Inspire Medical Revenue Falls 7.9% To $206.7 Million As Coding Troubles Hit U.S. Sales
The sleep apnea implant maker took a $24.1 million restructuring charge, narrowed its 2026 revenue range and said it plans a return to growth in 2027.
Inspire Medical Systems, which makes an implanted device for moderate to severe obstructive sleep apnea, said Monday that third-quarter revenue fell 7.9% to $206.7 million, driven mainly by weaker U.S. sales that the company tied to coding and reimbursement challenges. It posted a net loss of $24.4 million, or $0.84 per share, and narrowed its 2026 outlook in an 8-K filing.
A loss built on one-time charges
The loss includes $24.1 million of restructuring charges tied to Project Horizon and a $7.0 million legal settlement over a proposed pixel-tracking class action. On an adjusted basis, the company earned $0.14 per share, against a reported loss of $0.84. A year earlier it earned $0.34 per share, or $0.37 adjusted.
Operating expenses rose 12.8% to $206.6 million. Operating loss was $28.7 million, and adjusted operating income was $1.9 million. Gross margin rose to 86.0%, which the company credited to a heavier mix of its newer Inspire V system.
The company's investor presentation shows revenue up 3.0% from the second quarter. Operating cash flow was $46.4 million, down from $68.5 million a year earlier. Cash, cash equivalents and investments stood at $453.1 million at September 30, up $48.5 million from December 31, 2025.
Project Horizon and a narrower outlook
Project Horizon, the company's restructuring, frees $30 million of annualized operating expense for growth spending, mainly on patient flow, according to the investor presentation. It expects about $25 million of pre-tax charges in total, roughly 95% of them booked in the third quarter.
For 2026, Inspire now expects revenue of $850 million to $860 million, down from a prior range of $835 million to $875 million. Adjusted earnings guidance is $1.20 to $1.40 per share, versus $1.05 to $1.45 before, and adjusted operating margin is 4.5% to 5.5%. The presentation anticipates low-single-digit revenue growth in 2027.
"We are pleased to have delivered sequential growth in the third quarter, with U.S. performance coming in ahead of our expectations," said Tim Herbert, Chairman and CEO.
The billing code that matters
Inspire sells the device to hospitals and ambulatory surgery centers; it stimulates the nerve that moves the tongue forward to keep the airway open. The presentation lays out a reimbursement timeline. The American Medical Association's CPT panel rejected the company's first application for a new single-lead code in May. It approved a revised one in September, effective January 1, 2028.
Proposed 2027 Medicare outpatient payment rules from July include a 12% increase for hospital outpatient settings and 15% for surgery centers. The final rule is expected this month, with rates taking effect in January 2027.
Management hosts a call at 5:00 p.m. Eastern Monday.
The final 2027 Medicare outpatient payment rule, expected this month, will settle whether the proposed 12% and 15% increases hold.
