Inspire (INSP) and Sprout Social (SPT) Report Huge Q1 Results
Inspire (INSP) is soaring this morning as the company trounced Q2 estimates and management raised guidance. Revenue was up 335% to $55 million (beating by $9.1 million) while EPS of -$0.48 improved from -$0.88 in the year-ago quarter and beat by $0.14. Driving the results was the addition of 63 new U.S. centers (well above expectations for 35 to 40) and a jump in covered lives. Results were strong both in the U.S. (up 349% to $49.4 million) and Europe (up 201% to $3.6 million) with average prices of both $23.9K and $23.4K (U.S. flat, Europe up modestly).
Full-year revenue guidance goes from $192 - $196 million to $210 - $213 million, implying growth of 82% to 85%. Gross margin guidance also goes up a point to 85% to 86% and the targeted number of new U.S. medical centers per quarter jumps from 36 to 40 to a range of 48 to 52.
Moving forward, we should see a more normalized growth rate in procedures at both new and existing centers (roughly 50-50) as compared to oddities that arose in 2020 and the first half of 2021 due to the pandemic.
In terms of reimbursement, management says the new two-incision approach (versus three incisions previously) means the reimbursement rate per minute goes up to $10 from $8.50 (a 50-minute reduction in time per procedure, to 90 minutes). They are confident the odd reimbursement rate in the ASC setting will be ironed out in the final ruling and will meet with CMS in August. Recall this impacts less than 4% of procedures and the rate was not tenable (lower than cost), meaning docs likely wouldn’t do the procedures in this setting. More on this to come as things unfold.
Overall, it was a great quarter and supports my recent upgrade to buy as I think shares could head back to all-time highs near 250. BUY
Sprout Social (SPT) also beat expectations, delivering revenue growth of 42.4% to $44.7 million (beating by $1.9 million) and adjusted EPS of $0.00, beating by $0.10. This was the company’s first quarter not losing money. Customer count grew to 29,612 from 24,356 a year ago and up from 28,122 in the previous quarter, while those contributing over $10,000 in ARR grew by 55% to 3,936. Billings growth accelerated from 38% in Q1 to 47% in Q2. Those are great numbers and show this business is starting to grow faster. Updated full-year guidance implies growth of 37%, to $182 - $182.6 million, above consensus estimates for $180 million.
Stepping back, these results confirm what we have believed, that social media is becoming a strategic imperative as it is the primary communication channel for many customers and that businesses need help managing it. Sprout fills that need. It is an aggressive move but I’m upgrading to buy today (preferably below 100) to try and catch a wave of buying after this report as the stock breaks out to fresh all-time highs. Note that I may pull back to a hold rating quickly if SPT is not able to hold above the 95-96 area in the coming days. BUY