Inspire Medical Systems, Inc. (INSP Quick QuoteINSP - Free Report) delivered a loss of 41 cents per share in second-quarter 2023, narrower than the year-ago loss of 53 cents. The metric was also narrower than the Zacks Consensus Estimate of a loss of 51 cents.

Revenues in Detail

Inspire Medical registered revenues of $151.1 million in the second quarter, up 65.3% year over year. The figure surpassed the Zacks Consensus Estimate by 9.8%.

Per management, the top-line growth was driven by higher utilization at existing sites. The addition of new implanting centers and U.S. sales territories also complimented the improvement. The top line also benefited from strength in U.S. revenues and revenues outside the United States (All other countries).

Segment Details

Inspire Medical’s operations consist of two geographic regions — the United States and All other countries.

For the quarter under review, U.S. revenues of $144.7 million reflected an increase of 64.6% from the year-ago quarter on a reported basis. Per management, this upside was primarily driven by higher utilization at existing centers. Other growth drivers include the addition of new implanting centers, Inspire Medical’s continuing direct-to-consumer marketing and a higher number of territory managers.

During the reported quarter, Inspire Medical activated 72 new U.S. centers, thus bringing the total to 1,045 U.S. medical centers providing Inspire therapy. The company also created 19 new U.S. sales territories in the quarter, bringing the total to 261 U.S. sales territories.

Revenues from outside the United States totaled $6.3 million, up 81% year over year on a reported basis. Units sold outside the United States grew 72%.

Inspire Medical Systems, Inc. Price, Consensus and EPS Surprise

Inspire Medical Systems, Inc. price-consensus-eps-surprise-chart | Inspire Medical Systems, Inc. Quote

Margin Analysis

In the second quarter, Inspire Medical’s gross profit increased 64.3% to $126.8 million. However, the gross margin contracted 54 basis points to 83.9%.

Selling, general and administrative expenses jumped 46.9% to $112.6 million. Research and development expenses surged 112.1% year over year to $30.8 million. Operating expenses of $143.4 million increased 57.2% year over year.

Operating loss totaled $16.6 million, wider than the prior-year quarter’s operating loss of $14 million.

Financial Position

INSP exited second-quarter 2023 with cash and cash equivalents and short-term investments of $467.1 million compared with $452.1 million at the first-quarter end.

Cumulative net cash provided by operating activities at the end of second-quarter 2023 was $3.7 million against net cash used in operating activities of $18.7 million a year ago.

Outlook

Inspire Medical has upped its revenue outlook for 2023.

The company now projects revenues in the range of $600 million-$610 million (reflecting growth of 47-50% from 2022 levels), up from the earlier projection of $580 million-$590 million (reflecting growth of 42-45%). The Zacks Consensus Estimate for revenues is pegged at $590.8 million.

INSP continues to plan to activate 52-56 new U.S. medical centers providing Inspire therapy and add 12-14 new U.S. sales territories during each quarter of 2023.

Our Take

Inspire Medical exited the second quarter of 2023 with better-than-expected results. The robust improvement of the top line was impressive. Strength in year-over-year geographic results was promising.

The activation of new U.S. centers and the creation of new U.S. sales territories during the reported quarter also look encouraging. Management’s expectations of activating more U.S. medical centers and adding new U.S. sales territories during each quarter of 2023 also raise our optimism about the stock.

During the second quarter, Inspire Medical submitted the Inspire V neurostimulator premarket approval supplement application to the FDA. The company also received the FDA’s approval for Apnea Hypopnea Index indication expansion and increased Body Mass Index labeling (June) and the SleepSync physician programmer during the quarter. These also look promising for the stock.

However, dismal bottom-line results were disappointing. Rising operating costs weighed on the gross margin and resulted in its contraction. It also added to the woes. Continued operating loss incurred by Inspire Medical also raises apprehension.

Zacks Rank and Stocks to Consider

Inspire Medical currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT Quick QuoteABT - Free Report) , Integer Holdings Corporation (ITGR Quick QuoteITGR - Free Report) and Intuitive Surgical, Inc. (ISRG Quick QuoteISRG - Free Report) .

Abbott, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted earnings per share (EPS) of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.

Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.

Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.

Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.

Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.