Inspire Medical Systems Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Travis Steed - Bank of America Corporation - Analyst : I wanted to first ask about the EPS guidance. I'm thinking of should we assume a linear path to profitability here, assuming there's some conservatism kind of built into the 2025 EPS guidance. And then also wanted to ask about the DOJ CID as well.

Question: Travis Steed - Bank of America Corporation - Analyst : And on the DOJ CID? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, INSP.N - Q4 2024 Inspire Medical Systems Inc Earnings Call

Question: Danielle Antalffy - UBS Equities - Analyst : Tim, I wanted to follow up on the commentary around the 300 centers that are doing the automated scheduling or online scheduling or, however you characterize it, sorry, if I'm mischaracterizing it, but have you seen -- what have you seen from a growth perspective at those centers? Have you seen growth accelerate from a patient volume perspective or maybe the right way to ask the question is more streamlined process? Maybe talk a little bit about what you've seen at those centers. What kind of impact that's having on the ability to work through volumes? And one quick follow up question on Inspire V and reimbursement, your favorite topic.

Question: Danielle Antalffy - UBS Equities - Analyst : And then just on Inspire V reimbursement, appreciate the commentary you provided thus far. I mean one of the things we talk about, I know you and I have spoken about this in the past, is physician reimbursement. And maybe you could talk a little bit about what you're hearing from your physicians and whether they're happy with reimbursement as it is or is that a barrier I guess I should ask to physicians doing the procedure if the physician fee does come down a little bit. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, INSP.N - Q4 2024 Inspire Medical Systems Inc Earnings Call

Question: Robbie Marcus - JPMorgan - Analyst : Very nice profitability. Maybe, for Rick. Considering that we are having -- going from a limited launch to a full launch of Inspire V sometime during the year, how do you want us to think about the phasing of revenues and expenses and margin as we go through the year? You talked about negative EPS in the first quarter, but how should we think about where -- how do you want us maybe versus historicals, and do you think the streets is in a good spot for first quarter to start the year?

Question: Robbie Marcus - JPMorgan - Analyst : And maybe one just on GLP-1s. I know it's painful to bring it up, but it just got added to one of the labels for sleep apnea. I wanted to see what, if anything, you're seeing in the field, the clinical discussions and just the latest on how you see Inspire fitting into the equation.

Question: Chris Pasquale - Nephron Research - Analyst : Rick, you made great progress in '24 on profitability. As I look at the '25 guidance, I know you said you're committed to improve margins for the year, but it doesn't seem like it's implying the same kind of leverage that we saw last year. So when we think about the big buckets for spending, R&D was down in '24. I think you said the DTC was going to kind of flatten out. Should we expect any of those to really ramp up here or what else is implied in the earnings guidance that you guys gave?

Question: Chris Pasquale - Nephron Research - Analyst : And with the Inspire V launch, when you do make that transition, is there any sort of near term impact on gross margin that we should think about? Is that initial inventory coming through going to be higher cost of production or is that not a factor?

Question: Chris Pasquale - Nephron Research - Analyst : Thanks, Tim.

Question: Anthony Petrone - Anthony Mizuho Securities USA - Analyst : I'll second the congrats to Pasquale there. It was a great game for the Eagles. Maybe a couple on Inspire V, Tim. Just when we think about, you ended the year at a little bit over 1,400 centers. Can you share how many centers in the United States actually have Inspire V at this point? And at what point do you expect that to be fully launched throughout all sites in the United States? And the quick follow up will just be on the sites that are doing it in the United States and Singapore, can you share how many cases they are doing per day? Like what is the uptick in daily cases at those early adopter sites?

Question: Richard Newitter - Truist Securities - Analyst : I'll just try to squeeze two quick ones, and congrats on the profit this quarter. I guess the first, I think you had spoken in the past about a back half versus first half waiting in part due to Inspire V. Could you just reconcile that with the comment that you feel comfortable with 1Q? And maybe just help us understand what the magnitude of that first half, second half might look like. And then just second, in your 10-K, you said that you're looking to drive an increase in utilization at established centers or growth in center utilization. I guess can you just talk about what exactly that means? I know you're not giving utilization growth guidance anymore, but just is there anything in that that you can parse out for us?

Question: Richard Newitter - Truist Securities - Analyst : But just to be clear, there's no major difference on first half, second half seasonality versus prior years in your current guidance because of Inspire V?

Question: David Rescott - Robert W. Baird & Co., Inc. - Analyst : Congrats on the finish of the year here. Two from us and maybe I'll ask both of them up front. Obviously, we have the heard the comments on the cadence for the full year broadly. I'm curious if you could maybe parse out, whether or not, international and specific as something that should be accretive to the growth. And then when you think about the pieces on the P&L for 2025, heard the comments on tax and spend, but just curious what your assumption is maybe for interest income, which is a bigger component, of the P&L.

Question: Adam Maeder - Piper Sandler Companies - Analyst : Congrats on the leverage in the quarter. I wanted to start with one on Gen V. In our checks, it's been pretty consistent. The 5th gen device should unlock faster procedure times and drive increased capacity. But I guess the question is how do you help kind of ensure that the extra OR capacity is allocated to Inspire versus the other ENT procedures that the doc has on his or her plate? And is there anything that you can do to kind of help the doc stack Inspire cases, and then I had a follow up?

Question: Adam Maeder - Piper Sandler Companies - Analyst : And just one quick one on gross margin for Rick. 84% to 86% for the full year is the guidance. Just wanted to kind of maybe flesh out some of the key assumptions there. And I guess specifically the impact from the Gen 5 launch. How much of a positive contributor is Gen 5 to gross margin this year or do we see more of kind of a pronounced impact benefit to gross margin in '26? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, INSP.N - Q4 2024 Inspire Medical Systems Inc Earnings Call

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : Tim, could you talk for a minute about just the logistics of transitioning back to the cranial nerve stimulation code? How does that work for Medicare and commercial patients, and do you envision a period of time when centers do both, Inspire IV and Inspire V, and I had one follow up?

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : And Tim, what are you assuming in the guidance for competition and any potential warehousing of patients before the full launch of Inspire V?

Question: Shagun Singh - RBC Capital Markets LLC - Analyst : I guess just to follow up on the DOJ investigation. Are you may be willing to share what your initial assessment is of the time and scope of this investigation? Any next steps or potential timelines if you can share, and estimates around potential cost to be incurred? Do you have a third-party looking into this? Just curious if you can share anything in addition to what you already have.

Question: Shagun Singh - RBC Capital Markets LLC - Analyst : And then I was hoping you can touch a little bit on your guidance philosophy. You're obviously exiting 2024 on a pretty high note, 25% year over year growth you're guiding to, high teens. What are you assuming in terms of a step down? Besides law of large numbers, it seems it's just that. But then what factors can really help you deliver another year of 2025 growth? It seems like the Inspire V launch you said, it's going to be a bit of a phased commercial launch. So maybe help us think through how you thought about the guidance and what you factored in for Inspire V.

Question: Brett Fishbin - KeyBanc Capital Markets, Inc. - Analyst : Just one for me. I was hoping you could provide a bit more color on where you currently stand around the inventory build for Inspire V ahead of the full market launch. It feels like this keeps coming up really as the primary driver of timing. And then maybe if you could just touch on if there was any like barriers with the production process that was preventing this from happening as fast as as you ideally wanted.

Question: Brett Fishbin - KeyBanc Capital Markets, Inc. - Analyst : And just really quick follow up on that one. Is there a general target level of inventory either in dollars or maybe like weeks of cases that you're trying to get to?

Question: Jonathan Block - Stifel Europe - Analyst : Maybe just to follow up on that last one. For Inspire V, I think I'm just trying to get a better feel for how back-end weighted it is or how it ramps throughout the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, INSP.N - Q4 2024 Inspire Medical Systems Inc Earnings Call And Tim, is it fair to say, look, this is going to be less than 5% of the overall procedures in 1Q? It seems like you're certainly targeting full conversion in 4Q. I mean do we think about it surpassing 50% evolves in the third quarter? Maybe you could just talk about the cadence and how we get there over the four quarters and then I'll ask a follow up.

Question: Jonathan Block - Stifel Europe - Analyst : And then just to pivot, UnitedHealthcare coverage changes. I think I've got this right, just sort of like reimplementing the DISE. The wording is a little awkward, but call it the implementation of the absence of complete blockage. What do you think about those changes, Tim? Do you expect them to stick? And was the reimplementation of the DISE a little bit of a surprise? Obviously with predictor, seemingly, you're hoping to go the other way with these payers throughout 2025.

Question: Jonathan Block - Stifel Europe - Analyst : Yeah. I thought I meant United but correct yes, United.

Question: Mike Polark - Wolfe Research LLC - Analyst : Just one for me, bigger picture. I know the center disclosure is going away in '25, although Rick, I did hear you say quarterly adds is probably about in the zone of what we've seen in the last couple years. So I'm square there. It gets you at the end of '25 to say 1,600 or 1,700 centers. I'm just curious before this disclosure goes away, like can you update us on your longer term view of what a potential center base might look like? What are you planning for over a three to five year horizon? What's the latest math there?

Question: Mike Kratky - Leerink Partners - Analyst : Tim, I'd love to circle back on some of those comments on the ASCs. So A, to what extent does driving continued adoption among ASCs fit into your strategic priorities this year? And then can you just help us understand what kind of an impact that could have just based on the different economics in that setting?

Question: Suraj Kalia - Oppenheimer & Co., Inc. - Analyst : Congrats on a strong end to the year. Tim, I appreciate your comments about not providing any more commentary on the DOJ investigation. It's still early, but maybe you can shed some color for us. Let's say 30,000 patients were implanted in FY24. How many of them would you say have not tried a CPAP at all?