The recent Q1 2024 earnings call for Inspire Medical Systems (NYSE: INSP) presented a mixed bag of growth, profitability, and uncertainty. While revenue was up and the company anticipates full-year profitability, a potential shadow looms: the delayed full launch of Inspire V, their next-generation hypoglossal nerve stimulation system.

The Delay and Potential Scenarios

Inspire maintains that the limited market release in 2024 and full launch in 2025 remain on track. However, this represents a shift from the initial timeline, which suggested a full launch in 2024. The company denies patient warehousing, but this contradicts the CEO's comments about the silicon-lead rollout in Europe, where re-labeling was required to restart sales in Germany. The CEO's statement that it will take "a couple of quarters" to return to a steady state implies a warehousing effect. This raises the critical question: is the delay a calculated move to maximize returns, or a sign of unforeseen challenges?

Scenario 1: Strategic Delay

Inspire may be strategically delaying the full launch to optimize inventory and ensure a seamless transition. This could indicate confidence in the product's market reception. In this scenario, the delay is unlikely to significantly impact 2024 revenue.

Scenario 2: Unforeseen Challenges

Conversely, the delay could indicate unforeseen challenges in development or regulatory approval. This raises concerns about the product's ultimate success and could negatively impact Inspire's long-term growth. A significant delay could allow competitors to gain traction, further eroding Inspire's market share.

Financial Performance and the Impact of Inspire V

Inspire's Q1 2024 revenue grew 28% year-over-year to $164 million. The company expects full-year profitability and increased its 2024 revenue guidance to $783-$793 million. However, the potential impact of Inspire V on future financial performance remains uncertain.

Assuming a full launch in 2025, we can consider two potential outcomes:

Outcome 1: Successful Launch

Let's assume Inspire V drives a 10% increase in average procedure volume due to reduced OR time and an additional 5% increase in utilization at existing centers. Given the company's guidance of adding 208-224 new centers in 2024, this translates to a potential revenue increase of approximately $32 million to $35 million in 2025.

Outcome 2: Delayed Launch or Market Underperformance

If Inspire V's full launch is pushed to late 2025 or 2026, or if the product doesn't achieve expected market penetration, the potential revenue increase outlined above would be delayed, and competitor encroachment could further erode Inspire's market share.

Revenue Growth and Operating Expenses

The chart below illustrates Inspire Medical Systems' revenue growth and operating expenses over recent years. While revenue has consistently increased, operating expenses have grown at a faster pace, indicating the company's investment in growth initiatives.

Key Takeaways

Inspire Medical Systems is experiencing strong revenue growth, driven by increased procedure volumes and expansion into new centers. The company expects to achieve full-year profitability in 2024, a significant milestone. The delay of Inspire V introduces uncertainty. The success of the product and its timely launch will be crucial for Inspire's long-term growth trajectory. The company's ability to manage operating expenses and improve leverage will be critical for sustaining profitability.

"Inspire Medical Systems celebrated the 10-year anniversary of the FDA's approval of its hypoglossal nerve stimulation therapy in Q1 2024. This marks a significant milestone for the company and highlights its commitment to providing innovative solutions for patients with obstructive sleep apnea."