Q4 2022 Inspire Medical Systems Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
We'll continue to increase utilization at our existing centers.
While adding capacity by opening and training new centers.
Ongoing expansion of our call center and investment in our DTC campaign support these initiatives and we are seeing enhanced productivity from these efforts, which is driving our improved financial performance.
Finally, the many R&D achievements in 2020 to highlight our commitment to improving patient outcomes and enhancing both the patients and health care providers experience with inspire therapy we.
We remain extremely excited about our future prospects and are confident that we have the appropriate standard strategy in place to drive long term stakeholder value.
With that I'd like to turn the call over to Rick for his review of our financials.
Thank you Tim and good afternoon, everyone total revenue for the fourth quarter was $137 9 million or 76% increase from the $78 4 million generated in the fourth quarter of 2021.
U S revenue in the fourth quarter was $134 3 million, an increase of 78% from the $75 6 million in the prior year period.
The growth in the U S reflects several factors, including higher utilization at existing centers.
Addition of new implanting centers.
Expanded direct to consumer marketing and a higher number of territory managers.
Revenue outside the U S increased to $3 6 million, which is a 28% increase year over year on a reported basis, while units sold outside the U S grew 43% year over year.
The U S average selling price in the fourth quarter was $24 $900 compared to 23900 in the prior year period.
The increase reflects our price uplift that began in may of 2022.
We expect U S asps to remain steady at the current level.
The ESP outside the U S was 2400 during the quarter compared to 22700 in the fourth quarter of 2021.
Which was driven by unfavorable exchange rates and a lower ASP for distributor sales in Asia.
Gross margin in the fourth quarter was 83, 9% compared to 85, 8% in the prior year period, primarily due to higher cost of certain component parts and additional costs associated with the transition to our new silicone base fleet, partially offset.
That by the price increase that began in the second quarter.
Total operating expenses for the fourth quarter were $116 1 million.
An increase of 68% as compared to $69 1 million in the fourth quarter of 2021.
This planned increase was due to expansion of our sales organization.
Increased direct to consumer marketing programs.
Continued product development efforts and general corporate costs.
The increase in operating expenses is reflective of our ongoing plan to drive continued long term growth and to make investments in key areas of our business.
Interest and dividend income totaled $3 4 million in the fourth quarter compared to 15000.
In the prior year period.
This higher income was driven by higher interest rates on our increased cash balances.
We had no interest expense in the fourth quarter, having paid off our outstanding debt in the third quarter of 2022.
We are proud to announce our first profitable quarter in the history of inspire.
Net income for the fourth quarter was $3 2 million.
<unk> two a $2 4 million net loss in the prior year period.
The diluted net income per share for the fourth quarter was 10.
Compared to the net loss per share of <unk> <unk> in the fourth quarter of 2021.
The weighted average.
Our number of diluted shares outstanding for the fourth quarter was $28 9 million.
We expect Q1 weighted average shares outstanding to be approximately $29 1 million.
During the fourth quarter, we generated $24 million in cash and we ended the year with cash and investments totaling $451 million.
This strong cash position allows us to remain focused on executing our growth strategy.
Increasing procedure volumes at existing centers, while training and opening new implanting centers.
For the full year 2022 revenue totaled $407 9 million or 75% increase.
Over $233 4 million.
U S revenue was $394 8 million or <unk>, 79% year over year growth, while revenue outside the U S totaled $13 million.
A 5% year over year growth, despite foreign currency headwinds.
Net loss for the full year 2022 totaled $44 9 million compared to $42 million in 2021 with the net loss per share of $1 60 for 2022 compared to $1 54 in the prior year.
Moving on to 2023 guidance, we expect full year revenue to be in the range of $560 million to $570 million, a 37% to 40% increase compared to 2022.
Full year gross margin is expected to be in the range of 83% to 85%.
As Tim previously noted we expect to activate 52 to 56, new centers per quarter and established 12 to 14, new sales territories per quarter in 2023.
Given the prevalence of high deductible health plans, we have historically seen seasonality in our business.
As Tim previously mentioned, we continue to expect revenue to step down sequentially in the first quarter of 2023 and will then increase throughout the year.
In conclusion, our strong performance and business momentum provide us with confidence in our outlook as we enter 2023.
With that our prepared remarks are concluded Josh you may now open the line for questions.
Thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Withdraw your question. Please press star one again, please limit yourself to one question and one follow up.
Our first question comes from Travis Steed with Bank of America You May proceed.
Hey, congrats on the profitability this quarter.
I think in the past you said once you turn profitable you wanted to stay profitable. So I don't know if this is the start without looking at the three times over $2 in La for earnings next year should that be closer to flat to slightly positive.
Yes, let me comment Jonathan comment person, Rick kind of jump in I think as we know.
We wanted to get to profitability, we know how important it is from a business standpoint, I think moving forward. We will continue to be a desire of the organization, but we also know that.
In Q1, we do see seasonality there so let me hand off director.
Yes, so we did demonstrate some improved leverage in Q4 and we also expect in Q1 that we would lose some leverage just due to our normal revenue seasonality.
But we do intend to show improving operating leverage as we progress throughout the year.
We're not changing our tone our profitability, we're going to continue to run our playbook.
But it is important to understand that we do have a very disciplined approach.
In determining our spending and our investments across our business.
Okay.
That's good color.
Our opex, so something maybe in the 30% range is that a good starting point and I'm curious if you had hold that if revenues come in higher than expected for the year or if you also can kind of grow opex upside with revenue upside over the course of the year.
And then the other follow.
Follow up was on the comment on inspire five.
As I mentioned I think move into early 2020 for I don't know if there was a change or something thats driven drove that comment or if it was just more of a caveat.
I'll start so.
Yes.
As we did demonstrate that revenue did outpace operating expenses in the fourth quarter, we're not going to guide on Bottomline, which means also operating expenses at this time and so we're going to continue to make.
Doubtful disciplined investments, but we're really focused on driving that topline.
As far as the inspire five I think we continue with the program. The design is for all of them. We are going through the operational testing we're building up the qual units and we're building redundancies, we have multiple manufacturers.
For that product again to protect for supply chain. So.
I always a little bit of a challenge to work discussed we get all the testing done and get the submission then, but we're still going to be pushing really hard to get the approval by the end of 'twenty three but we can see it.
Slide into early 'twenty four if the cycle is tight.
Okay.
Thanks for the question.
Thank you Travis.
Thank you.
Our next question comes from Robbie Marcus with Jpmorgan you May proceed.
Yeah, Thanks for taking the questions and congrats on a really nice quarter Hey.
Hey, Ravi.
Maybe starting with the guide you are coming off a really good growth year.
In terms of growth is still a really healthy rate for 2023, but.
A pretty significant decline in growth rate versus 2022 and <unk>.
By my math, it kind of looks like center utilization might be flat to down and the implied guide for 'twenty three so anything other than your usual conservatism here that we should be thinking about.
Implied in the guidance as we start the year.
Yes, we want to be very consistent on how we put our guidance out there how we look at the business at the beginning of the year.
We already mentioned in the note that we want to continue to drive utilization and actually improve utilization at existing centers in fact to the point of putting additional incentives in there for the sales team. So again, yes, we want to be careful putting guide.
Early on we.
I'd like to position that the company has done and really have been strong.
The board with all of our milestones.
Got it and then well not a huge part of sales today the international.
Constant currency growth number in fourth quarter was really impressive and a big step up from third quarter it looks like.
How should we think about the cadence of international throughout 2023 and.
Can this be.
Starting to become a material contributor.
And thank you very much Robby I think we're very excited about international.
And we.
We know, it's just days away before getting confirmation from the French authorities that we will be lifted.
The registry is an accepted product fully reimbursed in France, and we are recruiting a country manager. There. So we think that's going to have a good year, we think Belgium will follow that as well as the Netherlands is set up to have a strong year in 2023 and.
In Germany, and then on top of that even in the UK has started doing cases too. So we like what's happening in Europe and the other side.
Singapore, Hong Kong will be done in the first case in just a few weeks.
And Japan is really starting to uptick a little bit. So I think it's going to be a measured success with the growth.
International but the key thing is still hovering around the 3% Mark deferred global revenue and we're not going to take our foot off the pedal on the United States. We want to continue to outgrow utilization really focus on the U S market as well so while I think youll see continued growth internationally.
Our emphasis continues to be in the U S market.
Really helpful. Thanks, a lot.
Tony.
Thank you.
Our next question comes from Adam <unk> with Piper Sandler You May proceed.
Hi, Tim Hi, Rick Hope you can hear me, okay, and congratulations on the on a nice finish to the year.
Maybe just to start wanted to ask about.
Direct to consumer expense and realize there is no guidance on opex, but can you just remind us kind of where 2022 DTC spend came in.
And how investors should think about spend in 'twenty three and then just longer term kind of Directionally, where this could go.
Yes.
Sure Hey, Adam it's Rick.
We continue to make investments in DTC, because it's very important for our pipeline.
Talked about over $13 million.
Visits to our website and 78000 physician contacts and so it's a very important part of our business.
In the fourth quarter, our DTC spend was about $21 million.
That's relatively flat over the third quarter, but we're going to continue to increase that year.
Year over year in 'twenty, two we spent $74 million in 2022.
And that was up.
While 55%.
Over 21.
We spent $48 million.
We're going to continue to make those investments and grow our investments in DTC, but that growth will slow there'll be less than 55%, but we're not giving specific guidance around what that what might be in right now.
Okay understood. Thanks for the call.
All are there and then just for the follow up.
You guys gave helpful color and guidance on <unk>.
New account adds I'm curious if you are able to share some color on implanting physicians per account.
Are there metrics you can share there and how do you think about those trends going forward Theres clearly a lot of demand for your products. So wondering how you think about the importance of not just growing the account base, but also the number of docs at existing centers. Thanks for taking the question the absolutely great.
Great to hear from you. Thank you.
It continues to be a focus and it's one of the fastest ways to be able to increase capacity at an existing centers to add a surgeon and so we will continue with a focus on it we don't have specific metrics.
A year, but it is what are the key methods to work with centers to grab additional or time for the existing surgeons.
But to also just train their partners to be able to.
We have additional <unk> 10, because we know the demand certainly is there. So we'll continue to look forward and try to provide some more specifics on that but it is certainly.
A key factor in for our field team to be able to grow capacity.
Thank you.
Thank you Anna.
Thank you.
Our next question comes from Rich <unk>.
You May proceed.
Hi, Thanks for taking my questions and congrats on.
Really great quarter, a solid finish to the year.
Wanted to maybe.
Maybe just start off on the <unk> seasonality comments in the context of the kind of the <unk> impact you called out on supply issues and maybe some deferral into the <unk> typically you see I think.
Last few years about 10%.
Low teens percentage decline for Q2, <unk>, it sounds like youre, suggesting that might be a little bit less than normal. So a is that correct that the 10%.
Or less.
Sequential decline or less than historical is a good way to think about it and could you quantify what what do you think that supply push out.
Procedure.
Demand push out might have might have been.
Let's go ahead and talk a little bit about what we're talking about for the first time, we are considering we've always kind of talked about like a 12%.
Seasonality as we moved into Q1, but when we're talking about with these stimulation leads we remember were in the third quarter. When we transitioned from the polyurethane production lines of the Silicon production line, we built up the safety stock Polyurethane, then we had to stop and purge alive and get them back up and running and we did that.
But we have to be able to get up to volume and in the process of scaling as when we ran into some of the challenges. So we went to more of adjusted time delivery to support cases.
And what would be holding some parts.
Car level orders or things like that but we were able to fulfill and closely track with scheduled procedures to make sure that we had all of those products ready to go and for cases that get scheduled in January and part of the just in time system. Some of those may shipments in January so far.
Probably not a big number both certainly wanted to bring awareness to that and that the seasonality still exists.
With the supply chain challenges that.
It might offset that a little bit but.
Just to make everybody aware of that but.
But the good news is the inventories are growing and the production lines are scaling up.
Okay. That's helpful got it so it sounds pretty minor.
Normal seasonality is probably a good way to think about it.
Okay, and then just on the account opportunity I think I think youre right under a thousand.
Right now implanting centers, you've talked in the past about.
It's a very high level, but I think something in the order of magnitude of 4000 accounts in the U S that you could theoretically get and I think you've also said this 4000 afg's out there can you maybe just refresh our memory on kind of how you see that 1000 installed base progressing towards some account.
<unk> what is the right account opportunity.
Yeah. Good question, so, yes, I would just ask for.
1000, 4000 got to a total of 8000 and then we just assumed about a third of those centers would have capability or would would be doing inspire and that put our target market at 2400, and I think over the last couple of quarters, we've been spending more time evaluating that.
Because we have been recognizing in smaller communities physicians are setting up centers that don't require patients to take long drives into.
More of the larger city.
These centers. So I think we're going to continue to evaluate that I think the number of centers that we can move to will far exceed the 2400 and we've already I already demonstrated in some towns in Idaho, Montana, even in that while Jackson Wyoming.
There are very productive accounts in these smaller communities.
And we can really leverage the community doctors be able to offer inspire and have more community based care. So I think that story continues to evolve and we will continue to increase the number of centers capable of treating.
Treating patients with inspire.
Thank you very much.
Thanks Rich.
Thank you.
Our next question comes from Larry <unk> with Wells Fargo. You May proceed.
Good afternoon. Thanks for taking my question, Tim and Rick Finance Geek.
I wanted to ask on the guidance.
The new indications and label changes.
Tim what do you expect what are you assuming for the timing.
Down to Ehi BMI.
And any impact.
That youre assuming.
In the guidance.
Got it I think the.
We're very optimistic with the pediatric population with down syndrome, I think that we've been working closely with the FDA to answer questions that they have they've come in them.
On the clinical data. So we know that they are progressing in their review as well and so we're optimistic that that should happen.
In the first half of the year, which I think is really exciting.
As far as the Hyatt ehi and the warrants for BMI I think that all sort of progressing we're working with the FDA again in little bit earlier stage, so that'll take a little bit longer to be able to get that approval, but certainly confident that that's coming through and it does have the proper designation to help accelerate the review.
At the FDA. So we expect both of those in the near future.
Should have.
Impact on the business. So we did try to kind of build that into the guide.
That we put forward I think the and.
Both of those populations that will be a little bit of a slow uptick as we get awareness out there and to be able to incorporate that into the existing practices. The good news is a lot of the pediatric hospitals of the children's hospitals are affiliated with some of the larger institutions that already do inspire today. So we already have in inspire.
Presence, so hopefully that will streamline our ability to get those centers up and running on the pediatric front. So.
More to come on that we're very excited about that population, that's near and Dear to our heart and we are working with the societies and the and the parent the family groups to be able to build awareness of that.
Okay, just one follow up on pediatric down's.
Why do you why do you think the uptake will be the flow there.
They are relatively well or.
Organized community if you will.
I think the.
Clinical need seems pretty pretty high here.
<unk> been working on this for a while.
So why do you expect the.
Uptake in that population to be slow thanks for taking the questions. Thank you Larry I think the.
We've been working on it for years and you've seen the clinical studies and enrollment in those studies and there is still a relatively small number of patients have received inspire in that pediatric group I think it's just it's a new therapy and a new option for the families and the doctors to be able to underscore.
So I think this is going to be an educational process like any new indication are like any new therapy or.
Introducing inspire emptied into any new country does just though is it just a little bit of a slow adoption curve is as people learn both the therapy and become comfortable with it and increase the prescription of the therapy.
Alright fair enough. Thanks, a lot.
Great.
Thank you.
Our next question comes from Jon Block with Stifel. You May proceed.
Thanks, guys good evening.
Rick maybe first one for you given EBITDA quarter encore can around $15 million I, just don't have the cash flow statement.
So maybe just your thoughts on around $15 million and if so I believe you guys would be EBITDA positive for full year 'twenty two maybe just provide your.
Your thoughts on how that was book or trend for full year 'twenty three.
Yes, so stock based compensation.
It was about 15 million so in rough terms John .
We're about $18 million roughly an EBITDA positive for the fourth quarter.
And so yes that stock based compensation expense has increased.
Again.
That will increase we are also going to continue to make investments.
Along our.
All facets of our business R&D sales and marketing.
And so on and so with that.
We expect that we will lose leverage in the first quarter with our seasonality, but then.
Again that back as we progress throughout the year, but again, we're not providing any guidance on.
Opex.
Our bottom line at this time.
I got it but I guess, maybe just as a follow up to that.
EBITDA positive for full year, 'twenty, two which you just confirmed and you expect leverage not for one or two but over the course of 'twenty. Three we can just sort of draw our own conclusions from there is that a fair statement.
That's fair Okay, perfect and then can you just talk to US if you don't want on the ASC is a little bit I think it came in again, 23%.
Is that representative as a percent of the overall procedures and maybe more importantly, how do you see this playing out in the fall.
Being over time I think initially you were excited about those potentially being higher utilization setting the reimbursement to improve there you've got a good number or percentage of commercial payers to talk to us and how that can.
Act as an overall driver for utilization for inspire longer term. Thanks.
<unk>.
I think that it will continue to be excited about it and I think this will be a little bit more of a post COVID-19 phenomena, where the hospitals are really active again and so while we're still at 23%. We're still growing the number of <unk>, but we are growing the number of hospitals as well and that's not too surprising I do think the.
Utilization impact that we're seeing is part of the factor of the ASC. The tape right now we're running maybe 20% of our procedures are done in as seasonal even though ASE is make up 23% of the centers. What that means is they are taking more of their fair share of the.
Procedure, so that's really good to see.
The utilization growing in bolt ons, but particularly in <unk> as we continue to progress I think we'll continue to look for further sites of service.
But as we know the reimbursement and hospitals continues to be very very strong and our ability to garner all our time to take care of the patients continues to grow and that is evidenced by the increased utilization across the board. So we're not taking our focus off issues, but we continue to leverage all of the hospice.
Those that want to participate with inspire as well.
Got it thanks guys.
Thanks, John .
Thank you.
Our next question comes from Mike Polak with Wolfe Research you May proceed.
Hey, good evening, Thank you for taking the question.
First topic the comment on modifying incentive compensation for your field force.
On higher utilization at existing centers I guess can you level set.
The notable changes.
It'll change.
The framework looks like before what does it look like now and I guess why make this change.
For 2023.
Absolutely well first off it.
An important part of the compensation for the field, especially the territory managers, but the management team shares in the same compensation structure. So they are all very consistent we have different groups of people. We have the area business managers as you know that focus on opening new centers and the territory managers our response.
For cultivating.
The existing centers to increase utilization in the past we used to.
Compensate more everybody gets their base comp and of course, they get the commission based on implants and revenue and units sold but we have added components in the past years is from based on what we call patient expecting therapy are more around patients in the prior authorization process, but as we continue to.
Mature, it's important that we ship that from individual patient count to more utilization at site. So we've kind of switched over the parameter at starting this year to really focus more on the utilization side. So I think we just presented at the National sales meeting just a week ago.
The team is very excited about the <unk>.
Progress that they've made last year as well as the prospects moving forward.
My second one if I may.
Our leverage related question.
You report <unk>.
<unk> consolidated line I don't see a breakout in filings or the like SOCOM versus G&A I'm, just curious as you assess kind of.
The leverage that you're seeing in the model is there.
Our variance worth calling out as to how your G&A spend is getting leveraged versus <unk>.
If you could frame up like.
Where G&A.
Is there is a portion of the total and does that getting materially better versus lesser number or are they about trending the same any color there would be great. Thank you so much.
Hey, Mike It's Rick So we have demonstrated leverage across all those line items, R&D, G&A and sales and marketing.
Over the fourth quarter and throughout the year in 2022 again, we're going to lose that in Q1 with seasonality but.
R&D, we are continuing to make investments R&D was 19% of revenue in the third quarter that was 15% in the fourth quarter G&A is in that 10% to 12% range.
And we expect to continue to be.
And in those in that ballpark in that range going forward.
Let me elaborate dropout.
Thanks, Matt.
Thank you.
Our next question comes from Chris Pasqual with Nephron Research you May proceed.
Thanks, Hey, guys.
Similar to Chris.
Okay.
I wanted to follow up on the question about the shift in incentive comp the guidance for this year implies we add about as many states in 'twenty three 'twenty two just wanted to see how you square that with where you are incentivizing your team to spend their time, maybe we are reading too much into that comment, but it seems like.
That could mean fewer center adds this year.
Well I think we left the guide consistent from 'twenty two to 'twenty three because we still have our training team in the area of business managers to be able to focus on adding new centers and we're going to continue with that we also previously talked about how the.
<unk> growth has really been driven predominantly by increased utilization of same store sales versus the contribution from new centers and I think we were kind of highlighting is we're going to continue down that pathway.
And we want to keep focusing on growing utilization because centers that are able to do more procedures. They get better outcomes. They are more proficient in the procedure that proficient on managing the patient they are better at patient flow of the business. They are better at submitted the proper codes to get proper reimbursement so centers.
That have high utilization.
Just so much more.
Efficient and have higher patient outcome. So we're going to continue with that trend.
Continue.
Having territory managers ideally managed less centers that are doing higher utilization.
Okay that makes sense.
78000 physician contacts driven by your DTC effort is very impressive you treated about 16000 patients last year. So one out of every five people who raise their hand.
Getting an implant.
Or are the stumbling blocks today that are causing patients to fall out of that funnel and can you talk a little bit more about the digital scheduling tool you mentioned and whether that's part of the solution for trying to improve that yield.
But we wanted to tell you about the physician context, there's another sense in there that talks about.
Patients getting direct referrals from their own health care providers, that's not part of that number and so there is always a little bit of specificity on where exactly the patients come from it is it truly one and five from the adviser care program, but how many patients CV AD they'll go to the website there'll be educated but.
Rather than going through the adviser care program. They will contact they are all in the health care provider, they're all sleep physician, saying what are you thinking about inspire with US work for me and their actual will become.
Direct physician referral.
Coming through from the adviser care program. So that's really an important part of the business as well. So we have to continue to educate physicians on the other side, we need to continue to improve the efficiency of the adviser care program and we do have a pilot out there right now to be able to log directly in to the schedule.
At physicians office, so within the adviser care program tax to a potential patient determines that excuse me. They are a good candidate.
That they can directly to schedule a lift so we have a handful of sites up and active and we're really looking to further expand that program earlier in the year.
Thanks.
Yeah.
Thanks Scott.
Thank you. Thank you.
Our next question comes from Matthew <unk> with Keybanc you May proceed.
Hey, Tim Hey, Rick Thanks for taking the questions.
Absolutely yes.
Yes, so I think this might be a little bit early.
To ask but I think investors are encouraged about the improvements with the inspire five one.
Once I get through approval.
Do you think as it gets closer like some physicians will wait for it to be approved where it might actually delay.
Some implants.
Great question I don't think so we see this.
In the past with the new remote with Bluetooth with going to silicon leads going to inspire for from the inspire to know that.
Back in 2018, but we just don't see that slowdown once we have the patient flow in the patients get scheduled length of stay on the pathway inspire for going to five.
While that puts the sensing inside the can.
It doesn't have a dramatic impact such as like Wynn resorts.
Future generations with adults 50 tack door with <unk>.
Titration, so we don't expect to see any kind of slowdown.
And we know the demand continues to be strong.
Okay excellent and then a fall.
A follow up just the predictor study with initial readout in 2023, I think you mentioned that an industry presentation earlier. This year that there was some data published.
Another study can you can you comment on like what that showed.
Why that would be encouraging for the readout for predictor.
Yeah, absolutely. So we finished the first 300 in 2022 at the same time, Dr. Winer as a physician in Arizona.
Michelle at all because this paper was published several weeks ago with the first 100 patients.
And we're getting into the data now from the first 300 right now it's in the quality stays meaning that we get physician over read of the data for quality control. So we're right in that process, but we also noted that there were patients with a higher BMI above 32. So we actually are entertaining the opportunity to continue that.
That study and actually increase to maybe add another 300 patients go to 600 being able to widen the nut.
Ah patients that we can treat with that so very active program. We're in the process of getting into quality control on the first 300, and we're looking to just continue enrolling patients because the data is we like what we see and we think that we might be able to treat even a higher BMI population. So you would expect.
Spect us to say.
There will be one of 600 patients soon.
Alright, Thank you very much.
Absolutely good to hear from you.
Thank you and as a reminder to ask a question you will need to press star one on your telephone.
Our next question comes from Suraj Kalia with Oppenheimer you May proceed.
Good afternoon timber can you hear me alright.
Yes suraj.
Of course, the sentiments congrats on a nice finish to the year.
So Tim.
Forgive me, maybe I missed the new store same store metrics provided.
If I could ask specifically the 225 or so sites.
Added last year.
Many implants did they do for the whole year.
Jimmy Yes, we don't have that.
I get what Youre, asking we don't have the specific numbers in front of it but remember how we do new sites.
Our new site as anybody who has opened up during the year. So any sites that we opened in the fourth quarter.
Obviously, the they were only able to do their first cases correct. So they do one or two cases in November December .
Antibody, who opened up January one of 2022 is still in the same bucket of a new center and they have the opportunity to.
Reorder rate and do additional patients through the year. So some of those can be.
Productive accounts by the time, they get to the end of 2022, so it's kind of the way that we established centers. When we established them per year. So you don't really have the exact number of what percentage of the cases were.
From the class of 2022.
Hey, Tim how do you define account turnover.
First let's define account and account is up is our purchasing unit.
That would be a hospital bed orders product from us.
That's what we call a center et cetera can have several different accounts per se.
So there may be.
Kind of comes back down to who's on the website right. We don't have one center on our website, we could have multiple centers underwrite the sleep practices could be on the website along with the planning.
Urgent website so.
Turnover, we don't have a whole lot of sector turnover those are purchasing units.
But.
Sometimes they will go on hold if a surgeon moves but go ahead I guess, what I was really getting at just trying to get my arms around.
You'll have 905 sites exiting FY 'twenty two great, but does 900, <unk> really imply that Onboarding was I don't know pick a number 1100 and then some bled out for the various reasons that you mentioned on calls in the past they didnt do implants.
The amount of the list and all that and then Youll exited at 905, so just kind of trying to understand what the turnover. It's how many BM vary so to speak.
Okay, very low very very low and I don't think in the fourth quarter, we really closed any sites.
So what you see is additive and 905 as the active number of centers.
And during Covid, we reported I think we once we closed 15 sites time, we've closed like 12 by the way some of those failures sites have a surgeon move back in and our backend process. So we have very very low turnover.
Our site once they become active.
We want to continue to work with that site to be able to increase.
Utilization doesn't.
It doesn't mean a site if they're not productive or if they have too much of a backlog of patients that they're scheduling out too late will remove them from the website, but the website and enact et cetera to independent functions.
Gentlemen, thank you for taking my questions.
Josh good to hear from them.
Thank you. This concludes the Q&A session for the conference I'd now like to turn the call back to Tim for any closing remarks.
Thank you Josh and thanks for all for joining the call today as always I'm grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve successful and continuous and consistent patient outcomes. The inspire team's commitment to patient remains unmatched.
And is the most important element to our success and wish to thank all of our employees as well as the health care teams for their continued efforts as we remain focused on further expanding our business in the U S Europe and in Asia for all of you on the call. We appreciate your continued interest and support of inspire and look forward to providing you with further.
Updates in the months ahead.
Please stay safe and healthy.
Thank you. This concludes today's conference call you may now disconnect.
One one.
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Good afternoon, My name is Josh and I'll be your conference operator today at this time I would like to welcome everyone to the inspire medical systems fourth quarter and full year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I'll now hand, the call over to your first speaker.
The yards, though the vice President of Investor Relations at inspire you may begin the conference.
Thank you Josh and thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer.
Chief Financial Officer.
Earlier today, we released financial results for the three and 12 months ended December 31, 2022, a copy of the press release is available on our website.
This call management will make forward looking statements within the meaning of the federal Securities law.
All forward looking statements, including without limitation those relating to our operation.
Actual results and financial condition.
And our business continued effects of the COVID-19 pandemic full year, 2023 financial and operational outlook.
Could make the market access are based upon our current estimates and various assumptions.
Statements involve material risks and uncertainties that could cause actual results or events to materially differ.
Accordingly, you should not place undue reliance on these statements.
Please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K to be filed with the SEC by February 14 for a description of these risks uncertainties.
<unk> disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information.
The only as of the live broadcast today February seven 2023.
With that it is my pleasure to turn the call over to Jim Herbert Ken.
Thank you Angie and thanks, everyone for joining our business update call for the fourth quarter and full year 2022.
We are excited to report, our first profitable quarter and a solid finish to a very strong year with significant progress across all elements of our business.
As always we first and foremost reiterate our commitment to patient outcomes and to ensure that each patient has the best possible experience with inspire therapy.
During today's call we will highlight many accomplishments from 2022 that demonstrate our ongoing focus on the patient including improvements in access to therapy technology advancement and planned activities to grabbing the population that could benefit from inspire.
We will also discuss our outlook for full year 2023.
We completed many important milestones in 2022.
And there are now over 36000 patients who have received inspire therapy.
During the year, we received the FDA approval of full body MRI compatibility and launched our silicon based stimulation uncertainty along with the Bluetooth enabled patient remote.
Further we've made significant progress with our digital platform, including major updates to the inspire sleep sync patient management system and the inspire sleep app.
We also initiated a pilot.
Digital scheduling tool, which we believe will significantly enhance patient access to care through our adviser care program.
In addition, we submitted important indication expansions to the FDA, including for the pediatric population with down syndrome and for patients with a high at the hip hop Nick Index.
We raised over $249 in cash as noted previously and in the fourth quarter, we achieved profitability for the first time, all of which gives us confidence as we enter 2023.
With that let's review our results.
In the fourth quarter, we generated revenue of 137 9 million representing.
Representing a 76% increase compared to the fourth quarter of 2021.
For the full year of 2022 revenue totaled $407 $9 million or 75% increase compared to full year 2021.
Our growth continues to be driven by higher utilization at existing centers and supported by the activation of new centers.
During the fourth quarter, we experienced challenges with our supply chain and as the demand for the silicon based testing of the stimulation lead outpaced our ability to provide product due to issues with scaling that production back.
These challenges have been resolved and we are increasing our inventory level. Despite these challenges we were successful and providing product for all scheduled procedures in the fourth quarter.
Historically, we have experienced seasonality in the first quarter due to the reset of high deductible health plan at the start of the year.
While this remains the case the first quarter of 2023 may see slightly less seasonality due to the supply chain issues in the fourth quarter.
With that said, we expect full year revenue to be in the range of $560 million to $570 million up 37% to 40% increase compared to 2022.
In the fourth quarter, we continued to increase our capacity by adding 61, new implanting centers et cetera, ending the year with a total of 905 centers.
At the end of the fourth quarter ambulatory surgical centers made up 23% of U S centers.
And in 2023, we expect to continue to activate 52 to 56 standards curve quarter.
Regarding the U S sales team, we created 16, new sales territories in the fourth quarter, bringing our total to 225 territories.
We are increasing our guidance in 2023 and expect to add 12 to 14 sales territories per quarter compared to 10 to 12 per quarter in 2022.
In 2023, we will continue to scale, our sales management and training teams to optimize our ongoing expansion and to focus on strong patient outcomes in their productivity.
As such we modified our incentive compensation for the field organization to focus on higher utilization at existing centers.
We will continue to enhance our ability to collect interest in patients with a qualified health care provider. Our outreach programs are very effective in generating interest in inspire therapy, primarily through the inspire sleep dot com website.
For the full year 2022, the number of visitors to our website surpassed 13 million an.
An increase of 86% year over year.
And from these visits we had over 78000 physician contacts.
Of note. These physician capex represent the calls and E mails to adviser care program or directly to a physician's office and do not include referrals directly from a patient's health care provider.
From a U S reimbursement perspective.
The final rules for 2023 were published in November and came in generally as expected, providing a stable reimbursement outlook for health care providers.
Moving on.
Our international business continues to make strides growing 28% in the fourth quarter over the prior year, despite ongoing headwinds from unfavorable exchange rates.
During the quarter International revenue was less than 3% of global revenue highlighting the significant growth in the U S market.
The remain positive in our international business during the fourth quarter, including the strong performance in Germany.
The Netherlands and Switzerland.
Furthermore, following many years of working with the French authorities. We are in the final process travel inspired listed on the branch registry in early 2023 and reimbursement rates consistent with the rest of the world and the team continues preparation for our <unk>.
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In Singapore, our flagship programs continue to perform at productivity levels consistent with USS.
We also see momentum in Japan with multiple selling their centers doing first procedures in the fourth quarter.
That have also completed a booked additional cases in the first quarter.
And how we expect to complete our first procedures in February and in Australia. We have we've submitted for reimbursement and should have a determination later this year.
Turning to R&D.
We recently submitted our sleep physician programmer for FDA review this no new programmer connect with our next generation sleep sleep sync digital health platform, which is a key step towards providing remote patient programming.
Longer term, we continue to work on the design of our fifth generation inspire neurostimulator. The inspire five device will eliminate the pressure something need and incorporate the SaaS or inside the neuro stimulator using accelerometer to measure respiration.
We have finalized the design and we are conducting operational and production qualification, we are still targeting FDA and FDA approval in late 2023, but depending upon the FDA review cycle. This could move into early 2024.
Finally, we continue to conduct research and clinical trials to increase the number of patients who can benefit from an inspire therapy.
In the fourth quarter, we finished enrolling the first 300 patients in our predictive study, which is the first step to replacing the requirement for drug induced sleep endoscopy procedure with an asset based measurement for patients with a BMI less than 32 and continued our fast for an initial readout of the data.
In 2023.
In summary, we are experiencing significant momentum in all aspects of our business. We remain focused on patient outcomes and physician education to continue the adoption of our therapy.
In 2023, and beyond we will continue to increase utilization at our existing centers, while adding capacity by opening and training new centers.
Ongoing expansion of our call center and investment in our DTC campaign support these initiatives and we are seeing enhanced productivity from these efforts, which is driving our improved financial performance.
Finally, the many R&D achievements in 2020 to highlight our commitment to improving patient outcomes and enhancing both the patients and health care providers experience with inspire therapy.
We remain extremely excited about our future prospects and are confident that we have the appropriate standard strategy in place to drive long term stakeholder value.
With that I'd like to turn the call over to Rick for his review of our financials.
Thank you Tim and good afternoon, everyone.
Revenue for the fourth quarter was $137 9 million or 76% increase from the $78 4 million generated in the fourth quarter of 2021.
U S revenue in the fourth quarter was $134 3 million, an increase of 78% from the $75 6 million in the prior year period.
The growth in the U S reflects several factors, including higher utilization at existing centers.
The addition of new implanting centers.
<unk> direct to consumer marketing and a higher number of territory managers.
Revenue outside the U S increased to $3 6 million, which is a 28% increase year over year on a reported basis, while units sold outside the U S grew 43% year over year.
The U S average selling price in the fourth quarter was $24900 compared to 23900 in the prior year period.
The increase reflects our price uplift that began in may of 2022.
We expect U S asps to remain steady at the current level.
The ESP outside the U S was 24.
400 during the quarter compared to 22700 in the fourth quarter of 2021, which was driven by unfavorable exchange rates and a lower asps are distributor sales in Asia.
Gross margin in the fourth quarter was 83, 9% compared to 85, 8% in the prior year period, primarily due to higher cost of certain component parts and additional costs associated with the transition to our new silicon base lease partially.
Set by the price increase that began in the second quarter.
Total operating expenses for the fourth quarter were $116 1 million, an increase of 68% as compared to $69 1 billion in the fourth quarter of 2021.
This planned increase was due to expansion of our sales organization in.
Increased direct to consumer marketing programs continue.
Continued product development efforts and general corporate costs.
The increase in operating expenses is reflective of our ongoing plan to drive continued long term growth and to make investments in key areas of our business.
Interest and dividend income totaled $3 4 million in the fourth quarter compared to 15000 in the prior year period.
This.