Kestra Revenue Jumps 52% in Fiscal Q1

Kestra Medical Technologies (KMTS 1.15%), a developer of wearable cardiac defibrillators and digital cardiac care solutions, released its results for Q1 FY2026 on September 11, 2025. The headline news was a 52% year-over-year increase in revenue, alongside a raised annual revenue outlook to $88 million for FY2026. The quarter showed strong demand but also highlighted ongoing pressure from rising expenses and widening losses.

Business Overview and Focus Areas

Kestra Medical Technologies focuses on wearable cardioverter defibrillators (WCDs), specifically the ASSURE system, which helps protect cardiac patients from sudden cardiac arrest. The ASSURE system is a wearable medical device that monitors for abnormal heart rhythms and can deliver life-saving therapy automatically when needed.

The company’s strategy centers on five key areas: expanding its U.S. and international presence, innovating with advanced cardiac monitoring and digital health, solidifying regulatory and payor coverage, delivering scalable operations, and strengthening its revenue cycle management. Kestra’s success is tied to the adoption of the ASSURE system, payer contract coverage, and its ability to increase the efficiency of commercial operations while maintaining close relationships with healthcare providers.

Quarterly Highlights: Financial and Operational Developments

Revenue increased by 52% over the prior-year period. This growth matched the rising number of ASSURE system prescriptions, which increased by 51% compared to the prior year period. Management cited higher penetration in existing accounts as well as new account activations as drivers. The company also saw an improved “in-network” patient mix, meaning more patients treated were covered by existing insurance partnerships, supporting higher realized revenue.

Gross margin improved significantly—up 12.8 percentage points to 45.7% compared to the prior year period. Management attributed the margin lift to volume leverage and a higher mix of in-network patients. Gross profit rose to $8.9 million from $4.2 million in the prior-year period.

Operating expenses rose sharply, reaching $37.7 million, compared to $22.6 million in Q1 FY2025. Around $2.9 million of these costs were labeled as one-time public company expenses, but even after excluding these and share-based compensation, recurring spending was $30.3 million. The increases reflect continued investments in expanding the sales force, scaling revenue cycle operations, and building out infrastructure to support a growing customer base. Research and development expenses rose to $4.0 million and selling, general, and administrative expenses reached $33.7 million, up from $19.2 million in the prior-year period.

The company’s net loss and comprehensive loss widened to $25.8 million from $20.3 million in the prior-year period. Adjusted EBITDA—a measure excluding interest, taxes, depreciation, amortization, and non-cash charges—was a loss of $19.4 million, compared to a $15.7 million loss in the prior-year quarter. Despite strong growth in top-line revenue and gross margin, the company has not yet demonstrated operating leverage, as losses widened on both a reported and adjusted (non-GAAP) basis. Cash and cash equivalents stood at $201.2 million at quarter-end, down $36.4 million during the period.

Product and Platform Developments

ASSURE, Kestra’s wearable cardioverter defibrillator, is the core of its product platform. This system features high-resolution electrocardiogram (ECG) monitoring and an adaptive intelligence engine to minimize false alarms, making it more comfortable and accurate for patients. ASSURE’s false alarm rate is 6%, compared to 46% for the competing device, based on company estimates from the July 2024 ACE-PAS FDA submission.

Kestra continues to maintain its FDA-approved status in the U.S, and is expanding its commercial footprint. Management again highlighted improvements in payer integration and revenue cycle management, noting beneficial impacts from a higher in-network patient mix and more effective billing processes. Coverage now includes insurance contracts accounting for over 285 million U.S. lives, representing nearly 90% of the addressable U.S. patient population as of April 30, 2025.

The company, however, faces rising costs as it scales. Increased commercial and administrative expenses reflect Kestra’s efforts to reach additional physicians, hospitals, and payers, as well as to support patients wearing the ASSURE system. With investments focused on expanding market share and supporting a growing base of prescriptions, cost efficiency and disciplined growth remain areas for investors to monitor closely.

Kestra did not disclose any new international regulatory progress or updates regarding its plans for a CE Mark in Europe during the quarter. The company’s business model remains heavily U.S.-focused for now, though long-term growth initiatives still envision global market expansion.

Outlook and Investor Considerations

Kestra raised its full-year FY2026 revenue guidance to $88 million, up from $85 million, representing a 47% increase over the previous fiscal year’s revenue. No specific guidance was provided for profitability, margin, or cash flow for the coming quarters.

Management communicated a continued focus on expanding its commercial presence, improving gross margin, and further strengthening payer and reimbursement channels. Investors should keep an eye on the path to achieving operating leverage, trends in prescription growth, shifts in payer mix, developments on international expansion, and the company’s efforts to rein in cost escalation while supporting high top-line growth.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.