Inspire Medical Systems, Inc.

What they do

Inspire develops and commercializes the Inspire system, a minimally invasive, closed-loop neurostimulation device that monitors breathing and delivers mild hypoglossal nerve stimulation to keep the airway open. The system holds FDA premarket approval (2014), EU MDR approval and Japan MLHW approval (2018), and has been commercially available in certain European markets since 2011. Physicians have treated more than 125,000 patients with Inspire therapy across the U.S., Europe and Asia.

Revenue drivers

• United States Inspire system sales — The dominant revenue source, representing 93.4% of second quarter 2026 revenue at $187.3 million, sold through a direct U.S. sales organization to physicians and sleep centers.
• International Inspire system sales — Sales in certain European markets and Asia Pacific, 6.6% of second quarter 2026 revenue at $13.3 million, up 33.6% year over year.
• Inspire V versus Inspire IV system mix — Gross margin rose to 85.5% in the second quarter of 2026 from 84.0% on increased sales mix of the Inspire V system, which carries a higher gross margin than Inspire IV.

Recent performance

Second quarter 2026 revenue fell 7.6% to $200.6 million from $217.1 million, driven by a 9.6% decline in U.S. revenue to $187.3 million that the company attributed primarily to coding and reimbursement challenges, partly offset by 33.6% international growth. Gross margin improved 150 basis points to 85.5% on favorable Inspire V mix. Operating loss narrowed to $0.5 million from $3.3 million, net earnings were $0.3 million, and diluted EPS was $0.01 with adjusted diluted EPS of $0.14. Operating cash flow was $23.2 million versus $2.7 million in the prior-year period, and cash, cash equivalents and investments rose $10.6 million to $415.2 million as of June 30, 2026. The effective tax rate was 89.9%, reflecting a tax shortfall related to stock-based compensation.

Strategy

On August 3, 2026 the company announced Project Horizon, a strategic growth plan intended to generate approximately $30 million of annualized growth investment capacity by aligning resources to revenue growth initiatives, streamlining the organization, and consolidating production to support quality, scale and efficiency. Management said the freed-up capacity would be redeployed into targeted growth initiatives. R&D spending continues partly on a next-generation generator, though second quarter R&D fell 5.8% to $24.7 million. The company raised its full-year 2026 revenue outlook to $835 million to $875 million.

Risks

• Single-product dependence — Sales of the Inspire system accounted for essentially all revenue in 2025, 2024 and 2023, so any failure of that product to gain or hold market acceptance would directly harm the business.
• Coding and reimbursement pressure — The second quarter 2026 U.S. revenue decline was attributed primarily to the evolving coding and reimbursement environment, and maintaining adequate coverage levels is listed as a principal risk.
• Competition and alternative therapies — The company cites competitive companies, technologies and pharmaceuticals in its industry as a principal risk, alongside CPAP, the leading therapy for moderate to severe OSA.
• Gross margin mix and third-party supply — Gross margin depends on continued shift toward the higher-margin Inspire V system, and the company relies on third-party suppliers, vendors and contract manufacturers.

Outlook

For full year 2026, management raised revenue guidance to a range of $835 million to $875 million, with adjusted operating margin of 4% to 6%. Guidance assumes an effective tax rate of approximately 95% to 100%, an adjusted effective tax rate of 30% to 35%, about 29.4 million weighted average diluted shares, and capital expenditures of $35 million to $40 million. Diluted EPS is guided to $(0.42) to $0.17 and adjusted diluted EPS to $1.05 to $1.45.