Kestra Medical (KMTS) Q1 2026: In-Network Patient Mix Climbs to 80%, Powering Margin Expansion

September 11, 2025 | By EarningsIQ Research

Kestra Medical’s rapid progress in in-network patient coverage and commercial expansion drove another quarter of accelerating revenue and margin gains, with the company lifting full-year guidance on prescription growth and operational leverage. The late-2025 unveiling of a 25,000-patient clinical study at AHA is set to become a pivotal credibility milestone, as the business continues to target underpenetrated U.S. markets and leverages its scalable rental model for future profitability.

Summary

• In-Network Expansion Drives Margin Upside: Kestra’s patient mix shift toward in-network payers continues to unlock margin leverage and improved conversion rates.
• Commercial Footprint Ramps Methodically: Territory and specialist hiring is tightly linked to payer coverage, supporting both share gains and market expansion.
• Clinical Evidence Set to Reshape Category: Upcoming 25,000-patient post-approval study will address clinical credibility and fuel competitive positioning.

Performance Analysis

Kestra Medical delivered a 52% year-over-year revenue increase in Q1 2026, driven by a 51% surge in prescriptions for the Assure system, its wearable cardiac defibrillator platform. The company’s gross margin expanded to 45.7%, up from 32.9% a year ago, reflecting both a higher proportion of in-network patients and substantial cost-per-fit reductions. These operational gains marked the seventh consecutive quarter of gross margin improvement, a testament to the scaling economics of Kestra’s lease-based model, where device assets are rented to patients and providers.

Notably, in-network patient coverage climbed from 70% at IPO to nearly 80% this quarter, directly boosting revenue per fit and conversion rates, which rose to 47%. Operating expenses increased to support commercial and revenue cycle team expansion, but management emphasized that current cash reserves of $201 million are sufficient to reach profitability. Guidance for FY26 revenue was raised to $88 million, reflecting confidence in continued prescription growth and operational leverage.

• Mix Shift Accelerates Margin Gains: Higher in-network mix and payer contracting are now the primary gross margin drivers.
• Volume Leverage Reduces Unit Costs: Cost per fit fell 20% YoY, as device fleet utilization improves with scale.
• Prescription Growth Outpaces Market: Sequential prescription growth and rising conversion rates signal both share capture and category expansion.

Kestra’s operating model is increasingly validated by its ability to translate payer contracting and commercial expansion into tangible margin and revenue gains, setting a foundation for future profitability as the category matures.

Executive Commentary

Strategic Positioning

1. In-Network Penetration as a Margin Engine

Kestra’s payer contracting strategy is central to its business model, as each incremental in-network agreement raises conversion rates and average revenue per fit. The company now approaches 80% in-network patient coverage, up from 70% at IPO, with management signaling continued, if gradual, improvement as they tackle the “long tail” of regional payers. This mix shift is directly expanding margins and reducing revenue leakage.

2. Disciplined Commercial Expansion

Sales territory growth is tightly coupled to payer coverage, with new reps deployed only in geographies where both payer access and WCD (wearable cardioverter-defibrillator) demand are robust. An expanded clinical specialist role is being piloted in high-performing territories to offload account management and free up sales reps for new account cultivation, a proven MedTech playbook for accelerating share gains.

3. Scalable Rental Model Economics

The company’s lease-based device fleet model enables rapid operating leverage, as each device can serve multiple patients per year. This asset-light approach supports both margin expansion and capital efficiency, with current device inventory sufficient for near-term growth and incremental fleet additions paced to commercial team expansion.

4. Clinical Data as a Competitive Wedge

The upcoming 25,000-patient post-approval study, to be presented as a late breaker at the American Heart Association, will be the largest ever in the WCD category. This is expected to neutralize a key competitor objection regarding Kestra’s clinical evidence base and further drive adoption among prescribers and payers.

5. Underpenetrated Market with Multibillion-Dollar Potential

Despite guideline support, WCD therapy remains underutilized, reaching only 14% of eligible U.S. patients. Kestra’s strategy targets both share capture from the incumbent and category expansion, as recent third-party studies highlight persistent unmet need among high-risk cardiac patients.

Key Considerations

Kestra’s Q1 results underscore the interplay between payer contracting, commercial execution, and margin expansion, with strategic investments in sales and clinical infrastructure aimed at accelerating both share gains and category growth.

Key Considerations:

• Conversion Rate Leverage: Each percentage point increase in conversion rate, now at 47%, directly compounds top-line growth and profitability.
• Commercial Productivity Ramp: New and existing reps are achieving expected productivity curves, supporting continued territory expansion.
• RCM Specialization: Revenue cycle management (RCM, process for claims and collections) specialization is unlocking faster, more reliable collections, especially as in-network mix rises.
• Clinical Validation Catalyst: The imminent release of large-scale clinical data is poised to remove barriers with both payers and prescribers, shifting competitive dynamics.

Risks

Kestra’s growth remains dependent on continued payer contracting, with a long tail of regional payers potentially slowing further in-network mix gains. Commercial expansion is capital-intensive, and execution risk exists as new reps are onboarded and new geographies penetrated. Clinical adoption could be influenced by competitor responses, especially as the incumbent seeks to defend share through its own clinical initiatives and contracting tactics.

Forward Outlook

For Q2 2026, Kestra guided to:

• Continued sequential revenue growth driven by prescription expansion and in-network mix gains
• Further gross margin improvement as RCM processes mature

For full-year 2026, management raised guidance:

• Revenue of $88 million, up 47% YoY

Management emphasized:

• Prescription growth from both existing and new accounts will drive results
• Operational leverage and margin expansion will persist as commercial and RCM investments scale

Takeaways

Kestra’s Q1 demonstrates the compounding impact of payer contracting, commercial discipline, and scalable device economics, with the business now positioned to accelerate both revenue and margin expansion as clinical evidence and market coverage converge.

• In-Network Mix Fuels Margin Story: The 10-point increase in in-network patient mix since IPO is the single largest driver of margin and conversion rate gains.
• Commercial Execution Remains Disciplined: Sales hires are methodically deployed where payer coverage and demand intersect, supporting efficient market share capture.
• Clinical Data Release Is a Major Near-Term Catalyst: The upcoming late breaker at AHA will address a longstanding competitive gap and could accelerate adoption by both prescribers and payers.

Conclusion

Kestra Medical’s Q1 2026 results reflect a business rapidly scaling its core model, with payer mix, commercial expansion, and clinical evidence all trending in the right direction. As the company approaches critical mass in both market coverage and clinical credibility, the foundation for sustained growth and future profitability is increasingly visible.

Industry Read-Through

Kestra’s accelerating in-network penetration and margin expansion highlight the importance of payer contracting and RCM specialization for medtech growth-stage companies, particularly those operating in underpenetrated, guideline-supported categories. Competitors with legacy market share but weaker innovation pipelines may face pressure as clinical evidence and commercial agility drive adoption shifts. The company’s measured approach to commercial scaling, coupled with a robust clinical data milestone, offers a template for other device and digital health businesses seeking to convert clinical need into scalable, profitable growth. Expect further consolidation of share among players that can align payer access, clinical validation, and commercial reach.

KMTS Healthcare Medical Devices RCM Payer Contracting Wearable Devices Clinical Trials