Inspire Medical Systems (INSP) 2026 年第三季法說會：瞄準 2027 年成長

重點摘要

• 第三季營收為 2.067 億美元，年減 7.9%，但季增 3%，主因高於預期的美國市場表現抵銷了國際市場的疲軟。
• 毛利率增加 20 個基點至 86%，主要反映了毛利率高於 Inspire IV 的 Inspire V 銷售比重提升。
• 該公司公布營業虧損為 2,870 萬美元，調整後營業利益為 190 萬美元。調整後每股稀釋盈餘為 $0.14。
• 管理層將 2026 年營收展望縮窄至 8.5 億至 8.6 億美元，並估計代碼編碼與報銷挑戰將使全年營收減少約 1.2 億美元。
• Inspire Medical Systems 預期第四季營收將大幅季增，並表示對實現 2027 年營收低個位數年成長 越來越有信心。
• 單導線舌下神經刺激的專用第一類 (Category I) CPT 代碼預計於 2028 年 1 月 1 日 生效，管理層預期這將簡化 Inspire V 的代碼與報銷流程。

關鍵財務數據

營業費用包含 2,410 萬美元的「Horizon 計畫」重組費用、700 萬美元的和解費用以及較高的訴訟費用。這些項目部分被較低的行銷與股票報酬費用所抵銷。

業務與營運績效

Inspire V 佔本季手術的大部分。其較高的毛利率支撐了整體獲利能力，管理層並表示市場採用率維持強勁。

代碼編碼與健保報銷仍是主要的商業限制因素。管理層估計在 2026 年第三季造成 3,000 萬美元的負面影響，全年則約為 1.2 億美元。植入中心在臨時計費框架方面累積了經驗，公司預計他們將繼續使用該框架直至 2027 年。

據管理層表示，提出的 2027 年醫院與門診手術中心 (ASC) 報銷規則包含顯著幅度的調升，儘管在電話會議進行時尚未發布最終的 OPPS 規定。該公司在其初步的 2027 年展望中僅納入有限的報銷調升。

「Horizon 計畫」創造了約 3,000 萬美元的年化成長投資能力。Inspire 正將這些資金投入於患者教育、事前審查、Navigator 計畫、Inspire Connect 以及在美國高潛力市場增加約 40 個額外支援職位。這些職位旨在擴充現有區域內的容量，而非建立 40 個新區域。

公司還計劃增加來自治療心房顫動等疾病的心臟科醫師的轉診。該倡議重點在於轉診至耳鼻喉科 (ENT) 外科醫師，而非擴大執行植入手術的專科範圍。

由於德國市場進行去庫存，國際市場營收表現不佳，導致高個位數的衰退。管理層預計第四季國際營收將與去年同期大致持平。預計 2027 年國際業務占全球營收的比重將維持在個位數中段，且在較小的基期下，其成長率將高於全公司平均。

管理層財務指引

受惠於正常季節性因素與商業植入量增加，管理層預期 2026 年第四季營收將再次出現大幅季增。國際營收預計將與 2025 年第四季大致持平。

針對 2027 年全年，管理層的初步展望預期為 營收年增低個位數。該展望假設代碼環境趨於穩定、「Horizon 計畫」資助的商業投資、持續的市場成長，以及電池更換業務帶來的更高（但仍相對較小）貢獻。

風險與關鍵關注點

• 代碼編碼與報銷亂象仍是近期最大的逆風，且在電話會議期間，最終的 2027 年 OPPS 費率尚未獲得確認。
• 將於 2028 年生效的第一類 CPT 代碼仍需要 RUC 估值與 CMS 報銷審查。管理層承認，由於 Inspire V 是一項更快、效率更高的手術，醫師報銷金額可能面臨下降風險。
• 國際業務績效仍容易受庫存波動影響，特別是在德國，該國占美國以外地區營收的很大一部份。
• GLP-1 減重療法目前仍是逆風。管理層認為，如果體重減輕能使更多患者符合接受 Inspire 療法的資格，長遠來看可能會變成順風，但時間點與影響程度仍不確定。
• 爭取因報銷問題而延誤的患者取決於維持互動與改善患者流向；管理層指出，隨著時間推移，部分患者可能會離開治療漏斗。
• 競爭因素已納入公司的 2027 年展望中，儘管管理層表示目前的影響仍然有限。

分析師問答集錦

管理層將 2027 年低個位數成長展望描述為經歷一年實質營收壓力後的初步看法。管理層預期代碼穩定性、商業投資、電池更換以及患者流向改善等因素相結合，將支持營收恢復成長。

在電池更換方面，公司正利用大約 10 年前進行的植入手術來評估此機會，並假設具備高但非完全的更換轉換率。管理層表示，更換業務營收目前仍占整體業務的一小部分，但隨著時間推移應會變得更加顯著。

全新的第一類 CPT 框架預計將取代目前依賴付款方的計費演算法，並在聯邦醫療保險 (Medicare) 與商業保險機構中採用單一的主要植入代碼。另外兩個代碼將涵蓋修正或更換手術。

Inspire VI 目前仍處於演算法開發與臨床驗證階段。該產品旨在檢測睡眠狀態並自動啟動治療。管理層表示，以 2027 年送交 FDA 為目標，並將 Inspire VI 描述為 Inspire V 的韌體升級版。

管理層還計劃在 2027 年加大推動進入門診手術中心 (ASC) 的力道。在 ASC 執行的美國手術比例已從 10% 高段上升至 20% 中段，公司認為 Inspire V 非常適合該環境。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems Third Quarter 2026 Conference Call.

[Operator Instructions]

I'll now hand the call over to your first speaker, Louisa Smith from Gilmartin Group. You may begin the conference.

Unknown Executive

Thank you, Dilem. Joining me on today's call are Tim Herbert, Chairman and Chief Executive Officer, and Matt Osberg, Chief Financial Officer.

Earlier today, we released financial results for the 3 months ended September 30, 2026. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of federal securities laws.

All forward-looking statements, including, without limitation, those relating to our operations, financial results, financial condition, investments in our business, financial and operational outlook for 2026 and future periods, and changes in market access and different aspects of coding or reimbursement are based upon our current estimates and various assumptions.

Forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements.

For a discussion of these risks and uncertainties, please see our filings with the Securities and Exchange Commission, including our periodic reports on Form 10-K and 10-Q as well as the Form 10-Q, which we filed this afternoon with the SEC for the quarter ended September 30, 2026.

Inspire disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

This conference call contains time-sensitive information and speaks only as of the live broadcast today, November 2, 2026. With that, I'll turn the call over to Tim. Go ahead.

Timothy Herbert

Thanks, Louisa, and thank you to everyone for joining today's call. To start, the focus of our employees and the physicians and care teams we work with is delivering the best possible outcomes for patients.

OSA is a largely untreated condition, and the more we learn about it, the clearer it becomes that its impact goes beyond sleep to a patient's underlying health.

Our Inspire therapy is the market leader for hypoglossal nerve stimulation treatment for OSA. And we believe that better treatment leads to better sleep, which leads to better health. This belief shapes how we approach everything we do.

For the third quarter, we were pleased to deliver revenue and adjusted operating income slightly ahead of our expectations, with another strong quarter of operating cash flow and a 3% sequential revenue increase.

Coding has been a central topic this year. So I'll provide an update using the same near-, mid-, and long-term lens we shared in August. In the near term, we continue to work closely with physicians and staff on the new billing procedures.

As with any abrupt workflow change, it took time for implanting sites to get comfortable with the new rules. Over the last several months, centers have gained experience with a stable, temporary billing framework.

We expect centers to continue to use this framework and grow increasingly comfortable with it throughout 2027. For the midterm, back in July of this year, CMS announced the proposed OPPS rules for 2027 hospital and ASC reimbursement, but the final OPPS rule has not yet been released.

The proposed rule in July showed a significant increase, although we will confirm only once the final rule is published, which we expect to be later this week.

Longer term, we were pleased by the recently approved Category 1 CPT code for single-lead hypoglossal nerve stimulation, which covers the Inspire V device.

This dedicated Category I code is set to take effect on January 1, 2028, and stands to meaningfully simplify coding and reimbursement, thereby expanding access to Inspire therapy.

With the code now approved, the focus shifts to the RUC valuation and reimbursement review process. This process has been started, and physicians have been completing the RUC surveys sent out by the ENT Society.

We will continue to provide updates as these activities progress toward the codes' January 1, 2028, effective date. Overall, we are in a much more favorable position with coding than we were just last quarter and are increasingly confident in our path forward.

We are very pleased with the work our internal team and external partners did to help prepare us to have the best chance of securing a new code and achieving a favorable outcome.

I also want to highlight some of the exciting work we are doing in expanding our clinical evidence and how this strengthens our underlying value proposition.

Recent studies and publications include the full results of the Inspire V trial, a secondary analysis of the STAR trial data, a TriNetX meta-analysis, and the PREDICTOR study, all of which further support Inspire therapy's efficacy and positive impact on patient outcomes.

We remain excited about the strong data from the early clinical assessment of Inspire V, which we updated at the most recent ENT conferences, the American Academy of Orolaryngology and the International Sleep Surgical Society.

The accelerometer-based testing showed improved inspiratory overlap compared to Inspire IV, meaning more of the stimulation is synchronized with the patient's inspiration.

Median AHI also fell markedly at 6 months, showing a substantial reduction in the burden of disease.

As we build that evidence, we are looking beyond AHI as a quantitative measure of OSA severity, which is simply the number of breathing events per hour, to hypoxic burden, which measures the overall systemic impact of oxygen deprivation during sleep.

With further analysis of our STAR trial data, we saw a significant reduction in hypoxic burden with Inspire therapy, and even further independent studies are now looking at how that connects to cardiovascular risk and underlying health.

In the TriNetX analysis, Inspire therapy was associated with significantly lower odds of stroke, heart attack, and atrial fibrillation compared to CPAP.

What it tells us is that sleep apnea is not just a sleep problem; it is an overall health problem, and that is foundational for expanding access to care beyond ENTs and sleep doctors.

We are early in that work, but we currently have field team resources targeting a cardiology-based call point to expand our market reach into adjacent specialties.

We look forward to sharing more as this initiative develops. With the improved coding landscape, our primary commercial focus is shifting to improving patient flow.

By optimizing our organizational structure and consolidating production through Project Horizon, we created approximately $30 million of annualized growth investment capacity.

We are directing those funds to our highest impact revenue initiatives, which center on expanding access to care, improving patient education and engagement, and helping patients navigate their treatment journey.

We began making these investments in the third quarter and will further invest in the fourth quarter in order to build momentum for 2027.

One example is adding field roles in approximately 40 high-potential growth markets to improve patient flow, increase capacity, and support continued growth.

Further, we have made incremental marketing investments to create more targeted patient outreach and education and are continuing to enhance our prior authorization process, Navigator program, and Inspire Connect platform to improve our patient pathway.

Inspire remains the market leader in lasting OSA treatment, and we look to expand our market share. Adoption of Inspire V has been strong, and it now makes up the vast majority of our procedures.

The market remains underpenetrated, with a large and growing population of patients who could benefit from our therapy. As we look to 2027, we are encouraged by how the pieces are coming together.

The current coding framework is stable, with a new code coming in 2028; the evidence for Inspire V continues to build, and Horizon is directing resources to patient flow optimization initiatives.

Improvements like these take time to move through the system, but we feel confident that much of the disruption is behind us. The coding and reimbursement path is clear, and we are moving forward with conviction to drive a return to growth.

With that, I'll turn the call over to Matt.

Matthew Osberg

Thank you, Tim, and good afternoon, everyone. I'll begin with a review of our third quarter results before providing an update on our 2026 outlook.

Third quarter revenue was $206.7 million, down 7.9% from the prior year and up 3% sequentially from the second quarter. Our revenue achievement was driven by stronger-than-expected results in the U.S., which offset international revenue underperformance.

Gross margin was 86%, up 20 basis points from the prior year. The increase was primarily due to a higher sales mix of Inspire V, which carries a higher gross margin than Inspire IV.

Operating expenses were $206.6 million, an increase of $23.5 million over the prior year. The increase was primarily due to $24.1 million of restructuring charges related to Project Horizon, $7 million of legal settlement expense and higher legal fees, partially offset by lower marketing and stock-based compensation expenses.

Adjusted operating expense was $176 million compared with $181.8 million last year. Our operating loss was $28.7 million compared with operating income of $9.6 million last year.

Adjusted operating income was $1.9 million compared with $10.9 million last year. The effective tax rate was 2.5% compared with 26.7% last year, primarily driven by the current period pretax loss and discrete tax charges related to restructuring.

Our adjusted effective tax rate was 27% compared with 26.5% last year. We had a diluted loss per share of $0.84, and our adjusted diluted earnings per share was $0.14.

Our adjusted EBITDA margin declined 130 basis points to 18.3%, primarily due to the decrease in revenue. Turning to cash flow and the balance sheet.

Operating cash flow for the quarter was $46.4 million, with year-to-date operating cash flow of $82.5 million compared to $64.5 million in the year-to-date period prior year.

Our balance sheet remains strong with no debt and cash and investments of $453.1 million as of the end of the quarter. Our strong balance sheet and free cash flow conversion give us the opportunity to continue to invest in growth initiatives.

Turning to our outlook for the full year. We are narrowing our revenue outlook to a range of $850 million to $860 million. In addition, we now expect adjusted operating margin of 4.5% to 5.5%, diluted loss per share of $0.36 to $0.10, and adjusted diluted earnings per share of $1.20 to $1.40.

Our updated outlook assumes an effective tax rate of approximately 120% to 175%, an adjusted effective tax rate of 33% to 34%, weighted average diluted shares outstanding of approximately 28.9 million, and capital expenditures between $35 million and $40 million.

We estimate that our third quarter results were adversely impacted by coding and reimbursement challenges by approximately $30 million. For the full year, we are currently estimating the total impact to be approximately $120 million.

The estimated impact of these items on our results reflects high-level assumptions based on currently available data and incorporates inherent uncertainty related to quantifying how these items impact customers, physicians, and patients.

We are pleased to have delivered sequential revenue growth in the third quarter and are expecting another significant sequential revenue increase in the fourth quarter in both the U.S. and international, with fourth quarter international revenue expected to be approximately flat to Q4 last year.

As we look into 2027, based on our expectations for market growth, a more stable coding environment, growth initiative investments funded by Project Horizon, and a more significant contribution from battery replacement revenue, we are increasingly confident in our ability to return to growth and deliver low single-digit year-over-year revenue growth for the full year 2027.

In closing, despite the top-line pressure this year, I am pleased with our spending discipline and focus on prioritizing investments in revenue-generating activities.

Our team remains committed to providing strong patient outcomes and supporting our customers to expand the adoption of Inspire therapy while delivering value for our shareholders.

This concludes our prepared remarks. Dilem, please open the line for questions.

Operator

[Operator Instructions]

And I show our first question comes from the line of Jon Block from Stifel.

分析師問答

Jonathan Block

Tim or Matt, maybe you could just talk to the dynamics that you're seeing that allow for the low single-digit revenue growth in 2027.

Maybe that has something to do with the conversations you're having around reimbursement with some of your customers. What's the assumption around market growth as we think about additional players?

In other words, is that assume the market is growing mid-single or high single digits in 2027. And just sorry, one more sort of continuation of the same question. What does that reflect or embed in terms of the preliminary codes?

In other words, if the preliminary codes were to hold up, I think it was roughly low double digits for next year. Is that what you're putting in your assumptions?

Or could that be arguably upside to the initial low single-digit outlook?

Timothy Herbert

Jon, thank you very much. We look at where we are today and address the challenges, and Matt laid out the impact that we believe we had this year, and we're gaining confidence with all of our centers to get back to a growth situation.

A lot of the items that you identified, we built into it. We do understand that we do have competitors in the market, albeit not as impactful at this time, but we do build that into our assessment.

We also built a little bit into the coding, but we don't know where those codes are specifically going to land. We did estimate a little bit of an increase, but we're being careful until the final OPPS rules are released later this week.

So really turning the corner, getting back to a growth situation. We know the market dynamics are changing, but we know we're having significant improvements in the confidence of the code set that we have now, and that leads further into setting us up as we move into 2028 with the new code being put in place.

And so that's why we landed on this initial guide for 2027.

Operator

And I show our next question comes from the line of Adam Maeder from Piper Sandler.

Adam Maeder

I wanted to continue to pull on the guidance thread, but I guess I'll specifically ask about Q4 and what's implied.

I think at the midpoint of your full-year guidance range, it implies growth decelerates year-over-year from Q3 levels and is closer to similar to Q3, using the high end of your full-year range.

Hopefully, you followed that. It sounds like the reimbursement headwinds are continuing to abate, getting a little bit better. So why wouldn't the growth rate, Matt or Tim, I guess, improve as well in 4Q?

Timothy Herbert

Yes, sure. Let me comment, and I'll ask Matt to comment as well. I know Q4 is always the seasonality quarter for us.

We always have the largest step-up coming off the third quarter, and it's the biggest change for the dynamics of the market.

So we do expect to have a significant step-up because, of course, this is a quarter when we focus on commercial implants and those with high-deductible insurance. So yes, we've built that into our modeling and other comments, Matt.

Matthew Osberg

Yes. I think you've got the math right on there. And as Tim said, I mean, we're focused on stepping up from Q2 to Q3 as we did, and we've got another very large step-up even at the midpoint of our guide for Q4, and that's what we're focused on delivering.

Operator

And I show our next question comes from the line of Robbie Marcus from JPM.

Robert Marcus

Tim, if I'm doing the math right, I'm getting to about 7% implied U.S. growth, assuming you're the vast majority of the market for hypoglossal nerve in 2026 when I add back the $120 million.

What do you think, on an underlying basis, the right growth rate is for this market? And how do you think about the trajectory of that going forward, as 7% is still fairly sharp decel from the past few years? And what can you do to help improve that going forward if that is the right rate?

Timothy Herbert

Absolutely, Robbie. A great question. I think we're looking at multiple functions.

As we talked about before, we'll again highlight Project Horizon, where we can put more focus of our operating expenses towards revenue growth and not just a bigger hammer, but putting it into different channels, such as the cardiovascular channel, because we're really developing that clinical evidence and we can lean in from that standpoint.

We do believe the overall market continues to grow and that we need to continue to build capacity.

The other project we have going there is adding field reps in 40 of our largest markets to help capacity and help patient flow.

And then inside, we're building a lot more marketing programs to just help the patients through the process and streamline the whole opportunity, either with our digital communication with patients, helping our navigation systems, and even working towards a virtual sleep.

So we're focused on getting back to growing the market, and we've got 2027 in our line of sight, and we expect to continue to push that growth rate higher.

Operator

And I show our next question comes from the line of Anthony Petrone from Mizuho Financial Group.

Anthony Petrone

Sorry for the background noise. Maybe, Tim, just on kind of the process with RUC in 2027. When will the RUC survey AAA actually take place?

And when do you think the medical societies, AASM, AAO, will actually have comments from the survey? When do you expect that to actually hit in 2027?

And when you look ahead to 2028, can you just level set on this with a Category 1 code in place for 2028, how hospitals and ASCs are going to benefit, and how implanting surgeons are going to benefit?

And if I could sneak one more in on guidance, that would be helpful.

Timothy Herbert

Absolutely. I think the RUC process is a pretty set process. Once the code is approved, it gets handed over to the society.

In this case, the AAO is managing the rec process. They send surveys out to their membership. And they are looking for ENTs who are experienced in implanting the device, and they're asked to fill out a survey and return it.

There's a minimum number of respondents that the AAO requires. They pull that information, and they go to the RUC committee. I think the first panel meeting is probably in the January time frame, where they start to review much of that data and then the RUC proposes a number to CMS.

Of course, the first time we all see it officially is when CMS puts out the preliminary rule in July. So we don't coach any physicians on the process, but they did start the process before the AAO meeting in the ISSS meeting, the International Sleep Surgical Society meeting.

So there was awareness of the survey happening. And so hopefully, they have a good response from their membership, and they can build that into a good reimbursement.

And now I'm going to go back there -- what was your follow-up question?

Adam Maeder

Maybe just looking ahead to '28 with 3 Cat 1 codes in place, just how that's going to streamline the reimbursement process for hospitals, ASCs, and implanting surgeons.

Timothy Herbert

Well, I think the overall value is that there's simply one code. Whereas today, we have an algorithm.

And so depending upon if you're Medicare, you bill a C-code for a facility, or 645(b)(2), if you're a physician, commercial payers, you bill to policy and what the CPT code is in that policy. And what it does is it really streamlines the overall coding approach.

So in 2028, we can say for every payer, including for Medicare, you'll be building this code for implant. And the other 2 category codes are really just for replacement or revision, should they be required.

But there's really only one key Category 1 code, and everybody will use it for all payers.

Operator

And I show our next question comes from the line of Lawrence Biegelsen from Wells Fargo.

Larry Biegelsen

Tim, the 10-Q says that GLP-1s are still a headwind. Is there any way to quantify that? When do you think that turns to a tailwind?

And what are you assuming as new GLP-1s are approved for OSA with a BMI threshold of 27 as opposed to 30 today?

Timothy Herbert

Thanks, Larry. I think that we're really addressing the GLP-1s by watching that closely. We're coming up on a little over a year since they've been on the market and helping people lose weight, but monitoring their sleep.

And as we talked about in our prepared notes, it's not just about sleep. It's about health and making sure that patients are not just addressing the weight loss so they look better and feel better. But that they are, in fact, addressing their obstructive sleep apnea.

And when they get to a year out, many of the payers are requesting that the physician do an assessment to make sure they're properly addressing the obstructive sleep apnea because that is what they are being reimbursed to do.

And if they show that they're not being properly reduced to a safe level, then these patients are going to need to be on another therapy. So, in other words, we watch that closely.

We still track our patient flow closely, and we believe a lot of patients are losing weight and therefore now qualifying for Inspire, whereas with the high BMI and the lateral wall clot, they just were unable to be properly treated with Inspire until they lost some of that weight.

So again, Larry, we continue to track that very, very closely. We do believe that it will be a tailwind in the future as more and more patients lose weight and come into our funnel.

And for those patients that resolve their lateral wall class or resolve their sleep apnea with weight loss, they may have never had tongue-based obstructions for which they would need Inspire anyways.

So again, we're going to continue to talk about it. And I know you, and I will continue to discuss that well into the future.

Operator

And I show our next question comes from the line of Richard Newitter from Truist Securities.

Richard Newitter

Maybe just on the '27 outlook for low single-digit worldwide growth for that. I guess, really, I just want to know what you're assuming there for international, or if maybe you can give us a sense as to what percentage of total revenue international will comprise as we think about '27, and that, in fact, you are also anticipating a low single-digit U.S. growth trajectory next year.

Timothy Herbert

Thanks, Rich. I think we're going to continue to see international still be about a mid-single-digit percent of our global revenue.

I think they're doing a good job in specific target markets, primarily core Europe with Germany and France, U.K., Netherlands, Belgium, Switzerland, Austria. That's probably the core of all of it.

They're going to continue to grow at a higher rate than that, but it's coming off a smaller base. So mathematically, it will still probably be in the mid-single digits. But good prospects there.

Good progress in France because we're only a couple of years into having national coverage there to be able to further expand.

Richard Newitter

But that's a good low single-digit number for the U.S. Is that also what you're guiding to?

Timothy Herbert

That's a worldwide number. But I think international Europe will be higher than that, but it will still make up. It's coming from a small base. So it will still make up probably mid-single-digit percent of our overall global revenue.

Operator

And I show our next question comes from the line of Drew Curtis from Wolfe Research.

Unknown Analyst

This is Drew on for Mike. Can you help remind us of the Wiser-related headwinds embedded in '26? I think it was $125 million previously, but I would welcome any update to that number.

And then how much of that impact should we annualize in '27 versus representing it more as a transitory headwind?

Matthew Osberg

Drew, this is Matt. I'll take that one. So yes, we've tried to guide the year. I think the $125 million you're referring to is what we're considering all reimbursement and coding impacts.

So that's inclusive of Wiser, but Wiser is 80-20; Wiser is more at the $20 million than the $80 million in that. So we just updated in my prepared remarks.

We think that that estimate now for the year is about $120 million. And so that's what we updated related to that. We're working hard to improve the education and the momentum in the field and really continue to drive more efficiency and utilization in the flow so we can continue to benefit and get some of that back in 2027.

Operator

And I show our next question comes from the line of Travis Steed from Bank of America.

Travis Steed

The international business declined for the first time since the first quarter of '25. I was curious what the driver was this quarter. And when you think about the '26 guide, you did narrow the guide, so the top end did come down. So curious what took some of the upside away on the full year this year?

Matthew Osberg

Yes, Travis, this is Matt. So the impact we saw in Q3 in international is primarily around some destocking activities in Germany, and that led to their kind of high single-digit decline.

We did guide that there should be some recovery, and they should be about flat for Q4 year-over-year. So a little bit of recovery there. So yes, I think that's what we're seeing there.

Operator

And I show our next question comes from the line of Keith Hinton from Freedom Capital Markets.

Keith Hinton

Just one on the 2027 guide, and then I have a question on the commercial efforts.

So, in terms of the low single-digit revenue growth, can you just talk a little bit about the contribution there in terms of new patients versus battery replacements, or just how you're expecting replacements to trend year-over-year so we can think about new patients versus replacements?

And then I have a follow-up.

Matthew Osberg

Yes. Keith, this is Matt. From a replacement perspective, we're going back to the trajectory of when we start needing replacement revenue.

So think about 10 years back, look at the revenue, and then we're assuming a conversion rate of who would come back. We're not assuming 100% of that converts back into new batteries, but we're assuming a pretty high conversion rate.

So that's how we're thinking about that from a replacement perspective. What's exciting, it's the first time that we've actually called it out and you're the first person to have the opportunity to ask the question between de novo and replacements.

And I think that's something that's going to continue to grow and become more significant in the future. But again, it's still from 10 years back; you can look at where our revenue was.

It's still a small part of the overall program, but it's a new topic to be introduced into our business. So thanks for that.

Keith Hinton

Yes. So just in terms of adding more reps to the U.S., should we understand the commentary about the 40 additional territories to mean that there are going to be net 40 additional reps?

Or is there some transfer of investment from other areas? And then how should we think about the field clinical reps? Should that continue to stay at kind of 1:1?

And then related to that, just on the cardiology call point, are you really going after cardiologists looking for referrals to ENT surgeons to perform the surgery?

Or are you actually looking to target cardiac surgery surgeons to perform the procedure themselves?

Matthew Osberg

Yes. Let's work backwards. We want the referrals. We know the cardiovascular physicians are working with patients who have atrial fib that have had an event, and they need to assess those patients for obstructive sleep apnea and to be able to refer those back over to an ENT.

So we're not looking to expand the surgical call point at this time, but definitely want to work the referral aspect of it. And then backing up.

Yes, we are thinking it's a net 40 increase. We're adding 40 heads into, as Tim said, markets where we think we've got significant potential to grow and improve the patient pipeline there.

And that shouldn't displace or change how we're thinking about FCRs and how we built that structure to date. Right. And just comment on that. What we're talking about is not increasing 40 new territories, but adding capacity within the territories that we have.

And these are the territories that are at the cusp of expanding to really high-volume territories.

They just don't have enough support to drive patient flow, support the referral networks that we just got done talking through, and support the overall scheduling and management of centers within that territory.

So really, it's a support role for territory managers, but we're not looking at adding 40 specific territory managers. It's more of a support function there.

Operator

And I show our next question in the queue comes from Suraj Kalia from Oppenheimer.

Suraj Kalia

Tim? Can you help us? I appreciate all the commentary on the previous question. I was curious on a different topic on the SG&A line item, Tim.

I understand the market dynamics and how you are managing things. But in terms of the selling part of the equation, how has that changed? Your revs were up like mid-single, little high single digits, but your SG&A bumped up pretty significantly.

So help us understand on the ground what we should infer from that tactically and more strategically?

Matthew Osberg

Suraj, it's Matt. Maybe I'll just start with the SG&A side of that and maybe that leads to the next part of the question.

So if I'm thinking about our SG&A from the second quarter to the third quarter, we had a pretty significant increase. The majority of that increase came from our increase in marketing expense. We put a pretty significant investment in Q3.

So that's really driving our SG&A increase from the second quarter. And then year-over-year, we've significantly reduced our adjusted operating expenses from last year.

Operator

And I show our next question in the queue comes from the line of Michael Sarcone from Jefferies.

Michael Sarcone

So Tim, you talked about the rough process going on, and we'll get a single code that should reduce some of this complexity.

I guess on the other side of it, is there any risk that, I guess, from an implanting physician standpoint, because Inspire V is a quicker, more efficient procedure, could that professional fee go down to the point where it's potentially detrimental to new implanting surgeons signing on?

Timothy Herbert

I think that's a very fair question and one that we need to watch 2 things.

Number one, we encourage significant members of the ENT community to submit surveys such that when the AAO has a database, it has a significant database to get an accurate measurement of the true cost of performing the procedure, not just the surgical time, but also the in-office support time. And the third leg of it is the malpractice.

That's a calculated number. So as long as they're measuring all 3 elements of it and the RUC is able to work through that, it should be a pretty accurate measurement of what the true cost of ENT and managing these patients should be.

The advantage that we have going into this is Inspire V is performed by well over 1,000, 1,500 surgeons today, whereas if you go back to when we valued 64582, it was a much smaller sample size for which they had to work.

So it all comes down to the number of respondents that they get and the data that is provided to the RUC process. There's always a risk of a reduction in reimbursement, but that goes along with the Inspire V being a much more efficient procedure and also making sure that they have good partnerships with their sleep physicians who do the longitudinal management of patient care, and they have different CPT codes that they build.

So we'll monitor this very closely, obviously.

Operator

And I show our next question comes from the line of David Rescott from Baird.

David Rescott

I wondered if you could provide some maybe more color on this $1 I think, $20 million reimbursement headwind number you called out. Curious if these are patients that are essentially lost from the funnel or ones that you ultimately do see that you could recapture?

And if it is more of the latter, how are you assuming that some of this recapture of these patients pulls through relative to the low single-digit guide in 2027, and what that implies for the overall pieces to growth next year when you think about de novo plus recapture plus maybe some of these limited replacement batteries or replacement?

Timothy Herbert

Yes. Thanks, David. We try to track all those patients. One of the comments we made in the prepared remarks was around the marketing initiatives that we have.

A lot of that is maintaining communication with these patients and gaining the proper consent to be able to keep them updated on progress and how their centers are doing, and making sure that they can get appointments with their health care provider to be able to be assessed and still be interested in receiving Inspire.

Yes, as time goes on, patients do tend to go away, but I do think a lot of them are still in the queue looking to gain Inspire therapy.

As we continue to get more confidence and comfort around using the code set that's in place and growing that education that we'll continue to grow utilization and those patients will be able to receive Inspire therapy.

So we don't think they're gone. What we're trying to do is make sure we improve all of our communication techniques to be able to keep them informed both from the time they come to the website to go to our call center to being in the process and even communicating with them after they receive therapy and they can track their therapy with the new Inspire app that will be coming out.

So really, improving communication is a key initiative that we're working on as part of Project Horizon.

Operator

And our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets.

Brett Fishbin

I think you commented a little bit on Inspire VI at some recent conferences, and it sounded like 2027 might be in place for a potential PMA submission.

I was curious if you could just provide any updates on the timeline here and then what the key steps are before you're ready to submit.

Timothy Herbert

Thanks, Brett. You know I love the technology talk, so you brought it up.

So Inspire V6 is progressing in the development stages. The intention of 6 is to take therapy adherence to the next level. When we describe the benefits of Inspire V, it improves outcomes by reducing inspiratory overlap.

So when a patient inhales, we can stimulate the airway and maintain an open airway, thereby reducing the burden of OSA disease. What Inspire VI is meant to do is detect sleep.

And so when patients fall asleep, the device automatically turns on. And this automated sleep detection will improve outcomes because the patient no longer needs to turn the device on at night.

We are in the final stage of algorithm development. There's a series of algorithms that are part of the package. We are in clinical validation of this.

We're doing the algorithm development and validation. And we're targeting if we can get to the FDA next year would be a good target. We have been in communication with the FDA already.

So very excited about Inspire V and very excited about Inspire VI, which is just a firmware upgrade to Inspire V. So more to come on that in the near future.

Operator

And I show our next question comes from the line of Mike Kratky from Leerink Partners.

Michael Kratky

Maybe going back to OUS. So I understood about some destocking impact in Germany having an impact on OUS in 3Q that sounds like it should normalize this quarter.

But I believe you also mentioned some overall OUS revenue maybe expected to be flat year-over-year in 4Q. So just curious if there are any other factors contributing to that or what other markets might be weighing on OUS growth?

Matthew Osberg

Yes. Mike, this is Matt. So Germany is a very significant portion of our OUS revenue. And so the destocking in Q3 was the primary driver for it to be down 9%.

We think they'll start to recover a lot of that. And so the guide we had for fourth quarter was that OUS would be flat year-over-year in fourth quarter, picking up some of that recovery, but not yet growing back to double digits like they were in the first half of the year.

Operator

And I show our next question in the queue comes from the line of Daniel Markowitz from Evercore ISI.

Daniel Markowitz

The first one, there seem to be several factors supporting a return to growth in '27, which you highlighted, lapping the $120 million headwind on greater reimbursement clarity next year, the Project Horizon investments, and then the potential reimbursement upside.

In that context, would you say it's fair to characterize the initial low single-digit outlook as a prudent early view? Or are there some offsets to those tailwinds on the other side that we should keep in mind as well? And then again, I had one clarifying question as well.

Timothy Herbert

Yes. I think we want to put the initial based on where we are. We know that we've had significant revenue reduction this year, and we need to turn the corner, come back.

We do believe there are, as you identified, several elements that get us back into a growth situation. And going back to a question from earlier from Ravi, we expect to push that growth higher over time.

But coming from a single-digit reduction this year to turning the corner, we think that's the right guide for us to lean into and get us back into a growth situation.

We look forward to achieving that and working further in the future.

Operator

And I show our last question in the queue comes from the line of Chris Pasquale from Barclays.

Christopher Pasquale

Tim, the number of U.S. territories ticked down again; I think it's 5 quarters in a row. Where are you at now with the U.S. commercial organization?

Do you see it stabilizing around the current level? And then you talked about investing in these 40 high-potential territories. What criteria are you looking at to steer that investment? And is this targeted at opening more centers in those territories or going deeper in existing accounts?

Timothy Herbert

Yes. Thanks, Chris. Welcome back. The U.S. territories are stabilizing, and we have some turnover, but we're able to recruit and hire territory managers to be able to fill those roles.

That's not, again, what these 40 positions are for; these 40 are to drive capacity and territories that can expand further. And it is twofold. It is both opening new centers in those territories, but it's also in regard to growing utilization at existing centers.

And we pushed this hard in the fourth quarter. We want to get back to opening more centers because we had to kind of work through the whole coding clarification, and we're going to be watching the final OPPS rules, and we want to do a greater push to start transitioning to ASCs, as the percent of procedures at ASCs has grown from the high teens to the mid-20% of our implants in the United States recently because Inspire V lends itself so well to ASCs.

So we're going to see a strong push for that in 2027. And I think the 40 staffers that will help some of the top territories will really start pushing more growth in ASCs, as well as growth in existing hospitals and opening new centers as a whole. So thanks for that.

For everybody, I want to thank you all for your questions and your continued interest in Inspire. I'd like to thank our employees for their dedication this year, the physicians and care teams who partner with us, and the patients who trust us with their care.

We look forward to updating you on progress on our Q4 call as we close out 2026 and move into the new year. Thank you all very much.

Operator

Thank you. This concludes today's conference call. You may now disconnect.