Company's Q3 2025: Contradictions Emerge on Inspire V Transition, GLP-1s Impact, and 2026 Growth Guidance

Date of Call: November 3, 2025

Financials Results

• Revenue: $224.5M, up 10% YOY (Q3 2025 vs Q3 2024 $203.2M)
• EPS: $0.34 per diluted share, down from $0.60 in Q3 2024
• Gross Margin: 85.8%, compared to 84.1% in the prior year period
• Operating Margin: 4.3%, compared to 7.0% in the prior year period (operating income $9.6M vs $14.3M)

Guidance:

• Reaffirming FY2025 revenue guidance of $900M–$910M (12%–13% growth vs FY2024)
• Expect full-year gross margin of 84%–86%
• Now expect diluted net income $0.90–$1.00 per share (raised from prior $0.40–$0.50)
• Reported tax rate expected ~25%; expect a likely large one-time Q4 tax benefit from valuation allowance release (not included in guidance)
• Early, non-binding 2026 revenue indication of ~10%–11% growth; formal 2026 guidance to be provided in January

Business Commentary:

• Revenue and Financial Performance:
• Inspire Medical Systems reported revenue of $224.5 million for Q3 2025, representing a 10% increase compared to the prior year period.

• This growth was driven by strong revenue performance and cost discipline despite increased investments in patient marketing.

• Inspire V Launch and Transition:

• Over 75% of centers are currently implanting Inspire V, with physician training and contracting completing at over 90%.

• The success of the Inspire V launch is attributed to its easier implantation, improved patient outcomes, and positive clinical feedback.

• Clinical Evidence and Patient Marketing:

• Inspire's clinical studies and publications highlighted improved cardiovascular morbidity and mortality outcomes compared to CPAP treatment.

• The company is leveraging these findings to drive increased awareness and patient flow through a new ad campaign and celebrity influencer partnership.

• 2026 Revenue Guidance:

• Inspire provided an early indication of 10% to 11% revenue growth for 2026, suggesting a refined outlook from previous guidance.
• This is based on factors like the completion of Inspire IV inventory transition and positive feedback from physician adoption of Inspire V.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted Q3 revenue of $224.5M (+10% YOY), raised FY EPS outlook to $0.90–$1, reaffirmed FY revenue $900M–$910M, and emphasized strong Inspire V adoption (>75% implanting centers, >98% physician training complete, contracting >90%). Multiple statements: 'very pleased', 'confident', and emphasis on positive clinical data and marketing momentum.

Q&A:

• Question from Travis Steed (BofA Securities): How are you thinking about puts and takes for 2026 and cadence H1 vs H2?
  Response: No formal 2026 guidance yet; early non‑binding indication of ~10%–11% growth driven by Inspire V momentum, DTC, and operational improvements; formal guidance in January.

• Question from Adam Maeder (Piper Sandler): Color on October trends and visibility for Nov/Dec and implants scheduling?
  Response: Implants are continuing; majority of field inventory is Inspire V; seasonal strength later in year persists and DTC campaign is driving demand.

• Question from Adam Maeder (Piper Sandler): How to bridge >75% accounts implanting Gen V to 100% and will centers still use IV?
  Response: Most centers will transition to V by year‑end but some will continue limited IV use for economic/site‑of‑service reasons; IV will remain available.

• Question from Robert Marcus (JPMorgan): Where are you pulling back on spend and sustainability of expense control?
  Response: Not pulling back R&D; continuing targeted R&D (Inspire VI, digital/SleepSync) and manufacturing stabilization while keeping R&D run rate more consistent going forward.

• Question from Robert Marcus (JPMorgan): Update on inventory conversion IV→V and destocking/restocking impact into guide?
  Response: At start of Q3 inventory was mostly IV; now majority is V and most centers should work through IV by year‑end though some IV will persist for select centers.

• Question from Danielle Antalffy (UBS): How are you ramping lower/mid‑volume centers and increasing ENT mindshare?
  Response: New dedicated team re‑engaging lower/mid‑volume ENTs using Inspire V as a catalyst (easier implantability) — contributing in 2026 and already showing early 2025 activity.

• Question from David Rescott (Robert W. Baird): Should growth weight more to utilization vs new centers for 2026?
  Response: Both matter: Inspire V drives utilization (shorter surgery, better outcomes) and also enables training of new surgeons and opening new centers.

• Question from David Rescott (Robert W. Baird): Is the expected Q4 tax benefit included in the $0.90–$1 guidance?
  Response: No — the potential large one‑time Q4 tax benefit from valuation allowance release is not factored into current guidance.

• Question from Jonathan Block (Stifel): Why the refined early 10%–11% 2026 view vs prior higher expectations?
  Response: More conservative early estimate based on updated experience with IV→V inventory transition, GLP‑1 trialing dynamics and competitive factors; formal guide in January.

• Question from Jonathan Block (Stifel): What composes the $142M inventory (finished goods $111M)?
  Response: Inventory includes both IV and V; winding down IV manufacturing but retaining IV to support international transitions and centers that economically prefer IV; shared components allow conversion to V over time.

• Question from Larry Biegelsen (Wells Fargo): How do you view new competitor impact on the 10%–11% outlook?
  Response: Competitor presence is very early with limited current impact; will monitor and may provide more detail with full 2026 guidance.

• Question from Larry Biegelsen (Wells Fargo): Seasonality for 2026 — should we expect typical Q1 decline?
  Response: Yes — recent history shows Q1 sequential declines (~15% in early 2024 and ~16% in 2025); expect cadence to return closer to pre‑2025 norms.

• Question from Anthony Petrone (Mizuho): How much did GLP‑1 factor into the 10%–11% view and will GLP‑1s drive later conversions to Inspire?
  Response: GLP‑1s are a net positive: they drive more patients into clinics (often on concurrent CPAP/GLP‑1) and can expand the candidate pool as patients lose weight and become eligible for Inspire; trialing may delay some procedures short‑term.

• Question from Shagun Singh Chadha (RBC): What other factors explain gap to consensus and Q4 growth step‑down?
  Response: Company is being prudent; headwinds (inventory dynamics, GLP‑1 trialing, competitive activity) offset many positives (Inspire V performance, reimbursement increases), so they provided an early cautious preview.

• Question from Daniel Markowitz (Evercore): Why do some centers keep IV for economic reasons and will 2026 physician fee schedule change this?
  Response: It's primarily site‑of‑service/hospital reimbursement economics; IV can be offered at discounted economics to certain centers — physician fee schedule increase helps but doesn't fully eliminate site‑of‑service differences.

• Question from Daniel Markowitz (Evercore): Was DTC back to normal run rate in Q3 and OpEx outlook for 2026?
  Response: DTC was increased in Q3 after being held back earlier in the year; expect a modest increase in DTC going forward but overall OpEx to be managed methodically.

• Question from Michael Sarcone (Jefferies): Is the ~20% same‑store growth for V persisting as V rolls out?
  Response: There is a clear correlation between V adoption and accelerated volume, but the 20% uplift won't uniformly apply to all centers as rollout expands.

• Question from Christopher Pasquale (Nephron Research): Details on territory realignment — fewer centers or higher reps workload?
  Response: Optimizing territories to drive efficiency while adding field clinical reps to approach a ~1:1 territory manager to clinical rep ratio; average territory managers still support ~4–6 centers.

• Question from Christopher Pasquale (Nephron Research): OpEx cadence — is Q3 elevated spend a temporary bolus?
  Response: Yes, 2025 OpEx grew faster than revenue (~16% YOY) but expect sequential operating margin improvement into Q4 and implied full‑year operating margin around 2.5%–3% with longer‑term improvement planned.

• Question from Richard Newitter (Truist): What drove the EPS upside and are cost controls structural?
  Response: Quarter revenue beat plus disciplined investments (targeted DTC and other savings) and territory consolidation produced EPS upside; company will continue methodical investment while seeking efficiencies.

• Question from Brett Fishbin (KeyBanc): What drove the high‑efficiency KOL performing 12 implants/day vs 9 with IV?
  Response: Efficiency driven by center setup (stacked cases, access to multiple ORs), experienced surgeons and operational planning — a replicable model for high‑volume centers.

• Question from Michael Polark (Wolfe Research): Was there a net inventory headwind and did procedures grow faster than revenue in 2025?
  Response: Any inventory effects were slight; implant‑to‑sales ratio generally tracked closely with sales and majority of field inventory is now Inspire V.

• Question from Michael Kratky (Leerink): Did physician survey show GLP‑1s as net positive or negative for Inspire volumes?
  Response: Survey indicated sleep physicians expect overall increased procedure volume from GLP‑1 activity; physicians are cautious and track/triage patients, leading to appropriate referrals to Inspire when indicated.

Contradiction Point 1

Inspire V Transition and Impact on Revenue

It highlights differing perspectives on the impact of the Inspire V transition on revenue growth expectations, which is critical for investors to understand the company's financial outlook.

Can you elaborate on your expectations for 2026, particularly the cadence of growth between the first and second halves? - Travis Lee Steed(BofA Securities)

2025Q3: We're focused on finishing Q4 strong. Planning for 2026 is early. Not providing specific guidance, but an early indication of 10% to 11% growth. - Timothy Herbert(CEO)

Can you clarify the revised guidance and quantify the factors impacting the business? What are your 2026 revenue growth expectations? - Adam Carl Maeder(Piper Sandler & Co., Research Division)

2025Q2: We anticipate that our revenue growth will accelerate beyond the 12% to 13% guided for FY '25, reflecting the investments and actions we are taking. - Timothy P. Herbert(CEO)

Contradiction Point 2

GLP-1s Impact on Sleep Physicians

It involves differing views on the impact of GLP-1s on patient flow and diagnosis, which can significantly affect the number of potential candidates for Inspire procedures.

Are GLP-1s affecting Inspire procedure volumes positively or negatively? - Michael Kratky(Leerink Partners)

2025Q3: Increasing volume due to GLP-1s, with more patients seeking diagnosis. Sleep physicians are preparing for increased volume and referrals for appropriate patients. - Timothy Herbert(CEO)

Will Q3 performance be weaker than usual due to headwinds, and could GLP-1s pose a long-term issue? - Christopher Thomas Pasquale(Nephron Research LLC)

2025Q2: GLP-1s can help address high BMI, but we believe our algorithms will reduce the need for weight loss, limiting their long-term impact. - Timothy P. Herbert(CEO)

Contradiction Point 3

Inspire V Transition Challenges

It highlights differing perspectives on the challenges and setbacks faced during the transition to Inspire V, which is crucial for understanding the company's operational and strategic approach.

What are your thoughts on 2026 dynamics? Are there key cadence or H1/H2 growth considerations? - Travis Lee Steed(BofA Securities)

2025Q3: Transition challenges and Medicare billing timing issues are substantially behind us. - Timothy Herbert(CEO)

Will 2026 revenue return to the prior run rate? What were the biggest challenges with Inspire V’s launch? - Robert Justin Marcus(JPMorgan Chase & Co, Research Division)

2025Q2: The biggest challenges in the launch were ensuring sufficient inventory and addressing Medicare documentation timelines. - Timothy P. Herbert(CEO)

Contradiction Point 4

Inspire V Launch and Inventory Transition

It addresses the company's approach to the launch of Inspire V and the transition from Inspire IV inventory, which impacts revenue expectations and market dynamics.

Did Inspire V result in a net inventory headwind in 2025, or did procedure volumes outpace revenue growth? - Michael Polark(Wolfe Research)

2025Q3: Most inventory is now Inspire V. - Timothy Herbert(CEO)

How should we assess the balance between restocking and pent-up demand for Inspire V? Is the system ready for Inspire V, and is there significant pent-up demand? - Robbie Marcus(JPM)

2025Q1: The company has close knowledge of existing inventories, with the majority of centers having only a few units. - Tim Herbert(CEO)

Contradiction Point 5

2026 Growth Guidance

It affects the company's growth expectations for the future, which is crucial for investor projections.

Can you outline the key factors shaping 2026 dynamics or any key factors related to cadence or first-half vs. second-half growth? - Travis Steed(BofA Securities)

2025Q3: We're focused on finishing Q4 strong. Planning for 2026 is early. Not providing specific guidance, but an early indication of 10% to 11% growth. - Timothy Herbert(CEO)

What are the OpEx assumptions for the remainder of the year, including incremental costs for Inspire V? - David Rescott(Baird)

2025Q1: Our full year net revenue guidance remains unchanged. - Rick Buchholz(CFO)