Kestra Medical Technologies Ltd(KMTS) - 2026 Q1 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section provides important disclaimers regarding forward-looking statements in the report, highlighting inherent risks and uncertainties Forward-Looking Statements Overview This section highlights that the Quarterly Report contains forward-looking statements based on management's beliefs and assumptions, primarily found in the 'Management's Discussion and Analysis' section - Forward-looking statements are based on management's beliefs and assumptions and are primarily located in the 'Management's Discussion and Analysis of Financial Condition and Results of Operations' section[7] - These statements cover future results, business strategies, technology developments, financing plans, competitive position, and regulatory environment[7] Important Factors and Risks The company cautions that actual results may differ materially from forward-looking statements due to various known and unknown risks, and does not undertake to update these statements - Actual results may differ materially due to factors such as the ability to expand commercialization of the ASSURE WCD, maintain regulatory approvals, achieve market acceptance, secure reimbursement, scale manufacturing, and retain qualified personnel[8] - Other risks include intellectual property protection, clinical trial progress, regulatory landscape changes, financial performance, public company expenses, and competitive developments[8] - The company does not undertake any obligation to update forward-looking statements, which represent management's beliefs only as of the report date[9] PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial performance Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Kestra Medical Technologies, Ltd. and its subsidiaries, including balance sheets, statements of operations, equity changes, cash flows, and detailed notes Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of the company's financial position as of July 31, 2025, and April 30, 2025, showing a decrease in total assets and shareholders' equity, while liabilities also decreased | Metric | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :---------------------------- | | Cash and cash equivalents | $201,214 | $237,595 | | Total current assets | $220,691 | $255,328 | | Total assets | $266,296 | $295,744 | | Total current liabilities | $32,256 | $37,977 | | Total liabilities | $82,137 | $90,338 | | Total shareholders' equity | $184,159 | $205,406 | Condensed Consolidated Statements of Operations and Comprehensive Loss The condensed consolidated statements of operations and comprehensive loss show the company's financial performance for the three months ended July 31, 2025, and 2024, indicating increased revenue and gross profit but also a higher net loss due to significantly increased operating expenses | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Revenue | $19,371 | $12,782 | | Cost of revenue | $10,520 | $8,582 | | Gross profit | $8,851 | $4,200 | | Research and development | $4,001 | $3,404 | | Selling, general and administrative | $33,728 | $19,227 | | Total operating expenses | $37,729 | $22,631 | | Loss from operations | $(28,878) | $(18,431) | | Net loss and comprehensive loss | $(25,826) | $(20,323) | | Net loss attributable to common shareholders | $(25,826) | $(22,267) | | Net loss per share attributable to common shareholders, basic and diluted | $(0.50) | $(1.12) | Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders' Equity (Deficit) This statement details the changes in redeemable preferred stock and shareholders' equity (deficit) for the three months ended July 31, 2025, and the period from April 30, 2024, to July 31, 2024, showing the impact of share-based compensation and net loss on equity | Metric | Balances at April 30, 2025 (in thousands) | Share-based compensation expense (in thousands) | Net loss and comprehensive loss (in thousands) | Balances at July 31, 2025 (in thousands) | | :------------------------ | :---------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :--------------------------------------- | | Common Shares (Amount) | $51,349 | — | — | $51,349 | | Additional Paid In Capital| $674,306 | $4,579 | — | $678,885 | | Accumulated Deficit | $(520,249) | — | $(25,826) | $(546,075) | | Total Shareholders' Equity| $205,406 | $4,579 | $(25,826) | $184,159 | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows illustrate the cash inflows and outflows from operating, investing, and financing activities for the three months ended July 31, 2025, and 2024, showing a significant decrease in cash from operating and investing activities in 2025, contrasting with cash provided by financing activities in 2024 | Cash Flow Activity | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(26,274) | $(17,499) | | Net cash used in investing activities | $(8,232) | $(7,034) | | Net cash provided by (used in) financing activities | $(1,875) | $116,253 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(36,381) | $91,720 | | Cash, cash equivalents and restricted cash, End of period | $201,548 | $100,303 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering company background, significant accounting policies, specific asset and liability breakdowns, debt arrangements, equity changes, and other financial and operational details 1. The Company Kestra Medical Technologies, Ltd. is a commercial-stage medical device company that generates revenue by leasing its FDA-approved ASSURE© System, a Wearable Cardioverter Defibrillator (WCD) - Kestra Medical Technologies, Ltd. is a commercial-stage medical device company primarily generating revenue from leasing its FDA-approved ASSURE© System (Wearable Cardioverter Defibrillator) to patients[23] - The company completed an Initial Public Offering (IPO) on March 7, 2025, issuing 11,882,352 common shares at $17.00 per share, raising $215.8 million in net proceeds after underwriting discounts and commissions[27][33] | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net loss | $(25,826) | $(20,323) | | Cash used in operating activities | $(26,274) | $(17,499) | | Accumulated deficit (as of July 31, 2025) | $(546,075) | N/A | | Cash and cash equivalents (as of July 31, 2025) | $201,214 | N/A | - Management believes existing cash and cash equivalents will be sufficient to fund operating expenses and capital expenditures for at least the next 12 months[33] 2. Significant Accounting Policies This section outlines the significant accounting policies, including the basis of presentation in accordance with US GAAP, the use of estimates in financial reporting, and specific policies for accounts receivable, cash and cash equivalents, revenue recognition for operating leases, and segment information - The unaudited interim condensed consolidated financial statements are prepared in accordance with SEC rules and US GAAP, with all intercompany accounts and transactions eliminated[35] - Key estimates include collectability of lease payments, useful lives of property and equipment, share-based compensation, fair value of warrants, and valuation allowance for deferred tax assets[38] - Revenue from ASSURE© System leases is recognized on a straight-line basis over the one-month contractual non-cancellable lease term when collectability is probable; otherwise, it's limited to collected payments[46] | Accounting Policy | Details | | :---------------- | :------ | | Accounts Receivable Reserve | $3,806 (July 31, 2025) vs. $3,193 (April 30, 2025) for estimated probable losses | | Cash & Cash Equivalents | Highly liquid investments with original maturity of three months or less. Restricted cash for office lease ($109k) and credit card collateralization ($225k) | | Segment Information | Operates as a single operating and reportable segment, with the CEO as chief operating decision maker. All long-lived assets and revenues are in the United States | 3. Prepaid Expenses and Other Current Assets This note details the composition of prepaid expenses and other current assets, which primarily include prepaid software fees and other miscellaneous current assets | Category | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :-------------------------- | :----------------------------- | :---------------------------- | | Prepaid software fees | $1,809 | $1,387 | | Other current assets | $1,620 | $1,693 | | Total prepaid expenses and other current assets | $3,429 | $3,080 | 4. Property and Equipment This note provides a breakdown of property and equipment, net of accumulated depreciation, highlighting medical rental equipment as the largest component | Category | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :-------------------------- | :----------------------------- | :---------------------------- | | Medical rental equipment | $59,563 | $52,670 | | Total property and equipment| $66,104 | $58,785 | | Less: accumulated depreciation | $(25,728) | $(23,955) | | Property and equipment, net | $40,376 | $34,830 | - Depreciation expense for the three months ended July 31, 2025, was $2,028 thousand, compared to $2,375 thousand for the same period in 2024[55] 5. Leases This note details the company's operating lease agreements, primarily for office space, including amendments for expanded space and extended terms - The company amended its office lease in October 2023 to expire in April 2029 and further expanded leased space in February 2025. A new office lease in Texas commenced in May 2025[56][58] | Lease Expense Type | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | | Operating lease expense | $221 | $174 | | Variable lease expense | $165 | $153 | | Total operating lease expense | $386 | $327 | - Cash paid for operating leases was $491 thousand for the three months ended July 31, 2025, compared to $165 thousand for the same period in 2024[60] 6. Accrued Liabilities This note provides a breakdown of accrued liabilities, which saw a slight decrease from April 30, 2025, to July 31, 2025, primarily driven by a reduction in bonuses and commissions | Category | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :------------------ | :----------------------------- | :---------------------------- | | Bonuses and commissions | $4,536 | $6,368 | | Other accrued liabilities | $5,068 | $3,547 | | Paid time off | $2,248 | $2,305 | | Professional services | $1,423 | $1,141 | | Payroll and payroll taxes | $375 | $468 | | Total accrued liabilities | $13,650 | $13,829 | 7. Long-Term Debt The company's long-term debt primarily consists of a $60.0 million Senior Secured Delayed Draw Term Loan Facility (Term Loan 2024) maturing in September 2028, with $45.0 million drawn - The company has a Senior Secured Delayed Draw Term Loan Facility (Term Loan 2024) of up to $60.0 million, maturing on September 29, 2028[62] - The initial $45.0 million was drawn on September 29, 2023. An amendment on February 25, 2025, adjusted revenue milestones and made an additional $15.0 million draw available through July 31, 2026, contingent on achieving $60.0 million in trailing twelve-month revenue[63][66] | Metric | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :------------------------------------------ | :----------------------------- | :---------------------------- | | Term loan | $45,000 | $45,000 | | Accumulated paid-in-kind interest | $1,395 | $1,395 | | Less: unamortized debt issuance costs and debt discount | $(4,909) | $(5,297) | | Total long-term debt, net | $41,486 | $41,098 | | Expense Type | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Cash interest expense | $1,423 | $1,220 | | Amortization of facility fee and legal fees | $88 | $118 | | Amortization of debt discount (warrant) | $380 | $82 | | Interest expense paid-in-kind | — | $233 | | Total expense related to Term Loan 2024 | $1,891 | $1,653 | 8. Fair Value Measurement This note presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis, with warrant liabilities classified as Level 3 due to significant unobservable inputs | Category | July 31, 2025 (in thousands) | April 30, 2025 (in thousands) | | :------------------ | :----------------------------- | :---------------------------- | | Cash and cash equivalents (Level 1) | $201,214 | $237,595 | | Restricted cash (Level 1) | $334 | $334 | | Warrant liabilities (Level 3) | $5,188 | $8,097 | - The fair value of long-term debt, net of discounts, approximated $48,240 thousand as of July 31, 2025, and $47,330 thousand as of April 30, 2025, classified as Level 2[71] - Warrant liabilities are valued using the Black-Scholes option-pricing model with Level 3 inputs, including fair value of common shares, remaining contractual term, risk-free interest rate, expected dividend yield, and expected volatility[73][74] | Metric | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Fair value of Level 3 liabilities | $5,188 | $8,097 | | Change in fair value of warrant liabilities | $(2,909) | N/A | 9. Common Shares This note states that the company had 100,000,000 Common Shares authorized and 51,348,656 Common Shares issued and outstanding with a par value of $1.00 as of July 31, 2025, and April 30, 2025 - As of July 31, 2025, and April 30, 2025, the company had 100,000,000 Common Shares authorized and 51,348,656 Common Shares issued and outstanding, each with a par value of $1.00[76] 10. Redeemable Preferred Stock This note explains that Intermediate Holdings issued 103,400 shares of preferred stock for $103,400 thousand for the three months ended July 31, 2024, which were subsequently exchanged into Common Shares, with no preferred stock outstanding as of July 31, 2025, or April 30, 2025 - For the three months ended July 31, 2024, Intermediate Holdings issued 103,400 shares of preferred stock for proceeds of $103,400 thousand[78] - Following the Organizational Transactions, all preferred stock was exchanged into Common Shares of Kestra Medical Technologies, Ltd., resulting in no preferred stock outstanding as of July 31, 2025, and April 30, 2025[78] - Preferred stock was non-voting and subject to a preferred dividend capped at 4.7% (pre-April 30, 2023 issuances) and 6.0% (on or after May 1, 2023 issuances). No dividends were declared for the three months ended July 31, 2025 and 2024[79] 11. Non-Controlling Interest This note describes a $17,100 thousand investment received by a subsidiary (DAC) from a third-party investor in July 2024, in exchange for Class A Redeemable Ordinary Shares, which were subsequently exchanged into common stock of Intermediate Holdings and then into common units of West Affum LP in connection with the IPO - In July 2024, West Affum Holdings Designated Activity Company (DAC), a subsidiary, received a $17,100 thousand investment from a third party for 171 Class A Redeemable Ordinary Shares[81] - In connection with the IPO, all Class A Redeemable Ordinary Shares were exchanged for common stock of Intermediate Holdings, which were then exchanged for common units of West Affum LP[82] 12. Equity Incentive Plans This note details the company's equity incentive plans, including restricted common units, restricted shares, stock options, and restricted stock units (service-based, performance-based, and market-based) - The company has granted restricted common units, restricted Class A Common Units (exchanged into restricted Common Shares post-IPO), stock options, and various types of restricted stock units (service-based, performance-based, and market-based)[83][84][88][90][92] | Equity Instrument | July 31, 2025 (Shares/Units) | Unrecognized Compensation Cost (in thousands) | Weighted-Average Recognition Period (Years) | | :-------------------------------- | :----------------------------- | :------------------------------------------ | :------------------------------------------ | | Stock Options (Outstanding) | 4,539,300 | $23,430 | 1.54 | | Restricted Stock Units (Outstanding) | 1,263,384 | $19,489 | 2.93 | | Performance-based Restricted Stock Units (Granted) | 395,589 | $5,755 | 0.75 | | Market-based Restricted Stock Units (Granted) | 197,794 | $3,645 | 1.96 | | Expense Category | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Research and development | $455 | $44 | | Selling, general and administrative | $4,124 | $333 | | Total share-based compensation expense | $4,579 | $377 | 13. Income Taxes This note details the provision for income taxes, which was minimal for both periods, primarily related to state tax liabilities in the United States, with a full valuation allowance provided against net deferred tax assets | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :---------------------- | :---------------------------------------------- | :---------------------------------------------- | | Provision for income taxes | $33 | $7 | | Effective tax rate | 0.13% | 0.04% | - The company is based in Bermuda, a tax resident of Ireland, and has subsidiaries in the Cayman Islands, Ireland, and the U.S., with no income tax in Bermuda and Cayman Islands[95] - A full valuation allowance has been provided against net deferred tax assets due to uncertainty of realization[96] 14. Commitments and Contingencies This note addresses potential legal proceedings and indemnification agreements, with the company not expecting any material adverse effect from ordinary course litigation - The company is involved in ordinary course legal proceedings but does not expect a material adverse effect on its results, financial position, or cash flows[97][99] - Indemnification agreements with officers and directors exist, but no claims have been made as of July 31, 2025, and April 30, 2025[98] 15. Defined Contribution Plan This note outlines the company's 401(k) Plan for U.S. employees, which includes matching and discretionary contributions - The company sponsors a 401(k) Plan for its full-time U.S. employees, offering matching and discretionary contributions[100] | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Company contributions (matching and discretionary) | $548 | $428 | 16. Net Loss Per Share Attributable to Common Shareholders This note details the calculation of basic and diluted net loss per share attributable to common shareholders, noting no dilutive effect from potentially dilutive securities due to net losses - The calculation of basic and diluted net loss per share retrospectively adjusts for the exchange of Intermediate Holdings common stock into Common Shares of Kestra Medical Technologies, Ltd. in connection with the Organizational Transactions[101] - For both periods presented, there is no difference between basic and diluted shares outstanding due to the company's net loss position, meaning potentially dilutive securities had an antidilutive impact[103] | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Net loss attributable to common shareholders | $(25,826) | $(22,267) | | Weighted average shares of common share outstanding – basic and diluted | 51,304,599 | 19,885,382 | | Net loss per share attributable to common shareholders – basic and diluted | $(0.50) | $(1.12) | | Potentially Dilutive Securities | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 4,539,300 | — | | Warrants to purchase Common Shares| 434,916 | — | | Restricted stock | 40,103 | 36,893 | | Restricted stock units | 1,263,384 | — | | Performance-based restricted stock units | 395,589 | — | | Market-based restricted stock units | 395,588 | — | | Total | 7,068,880 | 36,893 | 17. Subsequent Events This note discloses a subsequent event where Perceptive Credit Holdings IV, LP exercised their warrant on September 4, 2025, resulting in the cashless issuance of 100,397 Common Shares at an exercise price of $11.54 - On September 4, 2025, Perceptive Credit Holdings IV, LP exercised their warrant on a cashless basis, resulting in the issuance of 100,397 Common Shares at an exercise price of $11.54[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, offering an overview of the business, key factors affecting performance, detailed comparison of financial results, and an analysis of liquidity and capital resources Overview Kestra Medical Technologies is a commercial-stage medical device and digital healthcare company focused on cardiovascular disease, commercializing its Cardiac Recovery System platform, centered on the ASSURE WCD - Kestra Medical Technologies is a commercial-stage wearable medical device and digital healthcare company focused on cardiovascular disease, commercializing its Cardiac Recovery System platform, including the ASSURE WCD[107] - Revenue is primarily derived from direct billing of third-party payors (Medicare, Medicaid, private payors) for leasing the ASSURE WCD, with established reimbursement codes[108] | Metric | Three Months Ended July 31, 2025 (in millions) | Three Months Ended July 31, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $19.4 | $12.8 | | Gross profit | $8.9 | $4.2 | | Net loss | $(25.8) | $(20.3) | | Cash and cash equivalents (as of July 31, 2025) | $201.5 | N/A | | Accumulated deficit (as of July 31, 2025) | $(546.1) | N/A | - The company raised $215.8 million in net proceeds from its IPO in March 2025, which, along with existing cash, is expected to fund operations for at least the next 12 months[113][114] Key Factors Affecting Our Results of Operations and Performance Several key factors impact the company's operating performance, including significant investments in its commercial organization, efforts to increase gross profit through cost management and improved reimbursement, effective payor coverage and revenue cycle management, and potential seasonality in billings and collections - Continued significant investments in recruiting, training, and retaining a direct sales force and supporting commercial infrastructure are crucial for growth[115] - Gross profit is expected to increase through more effective cost management, higher reimbursement realization due to improved market access, shifts to patients with longer wear duration, supply chain efficiencies, and manufacturing process improvements[115] - Revenue generation heavily depends on third-party payor coverage (Medicare, Medicaid, private payors) and effective revenue cycle management to collect cash[115] - Seasonality may impact billings and collections, particularly in January and February due to resetting annual patient healthcare insurance plan deductibles[115] Key Components of Our Results of Operations This section details the key components of the company's consolidated statement of operations, including revenue, cost of revenue, gross profit, research and development expenses, selling, general and administrative expenses, interest and other expense (income), and provision for income taxes, outlining their definitions and expected trends - Revenue is generated from leasing the ASSURE WCD on a month-to-month basis, recognized over the lease term when collectability is probable, and is expected to increase with patient growth[117] - Cost of revenue includes direct materials, labor, disposable components, depreciation of reusable equipment, shipping, and support costs, expected to increase with patient volume but decrease as a percentage of revenue long-term due to economies of scale[118] - Gross profit is expected to increase due to improved reimbursement, longer patient wear duration, supply chain efficiencies, and manufacturing improvements, but may be impacted by rising material, labor, and shipping costs[119] - Research and development expenses, consisting of personnel, prototype materials, and development costs, are expected to decrease as a percentage of revenue while continuing investment in new products and enhancements[120][121] - Selling, general and administrative expenses, including personnel, marketing, and public company costs, are expected to increase in absolute terms to support growth but decrease as a percentage of revenue[122][123][124] - Interest and other expense (income) includes cash interest from borrowings and interest income, as well as non-cash components like amortization of debt discounts and warrant fair value adjustments[125] - Provision for income taxes is limited, with a full valuation allowance against net deferred tax assets due to uncertainty of future taxable income[126] Results of Operations for the Three Months Ended July 31, 2025 and 2024 This section provides a detailed comparison of the company's financial results for the three months ended July 31, 2025, versus the same period in 2024, highlighting significant increases in revenue, gross profit, and operating expenses, leading to a larger net loss | Metric (in thousands) | 2025 | 2024 | $ Change | % Change | | :------------------------------------------------ | :--- | :--- | :------- | :------- | | Revenue | $19,371 | $12,782 | $6,589 | 52% | | Cost of revenue | $10,520 | $8,582 | $1,938 | 23% | | Gross profit | $8,851 | $4,200 | $4,651 | 111% | | Research and development | $4,001 | $3,404 | $597 | 18% | | Selling, general and administrative | $33,728 | $19,227 | $14,501 | 75% | | Total operating expenses | $37,729 | $22,631 | $15,098 | 67% | | Loss from operations | $(28,878) | $(18,431) | $(10,447) | 57% | | Interest income | $(2,167) | $(37) | $(2,130) | NM | | Other expense (income) | $(2,830) | $48 | $(2,878) | NM | | Net loss attributable to common shareholders | $(25,826) | $(22,267) | $(3,559) | 16% | - Revenue increased by $6.6 million (52%) primarily due to a 54% increase in patients using products and a 55% increase in the revenue cycle management team for improved collections[129] - Cost of revenue increased by $1.9 million (23%) mainly due to higher disposable medical equipment supplies and reconditioning costs, reserve for lost equipment, and depreciation, partially offset by increased useful lives of components[130] - Gross profit increased by $4.7 million (111%) driven by revenue growth, improved collection efforts, and a 21% decrease in cost of revenues per patient due to better utilization and manufacturing cost improvements[131] - Selling, general and administrative expenses increased by $14.5 million (75%) due to higher personnel expenses (including share-based compensation), public company-related professional fees, commercial support costs, travel, shipping, and software licensing fees[133] - Interest income increased by $2.1 million due to higher interest-bearing bank account balances, and other expense (income) decreased by $2.9 million primarily due to a decrease in the fair value of warrant liability[134][135] Liquidity and Capital Resources The company has incurred significant operating losses and negative cash flows since inception, with an accumulated deficit of $546.1 million as of July 31, 2025 - The company has incurred net losses and negative operating cash flows since inception, with an accumulated deficit of $546.1 million as of July 31, 2025[137][142] | Metric | Three Months Ended July 31, 2025 (in millions) | Three Months Ended July 31, 2024 (in millions) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net loss | $(25.8) | $(20.3) | | Negative operating cash flows | $(26.3) | $(17.5) | | Cash and cash equivalents (as of July 31, 2025) | $201.5 | N/A | - Management believes existing cash and cash equivalents, including IPO proceeds, will be sufficient to fund operating and capital needs for at least the next 12 months, but additional funding may be required for growth[138][140] - The company has a $60.0 million Term Loan 2024, with $45.0 million outstanding principal as of July 31, 2025. An additional $15.0 million draw is available through July 2026, contingent on revenue milestones[141][144][146] Cash Flows This section provides a summary of cash flows from operating, investing, and financing activities, highlighting significant cash usage in operating and investing activities for the three months ended July 31, 2025 | Cash Flow Activity | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(26,274) | $(17,499) | | Net cash used in investing activities | $(8,232) | $(7,034) | | Net cash provided by (used in) financing activities | $(1,875) | $116,253 | | Increase (decrease) in cash, cash equivalents and restricted cash | $(36,381) | $91,720 | - Cash used in operating activities for Q1 2025 was $26.3 million, primarily due to net loss and decreases in operating assets and liabilities, partially offset by non-cash charges like share-based compensation and depreciation[149] - Cash used in investing activities for Q1 2025 was $8.2 million, mainly for purchases of property and equipment (medical rental equipment, computer hardware, etc.) and deposits for medical rental equipment[151] - Cash used in financing activities for Q1 2025 was $1.9 million, primarily for IPO offering costs. In Q1 2024, cash provided by financing activities was $116.2 million, mainly from preferred stock issuance ($103.4 million) and non-controlling interest investment ($17.1 million)[153][154] Off-Balance Sheet Arrangements As of July 31, 2025, the company had two irrevocable standby letters of credit totaling $0.1 million related to office leases and a $0.2 million Cash Pledge Agreement for its credit card program - As of July 31, 2025, the company had $0.1 million in irrevocable standby letters of credit for office leases and a $0.2 million Cash Pledge Agreement for its credit card program[155] - The company does not have other off-balance sheet arrangements, including participation in transactions with unconsolidated entities or guarantees of other entities' debt[155] Critical Accounting Policies and Significant Management Estimates This section reiterates that the preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, and actual results may differ - Financial statements require management estimates and assumptions affecting reported assets, liabilities, costs, and expenses, based on historical experience and market-specific assumptions[156] - Actual results could differ materially from these estimates under different assumptions or conditions[156] - There have been no material changes in significant accounting policies and estimates since the Annual Report[157] Emerging Growth Company and Smaller Reporting Company Status The company qualifies as an 'emerging growth company' and a 'smaller reporting company,' allowing it to take advantage of reduced regulatory and reporting requirements - The company is an 'emerging growth company' and a 'smaller reporting company,' which provides reduced regulatory and reporting requirements[158][161] - Benefits include exemption from auditor attestation requirements of Sarbanes-Oxley Act Section 404(b) and reduced disclosure obligations regarding executive compensation[160][161] - The company has elected to adopt new or revised accounting standards within the same time periods as private companies[159] Recently Adopted and Issued Accounting Pronouncements This section refers to Note 2 for details on recently issued accounting pronouncements, indicating that no new pronouncements were adopted during the three months ended July 31, 2025, and no material effect is expected from future adoptions - Recently issued accounting pronouncements are described in Note 2 to the unaudited interim condensed consolidated financial statements[162] - No new accounting pronouncements were adopted during the three months ended July 31, 2025, and no material effect is expected from future adoptions[53] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's market risk during the three months ended July 31, 2025, and refers to the Annual Report for a detailed discussion - There have been no material changes to the company's market risk during the three months ended July 31, 2025[163] - For a detailed discussion of market risk, refer to Part II, Item 7A of the Annual Report[163] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting[164] - Material weaknesses include: (1) ineffective control environment due to insufficient resources in accounting, finance, and IT; (2) inadequate controls for proper presentation and classification of non-routine/complex transactions; (3) lack of effective controls to ensure independent review of manual journal entries and account reconciliations; and (4) ineffective IT general controls (program change management, user access, computer operations, program development)[166][167][168][170] - Remediation plans are ongoing and include hiring additional personnel (financial planning, accounting, IT), engaging third parties for technical accounting and control implementation, designing controls for complex transactions, and enhancing IT governance processes[172] - The material weaknesses will not be considered remediated until controls are designed, implemented, and tested as effective over a sufficient period[174] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings The company is occasionally involved in various lawsuits and claims arising in the ordinary course of business but does not anticipate any material adverse effect on its results of operations, financial position, or cash flows from these proceedings - The company is a party to various lawsuits, claims, and legal proceedings in the ordinary course of business[179] - The company does not expect any pending legal proceedings to have a material adverse effect on its results of operations, financial position, or cash flows[179] Item 1A. Risk Factors Investing in the company's common shares involves a high degree of risk, with no material changes to previously disclosed risk factors, though additional unknown risks may emerge - Investing in the company's common shares involves a high degree of risk[180] - There have been no material changes to the risk factors previously disclosed in the company's Annual Report[180] - Additional risk factors not presently known or currently deemed immaterial may also impair the business or results of operations[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[181] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report - No defaults upon senior securities to report[182] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[183] Item 5. Other Information During the three months ended July 31, 2025, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - During the three months ended July 31, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement[184] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL-related documents - The exhibits include the Certificate of Incorporation, Memorandum of Association, Amended and Restated Bye-laws, Certificate of Deposit of Memorandum of Increase of Share Capital, certifications of principal executive and financial officers, and Inline XBRL documents[186] Signatures This section contains the official signatures of the company's principal executive and financial officers, certifying the Quarterly Report Report Signatures The Quarterly Report is duly signed on behalf of Kestra Medical Technologies, Ltd. by Brian Webster, President and Chief Executive Officer, and Vaseem Mahboob, Chief Financial Officer, on September 12, 2025 - The report is signed by Brian Webster, President and Chief Executive Officer, and Vaseem Mahboob, Chief Financial Officer, on September 12, 2025[191]