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    INSP
    Earnings call· Jun 2026(Q2 FY26)

    Inspire Medical Systems Q2 FY26 earnings call INSP

    Aug 3, 2026 Source

    Executive summary

    Inspire Medical Systems Q2 FY26 — Strong Q2 Performance and Project Horizon Launch Amidst Reimbursement Headwinds

    Inspire Medical Systems delivered Q2 FY26 results ahead of expectations, driven by disciplined cost management and strong sales execution, despite a 7.6% revenue decrease due to ongoing coding and reimbursement disruption. The company launched "Project Horizon" to optimize operations and free up $30 million for growth initiatives, while increasing its full-year outlook for revenue and adjusted profitability. Management is actively addressing reimbursement clarity and is encouraged by proposed 2027 facility reimbursement increases, though physician fees are expected to decline.

    Highlights

    5
    • Revenue of $200.6 million, ahead of expectations.

    • Adjusted operating income and positive cash flow ahead of expectations through disciplined cost management.

    • Increased 2026 outlook for revenue, adjusted operating margin, and adjusted EPS.

    • Operating cash flow of $23.2 million for the quarter and $36.1 million year-to-date, an improvement of $40 million compared to prior year.

    • CMS proposed 2027 hospital outpatient reimbursement increase to $35,414 (12% increase) and ASC reimbursement to $31,722 (15% increase).

    Concerns

    5
    • Revenue decreased 7.6% to $200.6 million, primarily due to coding and reimbursement disruption.

    • Estimated full-year impact of coding/reimbursement challenges and WISeR program at $120 million to $130 million.

    • CMS proposed 2027 physician reimbursement decrease of approximately 4% for CPT code 64582.

    • Expected $20 million to $25 million pretax restructuring charges in connection with Project Horizon.

    • Q3 FY26 revenue forecasted to decline 8% to 10% year-over-year.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $835 million to $875 million
    high materiality
    High
    Full-year 2026 Adjusted Operating Margin
    4% to 6%
    high materiality
    High
    Full-year 2026 Diluted EPS
    loss of $0.42 per share to earnings of $0.17 per share
    high materiality
    High
    Full-year 2026 Adjusted Diluted EPS
    $1.05 to $1.45
    high materiality
    High
    Full-year 2026 Effective Tax Rate
    95% to 100%
    medium materiality
    High
    Full-year 2026 Adjusted Effective Tax Rate
    30% to 35%
    medium materiality
    High
    Full-year 2026 Capital Expenditures
    $35 million and $40 million
    medium materiality
    High
    Q3 FY26 Revenue Decline
    8% to 10% year-over-year decline
    high materiality
    High
    Q3 FY26 Adjusted Operating Income
    approximately breakeven
    medium materiality
    High
    New Category 1 CPT code for single lead Inspire system implementation
    January 1, 2028
    high materiality
    Medium
    CMS Proposed 2027 Hospital Outpatient Reimbursement for Inspire V
    $35,414
    high materiality
    Medium
    CMS Proposed 2027 ASC Reimbursement for Inspire V
    $31,722
    high materiality
    Medium
    CMS Proposed 2027 Physician Reimbursement for CPT code 64582
    $699
    medium materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    International
    International had a very good Q2, driven by focus and growth in core Continental Europe, especially France with new countrywide reimbursement, alongside contributions from other regions.
    Primary growth drivers: core Continental EuropePrimary growth drivers: France (new countrywide reimbursement)Primary growth drivers: Germany, Austria, Switzerland, Netherlands, Belgium, UK, Japan, Singapore
    very good Q2

    Operational metrics

    17
    Revenue
    $200.6 milliondecreased 7.6%
    Q2 FY26

    primarily reflecting the impact of coding and reimbursement disruption

    Cash and investments balance
    $415 million
    end of Q2 FY26

    Our balance sheet remains strong with no debt and $415 million in cash and investments at the end of the quarter.

    Effective tax rate
    89.9%
    Q2 FY26

    primarily driven by the tax impacts of stock-based compensation and executive compensation limitations

    Adjusted effective tax rate
    41.2%
    Q2 FY26

    The adjusted effective tax rate was 41.2%.

    Adjusted diluted EPS
    $0.14
    Q2 FY26

    adjusted diluted EPS was $0.14 for the quarter.

    Adjusted EBITDA margin
    19.4%declined 90 basis points
    Q2 FY26

    Our adjusted EBITDA margin, which excludes the impact of stock-based compensation, declined 90 basis points to 19.4%, primarily due to the decrease in adjusted operating margin.

    Project Horizon restructuring charges
    $20 million to $25 million
    FY26

    We expect to incur a total of $20 million to $25 million of pretax restructuring charges in connection with Project Horizon, with approximately 90% of the charges expected to be recognized in the third quarter.

    Project Horizon annualized growth investment capacity
    $30 million
    annualized

    The actions of Project Horizon are expected to generate approximately $30 million of annualized growth investment capacity, which we expect to direct to our highest revenue growth initiatives.

    Coding and reimbursement challenges impact
    $40 million
    Q2 FY26

    We estimate that our second quarter results were adversely impacted by coding and reimbursement challenges and the WISeR program by approximately $40 million.

    Coding and reimbursement challenges impact
    $120 million to $130 million
    FY26

    For the full year, we are currently estimating the total impact of these items to be in the range of $120 million to $130 million.

    Territory manager count
    280stable
    Q2 FY26

    Territory manager territories that we talk about, we're still at 280 and stable on that end.

    Field clinical representatives (FCR) count
    301
    Q2 FY26

    We've actually surpassed that, and we actually have 301 FCR areas that we're looking at. So a little bit higher than the 1:1 ratio because we think this can drive efficiencies in each of the territories and help us as we grow capacity and handle the demand from the patients.

    Inspire V implant mix
    majority
    Q2 FY26

    Inspire V is by far and away the majority of the implants performed in the second quarter, and we expect that to continue as we move into the rest of the year in '27.

    Average battery life
    11 years
    long-term

    with our average battery life of 11 years, we are starting to see patients come around for their replacement devices.

    Prior authorization submissions
    increasing trend
    Q2 FY26

    We're seeing trends increase from that standpoint and not necessarily going to comment too much on implants in July. Typically, we do see implants continue to progress as we go through a quarter. But again, the positive trends that we're seeing, we're gaining comfort around prior authorization submissions as our leading indicator.

    GLP-1 impact
    long-term

    GLP-1s will be a long-term benefit to help people lose weight to get them into the -- and to qualify for Inspire therapy.

    Patients treated
    over 140,000
    since inception

    improve the lives of our patients as we've already done for over 140,000 patients since our inception.

    Industry KPIs

    3
    MetricValueDetails
    Pricing realized priceincreased
    FCF conversion leverage guidanceno debt
    Sales force commercial capacity build280count

    Risks & headwinds

    3
    Coding and reimbursement disruptionOngoing for remainder of 2026

    Revenue decreased 7.6% in Q2 FY26; estimated $40 million adverse impact in Q2; estimated $120 million to $130 million total impact for FY26.

    Mitigation: Education and support for customers, improved prior authorization submissions, C-codes adopted into WISeR, Project Horizon to refocus efforts.

    Physician reimbursement decrease2027 (final rates in November)

    Proposed 4% decrease for CPT code 64582 to $699 in 2027.

    Mitigation: Educating customers regarding documentation requirements and related considerations for reporting Inspire V procedures using CPT code 64582 with the -52 modifier.

    Restructuring charges from Project HorizonApproximately 90% in Q3 FY26, substantially complete by end of year.

    $20 million to $25 million pretax, with $16 million to $20 million noncash impairment.

    Mitigation: Expected to create $30 million annualized growth investment capacity for reinvestment into growth initiatives.

    What to watch in Q3 FY26

    5

    Prior authorization submission trends

    Q3 FY26
    CurrentIncreasing trend
    TargetContinued improvement and conversion to higher utilization

    Why it matters

    This is a leading indicator for future revenue growth and resolution of coding/reimbursement disruption.

    As we mentioned in our prepared remarks that we are seeing improvements in the trends, including increase in the number of prior authorization submissions.

    Q&A highlights

    7

    What are you seeing in the two MAC regions with 0-30% physician fee cuts? What percentage of overall centers are up to speed with the new billing changes?

    Surgeons can minimize payment reductions by providing requested documentation. The company is actively training its top 25% highest-volume centers and expects to educate most centers in the next wave during Q3.

    So the number of centers that we're training today tend to be the top 25%. We're working through the majority of those and tend to be into the next wave, and we'll be able to educate most of them in the third quarter.

    asked by Jon Block · answered by Timothy Herbert

    2 min read7 chapters

    Detailed Narrative

    01

    Coding and Reimbursement Environment

    Inspire is actively educating customers on Inspire V coding and reimbursement, noting improved trends in prior authorization submissions. C-codes are now in place and adopted by WISeR for 6 states, with hospital and ASC reimbursement rates unchanged. Two MACs currently require a -52 modifier for surgeon billing, leading to payment reductions ranging from 0% to 30%, which the company is addressing through customer education on documentation requirements.

    02

    Proposed 2027 Reimbursement Rates

    CMS has issued proposed 2027 reimbursement rates, including significant increases for facility reimbursement for Inspire V procedures. Hospital outpatient reimbursement is proposed to increase by 12% to $35,414, and ASC reimbursement by 15% to $31,722. However, physician reimbursement for CPT code 64582 is proposed to decrease by approximately 4% to $699. Final rates will be published in November.

    03

    New CPT Code Development

    The company is supporting the development of a new Category 1 CPT code for a single-lead Inspire system. A revised application, addressing prior coding issues, submitted jointly with another industry participant, and including additional clinical evidence, will be reviewed at the September CPT Editorial Panel Meeting. If approved, the new code is targeted for implementation by January 1, 2028.

    04

    Project Horizon Strategic Growth Plan

    Inspire announced "Project Horizon," a strategic growth plan designed to accelerate revenue growth by optimizing organizational structure and supply chain. This initiative is expected to create $30 million of annualized growth investment capacity, which will be directed towards enhancing patient access, education, and navigation tools. Early successes include prior authorization support capabilities within the SleepSync platform and the Inspire Connect program for post-implant patient experience.

    05

    Clinical Outcomes and Cardiovascular Health

    Recent clinical data from the Inspire V trial in Singapore demonstrated the safety and efficacy of the new system. Multiple presentations highlighted growing evidence supporting Inspire therapy's benefits, particularly in improving cardiovascular risk markers. A secondary analysis of the STAR trial showed significant reductions in hypoxic burden, and a TriNetics database study indicated lower odds of stroke, myocardial infarction, and heart failure with hypoglossal nerve stimulation compared to CPAP.

    06

    PREDICTOR Study Publication

    The publication of the PREDICTOR study identified body mass index (BMI) and neck circumference as predictors of complete concentric collapse. These findings suggest that many patients with a BMI less than 32 may be screened for Inspire therapy eligibility without requiring drug-induced sleep endoscopy (DISE), potentially reducing diagnostic burden, time to treatment, and healthcare costs.

    07

    Board of Directors Changes

    Casey Tansey retired from the Board of Directors after 18 years of service, having been an early investor and mentor. Mike Carroll, a veteran of the medical device industry with significant executive leadership and Board experience, was welcomed as a new Board member.

    AI-generated summary of the company’s earnings call. Not investment advice.