Kestra Medical Technologies, Ltd.

certainties, 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 Form 10-K for additional information. Any forward-looking statements provided during this call, including projections of future performance, are based on management's expectations as of today. Keshtra undertakes no obligation to update these statements except as required by applicable law. With that, I will now turn the call over to Brian.

Thanks, Neil. Good afternoon, everyone, and thank you for joining us on today's conference call. We're excited to discuss the strong financial performance we had in the second quarter and the continued progress we are making on our key operational objectives. Before we jump in, I want to begin by grounding us in the patient focus that makes Kestra a special company. At the center of everything we do are the lives we protect each day and the impact we have on patients, their families, and the providers who care for them. Recently, a patient in Florida collapsed from ventricular tachycardia and required urgent intervention. After stabilization, the patient was discharged with the competitive wearable defibrillator and referred to electrophysiology for follow-up. At his outpatient visit, the patient reported poor tolerance of that device. Due to discomfort and adherence risk, the physician transitioned the patient to the Assure system, citing improved comfort and care coordination for the switch. Once fitted with the Assure system, the patient expressed a clear improvement in wearability compared to the previous device. The patient and family also noted greater confidence due to the system's ability to connect them quickly to emergency care. Weeks later, the patient collapsed again at home. The Assure system detected the event and announced it was preparing to deliver therapy. Before therapy was delivered, the patient regained consciousness and successfully diverted the shock, reflecting the Assure system's ease of use and patient-first design. Following the cardiac event, the patient was transported safely to the emergency department, while then our team delivered episode data directly to the emergency department. The following morning, care station reports guided discussion during cardiac ICU rounds. The care team described the data as detailed and clinically useful. Two days later, the patient received an ICD. This case reflects how the cardiac recovery system brings together protection, clinical insight, and care coordination to change outcomes when time matters most. While this is just one patient's experience, in the second quarter of fiscal 2026, our team and technology helped facilitate many similar life-saving events. We remain mindful of the trust placed in us by clinicians, patients, and their families every day. I would like now to turn over to our recent financial performance. In the second quarter, we continue to reach more patients who are at risk of cardiac arrest accepting approximately 4,700 prescriptions written for the Assure system. Revenue was $22.6 million with growth of 53% over the prior year period. Our gross margin climbed over the 50% line for the first time in the company's history, an important milestone for Kestron. Actual gross margin of 15.6% was up 11 points year over year and reflects the attractive unit economics of our business model. This was the eighth quarter in a row of sequential gross margin expansion. We expect continued gross margin expansion in the back half of FY26 and remain confident that Kessler is on the path to 70% plus gross margins over the next few years. With the strong revenue growth that Kestra is generating, we are seeing nice operating leverage in our business. This leverage supports the investments we are making in the company's key growth drivers that we believe will yield significant long-term value for Kestra and its stakeholders. Turning to the overall WCD market, we have previously noted that despite the overwhelming evidence that an external defibrillation shock is highly effective in terminating dangerous cardiac rhythms, WCD therapy remains underutilized, reaching just 14% of the eligible US addressable market. That means six out of seven patients that are indicated for a WCD are not being protected by one. The best way for Kestro to positively influence clinical practice and have more patients protected by WCDs is by generating highly impactful clinical evidence. So one month ago, we did just that with the presentation of the primary results of ACE-PASS, which is our FDA post-approval study at the American Art Association annual meeting in New Orleans. ACE-PASS is the largest real-world prospective WCD study to date. with over 21,000 patients enrolled and protected. The study design includes pre-specified performance criteria with objective performance measurements. The key takeaways from the study results were as follows. First, the Assure system met both of its primary endpoints, demonstrating a safe and highly effective device. It's worth noting that not only was ACE-PASS the largest WCD study ever, but it also enrolled the largest percentage of female patients at 34%. As a reminder, 40% of indicated patients are women, and the Assure system is the only WCD specifically designed for women. Next, sudden cardiac arrest doesn't wait. Patients were at high risk during the first 90 days of the study for all indicated populations. Base pass data showed patients had a 90-day incidence rate of 1.8% and an annualized incidence rate of 7.5%, which is actually slightly higher than landmark ICD trials. Guideline-directed medical treatment is effective in improving cardiac function, but it requires time. and patients need to be protected from significant SCA risk during their cardiac recovery. Third, at 23.1 hours, Assure had the highest wear time of any U.S. WCD trial. In fact, 30% of our patients wore the device for more than 90 days, demonstrating the effective protection for extended therapy optimization. And finally, ACE Pass reinforces that Assure has the lowest false alarm rate, with 94% of patients free from false alarms, dramatically lower than other commercially available WCDs. In our discussions with clinicians after the study results were presented, the most common theme is that the risk level of their patients is higher than they understood it to be. particularly early in the recovery and treatment journey. The existing WCD guidelines were published in 2017 and have not been updated since. We believe ACE-PASS, in conjunction with other recent studies such as SCD-PROTECT, provide compelling data on over 40,000 patients that significantly strengthens the existing body of evidence and may help inform future updates to clinical guidelines. You've heard me say before, there are three critical questions about the WCD category. The first one, is there a patient population that has significant health risk? The second question, is there an effective therapy to treat those patients? And the third question is, will the patients wear the device? ACE-PASS definitively answers all three of these questions in a very large, real-world population. A strengthened recommendation to guidelines would have a positive impact on clinical decision-making and potentially accelerate TAM penetration. Based on our estimates and data from the incumbent, we believe the WCD market growth has already accelerated to the low double digits and will continue to expand into a multi-billion dollar market over the coming years. Moving on to other updates, we continue to expand our sales organization with the goal of further penetrating existing accounts, as well as calling on new potential insured prescribers. As we have discussed previously, we are targeting geographies in which we have a high volume of WCD prescriptions and where we also have strong in-network payer coverage. We currently have approximately 100 active sales territories, up from about 80 sales territories at the end of fiscal year 2025 in April. While this will not be a data point that we will be updating on a quarterly basis, our territory additions in the second quarter were in line with our hiring plan. and we continue to aggressively expand our sales coverage. In recent months, we have seen the addition of clinical specialists in select markets, complementing our sales territory coverage and supporting further penetration of accounts. We also continue to make progress on improving our RCM capabilities, that's revenue cycle management, while also bringing more payers in networks. At the time of our IPO nine months ago, approximately 70% of our fittings were for patients with in-network benefits. This figure is now in the low 80s. The higher in-network mix meaningfully increases our team's efficiency and positively impacts all RCM metrics. It's important to note there are over 3,000 payers in the United States. so there is still a long tail of regional and local payers we are working to bring under contract. As you all know, we utilize a leased business model. Our substantial investment in our fleet of devices, each with a capacity to protect approximately three patients per year, enables the business to scale with our attractive unit economic profile. While our current business asset pool can support our near-term business objectives we are continuing to add to our fleet as we grow our field team. Over the long term, we expect about 90% of our annual patient fittings to be accomplished with reuse of existing devices. So, in conclusion, the fundamentals of the Kester thesis remain intact and were, in fact, fortified in Q2. WCD market growth is accelerating. Kestra revenue is growing north of 50%, and gross margin has expanded beyond 50% for the first time. We have an underserved medical education where we offer a clearly effective and superior solution. We have rapidly closed the gap on payer endorsement of our product, and we are implementing a commercial expansion plan to significantly grow the business. Our commercial plan is now supported by a large body of clinical evidence that has some potential to influence the prescription guidelines. Our execution has been strong across all elements of the business, and the foundation we have built has positioned Kestra for strong growth this fiscal year and beyond. I'd like to thank our incredible team in the field and here at the home office in Kirkland for their passion and commitment to the Kestra mission. I'll now turn it over to Basim, who will discuss second quarter financial results in more detail and provide our updated fiscal year 2026 revenue guidance. Basim?

Thank you, Brian, and good afternoon, everyone. Total revenue for the quarter was $22.6 million and an increase of 53% compared to prior year period. Revenue growth was driven by a 54% year-over-year increase in prescriptions, reflecting market share gains with existing customers and activation of new accounts. Excluding the impact of one-time revenue pickup in the prior year from a payer converting to accrual accounting, our revenue growth for this quarter was 60%. Growth margin was 50.6% in the second quarter compared to 39.6% in the prior year period. As Brian mentioned, we have now expanded our growth margin sequentially eight quarters in a row. The continued expansion in gross margin was driven by the attractive unit economics inherent in Kestrel's rental model, a higher revenue per fit from more in-network patients, and a 20% decline in cost per fit driven by volume leverage and cost improvement projects. In the quarters ahead, you should expect to see steady and consistent increases in our gross margins as our rental model benefits significantly from the volume and depreciation leverage. We remain confident in our ability to achieve 70% plus margins in the next few years. As we have discussed previously, higher in-network mix unlocks the power of Kestra's business model. We entered the quarter with our in-network mix percentage in the low 80s and are seeing improvements in all three key drivers of our conversion rate, our prescription fill rate, our bill rate, and our collections performance. Our conversion rate in the second quarter was 48.8%, up from an adjusted conversion rate of 48.2% in the prior year period. As we continue to bring more payers in-network and enhance our revenue cycle management capabilities, we will see benefits in our revenue growth, our gross margins, and our profitability profile. GAAP operating expenses were $43.2 million in the second quarter and included a $1 million of non-recurring costs associated with professional fees and costs related to our recent equity offerings. GAAP operating expenses were $25 million in the prior year period. Excluding non-recurring costs and stock-based compensation, operating expenses were $33.5 million in the second quarter of fiscal year 2026, compared to $23.8 million in the prior year period. The increase was primarily attributable to investments in commercial expansion and public company costs. Gap net loss was $32.8 million in the second quarter compared to a gap net loss of $20.6 million in the prior year period. And adjusted EBITDA loss was $19.7 million in the second quarter compared to an adjusted EBITDA loss of $16.1 million in the prior year period. Cash and cash equivalents store $175.4 million as of October 31, 2025. This does not include the $148 million of net proceeds we received from our public equity offering last week. I will now provide our updated fiscal year 2026 guidance. We are increasing revenue guidance to $91 million, representing a growth of 52% compared to fiscal year 2025. This compares to prior guidance of $88 million and our initial fiscal year 2026 guidance of $85 million. Underpinning this guidance is our expectation that we will continue to see strong growth in prescriptions as the market share increases and the WCD market continues to expand. We expect Revenue Perfect to continue to benefit from a higher mix of in-network patients and improvements in our revenue cycle management capabilities. With that, operator, we have concluded our prepared remarks and are ready to proceed to the Q&A portion of the call.

Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question, one follow-up. In the interest of time, please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Matthew O'Brien from Piper Sandler. Your line is open.

Good afternoon. Thanks for taking the questions. For starters, maybe to see more, Brian, just talk a little bit about the guide for the year. You know, it's nice to see it above what, you know, how you beat here in fiscal Q2. But maybe just talk a little bit about the cadence of the guidance, especially Q3, which I think has some seasonality to it. And just given that you're a newer public company, maybe just talk about that. And then just, you know, other factors you're considering as you think about the full year. And then, again, I do have a follow-up.

Yeah, thanks for the question, Matt. You know, as we've said in the past, we are a brand-new business, and we track our performance on a daily, weekly, and a monthly basis. Our revenue growth has historically been driven by prescription volume growth, our in-network mix, and the revenue cycle management initiatives that we've been driving. We remain focused on these drivers and are tracking all of the KPIs in the right direction. Our strategy to expand our sales force responsibility so that we continue to deliver the service level to the patients, and we've talked about how critical and important that is. And we are still early in our public company journey, so our guidance philosophy is based on delivering consistent quarterly results that establish trust and confidence with investors. And again, just a reminder, we have one of the fastest growth profiles in all of MedTech, and consensus has us growing at 45% to 50% through 2028.

Thanks for that. And then as a follow-up, and there's a million places I could go here, but maybe just, Brian, use the proceeds now. And again, I don't want us to get over our skis too much as far as the impact of some of these investments, but just how do we think about, you know, this additional capital in terms of accelerating some of the growth initiatives that you have at Kestrel? Thanks so much.

Yeah, thanks for the question, Matt. You know, what we're trying to do is we're trying to build a durable, top-tier MedTech growth profile for years to come. And, you know, as you know, we, in the first half of the year, we've gone faster than our plans. And so we wanted to de-risk any future capital needs and really fortify our balance sheet as we continue to invest in those key growth drivers. We decided to take advantage of the timing of the strong ACE-PASS clinical results and also our strong Q2 performance. And I think from our perspective, we're gonna now, with that capital in hand, We're going to go through our planning process. On our fiscal calendar, we are just kicking into our annual planning process. We'll be doing that in conjunction with our board over the next few months, and we'll be outlining what the impact of that capital may be on our growth strategies for the next couple of years. So it's a strong move for us. We feel good about having the balance sheet in a good place. And it gives us optionality, frankly, especially with the potential of, you know, the clinical results impacting the guidelines in the future. So we're happy to get that done.

Got it. Thanks so much.

You bet.

Thank you. One moment for our next question. Our next question will come from Larry Bigelson from Wells Fargo. Your line is open.

Good afternoon. Thanks for taking the question. Congrats on a nice quarter here. Brian, I wanted to ask about the AHA data. You know, I heard your comment about the WCD market growing low single digits. Are you already seeing an impact from the data? Any color on this? Is this more share capture, you know, more market expansion or both? And I had a follow up.

Yeah, hey, Larry, thanks for the question. And just to clarify, the market growth is low double digit is our calculation, which is up, you know, at least several points from at the time of the IPO. So we are seeing the market expansion absolutely accelerate. Now, when it comes to the post-clinical results presentation, We are, you know, it's a little too early to see it in the numbers, but anecdotally, we're absolutely seeing some really exciting cases where our reps have been in front of clinicians. telling our story, telling the story to our clinical data, and clinicians making different decisions than they had before. We've had, I know I've heard directly from a handful of reps who said, when I presented the data to my physician, they said, I didn't realize the risk level was this high. I'm going to start thinking about this device for a broader spectrum of my patients. So that's really good news for us. I think another Really interesting data point. Obviously with that data in hand, you know, we're hitting the street and really working on the clinical education. And so our medical education team actually in the month of December, this is sort of a fun fact, the month of December we will be conducting more medical education events with providers. than we have in Q1 and Q2 of FY26 combined. So we're getting after it, and so far the feedback has been terrific, and the team is really excited to be out there talking about it.

That's great to hear. And, Brian, could you talk a little bit about the rep productivity among the base reps and the new reps and your Salesforce hiring plans? I heard the 100 number, but, you know, the hiring plans following the recent secondary, Are you planning to accelerate your commercial plans, and are you willing to kind of tell us where you expect to end the year? Thank you.

Yeah, thanks, Larry. If you recall, at the time of the IPO, we said we were, you know, we had about 70 reps at that time. We said over the next couple of years we were going to double that. As I reported, we're up to about 100 reps now. I think we'll probably, in the next six to eight months, get close to having that doubling of that original number. So we definitely are right on plan with our hiring plan. As I mentioned to Matt's question, we are going to be going through a planning process here over the next few months to kind of figure out what we want that rate to look like as we move into our next fiscal year, 27. So we'll be taking that question up. And, you know, the nice thing is we have, as I mentioned, we have the optionality now to look and say, okay, where might we want to evaluate, you know, an even accelerated plan.

All right. Thanks so much.

You bet.

Thank you. One moment for our next question. Our next question will come from Michael Polark from Wolf Research. Your line is open.

Hey, good afternoon. Maybe a question on the guidelines. You know, is there a vent path to identify for us, Brian, timing? You know, in a lot of these fields, guidelines can take a really long time, and it sounds like you're in front of doctors with the message from all this data anyways, but do Are the guidelines nice to have down the road, or do you view it as a needle mover? And if so, when might something like that be up for adjustment?

Yeah, thanks, Mike, for the question. You know, first let me just be extremely clear in saying that, you know, our exciting growth profile that we have planned for the next five years does not rely on the guidelines changing. There's no There's no reliance on that in our business plan. So, having said that, we do believe that the clinical evidence warrants a review of that. Now, the committee that is responsible for this is the arrhythmia committee that is a part of HA and HRS. They will meet on an ad hoc basis. when there's sufficient new evidence or a new product comes to market. So there's not a scheduled time for them to do that. We will obviously be seeking to get the newly established evidence by both Kestra and our competitor in front of them so they understand that maybe this is the time to start to reevaluate those guidelines. And we think there's There's a real reason, real strong clinical reason for them to do that. So I don't know a firm guideline meeting schedule, but I do think there's going to be some strong momentum for getting that ball rolling.

Helpful. And for the follow-up, the comment on low double-digit WCD category growth, just doing some napkin math here, you're growing 50%. You're maybe... 10 points of the market, you know, it kind of implies your competitor hasn't slowed down versus where they were, you know, so you're not purely taking from them. It is market expansive. And I'm curious just to confirm the math that the way you see your competitor, they're growing like they used to and you're adding on top of that. Thank you.

Yeah, I think the, you know, the math is, is roughly, first of all, they released their earnings results a month ago or so now. And they did call out this part of their business. So they reported a little over 5% growth in that business. So if we have, we think we're probably at about 13% share now. So if we're growing at 53%, at 13% of the market, and they're growing at 5% at 87% of the market. You can do the math, and that's how we get there. And I think it's as good data as we've ever had because in the past, they haven't really called out that specific part of their business separately. So we feel like that's a really supportable data point. We, of course, will buttress that data with our claims data that allows us to come at that from the other direction. But we feel pretty good about, you know, what that's telling us. And it definitely says that, you know, we're definitely taking share where we put REFs, and we're also growing the market.

Thank you.

Yep.

Thank you. One moment for our next question. Our next question will come from the line of David Roman from Goldman Sachs. Your line is open.

Thank you. Good afternoon, everyone. I know there's been a lot of focus on the ACE pass data here and what that might be able to do for guidelines. But if you kind of reflect on what you're seeing on a day-to-day real-world basis, what are some of the things that you view as contributing to this acceleration in overall category growth? And as we think through things like the conversion rate and some of the other metrics that kind of inform the model on a go-forward basis, maybe just update us on where you think we are on some of the key drivers there, like the prescriptions, the fitting, and then the fitting to what's revenue and where you are on kind of average wear time. I know I threw a lot out there, but I'll leave it at that for my question and follow-up then.

Yeah. Thanks, David. And by the way, your audio was a little gargley, so I think I got your questions. I'll let Vasim talk to the conversion rate stuff, but when it comes to the clinical data and what we're seeing, you know, I think the biggest impact of it is it's, you know, everybody knows that an external manipulator works. We've proven that patients will wear our device for extremely long periods of time if necessary. So the remaining question was this question around risk. And, you know, our competitor recently published a big German study, which was a national registry. And it was really a study that was trying to identify what the risk of cardiac arrest was in these patients, including the non-ischemic cardiomyopathy patients. So now, on top of that 19,000 patient study, we come in with a 21,000 patient study that has, among other metrics, it has that data, and it confirms that risk level in an entirely different healthcare system, the United States system. So now we have two different countries, two different systems that are both saying the same thing about the risk of these patients, especially in the first 90 days. That is the eye-opener for these for these clinicians. They're saying, I didn't realize the risk was that great, and that's leading them, you know, to assess the decisions that they're making about WCDs. It is early. We're just getting started with the data, but the early returns are certainly positive. Christine, you want to talk a little bit about the impacts of insurance coverage and in-network and conversion rates, et cetera?

Sure.

So, David, thanks for the question. I think, you know, when I look at the conversion rate metric, I think we've made such tremendous progress over the last few years. And just to remind everybody, our conversion rate in fiscal year 2024 was 38%. Fiscal year 2025 was 44%. And we just for this quarter, our conversion rate is going to be approximately 49%. So a huge, huge improvement. And I think that kind of goes to the point that you were making, David, which is All of those KPIs, whether it's the prescription fill rate or the in-network mix rate, which really drives the conversion rate and our collections performance, they're all tracking in the right direction, and we continue to make good progress on that. And our strategy for that in-network mix remains unchanged. As we have said in the past, we are deploying new reps into high prescription density areas and also deploying them into high coverage areas. So that's really helping us. you know, move the rate along. And again, I want to remind everybody the gap to close for us is not from 48 percent to 100 percent. It's just to those high 60s, which is where we think Zola is at with 25 years.

Great. Thank you for all the detail.

Thank you. One moment for our next question. Our next question will come from the line of Marie Thibault from BTIG. Your line is open.

Good evening. Thanks for taking the questions. Wanted to ask here quickly about the prescription volume strength. A couple quarters here above 50%. Do you expect that to be sustainable or did you, you know, see anything kind of out of the ordinary in the quarter? And as part of that, Are you also sort of seeing prescribers, kind of alternate prescribers like physician assistant and nurse practitioners starting to join up as prescribers? Just would love to hear a little bit more of what you're seeing on the ground from the prescribers.

Yeah, thanks for the question, Marie. I think when it comes to, you know, the north of 50% rate, we don't see anything that... that will reduce that. We're winning not only are we further penetrating existing accounts, but we're also continuing to add additional hospitals to our account list. So we expect to continue to see nice prescription acquisition rates. When it comes to the prescribers themselves, I think the typical prescribers for us, they're not all just the physicians. We get a lot of physician assistants. We get a lot of other people in the providers who are actually executing on those, obviously under the umbrella of the physician. So, you know, when we talk about medical education and some of our strategies around that, especially with the clinical results, you know, we're not just targeting physicians, we're also targeting APPs, and other clinicians in the practice because we know that they're really central to the strategy there. So I think the good news about the high prescription rate in Q2 was that that didn't have the benefit of the new clinical results. So I think those stood on their own and there was no sort of one-off events or anything else that you might point to and say, hey, that's a... That's kind of an unusual event. This is literally, as Wasim said earlier, it's a day-by-day, week-by-week, month-by-month business. And we're just out there competing every single day in the territories that we're in. And the fact is that we're winning where we're competing.

Yeah, very helpful and good point on Ace Pass not being in the quarter. I wanted to follow up here then with any detail on sort of OPEX spending plans. I noticed a little bit of a tick up this quarter, obviously, the new territory reps, that would make sense. Is this kind of the new sustained level going forward? Anything you want to give us on cadence of OPEX going forward this fiscal year? Thanks for taking the questions.

So, Marie, thanks for the question. And I think on the OPEX, you know, we are winning. We are overachieving versus our kind of, you know, guidance that we had put out initially. And we know that that comes with some level of investment and reinvestment. And we continue to make sure that we are deploying our investments into the two key areas, which is one, expansion of the team, and two, on the revenue cycle management capability. And as Brian has mentioned in the past, this is a service-level business. we have to make sure that not only do we have the right level of coverage, we want to make sure that we have the right level of capex to support those teams. And then at the same time, to be able to convert those prescriptions into cash and revenue, we have to have the right revenue cycle management capability. So, you know, again, we feel that, you know, the run rate that we're on will help us get to You know, not only the guidance, but also continue to accelerate growth into 2027, and we'll continue to make those investments.

All right. Thanks so much.

Thank you. One moment for our next question. Our next question will come from the line of Travis Steed from Bank of America Securities. Your line is open.

Hi. This is Stephanie Puzolan for Travis. Thanks for taking the question, and congrats on a good quarter. You know, last quarter you talked about the expanded clinical specialist role to support further penetration in existing accounts. So, just wanted to follow up on that and see if there's anything you can share on how that strategy is going and the impact on the business and penetration within existing accounts since making that change.

Thanks, Stephanie, for the question. Yeah, I think as we reported last quarter, we were starting to hire some clinical specialists to put those in some of our really high-producing accounts. And the basic strategy there is once you get a high-performance account up and running, you have a clinical specialist who can come in and really maintain that account and give that territory rep a little more bandwidth to go open up new accounts. And that's really the core of the strategy. We started to implement that program in the last quarter, and we hired our first kind of cohort of those clinical specialists. So far, the feedback on that has been really good. I don't see this as a case where we're going to you know, add one-to-one for every rep, but I do think that we will selectively put more clinical specialists out there to help manage just the day-to-day, you know, care and feeding of those significant accounts. So, so far, so good on that. The early returns are positive, and we like the strategy.

Thank you. That's helpful. And then for my follow-up, just wanted to ask Don, gross margin, it was another great quarter of expansion there, you know, reached about 50%, and I've talked about getting to 70% in the next few years. So, you know, just wanted to follow up on the path to get there, and then any help in how we should think about the gross margin for this year. Thank you.

Yeah, no, thanks, Stephanie, for the question. On gross margins, again, as Brian mentioned on his prepared remarks, eight quarters in a row we have expanded our gross margins. And I think that goes back to the high say-do that we have kind of constantly said we're going to deliver something and done it. And we feel really good about the work that's gone into getting us to the 50% plus range. And I think the unit economics that we have talked about, plus the leverage that you get on the depreciation and the volume and the fact that the progress we are making with the in-network mix on rev cycle is really, really helping us, you know, expand our gross margins. And we feel at this point that, you know, we have good, clear line of sight to the margins, you know, in the next couple of years. And we'll continue that journey, that as we run more volume through the P&L and as we continue to make progress on that in-network mix, we should see sustained margins expansion in the near term and the long term line aside to the 70% plus gross margins.

Thank you. One moment for our next question. Our next question will come from the line of Rick Weiss from Stifel. Your line is open.

Hi, this is Annie. I'm for Rick. Thanks for taking our question. So, last quarter you hinted at the potential for new product or technology launches at Kestra. Could you give us a sense for what kind of innovation you might be working on? You know, are you focused on updating your existing systems or potentially developing completely new products?

Thanks. Yeah, thanks for the question. You know, we're not ready to disclose our full product pipeline for competitive reasons, of course, but we do have, you know, we very intentionally designed the Assure system to be three distinct platforms, the WCD platform, the wearable platform, and the digital platform. And what we're doing is in our pipeline, we're innovating in each of those three platforms, Some of that innovation is extending our current capabilities to further differentiate our product. Some of that is bringing new capability, new therapeutic capability and diagnostic capability of the product. I'll say this. We just published a 21,000 patient clinical study with an incredible amount of data, and we are going to follow that data to develop solutions for unmet needs and other patient conditions where our technologies can be useful. And that's really our focus. And I think if you look into the details of that data, it will give you some clues as to where we're going. And we're excited about using that data to help us to be an even better solution. So we've got a steady stream of innovation coming over the next two or three years, and we'll be excited to you know, get that out into the market at the appropriate times. So, thank you for the question.

Thanks, Brian.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Brian Webster for closing remarks.

Okay. Well, thank you, everyone, for joining the call today. You know, as we mentioned earlier, we're pleased with the quarter that we have. We've got really exciting momentum going. And as I said, you know, the core Kestra thesis is intact, and we're picking up steam on it, so we're excited about the back half of the year. And I'm very proud of the Kestra team for the way the team has executed our business plan every day, every week, and throughout the quarter. So thank you for joining us. We'll look forward to seeing you on the next call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.