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01/10 16:02
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerns: a significant EPS guidance cut due to reduced gross margin and a one-time charge, headwinds from Medicare billing delays, and lower-than-expected volume trends. Despite optimistic guidance for 2026 and temporary nature of some issues, the immediate challenges and reduced revenue guidance negatively impact sentiment. The market cap suggests moderate reaction, leading to a 'Negative' prediction (-2% to -8%).
Total Revenue $217.1 million, an 11% increase from $195.9 million in Q2 2024. The increase was driven by strong market demand and positive patient and surgeon feedback.
U.S. Revenue $207.2 million, a 10% increase from $187.8 million in Q2 2024. Growth attributed to increased adoption of Inspire therapy in the U.S.
Revenue Outside the U.S. $9.9 million, a 23% increase year-over-year. Growth driven by international market expansion.
Gross Margin 84%, compared to 84.8% in Q2 2024. The decrease was due to a $2.1 million charge for excess Inspire IV subcomponents, reducing gross margin by 100 basis points.
Total Operating Expenses $185.7 million, a 15% increase from $160.9 million in Q2 2024. The increase was due to the expansion of the sales organization, increased general corporate costs, and noncash stock-based compensation expenses.
Operating Loss $3.3 million, compared to an operating income of $5.1 million in Q2 2024. The loss was due to increased operating expenses and charges for excess inventory.
Net Loss $3.6 million, compared to a net income of $9.8 million in Q2 2024. The loss was driven by reduced operating income and increased expenses.
Adjusted EBITDA $44.1 million, a 14% increase from $38.7 million in Q2 2024. The increase reflects improved operational efficiency.
Adjusted Net Income Per Share $0.45, a 40% increase from $0.32 in Q2 2024. The increase was due to higher adjusted EBITDA and operational improvements.
Cash and Investments $411 million at the end of the quarter, reflecting a strong cash position to support growth strategies.
Inspire V next-generation system: The commercial rollout began in May 2025, but faced challenges such as delays in training, contracting, and onboarding criteria. Implementation of SleepSync was particularly challenging due to prolonged IT department approvals. Over 50% of U.S. centers have completed implementation, with the majority expected by the end of Q3 2025. Early results from a Singapore clinical study showed a 20% reduction in surgical times, increasing capacity at centers. U.S. centers that transitioned to Inspire V saw a 20% increase in patient implants in H1 2025 compared to H1 2024.
Market expansion efforts: Marketing and footprint expansion efforts were ramped up in H2 2025 to increase patient awareness and build capacity. This included increased website activity, calls to the Advisor Care program, and appointments with healthcare providers. Medical education and local community health efforts were also enhanced to promote Inspire V.
Revenue guidance adjustment: Full-year revenue guidance was reduced to $900-$910 million from $940-$955 million, reflecting a 12%-13% growth over 2024. This was due to headwinds in transitioning to Inspire V and increased marketing costs in H2 2025.
Gross margin and operating expenses: Gross margin for Q2 2025 was 84%, slightly down from 84.8% in Q2 2024 due to a $2.1 million charge for excess Inspire IV subcomponents. Operating expenses increased by 15% year-over-year, driven by sales organization expansion and legal fees.
Reimbursement and clinical evidence: CMS proposed positive increases for Medicare reimbursement for Inspire V starting January 2026. The PREDICTOR clinical evidence manuscript was submitted, proposing an algorithm to determine patient eligibility without a DISE procedure. Inspire also became a corporate champion of the American Academy of Otolaryngology to strengthen its brand and influence in ENT innovation.
Commercial rollout of Inspire V system: The rollout faced headwinds, including elongated time frames for transitioning customers to Inspire V, delays in training, contracting, and onboarding criteria, and challenges with implementing SleepSync due to prolonged IT department approval processes.
Inventory management: Most units sold in Q2 were Inspire IVs, leading to minimal inventory destocking. The burn down of Inspire IV inventory is expected to remain a headwind in the second half of 2025.
Medicare CPT code adoption: Delays in software updates for claims submissions and processing for CPT code 64568 until July 1 caused centers to continue treating Medicare patients with Inspire IV, slowing the transition to Inspire V.
Patient behavior: Some patients delayed treatment to wait for the Inspire V device, while others may be delaying therapy to try GLP-1s for weight loss, which is required for some patients to qualify for Inspire therapy.
Strategic resource allocation: The company intentionally reduced patient marketing and education spend and delayed footprint expansion in the first half of the year, impacting patient awareness and capacity building.
Legal and compliance costs: Operating expenses included $1.7 million in legal fees related to a civil investigative demand from the Department of Justice and a patent infringement suit, which do not reflect ongoing operational costs.
Revenue and financial performance: Full-year revenue guidance was reduced by 4% at the midpoint, and diluted net income per share guidance was significantly lowered due to revised revenue expectations and increased marketing costs.
Revenue Guidance: The company has adjusted its full-year revenue guidance to a range of $900 million to $910 million, down from the previous range of $940 million to $955 million. This represents an annual growth of 12% to 13% compared to 2024 revenue. Q3 revenue is expected to increase 1% to 3% sequentially from Q2.
Net Income Guidance: Diluted net income per share for the full year 2025 is now expected to be in the range of $0.40 to $0.50, reduced from the previous guidance of $2.20 to $2.30 per share. The reduction reflects the revised revenue guidance and increased patient marketing costs in the second half of the year.
Gross Margin: The company continues to expect full-year gross margin to be in the range of 84% to 86%.
Transition to Inspire V System: The company is addressing challenges in transitioning customers to the Inspire V system, including delays in training, contracting, and onboarding. The transition is expected to be completed in the next few quarters, with most U.S. centers implementing SleepSync by the end of Q3 2025.
Medicare Reimbursement Updates: The software updates for claims submissions and processing for CPT code 64568 took effect on July 1, 2025. Medicare reimbursement for Inspire V is expected to increase in 2026, with hospital reimbursement proposed to rise to $32,000 (up 4%) and ASC reimbursement to $28,000 (up 5%). Surgeon reimbursement is projected to increase to $660 (up 11%).
Marketing and Expansion Efforts: The company has ramped up patient marketing and footprint expansion efforts in the second half of 2025 to increase patient awareness and build capacity. These efforts are expected to provide a tailwind into the latter half of 2025 and beyond.
Clinical and Operational Improvements: Early results from the Singapore clinical study show a 20% reduction in surgical times, leading to increased capacity at centers. U.S. centers that transitioned to Inspire V have experienced a more than 20% increase in patient implants in the first half of 2025 compared to the same period in 2024.
Future Reimbursement and Clinical Evidence: CMS's proposed 2026 OPPS rules, if approved, will positively impact Medicare reimbursement for Inspire V. Additionally, the PREDICTOR manuscript, which proposes an algorithm to determine patient eligibility without a DISE procedure, is expected to be published later in 2025.
Interest and Dividend Income: Interest and dividend income totaled $4.5 million in the quarter compared to $5.9 million in the prior year period.
The earnings call summary presents mixed signals: strong cash flow and a solid cash position are positive, but reduced revenue and net income guidance, coupled with increased marketing costs, are concerning. The Q&A reveals management's lack of detailed guidance for 2026 and unclear responses to key questions. Despite positive trends with Inspire V, the overall sentiment leans negative due to lower guidance and uncertainties around growth drivers and competitive pressures.
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