Inspire Narrows 2026 Outlook After Project Horizon Costs

The Tip Desk · November 10, 2026 · 3 min read

Third-quarter revenue was $206.7 million as the company booked $24.1 million of Project Horizon restructuring charges and narrowed full-year sales to $850 million to $860 million.

Inspire Medical Systems (INSP), a medical technology company focused on minimally invasive treatments for obstructive sleep apnea, reported third-quarter revenue of $206.7 million, down 7.9% from a year earlier, as U.S. sales continued to absorb coding and reimbursement headwinds.

The sequential path had already turned. After first-quarter revenue of $204.6 million, second-quarter sales were $200.6 million, and the third quarter rose to $206.7 million. The year-over-year decline widened from 7.6% in the second quarter after first-quarter revenue had grown 1.6%. Chairman and CEO Tim Herbert said U.S. performance came in ahead of the company’s expectations and that results suggested greater comfort among implanting physicians with the current coding dynamic.

Gross margin was 86.0%, up 20 basis points from the year-ago quarter, which the company attributed primarily to a higher mix of the Inspire V system, which carries a higher gross margin than Inspire IV.

Operating expenses rose $23.5 million, or 12.8%, to $206.6 million, after a $13.8 million year-over-year decline in the second quarter. The increase was driven primarily by $24.1 million of restructuring charges related to Project Horizon, $7.0 million of legal settlement expense associated with a proposed settlement of a pixel-tracking class action, and higher legal fees, partially offset by lower marketing expenses and lower stock-based compensation.

The company recorded an operating loss of $28.7 million, or a (13.9)% operating margin, versus operating income of $9.6 million, or a 4.3% margin, a year earlier. Adjusted operating income was $1.9 million, or a 0.9% adjusted operating margin.

Net loss was $24.4 million, or $(0.84) a share, compared with net earnings of $9.9 million, or $0.34 a share, a year earlier. Adjusted diluted EPS was $0.14. The effective tax rate was 2.5%, versus 26.7% a year earlier, which the company said was driven primarily by the current-period pre-tax loss and discrete tax charges related to restructuring.

Net cash provided by operating activities was $46.4 million, compared with $68.5 million in the year-ago quarter. The company said the change was driven primarily by lower net earnings and lower collections on receivables after a third-quarter 2025 cash recovery that followed temporary issues with a new invoice portal and delivery process in the second quarter of 2025. Cash, cash equivalents, and investments were $453.1 million as of September 30, 2026.

The AMA CPT Editorial Panel approved new Category I CPT codes for single-lead hypoglossal nerve stimulation, including Inspire V, set to take effect January 1, 2028. Herbert said a dedicated code set would give physicians and hospitals enhanced clarity around coding and reimbursement and, in turn, further enable patient access to Inspire therapy. He said that, with that progress and investment capacity being redirected into high-impact revenue growth initiatives through Project Horizon, the company believes it is positioned well for growth in the years ahead.

Inspire narrowed its previously announced full-year 2026 revenue outlook to $850 million to $860 million from $835 million to $875 million. It now expects adjusted operating margin of 4.5% to 5.5%, diluted EPS of $(0.36) to $(0.10), and adjusted diluted EPS of $1.20 to $1.40. The outlook assumes an effective tax rate of approximately 120% to 175%, an adjusted effective tax rate of 33% to 34%, estimated weighted average diluted shares outstanding of approximately 28.9 million, and capital expenditures between $35 million and $40 million.