Inspire Medical Systems, Inc. (INSP) Q3 2025 Earnings Summary

Executive Summary

Q3 revenue was $224.5M, up 10% YoY and above S&P consensus ($220.4M); Primary EPS beat meaningfully (consensus -$0.17 vs actual positive), and gross margin expanded to 85.8% . Revenue consensus and EPS consensus from S&P Global indicated a beat*.
Management reaffirmed FY2025 revenue guidance ($900–$910M) and 84–86% gross margin, while raising diluted EPS guidance to $0.90–$1.00 (from $0.40–$0.50) on stronger Q3 execution and cost discipline .
Inspire V transition progressed materially: physician training ~98% complete, ~75% of centers ready/transitioning, and SleepSync onboarding completed at over 75% of centers; OUS revenue grew 37% YoY .
CFO flagged a higher 2025 tax rate (~25%) and potential Q4 one‑time tax benefit from removing a large portion of the valuation allowance; YTD share repurchases reached $125M ($50M in Q3) .
Near‑term stock reaction catalysts: large EPS beat vs consensus*, raised EPS guide, Inspire V adoption milestones, and clarity on tax/valuation allowance benefits .

What Went Well and What Went Wrong

What Went Well

Revenue +10% YoY to $224.5M; gross margin expanded to 85.8% (higher Inspire V mix) .
Strong Inspire V clinical/operational progress: “100% of patients had a successful device implant… 20% reduction in surgical procedure time… clinically relevant reductions in disease severity… over 75% of centers ready to transition to Inspire V” — Tim Herbert (CEO) .
Inspire V limited market release showed faster throughput and adherence; U.S. implants averaged ~6.7 hours/night and select center efficiency up to 12 implants/day vs 9 with Inspire IV .

What Went Wrong

Profitability lower YoY: operating income declined to $9.6M (vs $14.3M), net income to $9.9M (vs $18.5M); adjusted EBITDA margin 20% vs 22% in Q3 2024 .
OpEx up 17% YoY (patient marketing and corporate costs); included $1.3M litigation-related legal expenses not reflective of ongoing operations .
Transition headwinds: centers working down Inspire IV inventory, mixed site economics keeping some on IV; patient trialing of GLP‑1s introduced timing frictions .

Financial Results

Consolidated Financials (oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$201.3	$217.1	$224.5
Gross Margin %	84.7%	84.0%	85.8%
Operating Income ($USD Millions)	-$1.5	-$3.3	$9.6
Net Income ($USD Millions)	$3.0	-$3.6	$9.9
Diluted EPS (GAAP, $)	$0.10	-$0.12	$0.34
Adjusted Diluted EPS ($)	—	$0.45	$0.38
Adjusted EBITDA ($USD Millions)	$33.2	$44.1	$44.0
Adjusted EBITDA Margin %	16%	20%	20%
Cash, Cash Equivalents & Investments ($USD Millions, period-end)	$414.0 (3/31)	$410.7 (6/30)	$410.9 (9/30)

Revenue by Geography (oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
U.S. Revenue ($USD Millions)	$193.6	$207.2	$214.4
Outside U.S. Revenue ($USD Millions)	$7.7	$9.9	$10.1

YoY Snapshot (Q3 2024 vs Q3 2025)

Metric	Q3 2024	Q3 2025
Revenue ($USD Millions)	$203.2	$224.5
Gross Margin %	84.1%	85.8%
Operating Income ($USD Millions)	$14.3	$9.6
Net Income ($USD Millions)	$18.5	$9.9
Diluted EPS (GAAP, $)	$0.60	$0.34
Adjusted EBITDA ($USD Millions)	$44.5	$44.0
Adjusted EBITDA Margin %	22%	20%

KPIs and Capital Allocation

KPI / Item	Q3 2025
Operating Cash Flow ($USD Millions)	$68.5
U.S. Territories (#)	336
U.S. Field Clinical Representatives (#)	268
Physician Training Complete (%)	~98%
SleepSync Onboarding Complete (%)	>75%
Centers Ready to Transition to Inspire V (%)	>75%
Share Repurchase ($USD Millions, Q3)	$50
Share Repurchase ($USD Millions, YTD)	$125

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$900–$910M	$900–$910M	Maintained
Gross Margin %	FY 2025	84–86%	84–86%	Maintained
Diluted EPS ($)	FY 2025	$0.40–$0.50	$0.90–$1.00	Raised
Reported Tax Rate	FY 2025	~10%	~25%	Increased
Diluted Shares Outstanding (#)	FY 2025	~31M	~30M	Lower

Management also expects to eliminate a large portion of the valuation allowance on deferred tax assets in Q4, creating a one‑time tax benefit to be called out with Q4 results .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Inspire V launch cadence	Full U.S. launch initiated; transitional Q2 expected	Slower‑than‑expected rollout; SleepSync IT onboarding and Medicare CPT timing headwinds	Majority of field inventory now Inspire V; ~75% centers implanting V, training ~98% complete	Improving execution
SleepSync adoption	Emphasized as core platform	Implementation >50% targeted by end Q3	Onboarding complete for >75% centers; supports remote monitoring/programming roadmap	Scaling
Reimbursement (CPT/OPPS/PFS)	CPT 64568 adoption building	Proposed 2026 OPPS/ASC increases	Finalized 2026 physician fee schedule +11% for CPT 64568; awaiting OPPS final	Positive
GLP‑1 dynamic	Warehousing/eligibility narratives emerging	Some patient trialing delays; long‑term tailwind view	Survey suggests combo therapy and higher clinic funnel; LT eligibility tailwind	Mixed near‑term, tailwind LT
Capacity and center utilization	Focus on APPs/ENT training	Pulled back H1 footprint; plan ramp H2	ENT re‑engagement with Inspire V; throughput examples (12/day)	Improving
Competitive/legal	Patent actions; DOJ civil investigative demand (legal fees)	Ongoing legal costs	Continued legal expense ($1.3M in Q3)	Persistent headwind

Management Commentary

“We are reaffirming our full year revenue guidance of $900 to $910 million and increasing our diluted net income per share guidance to $0.90 to $1.00, up from $0.40 to $0.50 previously.” — Tim Herbert (CEO)
“The Singapore study of 44 patients demonstrated a 20% reduction in surgical times… field experience with Inspire V is generating very positive feedback… over 75% of centers ready to transition.” — Tim Herbert (CEO)
“Gross margin in the quarter was 85.8%… primarily due to increased sales volume and increased sales mix of Inspire 5, which is more cost‑effective to manufacture.” — Rick Buchholz (CFO)
“We now expect our reported tax rate in 2025 to be 25%… likely eliminate a large portion of the valuation allowance on our deferred tax assets in Q4.” — Rick Buchholz (CFO)

Q&A Highlights

2026 early view: Management offered an early indication of ~10–11% revenue growth (formal guide in January), citing Inspire V momentum, marketing, and operational focus; acknowledged puts/takes (inventory conversion, GLP‑1 trialing, competition) .
Inventory conversion: Majority of field inventory now Inspire V; most centers transitioning should work down Inspire IV by year‑end, while select centers continue IV for economic reasons .
Capacity strategy: Dedicated initiatives to re‑energize lower/mid‑volume ENTs using Inspire V’s simpler procedure; highlighted stacking cases and OR access leading to higher daily throughput .
OpEx cadence: Near‑term elevated spend (DTC and footprint) but targeted operating leverage in 2026; implied full‑year operating margins ~2.5–3% on new EPS guide .
GLP‑1 interplay: Physicians lean to combo therapy; monitoring increases funnel; long‑term eligibility tailwind as higher BMI patients lose weight to qualify for Inspire therapy .

Estimates Context

Q3 2025 Actuals vs S&P Global Consensus

Metric	Consensus*	Actual	Surprise
Revenue ($USD Millions)	220.4*	224.5	Beat
Primary EPS ($)	-0.17*	0.38 (S&P “Primary EPS” actual)*/GAAP diluted 0.34	Beat
EBITDA ($USD Millions)	24.7*	13.3 (GAAP EBITDA)	Miss

Notes: Company also reports adjusted EBITDA of $44.0M and 20% adjusted EBITDA margin .

FY 2025 Context

Metric	Consensus*	Company Guidance
Revenue ($USD Millions)	905.0*	$900–$910
Primary EPS ($)	1.51*	$0.90–$1.00

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Q3 print was operationally solid: revenue and EPS beats, margin expansion, and raised EPS guide; top‑line guide held as Inspire V transition continues .
Inspire V adoption is the growth fulcrum; training/onboarding milestones and throughput improvements should support volume leverage into 2026 .
Near‑term watch items: IV→V inventory burn‑down, GLP‑1 trialing effects on timing, and any incremental legal expense; EBITDA miss vs consensus reflects GAAP (non‑adjusted) framing .
Reimbursement backdrop is improving (2026 physician fee +11% for CPT 64568; OPPS/ASC increases proposed), aiding site economics and capacity scaling .
Tax and capital returns: Higher 2025 tax rate but potential Q4 valuation allowance release; continued buybacks (YTD $125M) provide flexibility .
Trading lens: The raised EPS guide and Inspire V execution are positive catalysts; monitor January 2026 formal guidance for growth cadence and margin trajectory .
Medium‑term thesis: Large underpenetrated OSA market, improving product economics/clinical data, and digital SleepSync platform support durable growth with margin leverage as Inspire V scales .