Inspire Medical Systems’ fourth quarter was marked by robust revenue growth and improved operating margins, yet the market responded negatively due to heightened uncertainty around reimbursement for its Inspire 5 system. Management attributed the quarter’s performance to strong patient demand, successful rollout of Inspire 5, and disciplined cost controls, with CEO Timothy Herbert highlighting “a significant increase in the fourth quarter in social media activity” and expanded physician training. However, the looming changes in procedure coding and associated professional fee reductions created caution among investors and management alike.
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Inspire Medical Systems (INSP) Q4 CY2025 Highlights:
- Revenue: $269.1 million vs analyst estimates of $266.3 million (12.2% year-on-year growth, 1.1% beat)
- Adjusted EPS: $1.65 vs analyst estimates of $0.68 (significant beat)
- Adjusted EBITDA: $79.3 million vs analyst estimates of $55.41 million (29.5% margin, 43.1% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.10 at the midpoint, beating analyst estimates by 23.1%
- Operating Margin: 17.1%, up from 13.3% in the same quarter last year
- Market Capitalization: $1.73 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Inspire Medical Systems’s Q4 Earnings Call
- Adam Carl Maeder (Piper Sandler) pressed for specifics on when reimbursement clarity for Inspire 5’s new coding would emerge; CEO Timothy Herbert said data would accumulate through the first half, with ongoing efforts to minimize reduction via payer engagement.
- Jonathan David Block (Stifel) asked about the relative impact of WISER Medicare prior authorization versus coding changes on revised guidance. Management clarified that coding uncertainty was the primary driver, with WISER causing only short-term disruption in six states.
- Robert Justin Marcus (JPMorgan) questioned how Inspire Medical Systems could achieve its wide guidance range given possible 50% fee cuts. Herbert pointed to modeling based on physician employment mix and anticipated payer negotiations, aiming for a lower reduction.
- Travis Lee Steed (Bank of America Securities) requested details on the pathway to a new CPT code and potential interim coding strategies. Herbert explained the dual-track approach: short-term mitigation and long-term pursuit of a dedicated Category I CPT code, avoiding temporary or miscellaneous codes.
- Danielle Joy Antalffy (UBS) explored how patient demand and physician bottlenecks are being managed as fee reductions may deter some doctors. Herbert said the company will focus on centers less affected by the fee change and leverage strong clinical data to sustain patient access.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will monitor (1) the pace and consistency of payer adoption for the new coding and any resulting changes in physician participation, (2) the resolution of operational hurdles from the WISER Medicare prior authorization program in key states, and (3) the impact of ongoing product innovation, including Inspire 6 development and SleepSync enhancements, on maintaining patient access and provider engagement. The evolution of competitive dynamics and further clarity on reimbursement rates will also be important signposts.
Inspire Medical Systems currently trades at $60.75, down from $68.21 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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