Inspire Medical Systems, Inc. Q2 FY2025 earnings call

• Challenges in Inspire V rollout: Many centers didn't complete training, contracting, and onboarding for Inspire V, with SleepSync implementation taking longer than expected. Medicare billing for Inspire V via CPT code 64568 had software updates delayed until July 1, causing centers to continue using Inspire IV. Some patients waited for Inspire V, and marketing/footprint expansion was held back in the first half.
• Highlights: Inspire V clinical study in Singapore showed 20% reduction in surgical times; U.S. centers with Inspire V had over 20% increase in patient implants in H1 2025; CMS OPPS rules proposed positive increases for Medicare reimbursement of Inspire system; PREDICTOR manuscript submitted for publication; Randy Ban to retire at end of January 2026, with Carlton Weatherby taking lead of U.S. sales and marketing.

Total revenue for the quarter was $217.1 million, an 11% increase from the $195.9 million in the second quarter of 2024. U.S. revenue was $207.2 million, up 10% from $187.8 million in the prior year period. Revenue outside the U.S. was $9.9 million, a 23% year-over-year increase. Gross margin in the quarter was 84% compared to 84.8% in the prior year period, primarily due to a $2.1 million charge for excess Inspire IV subcomponents.

Full-year revenue revised to $900 million to $910 million (down from $940 million to $955 million), representing 12%-13% growth over 2024 revenue. Diluted net income per share revised to $0.40 to $0.50 (down from $2.20 to $2.30 per share) due to revised revenue guidance and increased patient marketing costs. Q3 revenue expected to increase 1%-3% sequentially from Q2. Full-year gross margin expected to be 84%-86%.

• Delayed SleepSync implementation by customers' IT departments.
• Medicare billing software updates not taking effect until July 1, causing centers to continue using Inspire IV.
• Some patients waiting for Inspire V instead of being treated with Inspire IV.
• Burn down of Inspire IV inventory remaining a headwind in the second half of 2025.

Q: Sense of uptick in Medicare billing since July 1?

A: Limited early in the quarter as sites needed to be fully implemented before billing; now no longer a barrier, driving third quarter guidance changes.

Q: Confidence in Inspire V growth translating to average accounts?

A: High-volume centers showing over 20% increase in implants, which can be translated to other centers by demonstrating capacity increases and reduced OR time.

Q: Implied Q4 guide and confidence?

A: Q4 expected to have strong seasonality, with focus on ramping up marketing and footprint expansion to drive growth, leveraging historical seasonality.

Q: Capacity, SleepSync, and GLP-1 impact?

A: Capacity increased with reduced OR time for Inspire V; SleepSync to be implemented in majority of sites for long-term patient monitoring; GLP-1s help patients with high BMI qualify for Inspire therapy by addressing weight issues.

Q: Reimbursement pushback from physicians?

A: Reimbursement gap reduced with OPPS rules, and reduced OR time with Inspire V should increase capacity and physician commitment to treating Medicare patients.

Q: Inspire IV inventory and 2026 guidance?

A: Inspire IV available in select sites, with inventory management in Europe being a key factor; guidance for 2026 will consider inventory and center activation.

Q: EPS guide and OpEx?

A: OpEx growth due to increased marketing and footprint expansion, with adjusted EBITDA margin consistent, and focus on long-term profitability.

Q: Marketing and footprint expansion spend?

A: Increased DTC spend to build patient awareness, with ramping up of efforts in the second half of 2025.

Q: Net inventory destocking and center activation?

A: Destocking factored into back half guidance, with over 1,500 active implanting centers in the U.S. as of June 30.