat, and they are doing that by trying to focus on being easy to do business with in terms of order processing, insurance coverage, and service level. Those are really the things that they can compete on because they know that from a product perspective, we have clear differentiation from their product. That is what we are seeing right now, but we have not seen any impact of their new rollout or their new product.

Okay, great. At a high level, you are approaching about 20,000 scripts by our math in fiscal 2026, and the market is approaching 140,000. There are still a good number of physicians that do not prescribe WCD. In your view, what is it going to take to get physicians off the sidelines and show more interest in WCD?

I think the market growth will continue. If we are in the low- to mid-teens today, then it is reasonable to think that over the next couple of years, as we expand our footprint, we are going to see that market growth continue to accelerate. But when it comes to really growing the market—doubling or tripling the market—it is going to require updates to the clinical guidelines. What we talked about with our ACE PAS study on the last call was that we felt like that was an important next step in the development of WCD clinical data and hopefully would allow us to come to the table and start to engage the societies around guidelines, and also help to clarify what are the remaining steps to get guidelines changed, if any, so that we can be focused on that. We are in the process now of working to get our ACE PAS study published, and that is the immediate next step for us. To really double and triple the market, which we think we are highly capable of doing, it is going to take some guidelines changes.

Thank you. One moment for our next question. Our next question comes from the line of Michael Polark from Wolfe Research. Your line is open.

Hi. Good afternoon. Question on your vision for the sales force and the size of it. At the end of your fiscal 2025, you said territories were 80, and the vision was to double that over the next couple of years. I heard 130 targeted by April. If 80 doubles, it is 160 in, call it, fiscal 2027 by the end of the year. That would mean you are adding 30 territories in fiscal 2027 versus adding close to 50 in fiscal 2026. You just raised a bunch of fresh financing. Are you interested in going faster than that vision, or is that still the vision?

Mike, thanks for the question. We are in our FY 2027 planning process right now. In fact, we had our board meeting last week, and our board got their first look at our FY 2027 planning assumptions. We will be refining that over the next 60 days or so, and that will be one of the key questions. You are directionally right in your math in terms of what we have said before, and I think one of the questions will be, can we go faster and should we go faster? Capital is not our constraint right now. Being able to execute our business model and keep promises to the clinicians—those are the things that we are going to try and balance as we work our way through our planning process. That is definitely a topic on the table right now. We are excited about the progress we are making. There is certainly a contingent that is driving towards that outcome.

Helpful, Brian. For my follow-up, I want to ask on the conversion rate. If I squint, I see it up year on year, clearly, but versus the prior two quarters of the fiscal year, it is a little bit of a dip back down. Can you remind us, Vaseem or Brian, of the dynamic there? Is that simply the quarter that was just reported is January and deductibles reset, so patient collections are lower, bad debt is higher, or other influences you would have us think about quarter to quarter to quarter?

Great, thanks, Mike. We are really excited about all of the progress that we are making on rev cycle. Just a reminder, we have made a significant improvement in that rate. Fiscal year 2024, we were at 38%. 2025, we finished at 44%. In this most recent quarter, we had 46%. So we were up three points on an adjusted basis. At the same time, all KPIs that we talked about on our conversion rate are trending in the right direction, so we feel really good about where it is going. You are right; we had said that second-half conversion rates usually tend to be lower than the first half. That is because of the points that you cited, which are really the deductibles that reset in January and some of the claims that we normally hold back to make sure that we get a fair share of the claims that we submit. Again, great progress on conversion rate and all of the KPIs related to that, and we will continue to show progress.

Thank you. One moment for our next question. Our next question will come from the line of Frederick Wise from Stifel. Your line is open.

Good afternoon. Hi, Brian. Hi, Vaseem. I was hoping you could expand on your comments and get more in the weeds on a couple of topics. First, Florida. Brian, that sounds like really important and major news. You are the market share leader. You have signed two of the largest managed Medicaid plans, and it sounds like two others could be relatively imminent or soon. Help us understand better how big a deal it is and how to think about it. Does this overnight accelerate growth in Florida? Obviously, a huge market.

Thanks, Rick. We appreciate the question. We are excited about that. If you were to ask any of our Florida territory managers what their biggest challenge has been in the last year, they would say the lack of a Medicaid license. Removing that barrier is, as our chief commercial officer likes to say, like removing a big pebble from your shoe for the reps. In the actual account, when our rep is trying to convert a prescriber completely over to KESTRA MEDICAL TECHNOLOGIES, LTD., it is very difficult, impossible in fact, when you do not have that Medicaid number and the ability to serve that part of the population. It is a big population in Florida. That is a limiter on how high you can go on market share capture. This will definitely be a benefit to the Florida team. It will take a little time to roll through as we get the actual agreements in place and rolled out to our team, so it will not be an overnight thing. It will be something that we will see progress on quarter over quarter, but we are very excited about that.

Rick, I will add to that on the gross margin side. In some of the accounts that we had already converted and where we were taking all of those patients, we were basically getting a goose egg for those. Now, not only do you see faster acceleration of adoption to get more market share, you will also see a nice impact on our gross margins because for that business, which is where we have the highest market share in the state of Florida, you will see a nice tailwind on gross margin in that business as well.

I was not going to ask you about gross margin this quarter because you did so well, but you brought it up. Cost per fit came in at, I think I am saying it right, 14% this quarter. How big a factor is that in the gross margin improvement? You keep doing outstandingly well. How much lower can it trend over time, and how big a factor is that in the mix of the multiple factors driving gross margin higher?

Thank you for that comment, Rick. We continue to make tremendous progress on gross margins, and as Brian mentioned in his prepared remarks, this is the ninth quarter now where we have shown sequential improvement. I was looking at it earlier—this is from massively north of negative 200% gross margins to where we have come. Incredible job by the team to get us there. In terms of the mechanics, other than the unit economics that we talk about, which is just inherent to the rental model where you get that depreciation leverage and volume leverage, we think that on some of the cost improvement programs—not on the hardware; remember, we have to protect that fleet and the fleet investment—on the disposable side, we have had some really nice cost improvement projects that completed last year that are now starting to really pay benefits in full because we are burning through the old inventory and the new inventory is coming at a lower cost. We will continue to see the team make really good unit cost reduction progress in the next few years. The good news is we have good line of sight to 70% plus gross margins that we aspire to, and this quarter is another proof point that we can get there.

Gotcha. I am going to slip in one more if you do not mind. The FDA approval for your new algorithm—you talked about it a little bit, Brian. My question is to expand on your comments. As a prescriber or patient, what am I going to experience, and is that going to be an important or meaningful step? How meaningful is it once you get that all rolled out?

Thanks, Rick. We are very excited about that change. It is a change we have been working on for well over a year since we started to see some of our clinical data. As we started to get past 10,000 to 15,000 patients, we saw opportunities where we could further reduce the already market-leading false alarm rate and also reduce the inappropriate shock rate. The inappropriate shock rate is very low—we met all the FDA targets for that—but we saw an opportunity to get even better and create an even better clinical product. The false alarm rate, as you are aware, is related to patient compliance, and the inappropriate shock rate is related to patient safety. We did what we believe was the right thing: we looked at our data, learned from it, and then made adjustments to the algorithm to make it even better than it already is. I am proud of the team because we made choices when we decided to invest in that algorithm. We are going to be rolling that out coming up at HRS, and I think our team is going to be very excited. It will absolutely put us clearly differentiated on both of those metrics from any competitor, and it is going to help to validate our product one step further.

Thank you. One moment for our next question. Next question will come from the line of Marie Thibault from BTIG. Your line is open.

Hey, good evening. Happy Saint Patrick's Day, and thanks for taking the questions. I wanted to follow up on the Veterans Affairs win, now being on schedule there. Can you tell us a little bit more about KESTRA MEDICAL TECHNOLOGIES, LTD.'s plans on how to approach the network, expectations for the ramp there, and any other hurdles as you start to deploy into some of those VA hospitals?

Thanks, Marie. We appreciate the question. It is another big win in market access for KESTRA MEDICAL TECHNOLOGIES, LTD. As you are probably aware, if you are trying to market your product in a VA hospital and you do not have a Federal Supply Schedule number, then you are handicapped and spinning your wheels. Getting that number is essentially a license to go in and serve those institutions. We are rolling that out territory by territory because almost every territory in our commercial footprint has some VA institutions in it. We are now giving our reps the ability to go in and knock on those doors when they have not really had that ability before. It is a great opportunity. We have already seen, just in the last four to six weeks, some really terrific wins at some of these VA hospitals. It is a strategy we are going to continue to roll out. We are going to get the KESTRA MEDICAL TECHNOLOGIES, LTD. team really fired up about protecting these veterans who have protected us, and we are excited about that opportunity.

I appreciate that. As a follow-up that is a little more high level, it was referenced earlier that your sequential uptick in prescriptions this quarter was the highest we have seen in your history here. I know one quarter may not be enough to call a trend, but it certainly looks like a nice acceleration. You have a lot of wind at your back: you have new reps on board, you have the ACE PAS data, you have done a lot of medical education, and you have had an expanded role for the clinical specialists as well. You have made a lot of changes that are beneficial as well. Any reason to think this acceleration or momentum cannot continue as we look ahead? Not asking for anything formal, but just from your own viewpoint.

If you want a really high-level answer, the answer is no. There is no reason. I think all of the things that you said are right on. We are investing—FY 2026 is a year of investment in the commercial footprint. We have been very clear about that as part of our strategy from the onset, and we have executed really well against that investment. As you know, it is no easy task to go out and recruit, hire, onboard, retain, train, and get them up the curve—hiring 50 new territories, which is essentially what we are going to end up doing this fiscal year. We are doing that. We are adding the clinical folks to anchor down some of those territories, as we have talked about, and we are investing in the future. Our intention is to build a long-term, durable commercial engine at KESTRA MEDICAL TECHNOLOGIES, LTD., and we are going to feed that engine with continuous innovation. That engine is going to have great innovation, great product differentiation, and great support because, at the end of the day, this is still a service business. We feel really good about the investments we are making and the foundation that we are building.

Thank you. One moment for our next question. Our next question will come from the line of David Roman from Goldman Sachs. Your line is open.

Thank you. Good afternoon, everyone. I appreciate you taking the questions here. Maybe I could just start with the territory expansion that you discussed. Can you help connect the accelerated territory expansion to your revenue outperformance this year and the extent to which sustaining this revenue growth requires territory adds versus same-store sales growth?

Yes, David, thank you for the question. As you can appreciate, when you are growing a sales force, you are dealing with different dynamics. One dynamic is you add new territories, and the other dynamic is how quickly you can get them on board, get them up the productivity curve; that is a big question. The other question is, with all your base reps, can you continue to see productivity? What we do not want to have is a situation where the only way we can grow is by expanding sales territories. That is where we focus on productivity improvements in our team. We have invested heavily in training. We have invested heavily in innovation, which will continue to help productivity. I think what we are going to see over the course of the next year is a bunch of new territory managers who have a little time in the saddle, so to speak, and we are going to see them do some great things. I do not think that our model requires us to continually add new reps. We have lots of opportunity to gain market share and to grow the productivity levels on a territory level. As you combine and roll all those up, that equals growth without having to continue that really aggressive sales force expansion.

Then maybe just a follow-up. Vaseem, in the past you have talked about CapEx spending as one of the best leading indicators of your confidence in forward revenue growth. Can you talk about where you are in that cycle and how you are thinking about forward use of cash, and how we should translate the increased investments here into the forward outlook? It certainly looks like you are performing on revenue. I know you are not going to make FY 2027 comments here, but if I take your past comments on CapEx and try to tie it to the forward outlook, maybe you could help connect the dots there for us a little bit.

Sure. Thanks, David. We have talked about this in the past. The leading indicator for us, going down this path of building out the distribution team, would be to hire the CapEx because when you deploy those reps, you want to make sure they have the right level of inventory and can maintain their service level, which is critical in our business. As we have said, the planning assumption—or at least what we are guiding everyone on—is long term, 10% of our fittings are going to come from new units; 90% of them are going to come from reconditioned units, which means we are our largest supplier ourselves. I think the team has done a fantastic job to drive the returns engine. At the same time, when you do that math on the 10% coming from new units, that gets you to the CapEx numbers, including some of the replacement CapEx investments, to about $30,000,000 a year for the next couple of years at least. When the Q comes out, you will see that we had a $9,000,000 investment in CapEx in this quarter. It should give you a lot of comfort that that $9,000,000 investment is ahead of us going from the previously publicized number of 100 reps in November to 130 by the end of the year.

Okay. Then maybe just a quick follow-up to that. If I look at your cash burn in the quarter, excluding the BioBeat investment, it looks like mid-$20,000,000. Is that isolated to the quarter? How should we think about that number on a go-forward basis?

We are very happy with where we ended up on the cash burn. Again, like I said, $9,000,000 of that $28,000,000 burn was CapEx. $18,000,000 or $19,000,000 of that was the operating burn, and we feel that we are going to be in that range at least for this next year.

Thank you very much.

Thank you. That will conclude our Q&A for today. I would now like to turn it back over to Brian for any closing remarks.

Thank you, and thank you everyone for the questions and for your attendance this afternoon. I just want to reiterate that we are very excited about the results that we saw in Q3. We are seeing the business model come together. We are seeing terrific performance out in the field as we scale up new reps, and I am very excited about the caliber of the new territory managers that we are hiring and the potential we have there. Q3 is a little bit of a challenging quarter for us because as a daily run-rate business, which KESTRA MEDICAL TECHNOLOGIES, LTD. very much is, when you get into the November–December holidays and then you get into the January new plan year for insurance, there are a lot of variables in Q3 that, quite frankly, make us nervous every year. Our team executed directly through those and delivered a fantastic quarter and, most importantly, continued to invest and build the infrastructure and the foundation that we need to create the long-term, durable growth engine that we are talking about. We are very pleased with the quarter and appreciate everybody joining the call. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good afternoon, and welcome to KESTRA MEDICAL TECHNOLOGIES, LTD. second quarter fiscal 2026 earnings 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.

Thank you, Operator. Thank you for joining KESTRA MEDICAL TECHNOLOGIES, LTD.'s second quarter fiscal 2026 earnings call. With me today are Brian Webster, President and Chief Executive Officer, and Vaseem Mahboob, Chief Financial Officer. This call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 MEDICAL TECHNOLOGIES, LTD.'s current expectations, forecasts, and assumptions and 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 MEDICAL TECHNOLOGIES, LTD.'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 MEDICAL TECHNOLOGIES, LTD. undertakes no obligation to update these statements except as required by applicable law. With that, I will now turn the call over to Brian.

Thanks, Neil. Good afternoon, everyone, and thank you for joining us on today's conference call. We are excited to discuss the strong financial performance we had in the second quarter and the continued progress we are making on our key operational objectives. Before we jump in, I want to begin by grounding us in the patient focus that makes KESTRA MEDICAL TECHNOLOGIES, LTD. a special company. At the center of everything we do are the lives we protect each day and the impact we have on patients, their families, and the providers who care for them. Recently, a patient in Florida collapsed from ventricular tachycardia and required urgent intervention. After stabilization, the patient was discharged with the competitive wearable defibrillator and referred to electrophysiology for follow-up. At his patient outpatient visit, the patient reported poor tolerance of that device. Due to discomfort and adherence risk, the physician transitioned the patient to the Assure system, citing improved comfort and care coordination for the switch. Once fitted with the Assure system, the patient expressed a clear improvement in wearability compared to the previous device. The patient and family also noted greater confidence due to the system's ability to connect them quickly to emergency care. Weeks later, the patient collapsed again at home. The Assure system detected the event and announced it was preparing to deliver therapy. Before therapy was delivered, the patient regained consciousness and successfully diverted the shock, reflecting the Assure system's ease of use and patient-first design. Following the cardiac event, the patient was transported safely to the emergency department, while our team delivered episode data directly to the emergency department. The following morning, care station reports guided discussion during cardiac ICU rounds. The care team described the data as detailed and clinically useful. Two days later, the patient received an ICD. This case reflects how the cardiac recovery system brings together protection, clinical insight, and care coordination to change outcomes when time matters most. While this is just one patient's experience, in 2026, our team and technology helped facilitate many similar life-saving events. We remain mindful of the trust placed in us by clinicians, patients, and their families every day. I would like now to turn over to our recent financial performance. In the second quarter, we continued to reach more patients who are at risk of cardiac arrest, accepting approximately 4,700 prescriptions written for the Assure system. Revenue was $22.6 million, with growth of 53% over the prior year period. Our gross margin climbed over the 50% line for the first time in the company's history, an important milestone for KESTRA MEDICAL TECHNOLOGIES, LTD. The actual gross margin of 50.6% was up 11 points year over year and reflects the attractive unit economics of our business model. This was the eighth quarter in a row of sequential gross margin expansion. We expect continued gross margin expansion in the back half of FY 2026 and remain confident that KESTRA MEDICAL TECHNOLOGIES, LTD. is on the path to 70% plus gross margins over the next few years. With the strong revenue growth that KESTRA MEDICAL TECHNOLOGIES, LTD. is generating, we are seeing nice operating leverage in our business. This leverage supports the investments we are making in the company's key growth drivers that we believe will yield significant long-term value for KESTRA MEDICAL TECHNOLOGIES, LTD. and its stakeholders. Turning to the overall WCD market, we have previously noted that despite the overwhelming evidence that an external defibrillation shock is highly effective in terminating dangerous cardiac rhythms, WCD therapy remains underutilized, reaching just 14% of the eligible US addressable market. That means six out of seven patients that are indicated for a WCD are not being protected by one. The best way for KESTRA MEDICAL TECHNOLOGIES, LTD. to positively influence clinical practice and have more patients protected by WCDs is by generating highly impactful clinical evidence. So one month ago, we did just that with the presentation of the primary results of ACE PAS, which is our FDA post-approval study, at the American Heart Association annual meeting in New Orleans. ACE PAS is the largest real-world prospective WCD study to date, with over 21,000 patients enrolled and protected. The study design includes pre-specified performance criteria with objective performance measurements. The key takeaways from the study results were as follows. First, the Assure system met both of its primary endpoints, demonstrating a safe and highly effective device. It's worth noting that not only was ACE PAS the largest WCD study ever, but it also enrolled the largest percentage of female patients at 34%. As a reminder, 40% of indicated patients are women, and the Assure system is the only WCD specifically designed for women. Next, sudden cardiac arrest doesn't wait. Patients were at high risk during the first 90 days of the study for all indicated populations. ACE PAS data showed patients at a 90-day incidence rate of 1.8% and an annualized incidence rate of 7.5%, which is actually slightly higher than landmark ICD trials. Guideline-directed medical treatment is effective in improving cardiac function, but it requires time, and patients need to be protected from significant SCA risk during their cardiac recovery. Third, at 23.1 hours, Assure had the highest wear time of any US WCD trial. In fact, 30% of our patients wore the device for more than 90 days, demonstrating effective protection for extended therapy optimization. And finally, ACE PAS reinforces that Assure has the lowest false alarm rate, with 94% of patients free from false alarms, dramatically lower than other commercially available WCDs. In our discussions with clinicians after the study results were presented, the most common theme is that the risk level of their patients is higher than they understood it to be, particularly early in the recovery and treatment journey. The existing WCD guidelines were published in 2017 and have not been updated since. We believe ACE PAS, in conjunction with other recent studies, such as SCD PROTECT, provide compelling data on over 40,000 patients that significantly strengthens the existing body of evidence and may help inform future updates to clinical guidelines. You've heard me say before there are three critical questions about the WCD category. The first one is, is there a patient population that has significant health risk? The second question, is there an effective therapy to treat those patients? And the third question is, will the patients wear the device? ACE PAS definitively answers all three of these questions in a very large real-world population. A strengthened recommendation to guidelines would have a positive impact on clinical decision-making and potentially accelerate TAM penetration. Based on our estimates and data from the incumbent, we believe the WCD market growth has already accelerated to the low double digits and will continue to expand into a multibillion-dollar market over the coming years. Moving on to other updates, we continue to expand our sales organization with the goal of further penetrating existing accounts, as well as calling on new potential WCD prescribers. As we have discussed previously, we are targeting geographies in which we have a high volume of WCD prescriptions and where we also have strong in-network payer coverage. We currently have approximately 100 active sales territories, up from about 80 sales territories at the end of 2025 in April. While this will not be a data point that we will be updating on a quarterly basis, our territory additions in the second quarter were in line with our hiring plan. We continue to aggressively expand our sales coverage. In recent months, we have seen the addition of clinical specialists in select markets, complementing our sales territory coverage and supporting further penetration of accounts. We also continue to make progress on improving our RCM capabilities, that's revenue cycle management, while also bringing more payers in-network. At the time of our IPO nine months ago, approximately 70% of our fittings were for patients with in-network benefits. This figure is now in the low eighties. The higher in-network mix meaningfully increases our team's efficiency and positively impacts all our RCM metrics. It's important to note there are over 3,000 payers in the United States, so there is still a long tail of regional and local payers we are working to bring under contract. You all know, we utilize a lease business model. Our substantial investment in our fleet of devices, each with the capacity to protect approximately three patients per year, enables the business to scale with our attractive unit economic profile. While our current business asset pool can support our near-term business objectives, we are continuing to add to our fleet as we grow our field team. Over the long term, we expect about 90% of our annual patient fittings to be accomplished with reuse of existing devices. So in conclusion, the fundamentals of the KESTRA MEDICAL TECHNOLOGIES, LTD. thesis remain intact and were in fact fortified in Q2. WCD market growth is accelerating, 50%. And gross margin has expanded beyond 50% for the first time. We have an underserved medical indication where we clearly have an effective and superior solution. We have rapidly closed the gap on payer endorsement of our product, and we are implementing a commercial expansion plan to significantly grow the business. Our commercial plan is now supported by a large body of clinical evidence that has the potential to influence the prescription guidelines. Our execution has been strong across all elements of the business, and the foundation we have built has positioned KESTRA MEDICAL TECHNOLOGIES, LTD. for strong growth this fiscal year and beyond. I'd like to thank our incredible team in the field and here at the home office in Kirkland for their passion and commitment to the KESTRA MEDICAL TECHNOLOGIES, LTD. mission. I'll now turn it over to Vaseem, who will discuss second quarter financial results in more detail and provide our updated fiscal year 2026 revenue guidance. Vaseem?

Thank you, Brian, and good afternoon, everyone. Total revenue for the quarter was $22.6 million, an increase of 53% compared to the prior year period. Revenue growth was driven by a 54% year-over-year increase in prescriptions, reflecting market share gains with existing customers and activation of new accounts. Excluding the impact of one-time revenue pickup in the prior year from a payer converting to accrual accounting, our revenue growth for this quarter was 16%. Gross margin was 50.6% in the second quarter compared to 39.6% in the prior year period. As Brian mentioned, we have now expanded our gross margin sequentially eight quarters in a row. The continued expansion in gross margin was driven by the attractive unit economics inherent in KESTRA MEDICAL TECHNOLOGIES, LTD.'s rental model, a higher revenue per fit from more in-network patients, and a 20% decline in 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 margins as our rental model benefits significantly from the volume and depreciation leverage. We remain confident in our ability to achieve 70% plus margins in the next few years. As we have discussed previously, a higher in-network mix unlocks the power of KESTRA MEDICAL TECHNOLOGIES, LTD.'s business model. We ended the quarter with our in-network mix percentage in the low eighties and are seeing improvements in all three key drivers of our conversion rate: our prescription fill rate, our bill rate, and our collections performance. Our conversion rate in the second quarter was 48.8%, up from an adjusted conversion rate of 48.2% in the prior year period. As we continue to bring more payers in-network and enhance our revenue cycle management capabilities, we will see benefits in our revenue growth, our gross margins, and our profitability profile. GAAP operating expenses were $43.2 million in the second quarter and included $1 million of non-recurring costs associated with professional fees and costs related to our recent equity offering. GAAP operating expenses were $25 million in the prior year period. Excluding non-recurring costs and stock-based compensation, operating expenses were $33.5 million in the second quarter of fiscal year 2026, compared to $23.8 million in the prior year period. The increase was primarily attributable to investments in commercial expansion and public company costs. GAAP net loss was $32.8 million in the second quarter compared to a GAAP net loss of $20.6 million in the prior year period. And adjusted EBITDA loss was $19.7 million in the second quarter compared to an adjusted EBITDA loss of $16.1 million in the prior year period. Cash and cash equivalents totaled $175.4 million as of 10/31/2025. This does not include the $148 million of net proceeds we received from our public equity offering last week. I will now provide our updated fiscal year 2026 guidance. We are increasing revenue guidance to $91 million, representing a growth of 52% compared to fiscal year 2025. This compares to prior guidance of $88 million and our initial fiscal year 2026 guidance of $85 million. Underpinning this guidance is our expectation that we will continue to see strong growth in prescriptions as the market share increases and the WCD market continues to expand. We expect revenue per fit to continue to benefit from a higher mix of in-network patients and improvements in our revenue cycle management capabilities. With that, Operator, we have concluded our prepared remarks and are ready to proceed to the Q&A portion of the call.

Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 1 again. Please limit yourself to one question and one follow-up. In the interest of time, please stand by while we compile the Q&A roster. One moment for our first question. And our first question will come from the line of Matthew O'Brien from Piper Sandler. Your line is open.

Good afternoon. Excuse me. Thanks for taking the questions. For starters, maybe Vaseem or Brian, just talk a little bit about the guide for the year. You know, it's nice to see it above what you know, how you'd be here in fiscal Q2. But maybe just talk a little bit about the cadence of the guidance, especially Q3, which I think has some seasonality to it. And just given that you're a newer public company, maybe just talk about that. And then and then just, you know, other factors you're considering as you think about the full year? And then again, I do have a follow-up.

Yes. Thanks for the question, Matt. You know, as we've said in the past, we are the run rate business and we track our performance on a daily, weekly, and a monthly basis. Our revenue growth has historically been driven by remaining focused on these drivers and tracking all of the KPIs in the right direction. Our strategy to expand our Salesforce responsibility so that we continue to deliver the service level to the patients, and we've talked about how critical and important that is. And we are still early in our public company journey, so our guidance will last is based on delivering consistent quarterly results that establish trust and confidence with investors. And, again, just a reminder, we have one of the fastest growth profiles in all of MedTech. And consensus has us growing at 45% to 50% through 2028.

Thanks for that. And then as a follow-up in a million places I could go here, but, you know, maybe just Brian, use the proceeds now. And, again, I don't I don't want to skid over our skis too much as far as the impact of some of these investments, but just how do we think about, you know, this additional capital in terms of accelerating some of the growth initiatives that you have at KESTRA MEDICAL TECHNOLOGIES, LTD.? Thanks so much.

Yeah. Thanks for the question, Matt. You know, what we're trying to do is we're trying to build a durable, top-tier med tech growth profile for years to come. And, you know, as you know, we in the first half of the year, we've gone faster than our plan, and so we wanted to de-risk any future capital needs and really fortify our balance sheet. As we continue to invest in those key growth drivers, you know, we decided to take advantage of the timing of the strong ACE PAS clinical results and also our strong Q2 performance. And I think from our perspective, you know, we're going to now with that capital in hand, we're going to go through our planning process. On our fiscal calendar, we are just kicking into our annual planning process. We'll be doing that in conjunction with our board over the next few months, and we'll be outlining what the impact of that capital may be on our growth strategies for the next couple of years. So it's a strong move for us. We feel good about having the balance sheet in a good place. And it gives us optionality, frankly, especially with the potential of, you know, the clinical results impacting the guidelines in the future. So we're happy to get that done.

Got it. So much. You bet. Thank you. One moment for our next question.

Our next question will come from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Good afternoon. Thanks for taking the question. Congrats on a nice quarter here. Brian, I wanted to ask about the data. I heard your comment about the WCD market growing low single digits. Are you already seeing an impact from the data? Any color on this? Is this more share capture, you know, more market expansion, or both? And I had a follow-up.

Yeah. Hey, Larry. Thanks for the question. And just to clarify, the market growth is low double digit, is our calculation, which is up, you know, at least several points from at the time of the IPO. So we are seeing the market expansion absolutely accelerate. When it comes to the post-clinical results presentation, we are, you know, it's a little too early to see it in the numbers, but anecdotally, we're absolutely seeing some really exciting cases where our reps have been in front of clinicians, telling our story, telling the story of our clinical data, and clinicians making different decisions than they had before. I've heard directly from a handful of reps who said, when I presented the data to my physician, they said I didn't realize the risk level was this high, I'm going to start thinking about this device for a broader spectrum of my patients. So that's really good news for us. I think another really interesting data point, obviously, with that data in hand, we're hitting the street and really working on the clinical. And so our medical education team actually, in the month of December, this is sort of a fun fact, the month of December, we will be conducting more medical education events with providers than we have in Q1 and '26 combined. So we're getting after it, and so far, the feedback has been terrific. And the team is really excited to be out there talking about it.

That's great to hear. And, Brian, did you talk a little bit about the rep productivity among the base reps and the new reps and your Salesforce hiring plans? I heard the 100 number, but, you know, the hiring plans following the recent secondary, are you planning to accelerate your commercial plans? And, you know, are you willing to kind of tell us where you expect to end the year? Thank you.

Yes. Thanks, Larry. If you recall, at the time of the IPO, we said we had about 70 reps at that time. We said over the next couple of years, we were going to double that. As I reported, we were up to about 100 reps now. I think we'll probably, in the next six to eight months, get close to having that doubling of that original number. So, you know, we definitely are right on plan with our hiring plan. As I mentioned to Matt's question, we are going to be going through a planning process here over the next few months to kind of figure out what we want that rate to look like as we move into our next fiscal year '27. We'll be taking that question up. And, you know, the nice thing is we have, as I mentioned, we have the optionality now to look and say, okay, where might we want to evaluate, you know, an even accelerated plan?

Alright. Thanks so much.

You bet. Thank you. One moment for our next question. Our next question will come from the line of Michael Polark from Wolfe Research. Your line is open.

Hey. Good afternoon. Maybe a question on the guidelines. You know, is there an event path to identify for us, Brian, timing, you know, a lot of these fields, guidelines can take a really long time. And it sounds like you're in front of doctors with the message from all this data anyways. But are the guidelines nice to have down the road, or do you view it as a needle mover? And if so, when might something like that be up for adjustment?

Yeah. Thanks, Mike, for the question. You know, first, let me just be extremely clear in saying that, you know, our exciting growth profile that we have planned for the next five years does not rely on the guidelines changing. There's no reliance on that in our business plans. So having said that, we do believe that the clinical evidence warrants a review of that. Now, the committee that is responsible for this is the arrhythmia committee that is part of and HRS. They will meet on an ad hoc basis when there's sufficient new evidence or a new product comes to market. So there's not a scheduled time for them to do that. We will obviously be seeking to get the newly established evidence by both KESTRA MEDICAL TECHNOLOGIES, LTD. and our competitor in front of them so they understand that maybe this is the time to start to reevaluate those guidelines. And we think there's a real reason, real strong clinical reason for them to do that. So I don't know a firm guideline meeting schedule. But I do think there's going to be some strong momentum for getting that ball rolling.

And for the follow-up, the comment on low double-digit WCD category growth, just doing some napkin math here, you're growing 50%. You're maybe 10 points of the market. You know, it kind of implies your competitor hasn't slowed down versus where they were. You know? So you're not purely taking from them. It is market expansive. And I'm curious just to confirm the math that the way you see your competitor, they're growing like they used to, and you're adding on top of that. Thank you.

Yeah. I think the math is roughly, first of all, it's all, you know, they released their earnings results a month ago or so now. And they did call out this part of their business. So they reported a little over 5% growth in that business. So if we have, we think we're probably at about 13% share now. So if we're growing at 53%, at 13% of the market, and they're growing at 5% at 87% of the market, you can do the math, and that's how we get there. And I think it's as good a data as we've ever had because in the past, they haven't really called out that specific part of their business separately. So we feel like that's a really supportable data point. We, of course, will buttress that data with our claims data that allows us to come at that from the other direction. But we feel pretty good about what that's telling us. And it definitely says that, you know, we're definitely taking share where we put reps, and we're also growing the market.

Thank you.

Yep. Thank you. One moment for our next question. Our next question will come from the line of David Roman from Goldman Sachs. Your line is open.

Thank you. Good afternoon, everyone. I know there's been a lot of focus on the ACE PAS data here and what they might be able to do for guidelines. But if you kind of reflect on what you're seeing on a day-to-day real-world basis, what are some of the things that you view as contributing to acceleration in overall category growth? And as we think through things like the conversion rate and some of the other metrics that kind of inform the model on a go-forward basis, maybe just update us on where you think we are and some of the key drivers there, like the prescriptions, the fitting, and then the fitting to what's revenue and where you are on kind of average wear time. I know I threw a lot out there, but I'll leave it at that for my question and follow-up then.

Thanks, David. And by the way, your audio was a little garbled, so I think I got your questions. I'll let Vaseem talk to the conversion rate stuff. But when it comes to the clinical data and what we're seeing, you know, I think the biggest impact of it is it's, you know, everybody knows that an external defibrillator works. We've proven that patients will wear our device for extremely long periods of time if necessary. So the remaining question was around risk, and, you know, our competitor recently published a big German study, which was a national registry, and it was really a study that was trying to identify what the risk of cardiac arrest was in these patients, including the non-ischemic cardiomyopathy patients. So now on top of that 19,000 patient study, we come in with a 21,000 patient study that has, among other metrics, that data, and it confirms that risk level in an entirely different healthcare system, the United States system. So now we have two different countries, two different systems that are both saying the same thing about the risk of these patients, especially in the first 90 days. That's the eye-opener for these clinicians. They're saying, I didn't realize the risk was that great. And that's leading them, you know, to assess the decisions that they're making about WCDs. It is early. We're just getting started with the data, but the early returns are certainly positive. Vaseem, you want to talk a little bit about the impacts of insurance coverage and in-network and conversion rates, etcetera?

Sure. So, David, thanks for the question. I think, you know, I look at the conversion rate metric, I think we've made such tremendous progress over the last few years. Just to remind everybody, our conversion rate in fiscal year 2024 was 38%. Fiscal year 2025 was 44%. We just for this quarter, our conversion rate is going to be approximately 49%. So a huge, huge improvement. And I think that kind of goes to the point that you were making, David, which is all of those KPIs, whether it's the prescription fill rate, or the in-network mix rate, which really drives the conversion rate and or collections performance, they're all tracking in the right direction, and we continue to make good progress on that. And our strategy for that in-network mix remains unchanged, as we have said in the past. You know, we are deploying new reps into high prescription density areas, and also deploying them into high coverage areas. So that's really helping us, you know, move the rate along. Again, I want to remind everybody, the gap to close for us is not from 48% to 100%. It's just for those high sixties, which is where we think Zoll is at with 25 years.

Great. Thank you for all the detail.

Thank you. One moment for our next question. Our next question will come from the line of Marie Thibault from BTIG. Your line is open.

Good evening. Thanks for taking the questions. Wanted to ask here quickly about the prescription volume strength. A couple of quarters here, above 50%, do you expect that to be sustainable? Or did you see anything kind of out of the ordinary in the quarter? And as part of that, are you also sort of seeing prescribers, kind of alternate prescribers like physician assistants and nurse practitioners starting to join up as prescribers? Just would love to hear a little bit more of what you're seeing on the ground from the prescribers.

Yeah. Thanks for the question, Marie. I think when it comes to, you know, the north of 50% rate, we don't see anything that would reduce that. We're winning. Not only are we further penetrating existing accounts, but we're also continuing to add additional hospitals to our account list. So we expect to continue to see nice prescription acquisition rates. When it comes to the prescribers themselves, I think the typical prescribers for us, they're not all just the physicians. We get a lot of physician assistants. We get a lot of other people in the providers who are actually executing on those, obviously under the umbrella of the physician. So, you know, when we talk about medical education and some of our strategies around that, especially with the clinical results, you know, we're not just targeting physicians. We're also targeting APPs and other clinicians in the practice because we know that, you know, they're really central to the strategy there. So I think the good news about the high prescription rate in Q2 was that, you know, that didn't have the benefit of the new clinical results. So, you know, I think those stood on their own, and there was no sort of one-off events or anything else that you might point to and say, hey, that's kind of an unusual event. This is just, this is literally, as Vaseem said earlier, it's a day-by-day, week-by-week, month-by-month business, and we're just out there competing every single day in the territories that we're in. And the fact is that we're winning where we're competing.

Yeah. Very helpful and good point on ACE PAS not being in the quarter. Wanted to follow-up here then with any detail on sort of OpEx spending plans. I noticed a little bit of a tick up this quarter, obviously, the new territory reps. That would make sense. Is this the new sustained level going forward? Anything you want to give us on the cadence of OpEx going forward this fiscal year? Thanks for taking the questions.

Marie, thanks for the question. And I think on the OpEx, we are winning, we are overachieving versus our guidance that we had put out initially. And we know that that comes with some, you know, level of investment and reinvestment. And we continue to make sure that we are deploying our investments into the two key areas, which is one, expansion of the team, and two, you know, on the revenue cycle management capability. And Brian has mentioned in the past, this is a service level business. We have to make sure that not only do we have the right level of coverage, we want to make sure that we have the right level of CapEx to support those teams. Then at the same time, to be able to convert those prescriptions into cash and revenue, we have to have the right revenue cycle management capability. So, you know, again, we feel that, you know, the run rate that we had on will help us get to, you know, not only the guidance, also continue to accelerate growth into 2027, and we'll continue to make those investments.

Alright. Thanks so much.

Thank you. One moment for our next question. Our next question will come from the line of Travis Steed from Bank of America Securities. Your line is open.

Hi. This is Stephanie Pizzola on for Travis. Thanks for taking the question. Congrats on a good quarter. Last quarter, you talked about the expanded clinical specialist role to support further penetration in existing accounts. So just wanted to follow-up on that and see if there's anything you can share on how that strategy is going and the impact on the business and penetration within existing accounts in making that change.

You bet. Thanks, Stephanie, for the question. Yeah. I think as we reported last quarter, we were starting to hire some clinical specialists to put those in some of our really high-producing accounts. And, you know, the basic strategy there is once you get a high-performance account up and running, you have a clinical specialist who can come in and really maintain that account and get that territory rep a little more bandwidth to go open up new accounts. And that's really the core of the strategy. We started to implement that program in the last quarter. And we hired our first kind of cohort of those clinical specialists. So far, the feedback on that has been really good. I don't see this as a case where we're going to, you know, add one to one for every rep, but I do think that we will selectively put more clinical specialists out there to help manage the just the day-to-day, you know, care and feeding of those significant accounts. So so far, so good on that. The early returns are positive, and we like the strategy.

Thank you. That's helpful. And then for my follow-up, just wanted to ask on gross margin. It was another great quarter of expansion there, you know, reached above 50%, and it talked about getting to 70% in the next few years. So, you know, just wanted to follow-up on the path to get there. And then any help in how we should think about the gross margin for this year? Thank you.

Yeah. No. Thanks, Stephanie, for the question. On gross margins, again, as Brian mentioned in his prepared remarks, eight quarters in a row, we have expanded our gross margins. And I think that goes back to the high thing that we have kind of constantly said we're going to do something and done it. And we feel really good about the work that's gone into getting us to the 50% plus range, and I think the unit economics that we have talked about plus the leverage that you get on the volume and the fact that the progress we are making with the in-network mix on rev cycle is really, really helping us, you know, expand our gross margins. And we feel at this point that, you know, we have good clear line of sight to the margins, you know, in the next couple of years, and we'll continue that journey. That as we run more volume through the P&L and as we continue to make progress on that in-network mix, we should see sustained margins expansion in the near term and the long-term line of sight to the 70% plus gross margins.

Thank you. One moment for our next question. Our next question will come from the line of Rick Wise from Stifel. Your line is open.

Hi. This is Annie on for Rick. Thanks for taking our question. So last quarter, you hinted at the potential for new products or technology launches at KESTRA MEDICAL TECHNOLOGIES, LTD. Could you give us a sense for what kind of innovation you might be working on? Are you focused on updating your existing systems or potentially developing completely new products? Thanks.

Yeah. Hey, thanks for the question. You know, we're not ready to disclose our full product pipeline for competitive reasons, of course, but we do have, you know, we very intentionally design the Assure system to be three distinct platforms: the WCD platform, the wearable platform, and the digital platform. And what we're doing is in our pipeline, we're innovating in each of those three platforms. Some of that innovation is extending our current capabilities to further differentiate our product. Some of that is bringing new capability, new therapeutic capability, and diagnostic capability to the product. I'll say this. We just published a 21,000 patient clinical study with an incredible amount of data, and we're going to follow that data to develop solutions for unmet needs and other patient conditions where our technologies can be useful. And really our focus. And I think if you look into the details of that data, it will give you some clues as to where we're going. And we're excited about using that data to help us to be an even better solution. So we've got a steady stream of innovation coming over the next two or three years, and we'll be excited to, you know, get that out into the market at the appropriate times. So thank you for the question.

Thanks, Brian.

Thank you. I'm not showing any further questions at this time. I will now turn the call back over to Brian Webster for closing remarks.

Okay. Well, thank you, everyone, for joining the call today. And as we mentioned earlier, we're pleased with the quarter that we have. We've got really exciting momentum going. And as I said, the core KESTRA MEDICAL TECHNOLOGIES, LTD. thesis is intact, and we're picking up steam on it. So we're excited about the back half of the year, and I'm very proud of the KESTRA MEDICAL TECHNOLOGIES, LTD. team for the way the team has executed our business plan every day, every week, and throughout the quarter. So thank you for joining us. We'll look forward to seeing you on the next call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.