Kestra Medical Technologies, Ltd.

good afternoon and welcome to the castra medical technologies third quarter fiscal 2025 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 baladkar vice president of investor relations. Please go ahead.

Thanks, Lateef. Thank you all for joining Kestra's third quarter fiscal 2025 earnings call. With me today are Brian Webster, President and Chief Executive Officer, and Vasim Meboob, 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'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's most recent filings with the SEC, particularly the risk factors described in our registration statement on Form S-1 for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Kestra undertakes no obligations to update these statements except as required by applicable law. With that, I'll turn the call over to Brian.

Thanks, Neil. Good afternoon, everyone, and welcome to Kestra's first earnings call as a public company. I'd like to take a moment to thank the entire Kestra team, our board of directors, and the investors that have supported Kestra throughout our journey, including and up through last month's initial public offering. With their support, we are well positioned to take the next steps forward towards our goal of making the Assure system the standard of care for patients at risk of sudden cardiac arrest. We're excited to share with you the details of our strong performance in the third quarter fiscal year 25. But first, I would like to provide a brief overview of Kestra for those who may be new to our story. Kestra is a commercial stage wearable medical device and digital healthcare company. focused on transforming patient outcomes in cardiovascular disease using monitoring and therapeutic intervention technologies that are intuitive, intelligent, and connected. We have developed in our commercializing our cardiac recovery system platform a comprehensive and advanced system that integrates monitoring, therapeutic treatment, digital health, and patient support services into a single, unified solution. The cornerstone of our platform is the Assure Next Generation Wearable Cardioverter Defibrillator, or WCD, which is used to protect patients at an elevated risk of sudden cardiac arrest, known as SCA. Sudden cardiac arrest, or SCA, is a life-threatening emergency characterized by the abrupt cessation of the heartbeat caused by an electrical malfunction in the heart. This is typically triggered by a ventricular arrhythmia and leads to a loss of consciousness and potentially death within minutes if not promptly treated. In fact, the American Heart Association estimates that SCA causes 436,000 deaths per year, making it the third leading cause of death in the United States. Defibrillation or the delivery of an electrical shock to the heart is the only way to restore a fibrillating heart to a normal rhythm. Time is of the essence as each minute of delay in restoring the heart to a normal rhythm reduces a patient's chance of survival by seven to 10%. The average time for EMS arrival is about seven minutes from the time of a 911 call in the US. The most common location of an SCA in adults is at home or their residence. That represents about 73% of all sudden cardiac arrests, with approximately 50% of SCAs going unwitnessed. For over 20 years, WCDs have been used to protect patients at elevated risk of SCA. However, until the Assure WCD began its full US commercial launch in August of 2022, Physicians and their patients were limited to a single incumbent's device. Despite the overwhelming evidence that an external depredation shock is effective at terminating dangerous ventricular cardiac rhythms, WCD therapy remains underutilized, reaching just 14% of the eligible U.S. patient population. We believe that the low penetration of the WCD therapy is due to the limitations of the incumbent commercially available device. Commonly cited reasons for patients or providers failing to use the incumbent's device include high false alarm rate frequency, poor wearability, patient discomfort, a unisex-only garment, low utility data, and limited connectivity with patients. The Assure WCD was purpose-built to enhance patient comfort and compliance and directly address the key barriers to adoption associated with the incumbent's device. The Assure WCD drives greater patient compliance as a result of a major reduction in false alarms and enhanced comfort and wearability. In addition to the Assure WCD, our cardiac recovery system platform includes digital solutions, such as the Assure Patient Application, the Kestra Care Station Remote Patient Data Platform, Heart Alert Services, and Assure Assist Services. The Assure Patient Application engages patients with real-time mobile updates to promote compliance, while the Kestra Care Station Remote Patient Data Platform equips healthcare providers with actionable insights to support timely and informed care decisions for their patients. Heart Alert Services and the Assure Assist Services work together to enhance safety and are designed to provide critical alerts to healthcare providers for significant arrhythmias and notify emergency services when therapy is administered. In the US, we estimate that there are approximately 850,000 cardiac patients each year that are eligible for WCD prescription, representing an annual addressable market opportunity of approximately $10 billion. In 2023, approximately 120,000 patients in the US utilized a WCD, generating sales of over $1 billion. Unfortunately, the other 730,000 eligible patients went unprotected. Our mission is to protect and support this large and growing population of at-risk patients by driving increased adoption of the Assure WCD. We continue to make significant investments in infrastructure to support rapid growth and scalability specifically in our commercial organization, our supply chain, our distribution capabilities, as well as our revenue cycle management processes. We utilize a leased business model. When a patient's wear time has concluded, the Assure device is returned for reprocessing and reintroduction into Kespra's distribution system. Our substantial investment in our fleet of devices Each with a capacity for approximately three patient wares per year enables the business to scale with an attractive unit economic profile. Now, turning to our recent performance in the third quarter, Kester generated $15.1 million of revenue, which represented growth of 82% as compared to the prior year period. We note that this result was in line with the preliminary estimated financial results that were previously disclosed in our IPO prospectus. In the third quarter, we continued to reach more patients at risk of SCA, generating over 3,400 prescriptions written for the Assure system. These prescriptions help protect families from the devastating impact of cardiac arrest. As of January 31st of 2025, which is the close of our fiscal third quarter, the Assured WCD is being actively prescribed by more than 550 hospitals, representing approximately 20% of WCD prescribing hospitals in the US. Clearly, we are still in the very early innings of activating new accounts and growing our market share. To give you a sense of our potential in our top 50 hospitals, we estimate our market share to be approximately 45%. We are expanding our sales force in targeted geographies where a high volume of WCD prescriptions are being written, and we now have strong in-network payer coverage. As of January 31st, we had approximately 70 sales territories with plans for continued commercial team headcount growth over the next 12 months. Our direct sales team is supported by a contracted team of over 250 Assure patient specialists who assist patients with fitting and training of their WCD. In March, Mr. Al Ford joined Kestra as our new chief commercial officer. Al most recently served as chief commercial officer at Exomics, where he led the development and execution of their commercialization strategy. Prior to that, he was the chief commercial officer at Cardiac Science Corporation, a leader in automated external defibrillation products. With significant experience managing strategic sales and commercial operations, Mr. Ford brings valuable knowledge, perspective, and leadership to our organization. We're confident that he will be an impactful addition as we continue to drive adoption of the Assure system. We're also continuing to build the body of clinical evidence supporting the safety, efficacy, and benefits of the Assured WCD. All patients prescribed the Assured WCD in the United States since August of 2022 have been included in our post-approval study and patient registry. As of January 31st of 2025, our registry has enrolled over 17,000 patients. The real-world findings are providing further validation of the results in our pivotal trials. Our most recent FDA submission from the study reported first shock conversion efficacy of approximately 96%, a median daily use of 23.2 hours, and a low false alarm rate of only 6%, compared to 46% for the competitor's device. In late March, data from our patient registry was presented at the annual scientific sessions of the American College of Cardiology, ACC, highlighting critical insights from over 4,700 patients with newly diagnosed dilated cardiomyopathy heart failure. We used who were prescribed the WCD system. The data revealed a substantial risk of SCA within a median of just 38 days, underscoring the need for early protection and also patient compliance. These results underscore the AssureWCD's competitive advantages in wearability, usability, and patient compliance, providing strong support for continuing adoption. On the market access front, we continue to secure in-network contracts with additional health plans, with the recent addition of Kaiser Permanente, covered lives for the Assure system now total more than 285 million health plan members in the U.S. In summary, I am proud of the hard work the Kestra team has done to protect thousands of at-risk patients from cardiac arrest and even more excited about the opportunity ahead. The foundation we have built has positioned Kestra for a strong growth for years to come. We are addressing a market that is large, growing, and highly under-penetrated. Our Assure system is a truly differentiated technology that clinicians are enthusiastically prescribing to their patients who are at risk of SCA. We are making targeted investments in our commercial infrastructure and rev cycle management capabilities to capitalize on the attractive market opportunity in front of us. Following our initial public offering, we are well capitalized and focused on executing on our commitments to patients and their prescribers. Before I wrap up, I would like to just give one more shout out to the incredible Kestra team. In our recent all team member survey, our team scored 92% on the very important engagement question. I have to say I'm humbled by the commitment and passion this team has for the Kestra mission. I will now turn it over to my partner, Vasim, who will discuss third quarter financial results in more detail and provide our fiscal year 2025 revenue outlook. Vasim?

Yeah, thank you, Brian, and good afternoon, everyone. As Brian noted, total revenue was $15.1 million for the third quarter of fiscal year 2025, an increase of 82% compared to the prior year period. Revenue growth was driven by a 51% increase in prescriptions in the third quarter, reflecting continued market share gains and activation of new accounts. As Brian mentioned, we benefited from a higher mix of in-network patients and improvements in our revenue cycle management capabilities. Gross profit was $6.5 million for the third quarter of fiscal year 2025 compared to $0.9 million in the prior year period. Gross margin was 43.4% compared to 10.6% in the prior year period. The significant expansion in gross margin was driven by volume leverage and a higher mix of in-network patients. We also began to realize a higher reimbursement rate for our HCPCS code KO606, which increased to $3,519 on January 1st, 2025, due to a 2.4% increase in the consumer price index. We know there is significant focus on assessing the impact of the newly enacted tariffs. KESRA is mostly insulated from the currently announced tariffs. Our two tier one contract manufacturing partners supply products to Castra from their U.S.-based manufacturing locations. That and the overall asset rental and the reuse business model that Brian talked about provide us protection from the tariffs as currently announced. As such, we don't expect any changes to our gross margin profile as a result of these new tariffs. Operating expenses were $27.1 million for the third quarter of fiscal year 2025 compared to $20.8 million in the prior year period. The increase was attributable to growth in commercial and revenue cycle headcount. We also recorded $1.9 million of IPO-related expenses in the quarter. Net loss was $21.8 million for the third quarter of fiscal year 2025 compared to a net loss of $21.6 million in the prior year period. Adjusted EBITDA loss was a $16.3 million for the third quarter fiscal year 2025 compared to an adjusted EBITDA loss of $16.2 million for the prior year period. Cash and cash equivalents totaled $54.4 million as of January 31st, 2025. This does not include the $205 million in net proceeds that we received from our successful IPO in March. I will now provide our revenue outlook for fiscal year 2025, which ends on April 30th. We expect total revenue for fiscal year 2025 in the range of $58 million to $58.5 million, representing a growth of approximately 109% to 110% compared to fiscal year 2024. With that, operator, we are ready to take questions.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Travis Steed of Bank of America Securities. Please go ahead, Travis.

Hey, thanks for taking the question and congrats on the first earnings call. I guess I wanted to ask really about kind of the Salesforce and, you know, you've got a new chief commercial officer and just trying to think about the investments there on the Salesforce and where you're going to be, you know, how are you going to kind of be going after this market a little bit differently, I guess, with some of the IPO proceeds? If you think you can take more share and how long these kind of new reps can get up to speed?

Yeah, thanks, Travis. Appreciate the question. You know, I think we're excited to have Al Ford join the company. He's been here, I guess, about six weeks now. So he's spent a significant amount of time out in the field, writing with reps, really understanding the business model, really understanding the point of sale. And he's in the process of sort of going through that evaluation process. I think when it comes to you know, the next 12 months, we are going to remain focused on our business plan, notwithstanding the additional funds that we receive. We are very cognizant in this business model of the need to protect the service level requirements. And we have to make sure that when we're putting a sales rep in the field, that we're also putting all the support around that rep that's required to be able to deliver on our prescription fulfillment according to the wishes of the prescribers. And so we're going to be very measured but aggressive when it comes to that. And I think as Al spends more time assessing what our needs are, I think we will continue to look for ways that we're going to continue to grow our market share. But we're very excited about him being on board, and we're very excited about the framework that we have with regards to in-network patients now with our insurance coverage and a fleet of devices and now this growing sales team.

Great. Thank you. And maybe just a follow-up on guidance. There's just kind of one quarter left in the year, but I'm not sure if there's any kind of color you'd like to give on how you kind of give guidance and share a new company. and trying to think through like some of the key drivers to now that you've gotten your payer mix better and kind of closing the gap into that potential revenue versus realized revenue over time. Thank you.

Sure. When it comes to guidance, we will be issuing our fiscal year 2026 guidance. at our July quarterly call. We're in the process of going through budgeting with our board and getting everybody on the same page with regards to the fiscal year plan for next year. So we'll be issuing that guidance in July. I think the drivers for our revenue acceleration remain essentially the same. We are going to focus on you know, driving more in-network patients because they pay better. We are going to focus on selectively expanding our sales force with a particular focus on expanding into areas where we do have favorable insurance coverage. And then we'll continue to make a month-over-month, quarter-over-quarter, year-over-year improvements in our revenue cycle management capability. And it's the focus on those three things, really, that we believe are going to drive our revenue acceleration.

Great.

Thanks a lot. Congrats.

Thank you. Thanks, Travis.

Thank you. Our next question comes from Matthew O'Brien of Piper Sandler. Please go ahead, Matthew.

Great. Thanks so much, and I appreciate you taking the questions. Brian, maybe on the account side of things, I know a big focus has really been, you know, going deeper within existing accounts. What can you do now with, you know, this broadening resource base of yours to go deeper in accounts, maybe even a little bit faster than initially expected? And it's like, you know, you mentioned kind of those top 50 accounts and how quickly you've gotten to 45% market share. How quickly can you bring the next 50 up to that 45% market share? And I guess where can those top 50 kind of pop out at?

Well, I think it's a little, first of all, thanks, Matt, for the question. It's a little too early to tell where the top out is. We think the ceiling's pretty high on capability as we get more and more really positive feedback from prescribers, and our reps continue to penetrate, you know, sort of position by position in any given account. I do think that our strategy will remain that we want to continue to go deeper. I think one of the things that our new Chief Commercial Officer Al Ford will be assessing will be the right mix between sales resources and clinical resources to best penetrate accounts. So I think that there will be a balance between getting that right mix for this business model and also getting ourselves into some new big opportunity markets that we just haven't been in in the past. So it'll be a combination of those things, but we feel like we've got really good evidence that when we apply resources in a given territory or even a state level view that we can achieve really exciting market share capture.

Got it. And then as the follow-up, just to kind of follow up on Travis's question on revenue cycle management, in fiscal 24, you saw a really good improvement in the conversion rate. 25 is trending nicely. For fiscal 26, we're not expecting much, and even 27, not expecting a lot in our model anyway. Is there anything you can do to accelerate the process or the improvements that we're seeing in revenue cycle management? Again, I'm not sure if some of the IPO proceeds can help with that or not, but just curious if that's a lever that you could pull on now to get a little bit more resource. Thanks so much.

You bet. Thanks for the follow-up. I think the additional capital resources only have a limited amount of impact on that simply because most of the issue is not necessarily resources when it comes to RevCycle. It's really It really comes down to what your in-network versus out-of-network patient mix is. And so what we're going to see, we believe, is as we continue to, at a territory and regional level, we continue to add additional payers, we will just continue to see that in-network mix improve, and then the corresponding improvement will happen with Red Cycle. We definitely will continue to invest in the processes, the people involved, et cetera, when it comes to revenue cycle management. But we're pretty happy with some of the progress we're seeing on that front. We would expect to continue to just see nice, steady improvement. It's sort of process-oriented, and so you're not going to have, you know, kind of a big jump. You're going to have steady increases, and that's what we're looking for as we continue to grow.

Understood. Thank you.

Thank you. Our next question comes from Larry Beagleson of Wells Fargo. Please go ahead, Larry.

Good afternoon. Thanks for taking the question. Brian, we recently did a survey that pointed to double-digit prescription growth for the USWCD market in 2025 and 2026. How are you thinking about just market growth? And I had one follow-up.

Yeah. Hey, Larry. Thanks for the question. I think that as we look backwards over the last two to three years, we've seen unit market growth has been somewhere around 6%. And then when you put the cost of living adjustment on the code, that adds another 2% to 2.5%. So that puts you at somewhere in the 8% to 8.5% kind of market growth that we've seen from 2021 through 2023 so I think when we think about our model we're using sort of that that parameter is how we're thinking about market growth and I'm not surprised that your survey has given you you know that kind of that kind of feedback because we definitely are seeing increased excitement about the use of this product, specifically with the non-ischemic cardiomyopathy patients. And so I'm not surprised that you're getting that kind of feedback.

That's helpful. And the other thing we saw that was interesting in the survey was that electrophysiologists were generally more familiar with your positive attributes compared to general cardiologists. Would you agree that there's just more familiarity among APs? And if so, what's your plan to educate general cardiologists more? Thank you.

Yeah, it's an interesting call point because the cardiologists generally are writing more of the prescriptions. And so we will certainly have a focus on that, including a focus in this coming year with... with a lot of speaker bureaus and educational programs and things like that. That's definitely going to be a focus of ours. But we don't want to take our eye off of the electrophysiology ball because electrophysiologists are often consulted when it comes to a patient. And so they are going to have an opinion and a view about these ventricular rhythms. And so We have to sort of straddle that a little bit, but you'll see a pretty good focus on educational programs and things like that here in the coming year for us.

Thanks so much.

Yep.

Thank you. Our next question comes from David Roman of Goldman Sachs. Please go ahead, David.

Thank you, and good afternoon, everybody. Maybe we can start with just looking at prescription volume growth and revenue performance and maybe just talk us through how we should think about the 51% growth in prescriptions during the quarter translating into revenues. I believe you saw a pickup in the growth right here exiting Q3 and into your Q4. And maybe just remind us how to think about the correlation between prescriptions and revenue and if that should converge over time or how we should think about that metric as a leading indicator.

Yeah, maybe I'll start that, and then, Vasim, maybe you can jump in here as well. But I would say that, you know, first and foremost, you want to remember that there's a timing difference between an actual prescription and the revenue that comes in for that prescription. And so that's an important factor when you're evaluating prescription volume versus revenue volume. And it is a monthly billing when it comes to how the actual billing occurs. And then each payer, you know, has its own payment cycle over time. Basim, you want to talk a little bit more about the relationship between those two? Sure, Brian, and David, it's a great question.

I think one of the things that we want to always highlight here is that we want to see our revenue cycle change. capability really drive the conversion of those prescriptions into fittings and then fitting into revenue. So every time you see the revenue growth that's better than your prescription growth tells you two things. One, that we are taking market share, and two, we are actually converting that into revenue with some good bit of leverage, and that's actually progress. So really, to Brian's point, a lot of it is timing. A lot of it is the fact that you have a different velocity of the mix of patients. And that's why when we talk about deploying new reps, we're trying to deploy them into areas with high prescription density that are in network. So really, it's a function of those three things. It's the revenue cycle management capability. It's the mix of the type of patients. And then obviously, that leads to a better leverage, if you will, on the revenue side. The simple way to put it is that you would always want to see your revenue go faster than your prescriptions, but your prescriptions are a leading indicator of the growth to come.

That's a super helpful perspective. And maybe just to follow up, and I think a couple others have asked this question around the incremental IPO proceeds that you generate, but maybe just be more specific on one topic, which is if just following Kestra on various social channels, You really have picked up hiring significantly here across multiple parts of the company. You've seen hires in sales and marketing, R&D, clinical development, et cetera. Maybe you can just sort of talk about what are some of the most significant areas of headcount expansion that you are undertaking right now and how we should think about the derivative impact on either pace of product development, clinical trial enrollment, pickup in sales, et cetera. Maybe I'll just tie that together.

Yeah, I appreciate that follow-up. I think that, you know, in our general philosophy about the additional proceeds are, you know, we're not going to be in a mad rush to go spend those proceeds. If there's ever, you know, an economic environment where having a little extra cash in the bank is a good idea, this would be probably one of them. So, however, we have had a plan along to really to invest in our commercial footprint. We know that for us to be able to achieve the market leadership that we are seeking to achieve in this market, we know that we need a bigger commercial footprint. So that's job number one. Job number two is There are, with the higher volume that we expect to be generated by that commercial team, there are volume-related rev cycle management and other functions that we need to make sure that we're growing as well. And so you'll see us posting plenty of positions for those kind of roles, which are directly in sync with volume. I think you'll continue to see us make you know, reasonable investments in our CapEx pool to make sure that we again can get a product to the patient when we need to to meet service level requirements. And we are very excited about, you know, I think I mentioned in my opening comments that we have a significant number of patients already enrolled in our post-approval study with the FDA. And we expect to wrap that study up here this year. And I think coming out of that study, you're going to see some very interesting and exciting results from a very large cohort coming. You know, when you're talking about 17,000 to 20,000 patients in a in a post-approval study, that's a significant number of patients. And we're excited about the clinical evidence that we're going to start to see coming out of there. So I think those are the areas. It's commercial. It's revenue cycle management and other volume related. It's CapEx. These are the areas that you're going to see us invest in. And we have a, by the way, we have a fantastic recruiting team that we do all that recruiting internally. And we love the way our team is able to really talk about the mission and the culture at Kestra.

Excellent. Thanks for all the color.

Yep. Thank you. Our next question comes from Rick Weiss of Stifel. Please go ahead, Rick.

Thank you and good afternoon, Brian and Basim. I thought maybe you could give us a little more color on gross margin performance. Your third quarter gross margins were obviously just exactly as expected. But I was hoping you'd talk a little bit more about the outlook for the fourth quarter and beyond. My impression is that supported by your steady sequential meaningful step up in gross margin. I felt that with more turnover of the assure rentals, we were going to see that sequential improvement continue to happen. And yet I find myself looking at my model and I'm sort of having gross margin sequentially just up a touch in the fourth quarter, and I see that's where consensus is as well. Remind us both the short-term and the long-term potential, and is this an area of potential conservatism as we look ahead to the fourth quarter?

Sure. Let me take one question. So, yeah, Ray, thanks for the question here. I think It's a good observation. While our rental model and the operating leverage drives the gross margin, as you can appreciate, it takes time to materialize. We'll continue to drive the two big things that actually help drive the margin expansion as we have talked about. One is driving that in-network patient mix over time because that actually gets us to better revenue per fit. And then obviously, all of the great work that the teams have done on reducing the cost per fit, which is really working the CIP programs and just making sure that we drive the right cost controls within the business. We are really excited about the progress that we made in the last six quarters on gross margin. We've done exactly what we said we were going to do. And I think we should expect to see some real nice steady increase in our gross margins as that revenue line continues to expand because really the depreciation and the volume leverage that you get as you drive more fittings through the business really helps drive the gross margin expansion. And at the same time, as we have communicated earlier, we continue to stay focused on the price, which we think is trying to get to those high growth MedTech margins, which are north of 70%. And we continue to stay focused on that.

Right. And one more macro question. Thanks for the the impeccable clarity on the tariff, your relative insulation from the tariff issue. But I'm just curious, Brian, are you getting, detecting any change in mindsets and attitudes on part of hospitals or technology officers or doctors to try new technology, openness to making these kind of conversions because of the potential for constricted budgets or funding pressures. And anything worrisome you've been through a lot over the last 30 years, you've seen a lot, anything worry you as you look ahead on that front? Thank you both.

Yeah, thanks. Thanks, Rick. I think that, you know, we don't see feedback from hospitals around this product category, because the hospitals are really, we're not leasing the product to the hospital, as you know, we're leasing it to the patient. And so the hospitals really, you know, they're not thinking about it like they would a capital equipment kind of an asset or something like that. So we're not seeing anything on that front. I do think the physicians are remain really excited about having a choice. They haven't had a choice in this category for 20 years. And so I think that's a big deal, especially when you can not only deliver a second option, but an option that's very clearly superior. That's a recipe for success. So I think we're in pretty good shape on that front. And I think the other, you know, in addition to the You know, the fact that our tier one manufacturing partners, and in fact, most of the high cost elements of our product cost are U.S.-based companies. That gives us a lot of protection. You have the fact that it is a rental model. We've already invested in a big pool that really can help us in the near term to be able to achieve our revenue objectives. I think those things are great mitigations. And then, you know, as you think about longer term for us, it's really about the opportunity for us to continue to, you know, be really efficient with how we turn those devices, how we manage the rental fleet. And I think there's a lot of protections. And then the final protection that you have with this category is it's a life-saving device. You know, this isn't sort of a – a device that people should have a, you know, hey, I might want to use it or might want to not use it. These are patients who are indicated to be at high risk of cardiac arrest, and a lifesaving class 3 device like this is generally going to have, you know, more protections than some other product category. So I think we're in pretty decent shape when it comes to the overall question around the tariffs and the consequential benefits you know, economic elements around that.

That's a really helpful answer. Thank you so much, Brian.

Thank you. Our next question comes from Michael Blart of Wolf Research. Please go ahead, Michael.

Good afternoon. I have a follow-up on the measured but aggressive rollout on the commercial front. Brian, I heard 7070 Justin Capposian, Sales territories at Jan 31 please correct me if I heard that wrong, but my question is, is you look out over the next year or two what's the right. Justin Capposian, number for a quarterly territory creation 510 15 how might you frame that as you look to put these IPO proceeds to work.

Yeah, Mike, thanks for the question. We're not going to get into the quarterly cadence of kind of reporting how many more reps did we do last quarter, that kind of thing. It's just when you're developing sales territories and you're in this constant cycle of recruiting and everything, that's kind of a difficult game to play because it ebbs and flows. I will say that I will reiterate that we have a really good recruiting engine We've got no problem in attracting really attractive and capable salespeople. I think the IPO has only helped that. And I will say, Mike, to your question, you know, right now, you're correct. We did have about 70 sales territories at the end of January. And I would expect that we will double that over the next couple of years. And that's sort of the framework that you can think about that in.

Helpful. For my follow-up on tariffs, I appreciate all the comments to this point. I'm just curious if you feel a little layer back, your CMO partners, their supply chains, have you been able to identify any risk that might exist for them? And if so, what contractually... um, exists for you to, to protect. Um, I'm thinking specifically about your garment, um, supply chain, but if there's anything else that you might call out as, as a mitigant, um, we'd appreciate it. Thank you.

Yeah. Yeah. I appreciate that follow-up. It, it's obviously, it's a layered, um, it's a, it's a layered problem that, um, that any company is trying to look at. And we certainly have a really good understanding of it multi layers down. So when you think about the garment production, for example, we have that dual sourced because that is a high volume part of our system. We took the risk mitigation, you know, a couple of years ago to not only have a single source, so we have that dual source and actually dual sourced in two countries and one country each. And then with the ECG electrodes that are a part of that garment assembly, we have a contract manufacturing partner that's in the U.S., that we again have that dual source between a U.S. plant and an OUS plant down in Mexico. And so part of our strategy there has been to give ourselves some redundancy, give ourselves the ability to react. If one environment becomes untenable because of the tariff or some of those kind of effects, then we would pull it over to the other territory to be manufactured. So I'm not certainly going to say there's zero risk because that would be silly, but I do think we've got a pretty significant level of risk mitigation that we've built into our supply chain because our supply chain is critical to our success and being able to, you know, these patients who are diagnosed It's urgent, and they need to be protected right away, and so you have to have product, and that's paramount to us. So we've done a lot of that mitigation as a result.

Thank you. I would now like to turn the conference back to Brian Webster for closing remarks. Sir?

Okay. Well, thank you again, everyone, for joining the call today. You know, it's a little bit of a no news because we just did execute the IPO, so there's not a lot of new news on the actual Q3 revenue. We did as we said we were going to do and as we had in our perspectives. We remain really excited about the place that we're at and the great team we're building. And most importantly, we remain incredibly excited about the lives we saved Every week on Monday afternoon, I get to share the previous week's lives saved with the Kestra team, and that's the best moment of the week, every week for our team. And we're excited to continue to expand that and make a big difference in many, many more families' lives. So thank you very much, and we'll look forward to seeing you at the next quarterly call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.