Inspire Medical Systems, Inc. (INSP) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue rose 25% year over year to $239.7M, with diluted EPS at $1.15 and gross margin at 85.0% . Management highlighted this as the company’s first full year of profitability and reiterated strong momentum into 2025 .
• FY 2025 guidance reaffirmed: revenue $940–$955M (+17–19% YoY), gross margin 84–86%, diluted EPS $2.10–$2.20; tax rate ~10%; diluted shares ~31M .
• Inspire V limited market release underway; full 2025 launch contingent on inventory scale, with reimbursement alignment via CPT 64568 and no expected near‑term gross margin drag; Inspire V expected to be a tailwind to gross margin and capacity .
• DOJ civil investigative demand received Jan 17 related to marketing, promotion and reimbursement practices; company will fully cooperate and does not anticipate interference with operations .
• Cash generation improved: operating cash flow was $69.2M in Q4 (FY $130.2M), cash and investments ended FY at $516.5M; company executed a $75M accelerated share repurchase in Nov 2024 .

What Went Well and What Went Wrong

What Went Well

• Strong top-line and profitability: Q4 revenue +25% YoY to $239.7M; operating income $31.9M; net income $35.2M; adjusted EBITDA $62.7M (26% margin) . CEO: “We are thrilled with our strong performance… delivering nearly $32 million in operating income and increasing diluted net income per share 135% year-over-year” .
• Execution on Inspire V and SleepSync: limited Inspire V implants in Singapore and U.S., positive early feedback; SleepSync programmer fully launched in U.S., improving programming efficiency and data access . CFO: raised annual gross margin guidance to 84–86% and noted Inspire V is a tailwind .
• Commercial scale and market development: added 72 U.S. centers (total 1,435) and 12 sales territories (total 335) in Q4; digital scheduling expanded to ~300 centers to streamline patient appointments .

What Went Wrong

• Regulatory overhang: DOJ CID introduces uncertainty (scope, timing, potential costs). Management provided limited detail given early stage but does not expect operational interference .
• Near-term earnings cadence: management expects negative EPS in Q1 2025 due to seasonality, with sequential improvement thereafter; implies limited near-term leverage despite full-year profitability trajectory .
• Inspire V full launch timing gated by inventory scale; management emphasized avoiding start‑stop transitions between IV and V, requiring careful ramp of production capacity .

Financial Results

Sequential Performance (Q2→Q3→Q4 2024)

Year-over-Year Comparison (Q4 2023 → Q4 2024)

Geographic Mix

Operating KPIs

Balance Sheet Snapshot (FY End)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “2024 was filled with many important milestones… and our first full year of profitability” .
• “We are reiterating our full year 2025 revenue guidance of $940 million to $955 million… we expect diluted net income to be in the range of $2.10 to $2.20 per share” .
• On Inspire V: “Respiratory sensing internal to the neurostimulator… eliminating the need to implant the pressure sensing lead… benefits include reduced surgical time and reduced production complexity and cost” .
• On DOJ CID: “We intend to fully cooperate… We do not anticipate that the investigation will interfere with the important work we’re doing” .
• EPS cadence: “We do not expect to be profitable in the first quarter, but then we’ll have sequential improvement thereafter” .

Q&A Highlights

• EPS/Profitability cadence: Management expects negative EPS in Q1 2025 due to seasonality, with sequential improvement thereafter; comfortable with Street Q1 estimates .
• Inspire V ramp and margin: Inspire V is a gross margin tailwind; limited launch now, inventory ramp gating full launch; reimbursement via CPT 64568 seen as appropriate; ASC economics improved with ~+$1,100 reimbursement vs prior settings .
• International mix & interest income: OUS to remain ~3–4% of WW revenue in 2025; interest income guided to $20M for FY ($5M/quarter) .
• Payer policy updates: UHC DISE language under discussion; broader move to reduce DISE for low BMI via PREDICTOR algorithm (e.g., BMI and neck circumference criteria) .
• DOJ CID: Early stage; limited incremental detail; company confident in compliance programs .

Estimates Context

• Wall Street consensus comparisons (EPS, revenue) via S&P Global were unavailable due to a temporary request limit; therefore formal beat/miss analysis vs consensus cannot be provided at this time. Management indicated comfort with Q1 estimates and reiterated FY 2025 guidance .

Key Takeaways for Investors

• Q4 capped a pivotal year: 25% revenue growth, strong operating leverage, and first full-year profitability; momentum supported by broad center and territory expansion .
• 2025 setup: Reaffirmed revenue growth (+17–19%), higher gross margin range, and EPS guidance imply continued scale despite Q1 seasonal reset; sequential improvement expected through the year .
• Inspire V as a structural driver: Reduced OR time, simpler procedure, and gross margin tailwind should expand capacity and improve economics; full U.S. transition targeted by year-end pending inventory scale .
• Execution focus: Scaling SleepSync and digital scheduling ameliorates bottlenecks in patient flow; continued payer engagement supports reduced DISE requirements for low BMI patients .
• Regulatory watch: DOJ CID is an overhang but management does not expect operational impact; monitor disclosures for scope/timing/costs .
• International stable but small: OUS likely remains ~3–4% of mix; U.S. dynamics and capacity are primary revenue drivers .
• Capital allocation: Strong cash generation and completed $75M ASR provide flexibility; watch for opportunistic repurchases and investments to accelerate patient flow .