Inspire Medical Systems, Inc.

Previous wording

For the three months ended March 31, 2025, 96.2% of our revenue was derived in the U.S. and 3.8% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue during the three months ended March 31, 2025.

Current wording

For the six months ended June 30, 2025, 95.8% of our revenue was derived in the U.S. and 4.2% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue during the six months ended June 30, 2025.

Previous wording

We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers. Currently, all of our manufacturing is done in the U.S. and most components for our Inspire system are sourced in the U.S. We have experienced supply disruptions in the past. During the third quarter of 2023, we experienced an inventory supply issue related to our polyurethane-based stimulation leads, one component of the Inspire system used only in the European market at that time. In 2022, the FDA approved our silicone-based stimulation and sensing leads in the U.S., which replaced the polyurethane versions of the leads, and we stopped manufacturing polyurethane leads. We obtained certification under the EU MDR in July 2024, and silicone leads may now be marketed throughout the EU. During the fourth quarter of 2023 and extending into early 2024, a delay in EU MDR certification and the shortage of polyurethane-based stimulation leads caused delays to implant procedures which adversely affected our business in Europe, including a reduction in our European revenue, and thereby our consolidated revenue.

Current wording

We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers. Currently, all of our manufacturing is done in the U.S. and most components for our Inspire system are sourced in the U.S. We have experienced supply disruptions in the past.

Previous wording

We typically seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.

Current wording

We typically seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence, excess, and expiration, which could lead to inventory impairment charges. For example, during the quarter ended June 30, 2025, we recorded a charge of $2.1 million for excess component parts related to our Inspire IV system.

Previous wording

Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock. We have devoted significant resources to research and development activities related to our Inspire system, including clinical and regulatory initiatives to obtain marketing approval, and sales and marketing activities. For the three months ended March 31, 2025, we generated revenue of $201.3 million with a gross margin of 84.7% and had a net income of $3.0 million compared to revenue of $164.0 million with a gross margin of 84.9% and a net loss of $10.0 million for the three months ended March 31, 2024. Our accumulated deficit as of March 31, 2025 was $288.9 million.

Current wording

Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock. We have devoted significant resources to research and development activities related to our Inspire system, including clinical and regulatory initiatives to obtain marketing approval, and sales and marketing activities. For the three months ended June 30, 2025, we generated revenue of $217.1 million with a gross margin of 84.0% and had a net loss of $3.6 million compared to revenue of $195.9 million with a gross margin of 84.8% and a net income of $9.8 million for the three months ended June 30, 2024. For the six months ended June 30, 2025, we generated revenue of $418.4 million with a gross margin of 84.4% and had a net loss of $0.6 million compared to revenue of $359.9 million with a gross margin of 84.8% and a net loss of $0.2 million for the six months ended June 30, 2024. Our accumulated deficit as of June 30, 2025 was $292.5 million.

Previous wording

We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions. We continue to make investments in research and development efforts to develop our future generations of Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as additional European countries and the Asia Pacific region. For example, in August 2024, we received approval from the FDA for our next generation Inspire system ("Inspire V"), which we expect to fully launch in the U.S. in 2025.

Current wording

We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions. We continue to make investments in research and development efforts to develop our future generations of Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as additional European countries and the Asia Pacific region. For example, in August 2024, we received approval from the FDA for our next generation Inspire V system ("Inspire V,") which we fully launched in the U.S. in May 2025.

Previous wording

Beginning late in the first quarter and continuing into the second quarter of 2025, in connection with awareness gained during our ongoing limited market release of the Inspire V system, we began to observe that some patients and physicians are delaying Inspire therapy until Inspire V is available at their location. Additionally, beginning late in the first quarter and continuing into the second quarter of 2025, we began to observe that some of our customers are using their existing inventory of our Inspire IV system ("Inspire IV") prior to purchasing Inspire V systems. While we cannot quantify the impact at this time or predict if these patterns may change, we anticipate that the occurrence of patients and physicians delaying Inspire therapy until Inspire V is available and the destocking by some of our customers of their existing Inspire IV inventory may impact our consolidated revenue until Inspire V is fully launched and our customers have used their existing Inspire IV inventory, which is expected to primarily occur in the second quarter of 2025. We plan to continue to make Inspire IV systems available in the U.S. after the Inspire V launch as inventory levels allow, and outside the U.S., subject to our receiving the appropriate regulatory clearances for Inspire V in foreign markets.

Current wording

Beginning late in the first quarter and continuing into the second quarter of 2025, in connection with awareness gained during our ongoing limited market release of the Inspire V system, we began to observe that some patients and physicians are delaying Inspire therapy until Inspire V is available at their location. Although Inspire V was fully launched in the U.S. in May 2025, an implanting physician and center must meet training, contracting, and onboarding criteria prior to purchasing and implanting Inspire V. We expect to continue to see patients delay Inspire therapy until centers meet these criteria and Inspire V is available at their location through the end of 2025. Additionally, beginning late in the first quarter and continuing into the second quarter of 2025, we began to observe that some of our customers were using their existing inventory of our Inspire IV system ("Inspire IV") prior to purchasing Inspire V systems. We continued to observe this during the remainder of the second quarter and into the beginning of the third quarter of 2025. While we cannot quantify the impact at this time or predict if these patterns may change, we anticipate that the occurrence of patients and physicians delaying Inspire therapy and the destocking by some of our customers of their existing Inspire IV inventory may impact our consolidated revenue until Inspire V is fully available at our customer locations and our customers have used their existing Inspire IV inventory, which we expect to primarily occur in the second half of 2025. We have continued to make Inspire IV systems available in the U.S. since the Inspire V launch and expect to continue to make Inspire IV systems available moving forward as inventory levels allow, and outside the U.S., subject to our receiving the appropriate regulatory clearances for Inspire V in foreign markets.

Previous wording

Our direct-to-consumer marketing program's goals are therapy awareness, connecting patients with providers, and supporting the patient through their path to Inspire from start to finish. Our investments in advertising are designed to increase patient awareness and encourage them to visit our website. On our website, patients can explore educational materials and videos about sleep apnea, learn about the benefits of Inspire therapy, find physician and clinical site contact information, and stay informed about community awareness events. We also use the Inspire Sleep app as a valuable tool for patient education. Moving forward, we plan to refine and optimize our outreach strategies, with an emphasis on expanding digital advertising efforts to reach more qualified patients. We expect our direct-to-consumer expenditures to increase slightly over 2024 levels during the remainder of 2025.

Current wording

Our direct-to-consumer marketing program's goals are therapy awareness, connecting patients with providers, and supporting the patient through their path to Inspire from start to finish. Our investments in advertising are designed to increase patient awareness and encourage them to visit our website. On our website, patients can explore educational materials and videos about sleep apnea, learn about the benefits of Inspire therapy, find physician and clinical site contact information, and stay informed about community awareness events. We also use the Inspire Sleep app as a valuable tool for patient education. Moving forward, we plan to refine and optimize our outreach strategies, with an emphasis on expanding digital advertising efforts to reach more qualified patients. We expect our direct-to-consumer expenditures to increase significantly over 2024 levels during the second half of 2025.

Previous wording

We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S., European, and Japanese sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets. As of March 31, 2025, we had 343 U.S. sales territories and 245 field clinical representatives, as compared with 335 U.S. sales territories and 230 field clinical representatives as of December 31, 2024.

Current wording

We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S., European, and Japanese sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets. As of June 30, 2025, we had 348 U.S. sales territories and 259 field clinical representatives, as compared with 335 U.S. sales territories and 230 field clinical representatives as of December 31, 2024.

Previous wording

Since 2023, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, has continued to gain popularity as a weight-loss drug. In late 2024, Zepbound (tirzepatide), which was FDA approved for weight loss in 2023, was also FDA approved for treatment of OSA in patients with obesity and moderate to severe OSA. If GLP-1s are used to treat OSA in an indication for which Inspire therapy is approved, demand for our Inspire system for patients with that indication could be reduced. OSA is a multifactorial disease with many independent factors including age, gender, weight, and neck circumference. Inspire is designed to address antero-posterior airway collapse, also known as tongue base collapse. In contrast, patients with a higher BMI are subject to a larger neck circumference and present predominantly with lateral-wall collapse. A combination of tongue base collapse and lateral wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse. In April 2024, Eli Lilly and Company ("Lilly") published headline results from its SURMOUNT-OSA trial demonstrating a 50.7% reduction in Apnea-Hypopnea Index ("AHI") for patients in the therapy arm of the study using tirzepatide, a GLP-1 injection. Subsequently, in June 2024, Lilly published additional results from its SURMOUNT-OSA trial demonstrating 43% of participants treated with tirzepatide at the highest dose met criteria for disease resolution. In this context, "disease resolution" means achieving an AHI of fewer than 5 events per hour, or an AHI of 5 to 14 events per hour and an Epworth Sleepiness Scale ("ESS") score of ≤10. ESS is a standard questionnaire designed to assess excessive daytime sleepiness. Given a baseline AHI of 50.3, and based on these results, we believe that most patients enrolled in the study will continue to have residual moderate to severe OSA that will require treatment and fall within Inspire’s FDA-approved indication. While weight loss may help reduce a patient’s AHI and other OSA symptoms, numerous other studies have shown that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue base collapse. Based on our ongoing ADHERE patient registry, the average BMI of patients treated with Inspire therapy is 29 and the American Academy of Sleep Medicine guidelines recommend weight loss prior to surgery for patients with BMI over 35 and nonsurgical solutions for patients with BMI over 40. While we cannot quantify the impact, we believe that in the long term there could be a benefit to our business as a result of GLP-1s reducing the BMI of our prospective patients and increasing the overall number of eligible patients for our Inspire therapy, although there can be no assurance of such benefit at this time.

Current wording

Since 2023, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, has continued to gain popularity as a weight-loss drug. In late 2024, Zepbound (tirzepatide), which was FDA approved for weight loss in 2023, was also FDA approved for treatment of OSA in patients with obesity and moderate to severe OSA. If GLP-1s are used to treat OSA in an indication for which Inspire therapy is approved, demand for our Inspire system for patients with that indication could be reduced. OSA is a multifactorial disease with many independent factors including age, gender, weight, and neck circumference. Inspire is designed to address antero-posterior airway collapse, also known as tongue base collapse. In contrast, patients with a higher BMI are subject to a larger neck circumference and present predominantly with lateral-wall collapse. A combination of tongue base collapse and lateral wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse. In April 2024, Eli Lilly and Company ("Lilly") published headline results from its SURMOUNT-OSA trial demonstrating a 50.7% reduction in Apnea-Hypopnea Index ("AHI") for patients in the therapy arm of the study using tirzepatide, a GLP-1 injection. Subsequently, in June 2024, Lilly published additional results from its SURMOUNT-OSA trial demonstrating 43% of participants treated with tirzepatide at the highest dose met criteria for disease resolution. In this context, "disease resolution" means achieving an AHI of fewer than 5 events per hour, or an AHI of 5 to 14 events per hour and an Epworth Sleepiness Scale ("ESS") score of ≤10. ESS is a standard questionnaire designed to assess excessive daytime sleepiness. Given a baseline AHI of 50.3, and based on these results, we believe that most patients enrolled in the study will continue to have residual moderate to severe OSA that will require treatment and fall within Inspire’s FDA-approved indication. While weight loss may help reduce a patient’s AHI and other OSA symptoms, numerous other studies have shown that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue base collapse. Based on our ongoing ADHERE patient registry, the average BMI of patients treated with Inspire therapy is 29 and the American Academy of Sleep Medicine guidelines recommend weight loss prior to surgery for patients with BMI over 35 and nonsurgical solutions for patients with BMI over 40. While we cannot quantify the impact, we believe that some prospective patients are attempting a trial of GLP-1 medication to reduce their BMI and OSA severity prior to considering Inspire therapy. We believe that in the long term there could be a benefit to our business as a result of GLP-1s reducing the BMI of our prospect…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The global economy continues to experience increased inflationary pressures and market instability. Higher interest rates and capital costs, higher shipping costs and new or increased tariffs, increased costs of labor, international conflicts and terrorism, and weakening foreign currency exchange rates are creating additional economic challenges. These conditions may cause our customers to decrease or delay orders for our products.

Current wording

The global economy continues to experience increased inflationary pressures and market instability. Higher interest rates and capital costs, higher shipping costs and new or increased tariffs, regulatory changes, including changes to Medicaid funding, increased costs of labor, international conflicts and terrorism, and weakening foreign currency exchange rates are creating additional economic challenges. These conditions may cause our customers to decrease or delay orders for our products.

Previous wording

Our business has grown rapidly in recent years, resulting in substantially increased revenues, and we expect that our business will continue to grow. However, our revenue growth rate has generally declined in recent periods, and it may continue to do so as a result of the difficulty of maintaining growth rates as our revenues increase to higher levels.

Current wording

Our business has grown rapidly in recent years, resulting in substantially increased revenues, and we expect that our business will continue to grow. However, our revenue growth rate has generally decelerated in recent periods, and it may continue to do so as a result of the difficulty of maintaining growth rates as our revenues increase to higher levels.

Previous wording

Other income, net consists primarily of interest and dividend income, minimal interest expense, the impacts of foreign currency transactions and remeasurements, and gains and losses on investments.

Current wording

Other income, net consists primarily of interest and dividend income, minimal interest expense, the impacts of foreign currency transactions and remeasurements, gains and losses on investments, and an impairment charge related to a strategic investment.

Previous wording

Revenue increased $37.3 million, or 22.7%, to $201.3 million for the three months ended March 31, 2025 compared to $164.0 million for the three months ended March 31, 2024. These results reflect an increase in sales of our Inspire system of $37.8 million in the U.S. offset by a decrease of $0.5 million outside of the U.S. compared to the same prior year period. Overall revenue growth was primarily due to increased market penetration in existing centers, expansion into new territories and centers, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints.

Current wording

Revenue increased $21.2 million, or 10.8%, to $217.1 million for the three months ended June 30, 2025 compared to $195.9 million for the three months ended June 30, 2024. These results reflect an increase in sales of our Inspire system of $19.3 million in the U.S. and an increase of $1.9 million outside of the U.S. compared to the same prior year period. Overall revenue growth was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints and some U.S. patients and physicians delaying Inspire therapy until Inspire V is available at their location or while they trial GLP-1 medications.

Previous wording

Revenue generated in the U.S. was $193.6 million for the three months ended March 31, 2025, an increase of $37.8 million, or 24.3%, compared to the three months ended March 31, 2024. Revenue growth in the U.S. was primarily due to increased market penetration in existing centers, the expansion into new territories and centers, and, we believe, increased physician and patient awareness of our Inspire system.

Current wording

Revenue generated in the U.S. was $207.2 million for the three months ended June 30, 2025, an increase of $19.3 million, or 10.3%, compared to the three months ended June 30, 2024. Revenue growth in the U.S. was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints and some patients and physicians delaying Inspire therapy until Inspire V is available at their location or while they trial GLP-1 medications.

Previous wording

Cost of goods sold increased $6.0 million, or 24.0%, to $30.7 million for the three months ended March 31, 2025 compared to $24.8 million for the three months ended March 31, 2024. The increase was primarily due to product costs associated with the higher sales volume of our Inspire system experienced during the first quarter of 2025.

Current wording

Cost of goods sold increased $4.8 million, or 16.2%, to $34.7 million for the three months ended June 30, 2025 compared to $29.8 million for the three months ended June 30, 2024. The increase was primarily due to product costs associated with the higher sales volume of our Inspire system experienced during the second quarter of 2025, and, to a lesser extent, the $2.1 million charge associated with excess components related to Inspire IV.

Previous wording

Research and development expenses decreased $1.0 million, or 3.6%, to $27.8 million for the three months ended March 31, 2025 compared to $28.9 million for the three months ended March 31, 2024. This change was primarily due to a decrease of $5.4 million in ongoing research and development costs, primarily with respect to our next generation versions of the Inspire neurostimulator and our SleepSync™ platform, partially offset by an increase of $3.9 million in compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and an increase of $0.5 million in regulatory and clinical studies expenses and quality compliance fees.

Current wording

Research and development expenses decreased $2.7 million, or 9.2%, to $26.2 million for the three months ended June 30, 2025 compared to $28.9 million for the three months ended June 30, 2024. This change was primarily due to a decrease of $5.9 million in ongoing research and development costs, primarily with respect to our next generation versions of the Inspire neurostimulator, our physician programmer, and our SleepSync™ platform, partially offset by an increase of $3.1 million in compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and an increase of $0.1 million in regulatory submissions and clinical studies expenses.

Previous wording

SG&A expenses increased $18.7 million, or 14.9%, to $144.3 million for the three months ended March 31, 2025 compared to $125.6 million for the three months ended March 31, 2024. The primary driver of this change was an increase of $17.4 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount. In addition, general corporate costs increased $2.7 million primarily due to computer equipment and software expense, bank fees, and depreciation expense, as well as an increase in travel expenses of $1.8 million, partially offset by a decrease of $3.2 million of marketing expenses primarily consisting of direct-to-consumer initiatives.

Current wording

SG&A expenses increased $27.4 million, or 20.8%, to $159.5 million for the three months ended June 30, 2025 compared to $132.1 million for the three months ended June 30, 2024. The primary driver of this change was an increase of $18.2 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount. In addition, general corporate costs increased $2.6 million primarily due to legal fees, computer equipment and software expense, and depreciation expense. Also contributing to the increase were marketing costs, which increased $4.8 million, and travel expenses, which increased $1.8 million.

Previous wording

Other income, net decreased by $0.2 million, or 3.7%, to $5.6 million for the three months ended March 31, 2025 compared to $5.9 million for the three months ended March 31, 2024. The change was primarily due to a decrease of $0.9 million in interest and dividend income due to lower cash, cash equivalents, and investment balances, and an increase of $0.6 million in foreign currency translation and remeasurement gains.

Current wording

Other income, net decreased by $4.8 million, or 82.9%, to $1.0 million for the three months ended June 30, 2025 compared to $5.7 million for the three months ended June 30, 2024. The change was primarily due to an impairment charge of $4.0 million on one of our strategic investments which occurred in the quarter ended June 30, 2025, a decrease of $1.4 million in interest and dividend income due to lower cash, cash equivalents, and investment balances, partially offset by an increase of $0.7 in foreign currency translation and remeasurement gains.

Previous wording

We recorded a provision for incomes taxes of approximately $1.2 million and $0.7 million for the three months ended March 31, 2025 and March 31, 2024, respectively. This change was primarily due to an increase in state and local taxes.

Current wording

We recorded a provision for income taxes of $2.4 million and $1.7 million for the six months ended June 30, 2025 and June 30, 2024, respectively. This change was primarily due to an increase in state and local taxes.

Previous wording

As of March 31, 2025, we had cash, cash equivalents, and available-for-sale debt securities of $414.0 million, a decrease of $102.5 million from $516.5 million as of December 31, 2024. Working capital totaled $508.2 million as of March 31, 2025, a decrease of $34.1 million from December 31, 2024. We define working capital as current assets less current liabilities. The decrease in working capital was primarily due to the following factors:

Current wording

As of June 30, 2025, we had cash, cash equivalents, and available-for-sale debt securities of $410.7 million, a decrease of $105.8 million from $516.5 million as of December 31, 2024. Working capital totaled $479.8 million as of June 30, 2025, a decrease of $62.5 million from December 31, 2024. We define working capital as current assets less current liabilities. The decrease in working capital was primarily due to the following factors:

Previous wording

•a $96.3 million decrease in cash and cash equivalents primarily due to the share repurchases made during the first quarter under our share repurchase program, as well as inventory purchases and the payment of taxes on net share settlements of equity awards, partially offset by proceeds from sales of the Inspire system, proceeds from the exercise of stock options, and interest and dividend income;

Current wording

•a $101.4 million decrease in short-term available-for-sale investments and a $43.2 million decrease in cash and cash equivalents primarily due to the share repurchases made during the first quarter under our share repurchase program, as well as inventory purchases and the payment of taxes on net share settlements of equity awards, partially offset by proceeds from sales of the Inspire system, proceeds from the exercise of stock options, interest and dividend income, and the increase in long-term available for sale investments; and

Previous wording

•a $9.6 million decrease in accounts payable due to the timing of vendor invoices.

Current wording

•a $14.5 million increase in accounts payable due to the timing of vendor invoices.

Previous wording

•a $19.6 million increase in inventory balances, as we increased inventory levels to support higher sales and the anticipated 2025 launch of our next generation Inspire system;

Current wording

•a $41.5 million increase in inventory balances, as we increased inventory levels to support higher sales and the launch of Inspire V;

Previous wording

•a $15.5 million decrease in accrued expenses which decreased primarily due to the payment of year-end bonuses and commissions; and

Current wording

•a $9.6 million decrease in accrued expenses which decreased primarily due to the payment of year-end bonuses and commissions; and

Previous wording

•a $1.9 million decrease in prepaid expense and other current assets; and

Current wording

•a $0.9 million increase in prepaid expense and other current assets.

Previous wording

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. At March 31, 2025, we had $268.0 million in U.S. government securities, $75.6 million in corporate debt securities, $29.8 million in money market funds, and $16.6 million in certificates of deposit, commercial paper, and asset-backed securities. See Note 2 to our unaudited consolidated financial statements in this Quarterly Report for additional information on our investments.

Current wording

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. At June 30, 2025, we had $202.4 million in U.S. government securities, $83.1 million in money market funds, $76.7 million in corporate debt securities, and $24.7 million in certificates of deposit, commercial paper, and asset-backed securities. See Note 2 to our unaudited consolidated financial statements in this Quarterly Report for additional information on our investments.

Previous wording

In the three months ended March 31, 2025, our SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during 2025. Our SG&A expenditures, primarily for increasing headcount and advertising, may exceed any associated increases in revenues, and therefore would reduce our cash flow from operations. We also anticipate R&D expenses will increase during the remainder of 2025, primarily related to the ongoing development of the SleepSync™ platform and next generation products.

Current wording

In the six months ended June 30, 2025, our SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during 2025. Our SG&A expenditures, primarily for increasing headcount and advertising, may exceed any associated increases in revenues, and therefore would reduce our cash flow from operations. We also anticipate R&D expenses will increase during the remainder of 2025, primarily related to the ongoing development of the SleepSync™ platform and next generation products.

Previous wording

We spent $8.4 million on purchases of property and equipment in the three months ended March 31, 2025, mainly on manufacturing equipment and tooling for our next generation Inspire system, development of our SleepSync™ platform, and computer hardware and software. We anticipate further capital expenditures in 2025, primarily for additional manufacturing equipment and our SleepSync™ platform, computer hardware and software, and leasehold improvements on our corporate office buildings.

Current wording

We spent $17.4 million on purchases of property and equipment in the six months ended June 30, 2025, mainly on manufacturing equipment and tooling for Inspire V, development of our SleepSync™ platform, and computer hardware and software. We anticipate further capital expenditures in 2025, primarily for additional manufacturing equipment and our SleepSync™ platform, computer hardware and software, and leasehold improvements on our corporate office buildings.

Previous wording

We believe that our existing cash and cash equivalents and investments, which totaled $414.0 million as of March 31, 2025, together with cash flows from operations, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will continue to generate cash flows at the same levels achieved in prior periods.

Current wording

We believe that our existing cash and cash equivalents and investments, which totaled $410.7 million as of June 30, 2025, together with cash flows from operations, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will continue to generate cash flows at the same levels achieved in prior periods.

Previous wording

Beyond the next 12 months, our cash requirements will depend extensively on the timing of market introduction, and extent of market acceptance of, our Inspire system. Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry and expansion into new markets, whether we make strategic acquisitions, whether we repurchase more shares of our common stock, and competition. We cannot accurately predict our long-term cash requirements at this time. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition. We may seek additional sources of liquidity and capital resources through equity or debt financings, such as additional securities offerings or through borrowings under a new credit facility. There can be no assurance that such transactions will be available to us on favorable terms, if at all.

Current wording

Beyond the next 12 months, our cash requirements will depend extensively on the extent of market acceptance of our Inspire system. Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry and expansion into new markets, whether we make strategic acquisitions, whether we repurchase more shares of our common stock, and competition. We cannot accurately predict our long-term cash requirements at this time. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition. We may seek additional sources of liquidity and capital resources through equity or debt financings, such as additional securities offerings or through borrowings under a new credit facility. There can be no assurance that such transactions will be available to us on favorable terms, if at all.

Previous wording

The net cash used in operating activities was $6.7 million for the three months ended March 31, 2025 and consisted of net income of $3.0 million, non-cash charges of $33.7 million, and an increase in net operating assets of $43.4 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included depreciation and amortization expense which increased with additional purchases of property and equipment, accretion of investment discount due to higher investment balances, a change in the provision for estimated credit losses, and other, net. Operating assets include inventories, which increased as we continue to build inventory levels to support higher sales and the anticipated launch of our next generation Inspire system, and accounts receivable, which decreased slightly due to collections on the higher sales volume we typically experience late in the fourth quarter. Operating assets also include prepaid expenses and other current assets, which decreased compared to the same prior-year period, primarily due to various prepaid expenses and prepaid insurance. Operating liabilities include accounts payable, which decreased generally due to the timing of vendor invoice payments, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

Current wording

The net cash used in operating activities was $4.0 million for the six months ended June 30, 2025 and consisted of a net loss of $0.6 million, non-cash charges of $82.5 million, and an increase in net operating assets of $86.0 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of the accelerated recognition of stock-based compensation expense for employees who are retirement eligible in accordance with implementation of changes to the treatment of equity awards under the Inspire Medical Systems, Inc. 2018 Incentive Award Plan upon the holder's death, disability, or retirement, and granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included depreciation and amortization expense which increased with additional purchases of property and equipment, an impairment of a strategic investment, accretion of investment discount on our available-for-sale investments, a change in the provision for estimated credit losses, and other, net. Operating assets include inventories, which increased as we continue to build inventory levels to support higher sales and the launch of Inspire V, and accounts receivable, which increased primarily due to a temporary delay in the delivery timing of customer invoices following the implementation of a new portal and invoice delivery process, which has since been resolved, and higher sales which occurred during June 2025. Operating assets also include prepaid expenses and other current assets which increased slightly. Operating liabilities include accounts payable, which increased generally due to the timing of vendor invoice payments, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

Previous wording

The net cash provided by operating activities was $8.9 million for the three months ended March 31, 2024 and consisted of a net loss of $10.0 million, non-cash charges of $23.8 million, and a decrease in net operating assets of $5.0 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included accretion of investment discount due to higher investment balances, depreciation and amortization expense which increased with additional purchases of property and equipment, non-cash lease expense, stock issued for services rendered, and other, net. Operating assets include inventories, which increased as supply chain constraints eased, and accounts receivable, which decreased due to collections on the higher sales volume we typically experience late in the fourth quarter. Operating assets also include prepaid expenses and other current assets, which decreased slightly compared to the same prior-year period, primarily due to various prepaid expenses and prepaid insurance. Operating liabilities include accounts payable, which increased generally due to our increased business volume year-over-year and the costs to support the growth of our operations, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

Current wording

The net cash provided by operating activities was $8.8 million for the six months ended June 30, 2024 and consisted of a net loss of $0.2 million, non-cash charges of $55.5 million, and a decrease in net operating assets of $46.5 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included accretion of investment discount due to higher investment balances, depreciation and amortization expense which increased with additional purchases of property and equipment, non-cash lease expense, the benefit for estimated credit losses related primarily to accounts receivable with two healthcare systems, and stock issued for services rendered. Operating assets include inventories, which increased as supply chain constraints eased, and accounts receivable, which decreased due to collections on the higher sales volume we typically experience late in the fourth quarter. Operating assets also include prepaid expenses and other current assets, which increased primarily due to dividends receivable on our investments. Operating liabilities include accounts payable, which decreased generally due to reduced direct-to-consumer marketing spend in the second quarter of 2024, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was $1.6 million and consisted primarily of the purchase of investments of $16.7 million and the purchases of property and equipment of $8.4 million, mainly on manufacturing equipment and tooling for our next generation Inspire system, development of our SleepSync™ platform, and computer hardware and software, as well as $0.6 million for the purchase of a strategic investment, partially offset by the proceeds from sales or maturities of investments of $24.2 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2025 was $45.0 million and consisted primarily of proceeds from sales or maturities of investments of $173.7 million, partially offset by the purchase of investments of $108.7 million and the purchases of property and equipment of $17.4 million, mainly on manufacturing equipment and tooling for Inspire V, development of our SleepSync™ platform, and computer hardware and software, as well as $2.5 million for the purchase of strategic investments.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $19.5 million and consisted primarily of the purchase of investments of $55.7 million, the purchases of property and equipment of $11.7 million, mainly for testing systems and manufacturing equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements, partially offset by the proceeds from sales or maturities of investments of $47.9 million.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $13.9 million and consisted primarily of the purchase of investments of $112.0 million and the purchases of property and equipment of $24.1 million, mainly for testing systems and production equipment for Inspire V, our SleepSync™ platform, computer hardware and software, and leasehold improvements, partially offset by the proceeds from sales or maturities of investments of $122.2 million.

Previous wording

Net cash used in financing activities was $87.8 million for the three months ended March 31, 2025 and consisted primarily of share repurchases of $75.0 million under our share repurchase authorization and the payment of $19.2 million of taxes paid on net share settlement of equity awards, partially offset by $6.4 million in proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities was $84.1 million for the six months ended June 30, 2025 and consisted primarily of share repurchases of $75.0 million under our share repurchase authorization and the payment of $20.9 million of taxes paid on net share settlement of equity awards, partially offset by $8.6 million in proceeds from the exercise of stock options and $3.3 million in proceeds from the sale of common stock from our Employee Stock Purchase Plan ("ESPP").

Previous wording

Net cash provided by financing activities was $0.8 million for the three months ended March 31, 2024 and consisted of $3.6 million in proceeds from the exercise of stock options, partially offset by $2.8 million of taxes paid on net share settlement of equity awards.

Current wording

Net cash provided by financing activities was $7.9 million for the six months ended June 30, 2024 and consisted of $9.1 million in proceeds from the exercise of stock options and $3.4 million in proceeds from the sale of common stock from our ESPP, partially offset by $4.7 million of taxes paid on net share settlement of equity awards.