Inspire Medical Systems, Inc. (INSP) Q2 2025 Earnings Summary

Executive Summary

Q2 2025 revenue was $217.1M, up 11% year over year, and above S&P Global consensus; Adjusted diluted EPS was $0.45, beating consensus, while GAAP diluted EPS was -$0.12 due to one-time charges . Revenue consensus: $214.3M*; Primary EPS consensus: $0.20*.
Management lowered FY2025 revenue guidance to $900–$910M (from $940–$955M) and GAAP diluted EPS guidance to $0.40–$0.50 (from $2.20–$2.30), citing a slower-than-expected transition to Inspire V, SleepSync implementation delays, and Medicare billing timing .
Gross margin remained strong at 84.0% (Q2), with FY2025 gross margin guidance maintained at 84–86% .
Call catalysts/narrative: transition headwinds expected to be temporary; CMS 2026 proposed OPPS increases for CPT 64568; DTC spend ramp in 2H; share repurchase authorization ($200M, Aug 11) and CFO transition announcement (Aug 26) add corporate actions to the setup .

What Went Well and What Went Wrong

What Went Well

Revenue growth and profitability on an adjusted basis: Q2 revenue +11% YoY to $217.1M; Adjusted EBITDA $44.1M and Adjusted diluted EPS $0.45, both up vs prior year .
Strong initial Inspire V feedback and efficiency: early studies suggest ~20% reduced surgical time; transitioned US centers saw >20% increase in implants vs 2024; management views Inspire V as a growth engine despite launch pacing issues .
Gross margin resilient: 84.0% in Q2 despite a 100 bps drag from a $2.1M excess components charge tied to Inspire IV .

Management quotes:

“The full launch of our FDA-cleared Inspire V system in the U.S. is an important milestone… strong positive feedback… simplified procedure and excellent patient outcomes” .
“The broad enthusiasm for Inspire V gives us confidence that it will be a growth engine for the Company” .
“We have our arms around the headwinds… actions are already underway to accelerate the adoption of Inspire V in the latter half of the year” .

What Went Wrong

Launch pacing and operational headwinds: slower-than-expected US transition to Inspire V due to SleepSync implementation delays (IT approvals), contracting/training timing, and Medicare billing software updates only effective July 1 .
Guidance reduction: FY2025 revenue cut to $900–$910M and GAAP diluted EPS to $0.40–$0.50, reflecting transition timing and increased 2H DTC spend .
One-time costs pressured GAAP results: $11.2M accelerated stock-based comp for retirement-eligible employees, $1.7M legal fees (DOJ civil investigative demand and patent suit vs Nyxoah), and a $4.0M non-cash impairment, driving a GAAP diluted EPS of -$0.12 .

Financial Results

Revenue, EPS, Margins vs prior periods and estimates

Metric	Q4 2024	Q1 2025	Q2 2025 Consensus*	Q2 2025 Actual
Revenue ($USD Millions)	$239.7	$201.3	$214.3*	$217.1
Primary EPS Consensus Mean ($)	—	—	$0.20*	$0.45
Diluted EPS (GAAP) ($)	$1.15	$0.10	—	-$0.12
Gross Margin (%)	85.0%	84.7%	—	84.0%
Adjusted EBITDA Margin (%)	26%	16%	—	20%

Values with asterisks (*) are retrieved from S&P Global.

Segment Revenue Breakdown

Revenue ($USD Millions)	Q4 2024	Q1 2025	Q2 2025
U.S.	$231.6	$193.6	$207.2
Outside U.S.	$8.1	$7.7	$9.9

Selected KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Cash, Cash Equivalents & Investments ($USD Millions)	$516.5	$414.0	$410.7
U.S. Sales Territories (#)	335	—	348
U.S. Field Clinical Representatives (#)	—	—	259
Inventories ($USD Millions)	$80.1	$99.7	$121.6
Weighted Avg Diluted Shares (Millions)	30.54	30.31	29.51

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	$940–$955	$900–$910	Lowered
Gross Margin (%)	FY 2025	84–86	84–86	Maintained
Diluted EPS (GAAP) ($)	FY 2025	$2.20–$2.30	$0.40–$0.50	Lowered
Revenue Sequential Growth (%)	Q3 2025	—	+1% to +3% q/q	New disclosure

Drivers: slower Inspire V transition (SleepSync implementations; Medicare billing software timing), intentional 1H pause in DTC/footprint expansion now ramping in 2H; inventory burn-down dynamic; one-time costs in Q2 .

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Inspire V rollout	First cases completed; full launch on track for 2025	Full launch set for May 2025	Full U.S. launch initiated; rollout slower than expected ; actions underway	Transition progressing; near-term headwinds
SleepSync implementation	Platform positioning; future monitoring/programming	SleepSync highlighted as part of V strategy	>50% centers implemented; IT approvals causing delays; majority expected by end Q3	Improving adoption through Q3
Medicare/CPT	—	—	CPT 64568 billing effective July 1; CMS 2026 proposed OPPS increases (hospital ~$32k, ASC ~$28k; surgeon ~$660)	Reimbursement backdrop improving
DTC spend and footprint	—	Lower marketing spend in Q1	DTC ramp in 2H; 2025 DTC ~$115M vs $95M in 2024	Increasing investment
Capacity/productivity	—	Expected OR time reductions with V	~20% reduced OR time; >20% implant increase at transitioned centers	Capacity tailwind building
GLP-1 impact	Claims data background	Expanded GLP-1 BMI data analysis	Some patients delay to try GLP-1; viewed as long-term tailwind; not quantifiable	Monitored; likely tailwind
Legal/regulatory	—	—	DOJ civil investigative demand and patent suit legal expenses ($1.7M)	One-time cost items
Leadership/corporate	—	—	EVP retirement noted (Jan 2026) ; $200M share repurchase authorization (Aug 11) ; CFO stepping down end-2025 (Aug 26)	Corporate actions; continuity planning

Management Commentary

“The broad enthusiasm for Inspire V gives us confidence that it will be a growth engine for the Company… the U.S. commercial launch is progressing slower than expected… which will impact financial results for the year.” — Tim Herbert, CEO .
“We have our arms around the headwinds… actions are already underway to accelerate the adoption of Inspire V in the latter half of the year.” — Tim Herbert .
“We are also reducing our diluted net income per share to a range of $0.40 to $0.50… to reflect this change in revenue guidance and… increased patient marketing cost for the second half of the year.” — Tim Herbert .
“Adjusted EBITDA… totaled $44.1M… Adjusted net income per share totaled $0.45… We ended the quarter with $411M in cash and investments.” — Rick Buchholz, CFO .

Q&A Highlights

Guidance bridge and EPS math: Revenue midpoint reduced ~$48M; GAAP EPS guide includes ~$0.57 one-time charge; DTC spend to ~~$115M in 2025 (~~+20% YoY) .
Q3/Q4 cadence: Q3 revenue +1–3% q/q; Q4 expected seasonality step-up (high-deductible plan dynamics), despite transition headwinds .
Adoption headwinds quantified: SleepSync implementations and Medicare billing were primary constraints; >50% SleepSync adoption; Medicare billing now live .
Accounts receivable: temporary increase due to billing system transition and back-end loaded June; remediation expected in Q3 .
Reimbursement pushback: management expects reduced OR time and proposed 2026 increases to offset concerns; capacity benefits seen at transitioned centers .

Estimates Context

Q2 2025 versus S&P Global consensus:
- Revenue: $217.1M Actual vs $214.3M Consensus* → beat .
- Primary EPS: $0.45 Actual vs $0.20 Consensus* → beat .
Forward setup:
- Q3 2025 Revenue Consensus Mean*: $220.4M; Primary EPS Consensus Mean*: -$0.17.
- Q4 2025 Revenue Consensus Mean*: $262.5M; Primary EPS Consensus Mean*: $0.68.

Values marked with asterisks (*) are retrieved from S&P Global.

Key Takeaways for Investors

Near-term headwinds are operational and timing-related (SleepSync IT approvals; Medicare billing software), not demand-driven; early Inspire V data and center feedback support medium-term capacity and utilization gains .
Guidance reset reduces FY2025 expectations, but gross margin resilience and adjusted profitability metrics remain intact; watch for 2H conversion of centers to Inspire V and DTC-driven funnel expansion .
Reimbursement tailwinds likely in 2026 (CMS OPPS proposals for CPT 64568), potentially enhancing ASC/hospital economics and surgeon fees, supporting broader adoption .
Corporate actions signal confidence and capital allocation discipline (up to $200M buyback) amid launch investments; monitor CFO transition for continuity .
Trading stance near term: focus on execution milestones — SleepSync adoption completion (majority by end Q3), Q3 sequential growth (+1–3%), Q4 seasonality step-up; any evidence of >20% throughput uplift at additional centers could re-rate growth expectations .
Medium-term thesis: underpenetrated $10B+ domestic market; technology and digital platform advantages (Inspire V and SleepSync) can expand capacity and adherence; monitor GLP-1 interactions as potential eligibility tailwind rather than structural demand headwind .

Additional Documents and Notes

Q2 2025 8-K press release and exhibits: detailed financials, non-GAAP reconciliations, and investor presentation .
Q2 2025 earnings call transcript: full context on transition dynamics, guidance rationale, and reimbursement updates .
Prior quarters:
- Q1 2025: Revenue $201.3M (+23% YoY); gross margin 84.7%; GAAP diluted EPS $0.10; prior FY2025 guide revenue $940–$955M and GAAP EPS $2.20–$2.30 .
- Q4 2024: Revenue $239.7M (+25% YoY); gross margin 85.0%; GAAP diluted EPS $1.15; FY2025 initial guide revenue $940–$955M; GAAP EPS $2.10–$2.20 .

S&P Global estimates disclaimer: All consensus values marked with asterisks (*) are retrieved from S&P Global.