Inspire Medical Systems Q2 Earnings Call Highlights

Second-quarter revenue fell 7.6% to $200.6 million as coding and reimbursement disruptions reduced procedure volumes by approximately $40 million; adjusted EPS was $0.14 and adjusted EBITDA margin was 19.4%. Despite the revenue decline, stronger profitability and cash flow led Inspire to raise its 2026 outlook to $835 million–$875 million in revenue , with adjusted diluted EPS of $1.05–$1.45. The company ended the quarter with $415 million in cash and investments and no debt. Inspire launched Project Horizon to generate about $30 million in annualized capacity for growth investments, while expecting $20 million–$25 million in pretax restructuring charges, mostly in the third quarter. Management expects reimbursement pressures to ease in the second half of 2026. Inspire Medical Systems reported second-quarter revenue of $200.6 million, down 7.6% from a year earlier, as coding and reimbursement disruptions continued to affect procedure volumes. The company said results exceeded its internal expectations for profitability and cash flow, prompting it to raise its full-year outlook for revenue, adjusted operating margin and adjusted earnings per share. Chairman and Chief Executive Officer Tim Herbert said the company has been working with customers to navigate changes in coding and billing for its Inspire V sleep apnea therapy system. He said improved trends in prior-authorization submissions and customer education efforts have provided greater confidence that the disruption will lessen during the second half of 2026. Chief Financial Officer Matt Osberg said the revenue decline primarily reflected coding and reimbursement disruption, including the effect of declining prior authorizations observed during the first quarter. Diluted earnings per share were $0.01, while adjusted diluted EPS was $0.14. Adjusted EBITDA margin declined 90 basis points to 19.4%. Operating cash flow totaled $23.2 million during the quarter and $36.1 million for the first six months of the year, an improvement of $40 million from the prior-year six-month period, which Osberg attributed primarily to improved working capital. Inspire ended the quarter with $415 million in cash and investments and no debt. The company revised its 2026 revenue outlook to a range of $835 million to $875 million. It now expects adjusted operating margin of 4% to 6%, diluted EPS ranging from a loss of $0.42 to earnings of $0.17, and adjusted diluted EPS of $1.05 to $1.45. For the third quarter, Inspire forecast an 8% to 10% year-over-year revenue decline, while expecting sequential revenue growth from the second quarter. Osberg said the company expects approximately breakeven adjusted operating income in the third quarter, as higher revenue is expected to be offset by a sequential increase in marketing expenses. Management estimated that coding and reimbursement issues, including the WISER program, reduced second-quarter results by about $40 million. For the full year, the company estimates a total adverse effect of $120 million to $130 million, with the impact expected to decline sequentially in the third and fourth quarters. Coding and Reimbursement Developments Herbert said previously announced C-codes are now in place and have been incorporated into the WISER system for the six applicable states. Hospital and ambulatory surgery center reimbursement rates have remained unchanged, he said. For physician reimbursement, most Medicare Administrative Contractors do not require a -52 modifier for ...