Inspire Medical ((INSP)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Inspire Medical’s recent earnings call painted a picture of robust growth tempered by rising costs. The company reported strong revenue growth and improved gross margins, largely driven by the successful launch and adoption of Inspire V and positive clinical outcomes. However, these positives were somewhat offset by increased operating expenses and decreased net income compared to the prior year. Despite these challenges, the company remains optimistic, with increased earnings guidance and an improved reimbursement outlook.
Strong Revenue Growth
In the third quarter, Inspire Medical reported a total revenue of $224.5 million, marking a 10% increase compared to the prior year period. The U.S. market contributed significantly with $214.4 million, a 9% increase, while revenue outside the U.S. saw a remarkable 37% year-over-year growth, totaling $10.1 million.
Improved Gross Margin
The company’s gross margin improved to 85.8% from 84.1% in the prior year period. This improvement was primarily attributed to increased sales volume and a favorable sales mix of the Inspire V system.
Positive Clinical Outcomes
Clinical studies have shown promising results, with the Singapore study demonstrating a 20% reduction in surgical times. Additionally, the U.S. Limited-Market-Release indicated a clinically relevant reduction in disease severity, underscoring the effectiveness of Inspire’s offerings.
Increased Earnings Guidance
Inspire Medical has raised its earnings per share guidance to a range of $0.90 to $1, up from the previous $0.40 to $0.50. This reflects the company’s confidence in its continued growth and financial performance.
Reimbursement Improvements
The Centers for Medicare & Medicaid Services (CMS) finalized the 2026 physician fee schedule, increasing the fee for CPT code 64568 by 11% to approximately $660, effective January 1, 2026. This improvement is expected to positively impact Inspire’s financials.
Decreased Net Income
Despite the revenue growth, net income for the quarter decreased to $9.9 million from $18.5 million in the prior year period. This decline resulted in diluted net income per share of $0.34, down from $0.60 in the third quarter of 2024.
Increased Operating Expenses
Operating expenses rose by 17% to $183.1 million, primarily due to increased patient marketing expenses and general corporate costs. This increase in expenses has been a significant factor in the reduced net income.
Legal Fees Impact
The quarter’s operating expenses included $1.3 million in legal fees related to a civil investigative demand from the Department of Justice and patent infringement lawsuits with a competitor, further impacting the company’s bottom line.
Forward-Looking Guidance
Looking ahead, Inspire Medical reiterated its full-year revenue guidance of $900 million to $910 million, representing a 12% to 13% growth from the previous year. The company also provided an early indication of 10% to 11% revenue growth for 2026, driven by strong performance and adoption of the Inspire V system.
In conclusion, Inspire Medical’s earnings call reflected a positive sentiment with strong revenue growth and improved gross margins. However, the company faces challenges with increased operating expenses and decreased net income. Nevertheless, the raised earnings guidance and improved reimbursement outlook signal a promising future for the company.