Kestra Medical Technologies Ltd Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Stephanie Piazzola - BofA Securities - Analyst : Hi, this is Stephanie Piazzola on for Travis. Thanks for taking the question and congrats on a good quarter and strong end to the year. I wanted to ask about the guidance for this year and if you could talk a little bit more about some of the underlying assumptions 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 the conversion rate? Thanks.

Question: Stephanie Piazzola - BofA Securities - Analyst : Thank you, that's helpful. And then maybe just one follow-up on the margin side. I know you're not guiding to gross margin, but maybe any color you could provide to help us think about the margin expansion potential this year as the existing [vest] 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.

Question: Michael Polark - Wolfe Research - Analyst : Brian, I want to follow up on one of the things you mentioned in your script. You said full source comp -- you want a sole source contract with a risk-bearing provider network. Can you talk more about -- is this special? If so, why the customer made this decision, why the customer didn't want to dual source, and to what extent this could be emblematic of emerging trend in the market?

Question: Michael Polark - Wolfe Research - Analyst : Can I ask one for Vaseem on the guidance, just obviously, of an unusual quarter and fiscal year end and we're all getting to know one another. You're investing for growth, you're adding a bunch of territories that will kind of in theory power through seasonality, but what's the base case for underlying seasonality as we roll through your fiscal year? Any phasing considerations on revenue or performance that we should keep in mind as we look at the models again tonight? Thank you.

Question: Matthew O'Brien - Piper Sandler - Analyst : I guess there's two things that kind of stand out, I think, from this print that'll probably get attention tomorrow. The first one being on the guide side, and I know earlier stage IPO 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're guiding to about $25 million in '26 fiscal. And that's with improved conversion rates of bigger sales force, et cetera. So that absolute deceleration probably is going to get some attention. Is there anything a competitive response wise, et cetera, 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.

Question: Matthew O'Brien - Piper Sandler - Analyst : Got it, thanks for that. And then Vaseem, this question is for you. You beat by, my model anyway, by about 10% here in fiscal Q4. Nice to see gross margin lift here a little bit. Would have expected, I think, a little higher improvement in the gross margin side. I don't know if there was extra expediting cost you encountered here in Q4. But can you talk a little bit about why that metric wasn't better? And then the EBITDA number as well on an adjusted basis wasn't what I was modeling; it's a little bit worse on a loss basis. So anything else, just one-time there to call out anything changing in terms of cost structure of the business to think about in fiscal '26? Thanks.

Question: David Roman - Goldman Sachs - Analyst : I appreciate you taking the question here. Maybe we can start on the 44.8% conversion rate. You talked about some of the drivers there that lead from prescriptions to revenue, but maybe you could just unpack in a little bit more detail which are the factors you're seeing the most progress on here during the quarter? And as you look forward, which are the metrics you think you can influence the most either through sales force expansions to getting the message out, clinical data that might drive greater adoption? Is it payer coverage? Maybe [almost] think about the bridge to what drives that 44.8% higher and which are the metrics you can most readily influence.

Question: David Roman - Goldman Sachs - Analyst : And maybe just as a related follow-up and then one 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 last night that look to provide increased focus on upstream diagnosis and early prevention and detection and whether that could be ultimately a reimbursement tailwind for Kestra that may not be fully contemplated in the outlook today or on a longer-term basis?

Question: Rick Wise - Stifel Nicolaus & Company Inc - Analyst : I was hoping, Vaseem, you or Brian, you could expand further on your comments. I think you said several times about considerable operating leverage ahead. Obviously, Brian, I heard your commitment or recommitment to the 70%-plus over the next few years. But you spent a little more on the OpEx side this quarter, Vaseem. Maybe help us better understand the key drivers of the operating leverage that when you say that language, what you're thinking about, what you would have us think about. But maybe help us better understand when we're going to see more of that clearly compelling operating leverage visibility?

Question: Rick Wise - Stifel Nicolaus & Company Inc - Analyst : Got you. And Brian, you highlighted innovation, continued innovation and exciting products on (inaudible), I think you said, and new products. Again, you said several of those. I feel like you're being a little more emphatic. Maybe I'm reading hopefully too much into it, but can you give us any incremental color on what we might see, when we might see it, and how we might -- I mean, are these adjacent products and/or new generations or new generation of existing products? How should we think about that innovation and the timing and the impact? Thank you.