Inspire Medical Systems, Inc.

Current report

Recent Developments

Current report

Coding and Reimbursement

Current report

Third-party payors require physicians and hospitals to identify the service for which they are seeking reimbursement by using Current Procedural Terminology (CPT) codes, which are created and maintained by the American Medical Association. Our various generations of Inspire therapy have been billed under different codes and reimbursement approaches throughout our history. In November 2025, the final 2026 Medicare reimbursement payments were announced. Since this announcement, there has been, and still is currently, significant uncertainty and changes directly and indirectly relating to the appropriate coding and reimbursement for our Inspire V therapy from CMS and Medicare Administrative Contractors (MACs), as well as other payors and stakeholders in the overall coding and reimbursement process.

Current report

Most recently, in April 2026 the American Hospital Association (AHA) recommended use of CPT code 64999 for Inspire V commercial cases. CPT code 64999 is an unlisted procedure code for the nervous system and is to be used when no specific CPT code exists to accurately describe a service. Because CPT code 64999 is non‑specific, reimbursement determinations typically required additional supporting documentation, which may result in increased claims review and processing time (in which case we will provide additional education and support to customers). The AHA's quarterly newsletter that included this recommendation indicates that its guidance does not dictate coverage and reimbursement policy as determined by local Medicare contractors or any other payer; nor is it a substitution for the judgment of a qualified practitioner in the application of HCPCS codes. Currently, many commercial policies still publish CPT code 64568 as the code to be used for the Inspire V procedure. As a result, Inspire continues to recommend that providers consider using the code listed in the applicable payer policy (recognizing that the payer policies may not reflect current coding guidance) and consult their provider's own compliance, coding advisors, and payers as needed.

Current report

In terms of Inspire V Medicare cases, in February 2026, the Centers for Medicare & Medicaid Services (CMS) announced that it would implement a series of HCPCS Level II C‑codes which were published on April 1, 2026. These C‑codes apply only to facility billing and do not address professional (or physician) fee reimbursement. We currently believe all Medicare Administrative Contractor (MAC) local coverage determinations identify CPT code 64582 as the appropriate code. In addition, based on information provided to us, most procedures billed year‑to‑date have been submitted and paid without the use of a modifier. Accordingly, we believe it is appropriate for providers to continue billing CPT code 64582 without a modifier. However, it is important to note that MACs may, in the future, require the use of a modifier for these services, which could affect professional fee reimbursement.

Current report

These and other recent coding and reimbursement decisions (particularly the uncertainty of the decisions and volatility of the announcements from multiple stakeholders) have adversely impacted our revenue in the first quarter and we anticipate that this will continue to adversely impact revenue during 2026. Inspire is actively engaging with relevant stakeholders regarding the reimbursement uncertainty affecting Inspire V and is providing support as appropriate - with a goal of limiting and moving past the uncertainty as soon as possible. In the short-term, we are working to minimize potential delays and continue to support patient access to therapy. This includes providing proactive education and assistance to our field team, our customers and physicians. We are also seeking a long-term solution, including the creation of a separate CPT code. There can be no guarantee as to the timing or outcome of the CPT code application.

Current report

In addition, the Wasteful and Inappropriate Service Reduction Model (WISeR) program, which is a government initiative requiring prior authorization of Medicare cases in six pilot states, began in mid-January 2026. During the first quarter, we experienced delays due to the new WISeR requirements for traditional Medicare procedures in the six WISeR states which adversely impacted our revenue in the first quarter. We anticipate that this will continue to adversely impact revenue for the remainder of 2026.

Current report

Commercial Organization

Current report

We continue to make significant investments in our sales and marketing organization. In 2025, we began optimizing our sales model through targeted territory consolidation and increased field clinical representatives (FCRs). This enables territory managers to focus on therapy awareness, surgeon recruiting and training, and driving the adoption of Inspire therapy, while FCRs provide technical and clinical expertise as well as educational and field support. As of March 31, 2026, we had 284 U.S. sales territories and 288 field clinical representatives, as compared with 295 U.S. sales territories and 275 field clinical representatives as of December 31, 2025.

Current report

GLP-1s

Current report

As a global company, our business is subject to local and international macroeconomic trends as well as geopolitical factors. Continued uncertainty around inflationary pressures, interest rates, regulatory changes (including changes to government funding of entitlement programs and changes to contain health care costs), foreign currency fluctuations, global trade policies and changes in tax laws, as well as actions by governments in response thereto, could create economic challenges which could negatively impact our business and results of operations. Further, geopolitical developments and uncertainties, including related to various ongoing global conflicts and tensions, may also create economic, supply chain, transportation, energy, and other financial or operational challenges, including disruptions to our suppliers or our customers' operations, which could negatively impact our business and results of operations.

Current report

•Revenue increased $3.3 million, or 1.6%, to $204.6 million driven by growth in the U.S. and International regions. U.S. growth was driven primarily by increased market penetration, partially offset by the adverse impacts of coding and reimbursement challenges and uncertainty as well as the WISeR program.

Current report

•Research and development expenses decreased $2.0 million, or 7.1%, to $25.8 million, primarily due to an increase in internal cost allocations into SG&A and cost of goods sold, partially offset by an increase in sourcing costs and clinical studies expenses.

Current report

•SG&A expenses increased $7.9 million, or 5.5%, to $152.2 million, primarily driven by higher payroll costs, marketing expenses, and legal fees.

Current report

•The effective tax rate was 571.2% compared to 28.1%. The increase in the effective tax rate was primarily driven by shortfalls related to stock-based compensation, which were driven by a decline in our stock price at award vesting and exercise compared to grant-date fair value (tax shortfall). For the three months ended March 31, 2025, we maintained a full valuation allowance against federal and state deferred tax assets, which was subsequently released at December 31, 2025. The majority of our stock awards vest annually during the first quarter of each year, which will generally concentrate the tax impact related to the tax shortfall in the first quarter of the year.

Current report

We rely on cash provided by operations for our material cash requirements, including working capital needs, investments in research and development, capital expenditures, other operating costs, and share repurchases. Our anticipated future uses of capital have not changed in any material respects from that described in our Annual Report. Our sources of capital have generally included sales of our Inspire system and registered offerings of our common stock.

Current report

Net cash provided by operating activities was $12.8 million for the three months ended March 31, 2026 compared to $6.7 million of net cash used in operating activities in the prior year period. The change was primarily driven by improved working capital, primarily in payables and receivables, partially offset by a higher net loss in the current period.

Current report

Net cash used in investing activities was $11.2 million for the three months ended March 31, 2026, compared to $1.6 million in the prior year period. The change was primarily driven by higher purchases of investments, partially offset by higher proceeds from the sale or maturity of investments.

Current report

Net cash used in financing activities was $7.5 million for the three months ended March 31, 2026, compared to $87.8 million in the prior year period. The change was primarily driven by higher share repurchases in the prior year period.

Current report

Off-Balance Sheet Arrangements

Previous report

We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe and Japan through a direct sales organization and we sell our Inspire system in Singapore and Hong Kong through distributors. Our direct sales force engages in sales efforts and promotional activities primarily focused on ENT physicians and sleep centers. In addition, we highlight our compelling clinical data and value proposition to increase awareness and adoption amongst referring physicians. We build upon this top-down approach with strong direct-to-consumer marketing initiatives to create awareness of the benefits of our Inspire system and drive interest through patient empowerment. We believe this outreach helps to educate thousands of patients on our Inspire therapy.

Previous report

Although our sales and marketing efforts are directed at patients and physicians because they are the primary users of our technology, we consider the hospitals and ASCs where the procedure is performed to be our customers, as they are the purchasing agents of our Inspire system. Our customers are reimbursed according to the coding and correlated payment by various third-party payors, such as commercial payors and government healthcare programs. Our Inspire system is currently covered on a per-patient basis for patients insured by commercial payors, under Local Coverage Determinations for patients insured by Medicare and Medicare Advantage, and under U.S. government contract for patients who are treated by the Veterans Health Administration. As of November 3, 2025, we have secured positive coverage policies with many U.S. commercial payors, including all large national commercial insurers, covering more than 300 million lives in the U.S. In addition, all seven Medicare Administrative Contractors provide coverage of Inspire therapy when certain coverage criteria are met.

Previous report

Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets.

Previous report

For the nine months ended September 30, 2025, 95.7% of our revenue was derived in the U.S. and 4.3% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue during the nine months ended September 30, 2025.

Previous report

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 report

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 nine months ended September 30, 2025, we recorded a charge of $2.1 million for excess component parts related to our Inspire IV system.

Previous report

Our products are shipped directly to our U.S. customers and to our Singapore and Hong Kong distributors on a purchase order basis, primarily by a third-party vendor with a facility in Tennessee, although we do ship some products from our facility in Minnesota. Warehousing and shipping operations for our European customers are handled by a third-party vendor with a facility located in the Netherlands, and warehousing and shipping operations for our Japanese customers are handled by a third-party with a facility in Japan. Customers do not have the right to return a non-defective product, nor do we place product on consignment. Our sales representatives do not maintain trunk stock.

Previous report

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 September 30, 2025, we generated revenue of $224.5 million with a gross margin of 85.8% and had a net income of $9.9 million compared to revenue of $203.2 million with a gross margin of 84.1% and a net income of $18.5 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, we generated revenue of $642.9 million with a gross margin of 84.9% and had a net income of $9.3 million compared to revenue of $563.1 million with a gross margin of 84.5% and a net income of $18.3 million for the nine months ended September 30, 2024. Our accumulated deficit as of September 30, 2025 was $282.6 million.

Previous report

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 report

Beginning late in the first quarter and continuing into the third quarter of 2025, in connection with awareness gained during our ongoing limited market release of the Inspire V system, we observed that some patients and physicians were 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 or early 2026. Additionally, beginning late in the first quarter and continuing into the third quarter of 2025, we observed 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 third quarter and into the beginning of the fourth 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 remainder of 2025 and early 2026. 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 report

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 remainder of 2025.

Previous report

We have a call center which we refer to as the Inspire Advisor Care Program. The primary purpose of this program is to assist patients with making a connection with a qualified healthcare provider based on their specific needs. In 2022, we initiated a digital scheduling program to facilitate and streamline patient access to care. We intend to continue to enhance and expand this scheduling capability during the remainder of 2025.

Previous report

We also continue to make significant investments in our sales and marketing by increasing our direct-to-consumer marketing efforts in existing and new markets and increasing the number of U.S., European, and Japanese sales representatives and sales support personnel. As of September 30, 2025, we had 336 U.S. sales territories and 268 field clinical representatives, as compared with 335 U.S. sales territories and 230 field clinical representatives as of December 31, 2024.

Previous report

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 government funding of entitlement programs, 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 report

Revenue

Previous report

We derive primarily all of our revenue from the sale of our Inspire system to hospitals and ASCs in the U.S. and in select countries in Europe and the Asia Pacific region. We recognize revenues from sales of our Inspire system when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms.

Previous report

Our revenue has fluctuated, and may continue to fluctuate, from quarter to quarter due to a variety of factors. For example, we have historically experienced seasonality in our first and fourth quarters. We have also previously experienced adverse impacts on our revenue due to the prior delay in obtaining EU MDR approval of our silicone-based leads and foreign currency exchange rates. In addition, we believe our revenue growth has been adversely impacted by lack of ENT surgeon capacity. If such impacts continue, our revenue growth may be further adversely impacted.

Previous report

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 report

Cost of goods sold consists primarily of acquisition costs for the components of the Inspire system, overhead costs, scrap, and inventory obsolescence, warranty replacement costs, as well as distribution-related expenses such as logistics and shipping costs, net of shipping costs charged to customers. The overhead costs include the cost of material procurement, depreciation expense for manufacturing equipment, amortization of internal-use software, and operations and quality supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel. We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively.

Previous report

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and we expect it will continue to be affected by a variety of factors, including manufacturing costs, the average selling price of our Inspire system, the implementation of cost-reduction strategies, inventory obsolescence costs, which generally occur when new generations of our Inspire system are introduced, and to a lesser extent the sales mix between the U.S. and countries outside of the U.S., as our average selling price in the U.S. tends to be higher than in other countries. Our gross margin may increase slightly to the extent our production volumes increase and we receive discounts on the costs charged by our contract manufacturers, thereby reducing our per unit costs, and when we implement price increases on our products, thereby increasing our revenue. On the other hand, our gross margin may decrease slightly to the extent our yields decrease, or materials and labor prices increase due to supply chain issues and inflation, thereby increasing our per unit costs. However, our gross margin may also fluctuate from quarter to quarter due to seasonality and foreign currency exchange rates.

Previous report

Research and development ("R&D") expenses consist primarily of product development, engineering, clinical studies to develop and support our products, regulatory expenses, quality assurance, testing, consulting services, prelaunch inventory, and other costs associated with the next generation versions of the Inspire system and SleepSync™, a cloud-based patient management system. These expenses include employee compensation, including stock-based compensation, supplies, materials, consulting, and travel expenses related to research and development programs. Additionally, these expenses include clinical study management, payments to clinical investigators, data management and travel expenses for our various clinical studies.

Previous report

We expense prelaunch inventory as R&D expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable, and we also expect future economic benefit from the sales of the product candidate to be realized.

Previous report

We expect R&D expenses to increase in the future as we develop next generation versions of our Inspire system and SleepSync™ and continue to expand our clinical studies to further expand positive coverage policies from private commercial payors in the U.S. and enter into new markets including additional European countries and the Asia Pacific region. We expect R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts and new clinical development activities.

Previous report

Selling, general and administrative ("SG&A") expenses consist primarily of compensation for personnel, including base salaries, stock-based compensation expense and commissions related to our sales organization, finance, information technology, human resources, and legal functions, as well as spending related to marketing, sales operations, and training and reimbursement personnel. Other SG&A expenses include training physicians, travel expenses, advertising, direct-to-consumer promotional programs, conferences, trade shows and consulting services, professional services fees, audit fees, insurance costs and general corporate expenses, including facilities-related expenses.

Previous report

We expect SG&A expenses to continue to increase as we expand our commercial infrastructure to both drive and support our planned growth in revenue and as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance, legal, and human resources personnel and information technology services. Additionally, we anticipate an increase in our stock-based compensation expense with grants of restricted stock units, performance stock units, and shares of our common stock purchased pursuant to our employee stock purchase plan.

Previous report

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 report

Revenue

Previous report

Revenue increased $21.3 million, or 10.5%, to $224.5 million for the three months ended September 30, 2025 compared to $203.2 million for the three months ended September 30, 2024. These results reflect an increase in sales of our Inspire system of $18.6 million in the U.S. and an increase of $2.7 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 report

Revenue generated in the U.S. was $214.4 million for the three months ended September 30, 2025, an increase of $18.6 million, or 9.5%, compared to the three months ended September 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

Previous report

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 report

Revenue generated outside of the U.S. was $10.1 million in the three months ended September 30, 2025, an increase of $2.7 million, or 37.3%, compared to the three months ended September 30, 2024. Revenue growth outside the U.S. was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system.

Previous report

Cost of goods sold decreased $0.6 million, or 1.9%, to $31.8 million for the three months ended September 30, 2025 compared to $32.4 million for the three months ended September 30, 2024.

Previous report

Research and development expenses decreased $1.9 million, or 7.2%, to $24.2 million for the three months ended September 30, 2025 compared to $26.1 million for the three months ended September 30, 2024. This change was primarily due to a decrease of $5.3 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, and a decrease of $0.1 million in regulatory submissions and clinical studies expenses, partially offset by an increase of $3.5 million in compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense.

Previous report

SG&A expenses increased $28.5 million, or 21.8%, to $158.9 million for the three months ended September 30, 2025 compared to $130.4 million for the three months ended September 30, 2024. The primary drivers of this change were an increase of $16.7 million in marketing costs, mainly for advertising, and $9.7 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 $1.7 million primarily due to legal fees, computer equipment and software expense, and depreciation expense. Travel expenses also increased $0.4 million.

Previous report

We recorded a provision for income taxes of approximately $3.6 million and $1.8 million for the three months ended September 30, 2025 and September 30, 2024, respectively. This $1.8 million increase was primarily due to an increase in federal taxes.

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Comparison of the Nine Months Ended September 30, 2025 and 2024

Previous report

Revenue

Previous report

Revenue increased $79.8 million, or 14.2%, to $642.9 million for the nine months ended September 30, 2025 compared to $563.1 million for the nine months ended September 30, 2024. The increase was attributable to a $75.7 million increase in sales of our Inspire system in the U.S and an increase of $4.1 million outside of the U.S. 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 report

Revenue generated in the U.S. was $615.2 million for the nine months ended September 30, 2025, an increase of $75.7 million, or 14.0%, compared to the nine months ended September 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 report

Revenue generated outside of the U.S. was $27.8 million for the nine months ended September 30, 2025, an increase of $4.1 million, or 17.2%, compared to the nine months ended September 30, 2024. Revenue growth outside the U.S. was primarily due to increased market penetration, and, we believe, increased physician and patient awareness of our Inspire system.

Current report — wording carried from elsewhere

There have been no material changes to our critical accounting policies and estimates from those described in our Annual Report.

Previous report — wording carried elsewhere

Revenue information by region is summarized as follows: