Q4 2025 Kestra Medical Technologies Ltd Earnings Call

Good afternoon and welcome to kestra Medical Technologies. Fourth quarter fiscal 2025 earnings conference call.

This conference call is being recorded for replay purposes.

We will be facilitating a question. Answer session following prepared remarks for management.

At this time, all participants are on listen-only mode.

I will now like to turn the call over to Neil boka vice president of investor relations. Please go ahead.

Speaker Change: Thank you for joining cash crew's fourth quarter, fiscal 2025 earnings call with me. Today are Brian Webster, president and chief executive officer and the same group Chief Financial Officer. This call includes forward-looking statements within the meeting of the private Securities, litigation Reform, Act of 1995, the 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 Castro's current expectations, forecasts, and assumptions, which are subject to inherent uncertainties, risks and assumptions.

Speaker Change: 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.

Speaker Change: Please review test dress most recent filings, with secc, particularly the risk factors described in our registration statement on form, S1, and the annual report will file later this week for additional information. Heading forward looking statements provided during this call including projections of future performance expectations as of today. Kestra undertakes, no obligation to update these statements except as required by applicable law with that. I will turn the call over to Brian.

Thanks Neil. Good afternoon, everyone. And thank you for joining us for today's conference call.

Brian Webster: Beautiful summer. Uh, day, we're excited to discuss the details of our strong performance in the fourth quarter, and the significant progress Kester made in 2025,

Brian Webster: Uh, before we jump in, I'd like to share a patient story with you. That demonstrates. Why the Castro team is so patient at, uh, passionate about our mission?

Brian Webster: And the incredible impact our products and people have on the lives of patients.

Brian Webster: Recently a 7 year old woman from Missouri, was discharged with our assure system after being hospitalized for a myocardial infarction or heart attack. She was diagnosed with a low ejection fraction of about 25%.

Ejection fraction is a measurement of cardiac out output and anything below. 40% is considered to be elevated risk.

Brian Webster: This patient wore the Assurance system for over 23 hours per day for more than 2 months.

Brian Webster: This highlights the effectiveness of patient education at the time of fitting and the comfort of the assured system.

Brian Webster: On day 66 of her wear. She experienced ventricular fibrillation or cardiac arrest.

Brian Webster: And received a life-saving shock from the assured wcd.

Brian Webster: Within seconds, the shock activated, our proprietary assure assist service which facilitated immediate connection to Emergency Care, enabling her to arrive at the emergency uh Department within minutes.

Brian Webster: Following the shock rapid transmission of her clinical data enabled, timely medical intervention demonstrating, how the cardiac recovery system and Care teams work seamlessly together to improve patient outcomes.

Brian Webster: She subsequently received an inflatable cardioverted, defibrillator or ICD to provide long-term protection against cardiac arrest. Her provider said it best.

Brian Webster: She's alive today because everyone played their birth, the team, the technology and the patient herself.

This is just 1 patient's story in fiscal year. 2025, our cardiac recovery system was used to protect thousands of patients at risk of sudden, cardiac arrest

We remain thankful and humbled by this responsibility, entrusted To Us by the prescribers, their patients, and their families.

With that, I would now like to turn to our recent performance.

Brian Webster: In the fourth quarter, we continue to reach more patients at risk of cardiac arrest during generating over. 3,900 prescriptions for the issur system, an increase of 43% year-over-year.

Brian Webster: Are Revenue accelerated in the fourth quarter, with Castro, generating revenue of 17.2 million and increase of 71% compared to the prior year period.

Brian Webster: Our reported Revenue continues to track ahead of our prescription growth reflecting the Tailwind of higher in network. Patient, mix continued improvements in Revenue, per fitting, and reductions in cost per fit from volume. Leverage, drove the 6/4 in a row of gross margin expansion.

Brian Webster: Fourth quarter fiscal, 25 gross margin was 44.3%. Compared to 13.9% in the prior year.

In fiscal year, 25 gross margin was 40.5% compared to just 1.3% in fiscal year 24.

We expect continued Improvement in fiscal year, 2026 and remain confident, that Kester is on the path to 70%, plus gross margin over the next few years.

Brian Webster: With the strong Revenue growth, that Kester is generating. We are seeing nice operating leverage in our business. This growing leverage supports the Investments. We are making in the company's key growth drivers to take advantage of the large and attractive Market opportunity that we see.

The Investments That We Believe will drive significant near and long term value for kestra include expanding our commercial team.

Brian Webster: Enhancing our revenue cycle management capabilities.

Brian Webster: Growing our Fleet of devices innovating, to extend our product advantages and growing. The body of clinical evidence supporting the Assurance system.

Brian Webster: Targeting geographies in which, a high volume of wcd prescriptions are being written and where we also have strong in network payer coverage.

Brian Webster: At the end of fiscal year 25 we had approximately 80 sales territories up about 67% from the prior year period. This was consistent with our plan.

Brian Webster: As we have previously discussed, we expect to nearly double the sales coverage of the next few years.

Brian Webster: Second we continue to make progress in improving our RCM capabilities. While also bringing more payers in network, covered lives for the assure system that totals more than 285. Million Health Plan members in the United States.

Brian Webster: A note, we recently signed an important sole source contract with a risk. Bearing provider Network, which is evidence that both payers and prescribers recognize the differentiated benefit of the assured system. We are pleased to see the steady convergence of covered lives nationally, and actual sales territory in network, patient mix, which positively impacts all the revenue cycle management metrics,

Brian Webster: Third. As you know, we utilize the lease business model when a patient's wear time is concluded, the issue of devices, return for reprocessing and reintroduction into Castro's distribution system.

Brian Webster: our substantial investment in our Fleet of devices each with a capacity for approximately 3, patient wears per year enables the business to scale with our attractive unit, economic profile,

Brian Webster: While our current asset will can support our near-term business objectives. We will keep adding to the fleet at a measured Pace as we scale the business.

Brian Webster: Forth the operating leverage that we are generating continues to support our goal of continuous innovation, our invention engine remains robust and we now own over 365 patent assets on the product development front. Our team has some exciting projects in flight to further extend our clinical Advantage with the performance of the issur system and also bring first-in category new therapeutic capabilities to the market.

Brian Webster: Finally, We are continuing to build the body of clinical evidence supporting the safety efficacy and benefits of the assure system.

Brian Webster: As of April 30th, we have enrolled over 20,000 patients and the real world findings are providing further validation of the results of our pivotal trials. Our most recent FDA submission from the study reported first shock conversion efficacy of approximately 96%

Brian Webster: And a false alarm rate of only 6% this extremely low false alarm rate Compares, very favorably to the 46% rate, reported by the competitor's device.

This has contributed to a median daily use of 23.2 hours per day for patients. Clearly demonstrating High patient compliance.

Brian Webster: Our post-approval study is expected to be completed this summer. We will share those results in the fall and expect that our registry study, will generate a steady Cadence of clinical Publications over the following quarters

Brian Webster: All of these initiatives further. Our mission of protecting even more patients, that are at risk of cardiac Forest.

Brian Webster: Despite the overwhelming evidence that a defibrillation shock is effective at terminating dangerous. Cardiac rhythms wcd therapy remains underutilized reaching, just 14% of the eligible us, uh, patient population of 850,000 patients annually.

Brian Webster: That means 6 out of 7 patients that are indicated for a wcd are not being protected by 1.

We believe that the low prescription rate for wcd therapy is due in part to the limitations of the incumbent commercial available device. The assure system was purpose-built to enhance patient comfort and compliance and directly address the key barriers to adoption associated with the incumbents device.

Brian Webster: what the science shows about wcds is that if a patient wears the device and they experience a serious cardiac event,

like a ventricular event.

Brian Webster: Clinical outcomes are compelling and many lives are saved.

Brian Webster: Back from Physicians and their patients on the assure system continues to be overwhelmingly positive.

Brian Webster: Importantly, as more for the positions have positive experiences with our system and our people, we are seeing examples of the market expanding at accounts and converted to kestra.

I would like to highlight 1 such Market expansion study.

Brian Webster: At the start of fiscal year, 2024 2 Regional hospitals, within a large Integrated Health System in the Midwest.

Brian Webster: At little to no adoption of wcds most clinicians discharged elevated risk patients without protection.

Brian Webster: across both sides awareness of wcd benefits and guideline directed use was limited and wcds were not embedded in the care pathways

Brian Webster: 1 hospital within the network. Had no assure patients in fiscal year. 2024 providers were largely unaware of updated clinical evidence and existing guidelines and therefore continued to rely on outdated methods of protecting their patients.

Brian Webster: Through Focus Education and service support and streamlined coordination with case management and EMR teams.

Pester helped shift clinical Behavior within a year that hospital had placed 74 patients on Aur and we now hold approximately, 90% market share in that account.

Brian Webster: At a nearby hospital in the same network, we applied the same strategy, patient volume Rose. From just 6 WCS, prescribed in fiscal year, 2024 to 52 in fiscal 2025,

As you can see, within 12 months, both hospitals transition from underutilization to establishing a wcd protocol with the asure system, as the preferred solution, it's important to know that these weren't just simple market share conversions. These were patients who in Prior years would have gone home without production uh protection

Brian Webster: Today we are extending their care into the home. This is how Market expansion is happening. Our teams are changing mindsets. Embedding best practices and enhancing the standard of care.

Across systems and regions. This is just 1 example, but 1, that gives us a glimpse of the Market expansion potential. There are multiple other Health Systems across the country where we are seeing a similar pattern.

In conclusion, we are well positioned to take the next steps. Towards our goal of making the assure system. The standard of care for patients at risk of sudden, Cardiac Arrest, we are seeing strong execution across all elements of our business and the foundation. We have built as position, kestra for strong growth, in fiscal year, 2026 and Beyond

Brian Webster: I would like to thank our incredible team out in the field and here at our home office in Kirkland for their passion and commitment to the Castro mission.

Brian Webster: I will now turn it over to my partner Vine who will discuss fourth quarter Financial results in more detail and also provide our fiscal year, 2026 Revenue Outlook Hussein.

Brian Webster: Thank you, Brian and good afternoon everyone. As Brian noted, total revenues was 17.2 million in the fourth quarter and increase of 71% compared to the prior year period.

Revenue growth was driven by 843% a year where you can increase in prescriptions reflecting market share gains with existing customers and activation of new accounts.

For fiscal year, 2025 total revenue was 59.8 million and increase of 115% compared to fiscal year 2024.

Brian Webster: In both the fourth quarter. And in fiscal year 2025 Revenue growth continued to benefit from a higher mix of inet network patients and improvements in our website management capabilities.

Brian Webster: gross margin was 44.3% in the fourth quarter compared to 13.9% in the prior year period for fiscal year, 2025 gross margins improved from 2 240.5 from 1.3% in fiscal year 2024,

The significant expansion in gross margin was driven by a higher Revenue per phase from more in network patients and a lower cost per fit from volume leverage and cost Improvement programs.

Brian Webster: Performance.

For fiscal year 2025, our Revenue conversion rate was 46.8% and adjusted for 1 time items. It was 44.1%.

Brian Webster: This compares to 38.4% in fiscal year 2024.

Brian Webster: We know competitive bidding has been a topic of conversation in Medtech due to a recent Medicare proposal. We would like to remind you that the assure system is a class 3 medical device and as such is not subject to competitive bidding.

Brian Webster: Moving on, gaap operating expenses, were 55.8 million in the fourth quarter, and included 22.3 million of stock based, compensation expense, and 3.8 million of Professional Services expenses related to the company's ideal.

Brian Webster: Stock based compensation expense of 22.3 million in the fourth quarter included, the non-recurring impact of 2 organizational items at the time of our IPO in March.

Brian Webster: First, we recognized the impact of accelerated investing of incentive units as Castro transitioned from a privately held company to being a public company.

Brian Webster: And second the issuance of stock options to companies team members.

Excluding stock-based compensation and Professional Services expenses related to the idea of operating expenses were 29.7 million in the fourth quarter, compared to 21.4 million in the prior year period.

Brian Webster: The increase was primarily attributable to growth in commercial and revenue cycle resources.

Brian Webster: for fiscal year, 2025, we reported Gap, operating expense of 130.6 million, which included, 24.3 million of stock-based, compensation expense,

Brian Webster: Excluding stock based compensation and Professional Services expenses related to the IPO operating. Expenses were 100.6 million in fiscal year 2025 compared to 83.99 in fiscal year 2024.

Brian Webster: With keser's transition to operating as a public company. And in line with standard public company compensation Frameworks, we expect soft based compensation to contribute, approximately 40 million dollars to gaap operating expenses in fiscal year 2026.

Brian Webster: Gaap, net loss was 51.1 million in the fourth quarter compared to gaap. Net loss of 22.3 million in the prior year period.

Brian Webster: I just received an invoice was 20.3 million in the fourth quarter compared to when it yesterday, even the loss of 16.5 million in the prior year periods.

Brian Webster: for fiscal year, 2025 gas, net loss was 113.8 Million compared to gaap net loss of 94.1 million in fiscal year 2024 but just an even down loss was 68.4 million in fiscal year 2025 compared to when adjusted even the loss of 72 million in fiscal year 2024,

Brian Webster: Cash and cash equivalents to 20237.6 million.

Brian Webster: As of April 30th 2025?

Brian Webster: I will now provide our fiscal year 2026 guidance.

Brian Webster: We expect the revenue of 85 million and increase of 42% compared to fiscal year 2025.

We expect prescription growth to be driven by higher share of wallet, with existing customers and activation of people counts.

Brian Webster: We expect Revenue to also benefit from continued improvements. In our revenue cycle management capabilities and driven by higher mix of in network patients.

As Brian discussed. We expect Castro to generate significant operating leverage over the next several years. Even as we continue to invest in our business to capitalize on the large and underpenetrated wcd Market opportunity.

Brian Webster: With that operator, we have concluded, our prepared, remarks and are ready to proceed to the Q&A portion of the call.

Speaker Change: Thank you. If you would like to ask a question, please press star 1, 1 on your telephone. You will then hear an automated message 5 from your hand is raised if you would like to remove yourself from the queue. Please press star 1 1 again.

Speaker Change: We ask that. You please wait for your name and Company to be announced before you proceed with your question 1 moment while we compile the Q&A roster.

Speaker Change: Our first question of the day will come from the line of Travis speed of Bank of America. Please go ahead.

Speaker Change: In the 85 million Revenue guide and how we should think about some of those key assumptions, like market growth and market, share capture and Commercial organization expansion and uh the conversion rate. Thanks.

Thanks Stephanie. Uh, this is Brian. I I, uh, in in response to that, I, I would say that the, the key drivers that that build, our Revenue model include, uh, our sales, uh territory productivity, improvements our sales territory, expansion plans, uh, as well as, uh, further penetration of existing accounts and, uh, and getting into, uh, additional new accounts on the market, um, as well as also the, um, the further expansion of our of our, in network Fair, uh, metrics. So, I'll turn over to the team. We can talk in more specifics about, uh, some of the details of that. Yeah, thanks Brian. So, uh, Stephanie, our Revenue growth. Um, as Brian said, it's historically being driven by the prescription 1 growth and, and our uh, mix of pin number of patients as we have talked about, um, and the improvements in the website.

Speaker Change: Cycle capability and and we remain focused on those and all of those kpis as we have mentioned in the past. And today, we're all tracking in the right direction. Um, the, uh, we'll start the year with 80 sales territories as Brian talked about, on the prepared remarks and then our conversion rates are going to gradually improve as we go through the year. Uh, and so will our, um, our Network versus in network mix as you know, we are the only public company in in, in the public domain so we don't talking about the specifics on the individual assumptions, but those are the underpinnings for our Revenue guidance.

Speaker Change: Thank you, that's helpful. And then maybe just 1 follow-up.

Speaker Change: On the margin side. Um I know you're not guiding to gross margin but maybe any color you could provide to help us think about the uh margin expansion potential this year as the existing vests get rented, out more. And I guess just generally how you view the path for gross, margin expansion and the visibility you have to it. Thanks again.

Speaker Change: Yeah, I'm saying we we um, continue to benefit from increasing volumes because the business model is, is certainly volume sensitive. Um, and the further in network, uh, status of our, of our patients, as we, uh, expand, uh, or payer contracts, uh, continues to help us on the revenue, per fit, side of gross, margin on the costs.

Speaker Change: It's it's largely around, volume related things and then um various cost Improvement projects that we have executed over time. And now we're seeing the benefit of those as we've both flow through the p&l.

Speaker Change: Thank you. 1 moment for the next question.

Speaker Change: In our next question, will be coming from the line of Michael, Pollock of well, excuse me. Wolfe research, your line is open.

Michael Pollock: Afternoon, thank you for taking the question. Brian. I want to follow up on 1 of the things you mentioned in your uh, script. Uh, you said Full Source, um,

Michael Pollock: You want a soul Source contract with a risk? Bearing provider Network? Um, can you talk more about it? You know, is this special if so why, um, why why the customer made this decision, why the customer didn't want a dual source? And to what extent? This could be emblematic of of emerging Trend in the market.

Speaker Change: Yeah. Thanks Mike for the question. And, uh, by the way, congratulations, their daddy? Um, uh, and, uh, thank you. Yeah. I, I think the, um,

Speaker Change: The rate of patients, coming back into the hospital are for these kind of situations and so the fact that we're monitoring them, gives them a bigger better. Handle on that, on the flip side for us having an agreement. Like that gives us the ability to have revenue cycle management, um, really high efficiency there because things like the prior authorization processes and things like that. Just go a lot smoother when you have that kind of an arrangement. So it it's a, it's a good sign for sure. It's a sign that that provider, you know, voted uh, uh, on the Castro side and is going to try and work with us to develop a, a really exciting program for how they manage these kind of patients.

Speaker Change: can I, um,

Ask uh, 1 for Vim on on the guidance. Just um obviously I have an unusual quarter in fiscal year end and uh we're all getting to know 1 another like you're investing for growth. You're adding a bunch of territories that will kind of in theory power through seasonality. But what's what's the base case for? Underlying seasonality is um,

Speaker Change: As we roll through your fiscal year, any phasing considerations on revenue or performance that we should? Um, keep in mind as we look at the models again tonight, thank you.

Speaker Change: Yes, and thanks. Uh, Mike. I think, um, you know, from our perspective I think the the, the, uh, the prescriptions, you know, in terms of our growth rate, you know, we we're saying, we're going to grow our prescriptions on average 40%, uh, for for every quarter as we head into fiscal year 2026 and then in terms of the phasing, there's always a timing component to, you know, when we actually do the fittings, and when we actually convert that into cash and, you know, as we have said, the conversion rate is the best indicator for, uh, you know how that will convert to revenue and we'll see higher conversion rates in the first half of the year and lower conversion rates in the second half of the year. That's how the business is built from a seasonality perspective.

Speaker Change: Thank you. 1 moment for the next question.

And our next question will be coming from the line of Matthew O'Brien of Piper Sandler. Your line is open.

Matthew O'brien: Great. Thanks for taking the questions. I guess there's 2 things that that kind of stand out. Um, I think from this point that I'll probably get attention tomorrow. The first 1 being on the guide side and I know, you know, early earlier stage IPO

Matthew O'brien: Company, you want to be conservative with things, but if I look at the absolute growth in dollars, year-over-year, 25 was about 32 million and, you know, your guiding to about 25 million in 26 fiscal. And that's with, you know, um, improved conversion rates, the bigger sales force, Etc. So that that you know,

Speaker Change: Absolutely deceleration probably is going to get some attention. Um, you know, is there anything a competitive response wise Etc to really call out? As far as why on an absolute basis, it would be even better in fiscal 26 versus 25 and then I have a follow-up.

Speaker Change: Yeah, thanks for the question, Matt. Um, I think when it comes to the competitive response there's nothing unusual going on there. I think what you're seeing is a, is a company getting its footing a little bit, um, in, in the new environment. And, um, and I think, uh, the from the competitive response perspective, uh, they're they're doing the things that you would expect them to do, uh, as they try and defend what, you know, was previously, a long-term Monopoly, but nothing, um, nothing nothing out of the ordinary. I think we're, we're doing some blocking and tackling. Now we're trying to execute to our business plan. We're trying to you know, lay the foundation for uh a strong and consistent. Um execution as we move forward. That that's really at the heart of it. You know. The same in the other comments. Yeah. And I think Matt, if you remember, we, we talked expensively about this, um, you know, as part of the ideal and then, uh, and then conversation since then, with the investors,

Speaker Change: Um, the fact that you know, we were at those 48 territory managers that we talked about at the end of fiscal year 2024. And the fact that we were in cash conservation mode, we have added reps, um, in the second half of last year. And if you remember, we actually very clearly talked about the

You know, the, uh, the, the quality of the talent that bringing in and the fact that we are actually able to fill them. So quickly is a testament, to again, the sale of the company, um, from the past

Speaker Change: Got it. Thanks for that. And then the same as questions for you, you know, you beat by by model, Anyway, by about 10% here, in fiscal Q4. Um nice to see gross margin lift here a little bit. Um would have expected I I think a little higher uh Improvement in their gross margin side, I don't know if there was extra Expediting cost, you you you, um, encountered here in Q4, but can you talk a little bit about why that metric wasn't better? And then the the ebit number, as well on an adjusted basis wasn't, wasn't what? I was modeling is a little bit worse on a, on a loss basis. So anything else just 1, time there to call out anything changing in terms of cost structure of the business to think about, in, in fiscal 26, thanks.

Speaker Change: Ya know. So so so on the, on the, on the, on the top line. First of all, um, you know, starting the cost side. No, I mean there's no fundamentally change. Uh, we did come in, uh, slightly higher on the Opex side and I think that's a combination of of 2 things 1. Uh, we are making the transition to a public company. So we, we did see slightly higher, professional fees, related to accounting legal and and just general, um, public company costs. Um, and then the second 1 is, uh, we have brought in a new new Chief commercial officer and he's making some Investments and some enhancements to um, the leadership within the commercial organization.

Position, that's going to drive a little bit for Higher Ground rate on Opex. So, um, so that there's there's, um, you know, uh, those are investments that you want us to see. We, you know, we oversized an IPO and raised an extra bit of cash, and we are just starting to deploy that in a very intentional and deliberate manner.

Speaker Change: On, on the gross margin side. Um, remember, this is something that we have said, and we're trying to do as much messaging as possible, uh, the, the, the revenue side of the business is driven by all of the, the conversion based Dynamics, the fund raise the bill rate, and obviously, the revenue cycle management performance, but the cost is really driven by failing. So, there's always going to be a timing, Delta Matt between when you see the revenue and when you start to see the FedEx. So it's just purely a timing element of, um, on how the costs are running through the pnl.

Got it. Very helpful. Thank you.

Speaker Change: Thank you and 1 moment for the next question.

Speaker Change: Our next question will be coming from the line of David Roman of Goldman Sachs. Your line is open.

Speaker Change: Uh, thank you and good evening, big. I appreciate you taking the question here. Um, maybe we can start on the 10th 4448 % conversion rate. Uh you talked about some of the drivers there um that that that lead from prescriptions to revenue but maybe you could just unpack in a little bit more detail which of the factors you're seeing the most progress on here uh during the quarter. And as you look forward which are the the metrics you think you can influence the most either through.

Speaker Change: Salesforce expansion to getting the message out clinical data that that might drive. Um greater adoption. Is it payer coverage? Maybe I was thinking about the bridge to what drives that 44.8% higher and which are the metrics you can most readily influence.

Speaker Change: Yeah, so David, thanks for the question. Um, and again, we've talked about the 3 elements of the conversion rate, being 1, the film rate, which is the ability to convert that prescription into a failing. And and we've said that we are slightly better than our competitor. Um and there's not a big remarkable difference today, but I think over the over the long term with a more variable solution with a more comfortable solution with less false alarms. We think um we can make more progress than our competitor has on the, on the second bucket, which is really the ability to uh, to convert that fitting into a claim. For payment is really the single biggest driver, uh, of the conversion rate Dynamic and we have made great progress, uh, year over year. Um, you know, on on getting uh, more patients in network. And as we have said, you know, being in network totally unlocks, the rental business model. So so that's really in our mind, the single biggest area where we focused on. And as we have said, um, even at your conference, we are

Speaker Change: So so overall, like I said, all 3 elements of our conversion rate are trending in the right direction. And we really feel confident about where we go in a fiscal year 2026 and Beyond

and and maybe just as as a related follow-up and then and then 1 further question, is there a benchmark that you're willing to offer people on what

Best-in-class conversion rate would look like whether that's the competitors or what you ultimately are aiming for. And then I know you talked about brought up competitive bidding as a topic, but would you be able at this point to offer? Any perspective on the ambulatory specialty model announcements from from last night that looked to provide increased focus on Upstream, diagnosis and early prevention and detection. And whether that could be ultimately a reimbursement Tailwind. Uh, for Kester. That may not be fully contemplated in the Outlook today or or on a longer term basis.

Speaker Change: So let me think that this is all uh, or the income. And uh, you know what we have, and the best information. We, we know that, um, you know, the like I said, the full rates on the prescription are not dramatically different than ours. So the in in that kind of 85% range, we have said this publicly, the, the zo's been in the market for a very long time and as we have said, there's about 3,600 pairs of there. So even they're not at 100% because there's always going to be some flux on the fair landscape. So we think that they're in that 95% range and then on collections, you know, DM me Best in Class is 95%. So when you do the

The map on that David, you come out with a potential best-in-class conversion, rate of 76% and let me just remind you fiscal year 2026, we are expecting to be at 46.6%. So, uh, not only have we made good progress from where we were back, in fiscal year 2024, at 384, you know, we think, uh, it's the single biggest opportunity in front of us outside of all of the other commercial execution, we got to do.

Speaker Change: So yeah, I think I think David on your second question, uh, is it's a little early to to, to sort of unpack that what the real meaning of that announcement is going to be. But I, I will say that, you know, we believe that we're in a space and positioned, really well. Um, for ambulatory patients, you know, we're I, I mentioned our our, uh, uh, post of Google Registry where we've got 20,000 patients were in the data now. Well, that's going to help us to do a better job of predicting and hopefully preventing uh out. Uh, some of these. These cardiac events that, uh, that are out there now and and the fact that we're able to, you know, put our system on the, on the patient. They go home, they wear it because it's they can tolerate it and and they are willing to wear it. Uh, and then we can monitor them in in concert with the, the hospital will be a

Speaker Change: An extended part of the Care team. I think that puts us in a, in a really nice category and a really nice position but it's really hard to say how you might think about that in terms of um, you know, actual Tailwind at this stage.

Speaker Change: Understood appreciate all the perspective.

Thank you. 1 moment for the next question.

Speaker Change: And the next question is coming from the line of Rick, Wise of stifel your line is open.

Rick: Hey, Rick.

Speaker Change: Uh, did you call me the line broke up? Uh, do you hear me? Okay.

Speaker Change: Yeah, we can hear you.

Speaker Change: Okay, great. Um, just to stop. I was hoping um uh the thing you or Brandon uh uh, you could expand further on your comments. I think you said it several times about considerable operating leverage ahead. Uh, obviously the the Brian I heard your your commitment or recommitment to the 70% plus over the next few years. Um, and but you spent a little more on the Opex side this quarter uh the same. It maybe help us better understand the the the key drivers of the operating leverage that when you say, the that line

Speaker Change: Which what you're thinking about what you would have us? Think about, but maybe help us better understand.

Speaker Change: when we're going to see more of that uh you know, clearly compelling operating uh leverage visibility

Speaker Change: yeah, I I've, I've

Speaker Change: Um, is very volume, um, sensitive. And, uh, as we increase volumes, uh, we believe that those gross margins are going to expand we and we think that gross margin expansion will occur in a, at a rate along with the revenue, uh, generation that allows us to, you know, be growing that Top Line at a, at a much faster rate than we're growing, the Opex line, even though we're clearly making investments in Opex and investments in the commercial, uh, team as we've as we've said consistently, uh, as well as, uh, continuing investments in the in R&D and the web cycle management capability. So, uh, you know, we, we think there's a, a really exciting opportunity to, to see the the operating leverage of the business model, but you know, the trick for us is going to be to how to feather that. Right? So that we're, we're making the investments in the future, uh, while

Speaker Change: Also, delivering, you know, the The Leverage that we want to that p&l come over to see any other comments. Yeah, no, I think, Brian. I think we, we, we talked about the concept of love is all the way down the tnl. And I think the, the, uh, the prescriptions are going to be at 40%, uh, revenue is going to be up 42%. So that's kind of really the revenue cycle management improvements that we talked about going to drive at least at the Top Line. And then um, you know, the gross margin numbers that you guys have already put in your models and what the consensus number, which we

Speaker Change: You know, at this point of blessing and saying, you know, we are very clearly insight to those numbers and long-term 70% to price point operating, expenses is still growing. A fraction of that uh Topline number. So um, you know, our Opex uh for the year uh will be, you know, up in the 20% plus range. So when you're driving Revenue at 40% plus and you're driving up, I said 20% plus we think that's pretty significant operating Leverage

Speaker Change: Gotcha. Um, and uh, Brian you you highlighted Innovation continued, Innovation and exciting products on Type Tap, I think you said and uh, you know, uh uh, new products again. You you you said it several of those. I feel like you're you're being a little more emphatic. Maybe I'm reading hopefully too much into it but, um, you know can you give us any incremental color on what we might see when we might see it and how it might I mean, are are these adjacent products and or are are new generation uh or new generation of existing products, how should we think about that Innovation at the timing and the impact? Thank you.

Speaker Change: Yeah, but appreciate that question as well Rick. Um, you know, we're we're being, uh, a little careful, just for competitive reasons about the level of detail in this, in the, um, you know, the granularity that we're providing there. But but, you know, I, I think, from our perspective, we're, we're thinking about the Innovation engine in in number 1 job. Number 1 is, to continue to extend the, the advantage that we have, the differentiation that we have today. So we have, uh, I think a really exciting, uh, work being done to do that. Then then job number 2, is we have additional, um, patient situations that we believe we can bring therapy to help and that we can add more features and capability to the cardiac recovery system. And then and then job. Number 3 is, is really, you know, how do you make sure that you're you're going to go and you're going to um, make yourself obsolete, right?

Speaker Change: And that's by coming out with Next Generation product and, uh, and continuing that Innovation cycle. So, I think my message is really simple. It's it's that we're, we're working on all those things and we're excited about what we have in the pipeline and and, you know, from our perspective, if we can drive more operating leverage, it gives us the ability to invest more. We'd be happy to do that because we have a great team of clinical people and Engineers that, uh, that really know how to innovate.

That that's great. Uh, feedback. Thank you.

Speaker Change: Thank you. 1 moment for the next question.

Speaker Change: and our next question is coming from the line of Larry biegelsen of Wells, Fargo, your line is open,

Hi. This is uh, nickman trade back on for Larry. Um, just um, can you provide us with an update on your plans for running a randomized trial either in? Post me or heart failure.

Speaker Change: You. I'm sure you can appreciate that. Um, you know, 20,000 plus patients in a registry is a, is a very significant, uh, amount of patience. Um, and uh, what we will do once we complete that study, which we intend to do over the, the next few months is, uh, is start to publish first and foremost, the results out of that registry. Uh, and then those results will lead us to the publication strategy that we undertake beyond that. We have a a really uh strong group of medical and clinical advisors that we're working, very, very closely with and we're very anxious to advance, you know? The

Uh, Advanced the evidence for wcds. Uh, I would say that we're, we're also very interested in in making sure that, uh, the folks that are looking at the guidelines, whether they be heart failure, guidelines or the existing heart rhythm guidelines that, um, that we are able to add our body of evidence, to the existing body of evidence, that's out there today. And, and really put a a compelling case forward for how we can improve the guidelines recommendations for this category. So, uh, we have a lot of work there. Uh, it's an exciting work. We've got a lot of incredible. Um, you know, data that we will be leveraging to do that. And, you know, we think that's going to be an exciting area for us in the future.

Speaker Change: Right. And just for my follow-up. I, I know you talked about Cadence for fiscal 26, but any finer point you could put on, uh, fiscal q1, whether you know, consensus numbers are kind of in line with, you know, your expectations for the quarter. Thanks.

Speaker Change: Yeah, and I think Nathan, unfortunately, we don't provide quarterly guys. Um, but uh, at this point I'd say is, um, you know that again, I think Matt asked that question earlier, I go back to the messaging when back to the, the time of the idea of we are working, um, to to ramp up the teams, their reps that are scaling their territories, that we have activated in in the second half of last year. They had already starting to contribute, but at the same time, we had said that the first half was going to be slower than the second half because we just giving those, uh, uh, TMS and those territories, uh, time to, um, start to deliver and put points on the board. So, um, but you know, we're very comfortable with, with, with the numbers that are out there. And I think this guy just supplements supplements that commentary

Speaker Change: Thanks.

Thank you. And there are no more questions in the queue. I would like to go ahead and turn the call back over to Brian Webster. For closing remarks. Please go ahead.

Brian Webster: Okay, well, thank you everyone for joining our uh, fourth quarter fiscal year. 25 Earnest call as we've as you've heard on the call. We're excited about the uh, the strong close. We had as a big year for kestra.

You know, executing an IPO is a, is a heck of a way to distract an organization from, uh, executing on their business plan. And I was really proud of the fact that our team was able to, uh, to really do both to execute the IPO. And also to execute the business plan, uh, 115% year-over-year growth is pretty fantastic and we're looking forward to some some exciting years ahead. So, um,

Brian Webster: We'll uh we'll look forward to getting everybody back up to speed on the on the next call. Thank you very much.

Brian Webster: Let's conclude today's conference call, you may all disconnect