Q2 2023 Inspire Medical Systems Inc Earnings Call

August 1, 2023

Okay.

Operator: Good afternoon. My name is Delemm, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems Q2 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. I'll then now hand the call over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Okay.

Good afternoon, My name is dilemma and I'll be your conference operator today at this time I'd like to welcome everyone to the inspire medical systems second quarter 2023 conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.

And now I'll hand, the call over to your first speaker Esky Gotcha, the Vice President of Investor Relations at inspire you may begin the conference.

Ezgi Yagci: Thank you, Delemm, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer, and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the three and six months ended June 30, 2023. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including, without limitation, those relating to our operations, financial results, and financial condition, investments in our business, full year 2023 financial and operational outlook, and changes in market access, are based upon our current estimates and various assumptions. These 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.

Thank you Joanna and thank you all for participating in today's call.

Me are Tim Herbert President and Chief Executive Officer, and with me.

<unk> Chief Financial Officer earlier today, we released financial results for the three and six months ended June .

2023.

Copy of the press release is available on our website.

On this call management will make forward looking statements.

Of the federal Securities laws, all forward looking statements, including without limitation those relating.

Our operations financial results and financial condition.

That's in our business full year 2023.

The operational outlook.

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.

Ezgi Yagci: Please see our filings with the Securities and Exchange Commission, including our Form 10-Q, which was filed with the SEC earlier this afternoon, for a description of these risks and uncertainties. Inspire 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 and speaks only as of the live broadcast today, August 1, 2023. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Please see our filings with the Securities and Exchange Commission.

Our Form 10-Q, which was filed with the SEC earlier. This afternoon for a description of these risks and uncertainties inspire 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 live broadcast today August 1st 2023.

With that it is my pleasure.

Ill turn the call over to Tim Herbert Tim.

Tim Herbert: Thank you, Ezgi, and thanks everyone for joining our business update call for Q2 2023. As always, we start with our commitment to patient outcomes and to ensure that each patient has the best possible experience with Inspire therapy. As of the end of the second quarter, over 46,000 patients have been treated with Inspire therapy. Over the past week, we shared some exciting announcements with the additions of Carlton Weatherby as our Chief Strategy Officer, and Dr. Charisse Sparks as our Chief Medical Officer. As we continue to expand our business, we need strong leadership to guide the team with our focus on increasing the adoption of Inspire therapy in the obstructive sleep apnea market. OSA is a large and underpenetrated market, and we see many years of sustained, healthy, organic growth ahead of us.

Thank you Eric and thanks, everyone for joining our business update call for the second quarter of 2023.

As always we start with our commitment to patient outcomes and to ensure that each patient has the best possible experience with inspire therapy.

And so at the end of the second quarter over 46000 patients have been treated with inspire therapy.

Over the past week, we shared some exciting announcements with the additions of Carlton Wetherbee.

Chief strategy Officer, a doctor Sherry Sparks as our Chief Medical Officer.

As we continue to expand their business with a strong leadership to guide the team with our focus on increasing the adoption of inspire therapy in the obstructive sleep apnea market.

OSA is a large and underpinning penetrated market that we see.

Many years of sustained healthy organic growth ahead of us.

Tim Herbert: Carlton joins us from Medtronic, where he was General Manager of the Spinal Division. He brings a wealth of talent and experience that will be invaluable as we continue to scale our business. Dr. Sparks is a board-certified physician with extensive business and leadership experience, including direct experience with Inspire as a board director. She will lead Inspire's clinical program, provide executive oversight to ensure high-quality patient outcomes, and serve as a liaison for the ENT and sleep physician communities. In connection with her appointment, Dr. Sparks will transition from her current role on the Inspire board of directors. We look forward to Carlton and Charisse's contributions toward our mission of serving the many patients with untreated OSA. With that, let's review our results.

Carlton joins us from Medtronic, where he was general manager of the spinal division. He brings a wealth of talent and experience that would be invaluable as we continue to scale our business.

Dr. Spark is a board certified physician with extensive leadership.

Leadership experience, including direct experience with inspire as a board director.

She will lead as far as clinical program provide executive oversight to ensure high quality patient outcomes.

Serve as a liaison for the Emt and sleep physician communities.

In connection with her appointment Doctor's Sparks will transition from her current role on inspire board of directors.

We look forward to curl tenant chorizo contributions toward our mission of serving the many patients with untreated OSA.

With that let's review our results in the second quarter, we generated revenue of 151 $1 million, representing a 65% increase compared to the second quarter of 2022.

Tim Herbert: In Q2, we generated revenue of $151.1 million, representing a 65% increase compared to Q2 2022. Our growth continues to be driven by higher utilization at existing centers and is complemented by the activation of new centers. Given the strong momentum we are seeing in our business, we now expect full-year revenue to be in the range of $600 to $610 million, a 47% to 50% increase compared to 2022. In Q2, we continued to increase our capacity to support the strong demand for Inspire therapy by adding 72 new implanting centers in the US, ending the quarter with a total of 1,045 centers. For the remainder of 2023, we continue to expect to activate 52 to 56 centers per quarter.

Our growth continues to be driven by higher utilization at existing centers and it's complemented by the activation of new centers.

Given the strong momentum we are seeing in our business. We now expect full revenue to be in the range of $600 million to $610 million up 47% to 50% increase compared to 2022.

In the second quarter, we continued to increase our capacity to support the strong demand for inspire therapy by adding 72, new implanting centers in the U S.

We ended the quarter with a total of 1045 centers.

For the remainder of 2023, we continue to expect to activate 52 to 56 centers per quarter.

Tim Herbert: Regarding the US sales team, we created 19 new sales territories in Q2, bringing our total to 261. We continue to expect to add 12 to 14 US sales territories per quarter for the remainder of 2023. In Q2, the number of visitors to our website surpassed 2.9 million. From these visits, we had over 12,000 physician contacts, and even with the typical summer slowdown in contacts, we steadfastly improved our conversion of patients receiving therapy. We continued to make numerous changes to our website to enhance how patients engage with our Advisor Care Program, and we have a new website design in the works for later this year. Further, we are continuing to increase the use of digital scheduling for Inspire consultations through our ACP.

Regarding the U S sales team.

We COVID-19, new sales territories in the second quarter, bringing our total to 261.

We continue to expect to add 12 to 14 U S sales territories per quarter for the remainder of 2023.

In the second quarter, the number of visitors to our website surpassed $2 9 million.

These visits we had over 12000 physician contacts and even with the typical summer slowdown in contact we steadfastly approved our conversion of patients receiving therapy.

We continue to make numerous changes to our website to enhance how patients engage with our adviser care program and we have a new website design in the works for later this year.

Further we are continuing to increase the use of digital scheduling for inspire.

Consultation through our ACP.

Tim Herbert: We previously mentioned one of the limiting factors to the adoption of Inspire therapy is the capacity of ENT surgeons performing the procedure. To this end, we are focusing on providing robust training programs to new physicians and reducing the time required to qualify and support patients through the entire Inspire journey. We believe that both of these focus areas will provide implanting surgeons with additional time to perform Inspire procedures. One example to improve the patient experience and reduce the time burden of the surgeons is our ongoing predictor study, which is designed to replace a drug-induced sleep endoscopy, or DICE, with an office-based airway exam. We have completed the data quality checks from the first 300 patients and are actively enrolling the second group of 300 patients with a higher BMI.

We previously mentioned one of the limiting factors to the adoption of inspire therapy.

Is the capacity of Emt surgeons performing the procedure.

To this end, we are focusing on providing robust training programs to new physicians and reducing the time required to qualify and support patients through the entire inspire journey.

We believe that both of these focus areas will provide implanting surgeons with additional time to perform inspire procedures.

One example to improve the patient experience and reduce the time burden of the surgeon is there ongoing predictors study, which is designed to replace a drug induced sleep endoscopy or dies.

With an office based airway exam.

We have completed the data quality checks from the first 300 patients and are actively enrolling the second group of 300 patients with a higher BMI.

Tim Herbert: We will be moving towards preparing a publication from the first dataset and expect that these results will be presented in the fall. Another example relates to the growing adoption of the SleepSync patient management system. SleepSync is designed to streamline the patient journey from initial contact through diagnosis, system implant, and post-procedural longitudinal patient management. The utility of this platform continues to improve, as is highlighted by the recent launch of the Inspire Bluetooth-enabled patient remote, which is the link between the patient's device and SleepSync. The next step is our new physician programmer, called the SleepSync Programmer, which was approved by FDA in Q2 and will formally launch in the US in early 2024. The SleepSync Programmer allows physicians and their staff to log in from their own computer to access the programming screens and view all patient activities stored in the SleepSync system.

We will be moving towards preparing a publication from the first dataset and expect that these results will be presented in the fall.

Another example relates to the growing adoption of the sleep sync patient management system.

<unk> is designed to streamline the patient journey from initial contact through diagnosis system implants at post procedural longitudinal patient management.

The utility of this platform continues to improve as is highlighted by the recent launch of the inspire Bluetooth enabled patient remote.

Which is the link between the patients device as Steve said.

The next step is our new physician programmer called the sleep St programmer, which was approved by FDA in the second quarter and will formally launch in the U S. In early 2024.

The state saved programmer allows physicians and their staff to log in from their own computer to access the programming screens and view all patient activity stored in the sleep sync system.

Tim Herbert: Once launched, this technology will remove the necessity for Inspire to provide tablets as part of the physician programming system and will pave the way for future remote patient programming. Staying with product development, the Inspire V team is excited to announce the submission of our PMA supplement to the FDA. Subject to the FDA's review process, we expect approval in early 2024. Recall, Inspire V incorporates the sensor inside the neurostimulator, using an accelerometer to measure respiration and will eliminate the need for the pressure sensing lead. Further, Inspire V is a platform device which will enable firmware upgrades, transitioning to Inspire VI and beyond, whereby further product enhancements, such as auto activation, will be introduced.

Once launched this technology will remove the necessity for inspired to provide tablets as part of the physician programming system and will pave the way for future remote patient programming.

Staying with product development.

The inspire five team is excited to announce the submission of our PMA supplement to the FDA.

Subject to the Fda's review process, we expect approval in early 2024.

Recall inspire five incorporates the sensor inside the neuro stimulator, using an accelerometer to measure respiration.

And we will eliminate the need for the pressure sensing lead.

Further.

Inspire five as a platform device, which will enable firmware upgrades transitioning to inspire six and beyond.

Whereby further product enhancements such as auto activation will be introduced.

Tim Herbert: From a research, clinical, and regulatory viewpoint, in Q2, we received FDA approval to expand our indication to include patients with an AHI up to 100 events per hour, up from 65, and raised the BMI warning in the labeling from 32 to 40. Furthermore, we are happy to announce that the ADHERE Registry has met its target of 5,000 patients, and moving forward, patients will be enrolled into the ADHERE 2.0 Registry, which will be integrated into the SleepSync system and included as part of a broader software release later this year. A quick comment on reimbursement.

From our research clinical and regulatory viewpoint in the second quarter, we received FDA approval to expand our indication to include patients with an <unk> up to 100 events per hour up from 65 and raise the BMI warning in the labeling from 30 to 40.

Furthermore, we are happy to announce that the adhere registry has met its target of 5000 patients.

And moving forward patients will be enrolled into the adhere to point old registry.

Which will be integrated into the sleep sync system and included as part of our broader software release later this year.

A quick comment on reimbursement as the new all the new proposed or PPS rules were recently published and showed an increase to the national Medicare payments to hospitals of about $1000.

Tim Herbert: As the new proposed OPPS rules were recently published and showed an increase to the national Medicare payment to hospitals of about $1,000 to $30,355, and an increase for ASCs of about $300 to $25,470. We also highlight the significant increase in the reimbursement of the DICE procedure, which increased from $180 to $1,639 for the Medicare facility payment. We do see a slight reduction in the physician payment proposed, but this is tied to the overall RVU rate, which typically rebounds by the final November rules. Today, ASCs continue to make up about 23% of our total number of centers.

$30355.

And the increase for <unk> of about $300 to $25470.

We also highlight the significant increase in the reimbursement of the procedure, which increased from $180.

Two $1639 for the Medicare facility payment.

We do see a slight reduction in the physician payment proposed but this is tied to the overall RV year rate, which typically rebounds by the final November rolls.

Today.

<unk> continue to make up about 23% of our total number of centers.

Tim Herbert: But longer term, we continue to see the Inspire therapy migrate more to the ASC setting, but this is challenged by the varying Medicare reimbursement rates in different states. We also have seen a stronger rebound in Medicare cases over the last 2 quarters, and with the Medicare reimbursement rates lower, especially in the South, this is limiting Medicare cases to the hospital outpatient setting. While we are able to obtain sufficient OR time in hospitals, our long-term programs will focus on ASC reimbursement and education for ASCs, as we see this as an efficient site of service for the Inspire procedure. Finally, while we are very happy with the strong Medicare rebound, we expect that the balance will shift more heavily towards commercial cases as we progress through the year.

But longer term, we continue to see the inspire therapy migrate more to the ASC setting.

But this is challenged by the varying Medicare reimbursement rates in different states.

We also have seen a stronger rebound in Medicare cases over the last two quarters and with the Medicare reimbursement rates lower especially in the South this is limiting Medicare cases to the hospital outpatient setting.

Well, we are able to obtain sufficient or time and hospitals are long term programs will focus on ASC reimbursement and education for <unk> as we see this as an efficient site of service for the inspire procedure.

Finally, while we are very happy with the strong Medicare rebound, we expect that the balance will shift more heavily towards commercial cases, as we progress through the year.

Tim Herbert: Switching over to our international business, the European team achieved a very successful second quarter, growing 81% over the prior year. This robust growth was driven by a strong performance in Germany and supported by the Netherlands and Switzerland. We are very excited about the strength we are seeing in Belgium, which finalized country-wide reimbursement earlier this year, and look forward to building momentum in the quarters ahead. We are also excited about our new country manager in France, and we continue to prepare for a full market launch there, pending the final reimbursement announcement expected later this year. Finally, we have made progress with reimbursement in the United Kingdom and expect additional patients receiving Inspire therapy in this region. In Asia, we are seeing great momentum in Singapore, with procedures showing significant growth, both sequentially and year over year.

Switching over to our international business.

The European team achieved a very successful second quarter growing 81% over the prior year.

This robust growth was driven by a strong performance in Germany.

And supported by the Netherlands and Switzerland.

We are very excited about the strength, we're seeing in Belgium with finalized countrywide reimbursement earlier this year and look forward to building momentum in the quarters ahead.

We're also excited about a new country manager in France, and we continue to prepare for a full market launch there pending the final reimbursement announcements expected later this year.

Finally, we have made progress with reimbursement in the United Kingdom and expect additional patients receiving inspire therapy in this region.

In Asia, we are seeing great momentum in Singapore with procedure, showing significant growth significant growth both sequentially and year over year in.

Tim Herbert: In Japan, we continue to advance our efforts of going direct by hiring and training additional team members, have completed the Japanese website, and are seeing increased activity with physicians and active centers. Regarding operations, we continue to make progress with the production ramp of the silicone-based stimulation and sensing leads. We remain in a challenged position with the sensor manufacturing yields. However, we have incorporated a recent manufacturing change and expect to grow inventory as we move through the quarter. We remain in a positive inventory position, with short-term plans in place to grow to our goal of one quarter of safety stock by year-end. We feel good about our inventory position in our other products. In summary, we continue to see significant momentum in our business. We remain focused on patient outcomes and physician education to continue the adoption of our therapy.

In Japan, we continue to advance our efforts are going direct by hiring and training additional team members.

<unk> completed the Japanese website and are seeing increased activity with physicians and active centers.

Regarding operations, we continue to make progress with the production ramp of the silicon based stimulation in southern leads we remain in a challenged position with the sensor manufacturing yields. However, we have incorporated our recent manufacturing change.

And expect to grow inventory as we move through the quarter.

We remain in a positive inventory position with short term plans in place to grow to our goal of one quarter of safety stock by year end.

We feel good about our inventory position and our other products.

In summary.

We continue to see significant momentum in our business, we remain focused on patient outcomes and physician education to continue the adoption of our therapy.

Tim Herbert: We will continue to increase utilization at our existing centers while adding capacity by opening new centers. We remain extremely excited about our future prospects and are confident that we have the appropriate 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.

We will continue to increase utilization at our existing centers.

Adding capacity by opening new centers.

We remain extremely excited about our future prospects and are confident.

That we have the appropriate strategy in place to drive long term stakeholder value.

With that.

I'd like to turn the call over to Rick for.

For his review of our financials.

Rick Buchholz: Thank you, Tim, and good afternoon, everyone. Total revenue for the second quarter was $151.1 million, a 65% increase from the $91.4 million generated in the second quarter of 2022. US revenue in the second quarter was $144.7 million, an increase of 65% from the $87.9 million in the prior year period. The primary growth driver in the US was higher utilization at existing centers. Other growth drivers include the addition of new implanting centers, our continuing direct-to-consumer marketing, and a higher number of territory managers. We are pleased to announce revenue outside the US increased to $6.3 million, which is an 81% increase year-over-year on a reported basis, while units sold outside the US grew 72%.

Thank you Tim and good afternoon, everyone total revenue for the second quarter was $151 1 million or 65% increase from the $91 4 million generated in the second quarter of 2022.

U S revenue in the second quarter was $144 7 million and.

An increase of 65% from the $87 9 million in the prior year period.

The primary growth driver in the U S with higher utilization at existing centers.

Other growth drivers include. The addition of new implanting centers are continuing direct to consumer marketing and a higher number of territory managers.

We are pleased to announce revenue outside the U S increased to $6 3 million, which is an 81% increase year over year on a reported basis, while units sold outside the U S grew 72%.

Rick Buchholz: The US average selling price in Q2 was $25,000, compared to $24,100 in the prior year period. The increase reflects our 5% price uplift that began in May 2022. We expect the US ASP to remain steady at the current level. The ASP outside the US was $22,100 during the quarter, compared to $21,000 in Q2 2022. Gross margin in Q2 was 83.9%, compared to 84.5% in the prior year period, primarily due to additional manufacturing costs of sensors and lower yields prior to process enhancements, as well as higher costs of certain component parts, partially offset by the price increase, which is now fully in effect.

Okay.

The U S average selling price in the second quarter was 25000 compared to 24100 in.

In the prior year period.

The increase reflects our 5% price uplift that began in may of 2022.

We expect the U S asps to remain steady at the current level.

DSP outside the U S was 22100 during the quarter compared to 21000 in the second quarter of 2022.

Gross margin in the second quarter was 83, 9% compared to 84, 5% in the prior year period, primarily due to additional manufacturing costs of sensors and lower yields prior to process enhancements as well as higher cost of certain component parts.

Partially offset by the price increase which is now fully in effect.

Rick Buchholz: Total operating expenses for the second quarter were $143.4 million, an increase of 57% as compared to $91.2 million in the second quarter of 2022. This planned increase was due to the 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 $4.9 million in the second quarter, compared to $297 thousand in the prior year period. This higher income was driven by higher interest rates on our increased cash balances compared to a year ago. Net loss for the second quarter was $12 million, compared to $14.5 million net loss in the prior year period.

Total operating expenses for the second quarter or $143 4 million, an increase of 57% as compared to $91 2 million in the second quarter of 2022.

This planned increase was due to the 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 $4 9 million in the second quarter compared to 297000 in the prior year period.

This higher income was driven by higher interest rates on our increased cash balances compared to a year ago.

Net loss for the second quarter was $12 million compared to $14 5 million net loss in the prior year period.

Rick Buchholz: The net loss per share was $0.41, compared to $0.53 in Q2 2022. The net loss for Q2 includes $3 million of R&D expenses associated with pre-launch inventory related to Inspire V that is expensed for accounting purposes. The weighted average number of shares outstanding for Q2 was 29.2 million. We expect the Q3 weighted average shares outstanding to be approximately 29.4 million. Given our continued operating leverage improvement, our cash and investments increased to $467 million at 30 June 2023, from $452 million at 31 March 2023. This strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers while training and opening new implanting centers. Moving on to updated 2023 guidance.

The net loss per share was <unk> 41.

Compared to 53 in the second quarter of 2022.

The net loss for the second quarter includes $3 million of R&D expenses associated with prelaunch inventory related to inspire five that is expensed for accounting purposes.

The weighted average number of shares outstanding for the second quarter was $29 2 million.

We expect the third quarter weighted average shares outstanding to be approximately $29 4 million.

Given our continued operating leverage improvement, our cash and investments increased to $467 million at June 30.

From $452 million at March 31.

This strong cash position allows us to remain focused on executing our growth strategy of increasing procedure volumes at existing centers, while training and opening new implanting centers.

Moving onto updated 2023 guidance give.

Rick Buchholz: Given the strong momentum we are seeing in our business, we now expect full year revenue to be in the range of $600 to 610 million, an increase from our previous guidance of $580 to 590 million. This updated revenue guidance represents 47 to 50% growth compared to full year 2022 revenue. Similar to prior years, as we progress through the second half of the year, we generally see increased seasonality in Q4 as patients and physicians attempt to schedule Inspire procedures before high deductible health plans reset at the beginning of the year. We continue to expect full year gross margin to be in the range of 83 to 85%.

Given the strong momentum we are seeing in our business. We now expect full year revenue to be in the range of $600 million to $610 million.

An increase from our previous guidance of $580 million to $590 million.

This updated revenue guidance represents 47% to 50% growth compared to full year 2022 revenue.

Similar to prior years as we progressed through the second half of the year, we generally see increased seasonality in the fourth quarter as patients and physicians attempt to schedule inspire procedures.

For high deductible health plans reset at the beginning of the year.

We continue to expect full year gross margin to be in the range of <unk>, 83% to 85%.

Tim Herbert: ...As Tim noted, we expect to activate 52 to 56 new US centers per quarter and establish 12 to 14 new US sales territories per quarter for the remainder of 2023. In conclusion, our strong performance and business momentum provide us with confidence in our outlook for the remainder of 2023. With that, our prepared remarks are concluded. Dilem, you may now open the line for questions.

As Tim noted, we expect to activate <unk>.

52 to 56, New U S centers per quarter, and established 12 to 14, New U S sales territories per quarter for the remainder of 2023.

In conclusion, our strong performance and business momentum provide us with confidence in our outlook for the remainder of 2023.

With that our prepared remarks are concluded.

You May now open the line for questions.

Operator: Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. To withdraw your question, please press star one one again. We ask that you keep your questions to no more than one question and one follow-up, and if time permits, we'll be more than happy to take more questions. Please stand by while we compile the Q&A roster. Your line is open, John.

Thank you Sir.

As a reminder to ask a question you will need to press star one on your telephone.

Your question. Please press star one again.

We ask that you keep your questions to no more than one question and one follow up and if time permits we'll be more than happy to take more questions. Please.

Please standby, while we compile the Q&A roster.

Yeah.

Your line is open John .

Jonathan Block: Hey, guys, it's John from Stifel. I didn't hear the beginning, but maybe I'll go. Good afternoon, guys.

Hey, guys, it's John from Stifel I didn't hear the beginning but maybe I'll go.

Tim Herbert: I didn't hear the beginning either, John, but great to have you. How are you?

Good afternoon, guys are beginning either John but great to have you. How are you I figure Tim I'd, just jump in and what the heck.

Jonathan Block: I figured, Tim, I'd just jump in. What the heck? I'm going to ask both upfront. GLP-1, there's certainly a lot of chatter or concern. So Tim, maybe sort of big picture, how do you view this playing out for the company's PMA? And is the funnel, you know, altered materially to the upside or the downside, arguably, from your view? And then the second question, maybe more specific to the quarter P&L. You know, I've been following you guys for a while, and international usually doesn't get a lot of play, but that's a big growth number. I know you've been working on the opportunity for some time. Was there anything specific to the second quarter, or is this arguably an inflection point for the OUS business that you see going forward? Thanks.

I would add both up.

I'd ask both upfront.

<unk> one there is certainly a lot of chatter or concern so Tim maybe sort of big picture. How do you view this playing out for the Companys Tam and as the funnel altered materially to the upside or the downside arguably from your view and then the second question, maybe more specific to the quarter P&L you have been following you guys for.

While an internationally usually doesn't get a lot of play, but that's a big growth number I know you've been working on the opportunity for some time was there anything specific to the second quarter or is this arguably an inflection point for the O U S business that you see going forward. Thanks.

Tim Herbert: You bet. Thank you. GLP-1 concerns. We're happy with GLP-1. We think it's complementary to Inspire. Again, it's very specifically discussed that the Inspire mechanism of action is to move the tongue base forward. We don't address lateral wall collapse that is associated with higher BMI patients. Let that sink in. We've talked about this before. When patients go on a GLP-1 drug and they lose weight, they tend to lose the weight in the neck circumference, which is addressed by lateral wall collapse, which is outside of our mechanism of action. Therefore, if we can get higher BMI patients to lose weight, it will relax the lateral walls and we- there will be predominantly tongue-based obstructions, which is highly effectively treated with Inspire by stimulation of the hypoglossal nerve.

You bet. Thank you.

P market.

We're happy with <unk>, we think it's complementary to inspire.

Again, it's very specifically discussed that the inspire mechanism of action is to move the tongue based forward, we don't address lateral wall collapse that is associated.

With higher BMI patients.

That that St. Yet we've talked about this before.

With patients go on a GOP one dragon they lose weight they tend to lose the.

And the next or conference, which is addressed by lateral wall collapse, which is outside of our mechanism of action. Therefore, if we can get higher BMI patients to lose weight. It will relax the lateral walls.

There will be predominantly tongue based obstruction, which is highly effectively treated with inspire by stimulation of the hypoglossal nerve. So again two different mechanisms of actions being treated by GOP, one and inspire and very complementary to each of them we do.

Tim Herbert: So again, two different mechanisms of actions being treated by GLP-1 and Inspire, and very complementary to our, to each of them. We do have our own research project to address lateral wall collapse, but that's a longer-term solution. But in the meantime, if we can see progress with the GLP-1 drugs, helping patients lose weight and moving them towards the Inspire indication, it's going to be highly beneficial. At this point, it's a little early, so we haven't seen a lot of movement out in the field. We don't hear a lot of feedback from our physicians, but we welcome the opportunity to take care of the patients as they start to lose weight. International is exciting, and I think we've seen some great progress in international.

Our own research project to address lateral wall collapse, but that's a longer term.

<unk>.

Solution, but.

But in the meantime, if we can see progress with the GOP, one drugs, helping patients lose weight.

Moving them towards the inspire indication, it's going to be highly beneficial.

At this point, it's a little early so we havent seen a lot of movement out in the field, we don't hear a lot of feedback from our physicians, but we welcome.

The opportunity to take care of the patients as they start to lose weight.

International is exciting and I think we've seen some great progress in international as we John you've been following inspire for quite some time and what we've always said is we don't make strong investments in our country until we've established a reimbursement pathway in that country.

Tim Herbert: As we've, John, you've been following Inspire for quite some time, and what we've always said is we don't make strong investments in a country until we've established a reimbursement pathway in that country. And, in the case of, Germany, we've had great success there. And as we're coming, you know, well after COVID, now we're seeing a strong rebound. Germany's had a very good quarter. The Netherlands overcame some reimbursement challenges and are opening up new centers, which provides, growth there. But the exciting news is in Belgium, that completed the, countrywide reimbursement. They will have a strong second half as they start to schedule their cases. And, we already have the announcement on countrywide reimbursement in France, and we expect the new coding to come out relatively soon, so we can do a full launch there.

And in the case of Germany, we have had great success, there and as are coming.

Well after Covid now, we're seeing a strong rebound, Germany had a very good quarter, the Netherlands overcame some reimbursement challenges and are opening up new centers, which provides growth there, but the exciting news is in Belgium that completed the.

Countrywide reimbursement they will have a stronger second half as they start to schedule their cases.

And we already have the announcement our country wide reimbursement in France, and we expect the new coding to come out relatively soon so we can do a full lots there so lot going on in the international markets, we really like whats happening and the team is well organized and then in the Asia market second part as we said is doing well and.

Tim Herbert: So a lot going on in the international markets. We really like what's happening. The team is well organized. And then in the Asian markets, Singapore, as you said, is doing well, and going direct in Japan is really starting to have show good progress, and we look forward to reporting more activity there in the future. So thank you very much.

Going direct in Japan is really starting to have.

So a good progress and we look forward to reporting more activity there in the future. So thank you very much.

Jonathan Block: Thanks, Tim. Great call.

Great color.

Operator: Thank you. And I show our next question comes from the line of Robbie Marcus from J.P. Morgan. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Robbie Marcus from JP Morgan. Please go ahead.

Robbie Marcus: Oh, great, and congrats on a really nice quarter here. Maybe to start, you've recently had the label updated. You can treat more episodes per night, more severe sleep apnea, and the BMI raised to 40. Can you talk about what you're seeing as an impact in the field and how much this can really increase your addressable market, and I guess that, you know, you touched on in the last with GLP-1s, but, you know, I imagine it probably helps a whole lot with the combination of the two going forward.

Oh, great and congrats on a really nice quarter here.

Maybe to start.

You've recently had the label updated.

You can treat more episodes per night more severe.

Sleep apnea and the BMI raised to 40 can you talk about what Youre seeing is an impact in the field and how much. This can really increase your rob.

Your addressable market and I guess it.

You touched on it in the last with <unk>, but you know I I imagine it it probably helps a whole lot with the combination of the two going forward.

Tim Herbert: Yeah, absolutely. And thanks, Robbie. As far as the label updates go, well, also remember we recently received a pediatric approval for Down syndrome, and that is going along well, and we're opening up more children's facilities. Most of those facilities are already tied in with existing Inspire centers, so we can take care of those kids. The label update for AHI is a pretty immediate introduction because there's just not a lot of options for those patients that have a higher apnea-hypopnea index above 65, going up to 100. And so that really helps us get the approval with the insurance company. So that's a pretty immediate return. We're gonna see a little bit increase in procedures right there.

Absolutely and.

Thanks, Ravi as far as the label updates go also remember we recently received a pediatric ruble for.

Down syndrome, and that that is going along well and we're opening up more children.

Facilities most of those facilities are already tied in with existing inspired centers, where we can take care of those kits.

The label update for Ehi is a pretty immediate introduction because.

This is not a lot of options for those those patients that have a higher <unk> index above 65 going up to 100, and so that really helps us getting approval with the insurance company. So that's a pretty immediate return we're going to see a little bit.

Increase in procedures.

Tim Herbert: BMI, we got to be a little bit careful about because just bringing in a BMI patient who up to a BMI of 40 is a little dangerous because the probability of them having lateral wall collapse, which again, that presents as a complete concentric collapse when you do a DICE procedure. And remember, we treat a tongue-based obstructions with the anterior posterior, with the tongue moving forward. So with a higher BMI, we're being very careful to not fill the appointment books of the ENT surgeons with high BMI patients who won't qualify for Inspire anyways. Now, those are the patients that will be good patients to get on the GLP-1 drugs, if you will, to help them lose some weight, relax the lateral walls, and allow us to assess if they are tongue-based collapse that can be properly treated with Inspire.

Right there.

We got to be a little bit careful about because just bringing in a BMI patients up to a BMI of 40.

Love dangerous because the probability of them, having lateral wall collapse, which again that presents as a complete concentric collapse. When you do a dice procedure and remember we treat.

<unk>.

Tongue based obstructions with anterior posterior what the time moving forward.

So with a higher BMI, we're being very careful to not fill the appointment books.

The anti surge as with high BMI patients, who won't qualify for inspire anyways.

Those are the patients that will be good patients to get on the GOP. One drugs. If you will to help them lose some weight relaxed the lateral walls and allow us to assess if there are time based collapse that can be properly treated with inspire so to summarize.

Tim Herbert: So to summarize, the AHI is going to be an indication expansion. I think in the past we've talked about it, being about a 10% increase over our published TAM. BMI, we're going to be careful about because our current system doesn't treat lateral wall, but we now have the advantage of the GLP-1 to be able to address, that market as well, albeit they need to lose the weight, first, and we know that takes a little bit of time with the drugs.

The AI is going to be a indication expansion I think in the past we've talked about it being about a 10% increase over our published Tam BMI, we're going to be careful about because our current system doesn't treat lateral wall, but we now have the advantage of the <unk> want to be able to address.

That market as well, albeit they need they lose the way first.

First and we know that takes a little bit of time with the drugs.

Robbie Marcus: Great. And maybe one on spending. There was clearly you called out, I think it was $3 million or so in Inspire V buildup and inventory and R&D accounts for a lot of the step up. But maybe just give us an update on how you're thinking about balancing the great top line growth versus margin leverage and views on profitability going forward. Thanks a lot.

Great and.

Maybe one on spending there was clearly you called out I think it was $3 million or so and inspire five.

Buildup in inventory in R&D accounts for a lot of the step up.

But maybe just give us an update on how youre thinking about balancing the great topline growth versus.

Margin leverage and views on profitability going forward. Thanks, a lot.

Rick Buchholz: Yeah. Hey, Ravi, it's Rick. So yeah, we understand profitability is important, and we continue to create leverage in our P&L, but our real focus is top line growth and growing the adoption. So we do invest in a disciplined manner. We continue to do that. We've made investments in DTC, R&D, and all areas of our business, but we have been improving our leverage with our operating expenses. R&D is 20% of revenue. It was 20% of revenue in Q1. We've talked about we expect that to be in the high teens or so, but we're making tremendous investments, as Tim talked about in the prepared remarks.

Yeah, Hey, Ravi it's Rick So yes, we are.

We understand profitability is important.

And we continue to create leverage in our P&L, but our real focus is top line growth and growing the adoption.

So we do invest in a disciplined manner, we continue to do that.

We've made investments in DTC R&D in all areas of our business, but we have been improving our leverage on our with our operating expenses.

R&D is 20% of revenue it was 20% of revenue in the first quarter.

We've talked about we expect that to be in the high teens or so, but we're making.

Tremendous investments as Tim talked about in the prepared remarks.

Rick Buchholz: But we actually, in, in Q2, you know, given the, the current macro supply chain environment and, and our confidence in Inspire V approval in 2024, we are purchasing some Inspire V components now, but for accounting purposes, it must be recorded as a R&D expense. I don't mean to get into the fine details of that, but, but that, that accounted for 200 basis points of our R&D as a percentage of revenue. That being said, stock-based compensation is a big number. In, in the quarter, it was nearly $22 million. And so taking that out, you know, we've, we've generated cash. We're cash positive, by, by $15 million. So profitability will come. We haven't changed our tone on that, but we're really focused on the long-term top line growth.

But we actually in the second quarter.

Given the current macro supply chain environment, and our confidence in inspire five approval in 2024, we are purchasing some inspire five components now but for accounting purposes. It must be recorded as R&D expense I don't mean to get into the fine details of that but but that accounted for 200.

Basis points of our R&D as a percentage of revenue.

That being said stock based compensation is a big number.

In the quarter it was.

Nearly $22 million.

So taking that out we've generated cash we're cash positive by $15 million. So profitability will come we havent changed our tone on that but we're really focused on the long term topline growth.

Robbie Marcus: Great. Thanks for taking the questions.

Great. Thanks for taking the questions.

Tim Herbert: Thanks, Ravi.

Thanks Ravi.

Operator: Thank you. And next, our next question comes from the line of Danielle Antalffy from UBS. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Danielle <unk> from UBS. Please go ahead.

Danielle Antalffy: Hey, good afternoon, everyone. Thanks so much for taking the question. Congrats on a really strong quarter. It's great to see. I just wanted to ask a follow-up question on the, you know, the Medicare, the shift in patients a little bit away from Medicare patients, given the proposed to payment, payment, physician payment. So the first question I have is, what percentage of your patients today are Medicare, and then what percentage of overall OSA patients are Medicare? And also, how we should think about this going forward. Is this really meaningful or is this just you guys being cautious?

Hey, good afternoon, everyone. Thanks, so much for taking the question congrats on a really strong quarter, it's great to see I just wanted to ask a follow up question on the debt.

Medicare the shift in patients a little bit away from Medicare patients given that.

Carlos to payment.

Hey, Matt physician payment.

So the first question I have is what percentage of your patients today are Medicare and then what percentage of overall OSA patients are Medicare and also how we should think about this going forward is this really meaningful or is this just you guys being cautious.

Tim Herbert: Sure. Hi, Danielle. I think the Medicare, historically, our blend has always been about 65 to 70% commercial, 25 to 30% Medicare, and about 5% VA or military, and that probably purposely doesn't add up to 100. But as we've seen in the last couple of quarters, you saw a good Medicare rebound. Usually in Q1, we see heavy Medicare because we have the high commercial in Q4, again, going back to the high deductible insurance plans and so in Q1, Q2, we just saw a higher percent, not quite 50%, but approaching it for Medicare. So while that's really exciting for that population, it does put some challenges to the reimbursement in ASCs, and that's kind of what we're highlighting.

Sure Hi, Danielle I think their Medicare.

Historically, our blend has always been about 65% to 70% commercial 25% to 30% Medicare at about 5%.

<unk>.

<unk>, our military and that probably purposely doesn't add up to a 100, but as we've seen in the last couple of quarters you saw good Medicare rebound.

Usually in Q1, we see heavy Medicare because we have the high commercial in <unk>.

Q4, again going back to the high deductible insurance plans.

And so in Q1 Q2, we just saw a higher percent not quite 50%, but approaching it for Medicare. So while that's really exciting for that population. It does put some challenges to the reimbursement in afcs.

Tim Herbert: We're able to handle and cover those cases all in hospital setting or in ASCs in the north, but that does present a longer-term challenge. As we progress into Q3 and certainly into Q4, as Rick highlighted, it becomes more weighted towards commercial cases because, again, the high deductibles really kind of drive the fourth quarter. So I would expect our percentages to move back to more traditional ratios. And then overall, obstructive sleep apnea is a young person's disease, and in the clinical studies, we saw the average age of our studies were down at 54. During the early commercial years, of course, reimbursement is easier with Medicare, so it kind of rises up a little bit. But we think that it should be back in the average age in the 50s.

What we're highlighting we're able to handle and cover those cases out.

<unk>.

Hospital setting or in <unk> in the north but that does present a longer term challenge as we progress into Q3, and certainly into Q4 as Rick highlighted it becomes more weighted towards commercial cases, because again the high deductibles.

It really kind of drive the fourth quarter. So I would expect our percentages to move back to more traditional ratios.

And then overall obstructive sleep apnea is a young person's disease and in the clinical studies are the average age of our states were down at 54.

During the early commercial yields of course reimbursement easier with Medicare.

Will it rises up a little bit, but we think that it should be back in the <unk>.

Tim Herbert: Remember, now we have the pediatric approval. The youngest person is really just single digits years of age. So it, we're across the board on treating patients. But for the most part, I think that we want to keep our ratios focused on the commercial side, certainly complementary with the Medicare and always provide service to the VA and military.

Average age in the fifties remember now we have the pediatric approval. The youngest person is really just single digits years of age. So we're.

We're across the board on treating patients but.

For the most part I think that we want to keep our ratio is focused on the commercial side.

Certainly complementary with Medicare and ours provide service to the VA.

Danielle Antalffy: Okay, got it. And then, Inspire V, congrats on that. Once that is approved, should we think about that as a gradual rollout, or how should we think about building capacity of Inspire V ahead of a launch and potential impact to margins there? Thanks so much, guys.

And military.

Okay got it and then Empire guys. Congrats on that once that is approved should we think about that as a gradual rollout or how should we think about building capacity of inspire five ahead of that ahead of the launch in <unk>.

Tangible impact to margins there. Thanks, so much guys.

Tim Herbert: Thanks, Danielle. I think people are excited about Inspire V. Obviously, the removal of the pressure sensing lead is both an improvement for the patient. It's, it, is makes the procedure more comfortable for a ear, nose, and throat surgeon to perform. It gives us and the patient an improved reliability as, even though we have a small number of revision surgeries, the culprit for most of those is that pressure sensing lead. So we want to be able to get this out, broadly in the market as soon as we can. Once approved, I'm sure we'll do a small pilot study just to make sure it works well with all the SleepSync system, the new remotes, and the adoption into the market.

Thanks, Dan out Danielle I think people are excited about inspire five obviously.

The removal of the pressure certainly as both improvement for the patient.

It is mesa procedure more comfortable for ear nose and throat surgeons to perform it gives.

So on the patient and improve reliability is as even though we are a small number of revision surgeries.

The culprit for most of those is that pressures have delayed so we want to be able to get this out broadly in the market as soon as we can.

Once approved I'm sure with a small pilot study just to make sure. It is.

Works well with all of the sleep sync system, the new remote.

Tim Herbert: And, by mid-year, we expect to go full launch on this, and we believe once launched, it will be a very quick transition across the board.

And the adoption into the market and.

By midyear, we expect to go full launch on this and we believe once launched it will be very quick.

Transition across the board.

Danielle Antalffy: Thank you, all.

Thank you all.

Tim Herbert: Thank you.

Thank you.

Operator: Thank you. And our next question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Travis Steed: Hey, thanks a lot. Congrats on a good quarter. Maybe the hospital outpatient reimbursement that came out recently, there was a big uptick in DICE procedures, and a few things with the reimbursement going up on the replacement, if the leads need to be replaced. Just curious how you're seeing that, if that was expected and how that should play out in the business.

Hey, Thanks, a lot congrats on a good quarter, maybe the hospital outpatient reimbursement became out recently, there was a big uptick in Dise procedures.

And a few things with the reimbursement.

Going up on the replacement of the need to be replaced just curious how youre seeing that alright that was expected and then how that should play out and are in the business.

Tim Herbert: Hi, Travis. Thank you. I think the sleep endoscopy increase in reimbursement was a nice surprise. We know that they have been working on that one. It initially came out at just $180, or what it was was very disappointingly low for a 15-minute procedure, and it wasn't worth hospitals or ASCs to be able to do that procedure. But moving that up, I think it actually brought the economics from the actuals over the last couple of years, kind of drove that calculation, and getting it to $1,600 really is going to be beneficial for the centers providing that DICE procedure.

Hi, Thank you I think the the.

The sleep endoscopy increase in reimbursement was a nice surprise, we know that they have been working on that when they initially came out at just $180 or what it was was.

Very disappointingly low.

For a 15 minute procedure and it wasn't worth hospitals or ASC to be able to do that procedure, but moving that up I think it actually brought the economics from.

The actuals over the last couple of years kind of drove that calculation and getting it to $1600 really is going to be beneficial for.

For the centers, providing that dies procedure.

Tim Herbert: Then again, on the other hand, as we got done talking with our predictor study, we want to reduce the reliance on DICE anyways, to be able to go to an office exam. We'd rather have the ENTs and the OR suites spend that time doing implant procedures rather than DICE. So very happy about the reimbursement there, and I'm sure all the centers and ASCs will be equally excited when that takes effect in November. As far as the increase to the hospital ASC payment for the Inspire procedure, that's tied to the overall APC, Ambulatory Procedure code, and again, very happy with the continued increase, and that's been pretty steady of an increase year over year for the last several years.

And then again on the other hand, as we got time talking with our predictors study, we want to reduce the reliance on dice anyways to be able to go to the office exam, we'd rather have the e&ps and the our sweet spot at that time doing implant procedures, rather than days, so very happy about the reimbursement there and I'm sure all of us.

Centers and <unk> will be equally excited when that takes effect in November as far as the.

Increased to the hospital and ASC payment for the inspire procedure that's tied to the overall.

Ambulatory procedure code and again very happy with the continued increase and that's been pretty steady.

An increase year over year for the last.

Tim Herbert: So again, it just continues to move north, and that's really good for the hospitals and ASCs, but we just have to address the Medicare ASC payments in the south.

Several years, so again it just continues to move north.

That's really good for the hospitals in afcs, but we just have to address.

The Medicare.

ASE payments in the south.

Travis Steed: Great. Thanks. Thanks for that. Maybe you could talk about summer seasonality, kind of cadence of the year, Q3, Q4, just any color on both the revenue and the margins and spending, that'd be helpful. Thank you.

Great. Thanks thinks about and maybe you can talk about summer seasonality kind of cadence of the year Q3 Q4 just.

Just any color on on both the revenue and the margins and spending that'd be helpful. Thank you.

Rick Buchholz: Yeah. Hey, Travis, it's Rick. So as we talked about, we're really proud of the achievement of the team in the first half of the year, and we talked about all the opportunities with some of the label changes and the change in the BMI warning and other catalysts. So we have increased our guidance up to $600 to $610. And so we talk about the step that, and I mentioned this in the prepared remarks, that we generally see a strengthening in our year in the fourth quarter, given the commercial mix with physicians and patients attempting to schedule those procedures before those high deductible plans reset at the beginning of the year.

Hey, Travis it's Rick.

As we've talked about we're really proud of the achievement of the team in the first half of the year end and we talked about all the opportunities with some of the label changes and the change in the BMI warning.

In other catalysts.

So as we have increased our guidance.

600 to 610.

And.

So we.

We talked about the step that and I mentioned this in the prepared remarks that we generally see.

A strengthening in the in our year in the fourth quarter, given the commercial the commercial mix with physicians and patients attempting to schedule those.

Procedures before those high deductible plans reset at the beginning of the year.

Tim Herbert: ... We will continue to increase our spending. We have shown leverage. We expect to improve that as we progress throughout the year. And so we're excited about the second half of the year, but there will be a strengthening in the fourth quarter.

Rick Buchholz: ... We will continue to increase our spending. We have shown leverage. We expect to improve that as we progress throughout the year. And so we're excited about the second half of the year, but there will be a strengthening in the fourth quarter.

We will continue to.

Increase our spending.

We have shown leverage we expect to improve that as we progress throughout the year.

And so we're excited about the second half of the year, but there will be a strengthening in the fourth quarter.

Richard Newitter: Great. Thanks a lot, and congrats again.

Travis Steed: Great. Thanks a lot, and congrats again.

Great. Thanks, a lot and congrats again.

Tim Herbert: Thanks, Travis.

Thanks Charles.

Operator: Thank you. And I show our next question comes from the line of Adam Maeder from Piper Sandler. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Adam <unk> from Piper Sandler. Please go ahead.

Adam Maeder: Hi, Tim, Rick, and Ezgi. Congrats on the next quarter, and thank you for taking the questions. I wanted to ask about the, the OUS business, and apologies if this was asked earlier in the Q&A.

Hi, Tim Rick and SD Congrats on the next quarter and thank you for taking the questions.

I wanted to ask you about the O U S business and apologies. If this was asked earlier in the Q&A.

Tim Herbert: Okay.

Adam Maeder: But obviously a big increase sequentially, you know, to $6 million. So the question is, you know, is this kind of the new watermark? What drove the performance? And anything to call out from a competitive standpoint in Europe, and then I had a follow-up. Thanks.

Okay, but obviously a big increase sequentially.

$6 million. So the question is.

Is this kind of the new watermark what drove the performance.

Anything to call out from a competitive standpoint in Europe , and then I had a follow up thanks.

Tim Herbert: Sure. I think it really is down to the performance of the Inspire team. And the focus in Germany was really strong and drove most of that growth. I also want to compliment the team in the Netherlands with opening new centers in the Netherlands. That's something we haven't been able to do for several years. And also Switzerland and the rest of DACH market really did very, very strong. We haven't really seen the performance from Belgium yet. That's still forthcoming. You're gonna see with the implementation of the national insurance coverage in Belgium; they're gonna have a strong second half, so it's gonna continue to move north. I think the UK has done implants, but now we're able to open up additional centers in the UK, which is really promising.

Sure.

I think it really is down to the performance of the inspire team.

And the focus in Germany was really strong and drove most of that growth I also want to compliment the team in the Netherlands with opening new centers in the Netherlands.

Some we haven't been able to do for several years and also Switzerland, and the rest of dark market really dead.

Very very strong we haven't really seen the performance from Belgium, yet that's still.

It's coming you're going to see with <unk>.

Implementation of the national.

Insurance coverage in Belgium, they're going to have a strong second half. So that's going to continue to move north I think the U K has done implants, but now we're able to open up additional centers in the UK, which is really promising and we previously announced that we were awarded countrywide Ram.

Tim Herbert: We previously announced that we were awarded countrywide reimbursement in France, but France is working through the coding set, the CPT coding equivalent in France, to make sure that when they lay this out publicly and put this on their registry, that it will have the CPT codes in place. We expect that to happen post-vacation time in Europe, and so that will do a full launch in the latter half of the year, which is really exciting for France, which is obviously one of the largest markets in Europe. So while we have good progress in Europe, I think the upside is still yet to come, and it's really driven by the introduction of reimbursement in those countries, and that's what's really gonna continue to drive the business. I... No comment on competition.

<unk> in France, but France is working through the coding set the CPT coding E.

Equivalent in France to make sure that when they lay this out publicly and puts us on the registry that it will have the CPT codes in place, we expect that to happen post vacation time.

In Europe , and so that will do a full launch in the latter half of the year, which is really exciting for France, which is obviously one of the largest markets in Europe . So while we have good progress in Europe , I think the upside is still yet to come and it's really driven by the.

The introduction of reimbursement.

In those countries and that's what's really going to continue to drive the business.

No comment on competition I'm not sure that has any kind of impact on us over there.

Tim Herbert: I'm not sure that has any kind of impact on us over there. But the team is really moving very, very strong. Later in the year, I think you're gonna start to see some progress over from Asia. As we made mention, Singapore is doing really well. And Japan, we're just coming through the transition to direct representation in that country, and you're gonna start seeing activity in Japan, which is really our focus in the Asia markets.

But we are the team is really move in a very very strong and later in the year I think youre going to start to see some progress.

Over from Asia, as we've made mentioned, Singapore is doing really well and Japan, we're just coming through that transition to a direct representation in that country and youre going to start seeing activity in Japan, which is really our focus and in the Asia markets.

Adam Maeder: That's great color, Jim. Thank you for the fulsome response. And for the follow-up, I guess I'll ask about the digital scheduling tool.

That's great color Jim. Thank you for the Fulsome response and for the follow up.

I guess I'll ask about the digital scheduling tool.

Tim Herbert: Okay.

Adam Maeder: I'm curious if you gave an update in terms of the number of US centers that are now on, you know, that tool right now. And just remind us of the difference in utilization between centers that have that and don't. And a second part would be just on the ASC mix, this quarter. Can you provide an update there? Thank you.

I'm curious if you gave an update in terms of the number of U S centers that are now on.

That tool right now.

And just remind us the difference in utilization between centers that have that are done and then a second part would be just on the ASC mix.

This quarter can you provide an update there. Thank you.

Tim Herbert: Absolutely. We're still in the pilot center of the digital scheduling, but probably about 60 plus centers are using the tool right now, and that- that's really exciting, because it's good for the patients. They don't go through the, poor experience of getting voicemail at a center when we're trying to make, those appointments. So we're gonna continue to push that. We're in- we're entering the second phase of that, where we can add additional, centers, partnering with our software company, to interface into their digital scheduling. So really like what's happening there. I think some of the, top centers, we're gonna be pushing that obviously quicker with those centers with the higher utilization, because that really just, again, streamlines that process, going forward. And the second question?

Absolutely we are still in the pilot center of the digital scheduling, but probably about 60 plus centers are using the tool right now and that's really exciting because.

Because it's good for the patients they don't go through that.

Poor experience of getting voice rollout of center when we're trying to make.

Appointments or we're going to continue to push that we're in we're entering the second phase of that where we can add additional centers partnering with our software company.

To interface into their digital scheduling so really like whats happening there I think some of the top centers, we're going to be pushing that obviously quicker with those centers with the higher utilization because that really just again streamline that process.

Going forward.

And the second question.

Operator: ASC mix.

Tim Herbert: Oh, ASC mix. I think that comes down to just, a little bit higher Medicare mix in the second quarter, and Medicare tends to be dominated in the hospital setting, especially down South, where they have the reduced, Medicare rates. But as we progress back to, higher commercial rates, as we progress through the quarter, I think that you'll see more and more progress with ASCs. But it really is our long-term vision that ASCs will be a key catalyst for driving the business, and we need to continue to provide education to ASCs when they negotiate their contracts with commercial payers to make sure that they have the carve-out for Inspire. And we need to work on the reimbursement levels, from a Medicare standpoint and the proper mix between commercial, Medicare, and ASCs.

Email ASC mix I think that comes down to just <unk>.

Little bit higher Medicare mix in the second quarter and Medicare tends to be dominated in the hospital setting, especially down south where they have the reduced Medicare rates, but as we progress back to.

Higher commercial rates as we've progressed through the quarter I think that youll see more and more progress with <unk>, but it really is our long term vision that <unk> will be a key catalyst for driving the business and we need to continue to provide education to ask.

When they negotiate their contracts with commercial payers to make sure that they have the carve out for inspire and we need to work on the reimbursement levels from.

From a Medicare standpoint, and the proper mix between commercial and Medicare in Afcs.

Adam Maeder: Thanks, Jim, and congrats.

Thanks, again and congrats.

Tim Herbert: Thanks, Adam.

Thanks Anna.

Operator: Thank you. And I show our next question comes from the line of Richard Newitter from Truist Securities. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Richard <unk> from <unk> Securities. Please go ahead.

Richard Newitter: Hi, thanks for taking the questions, guys. Nice job on the- on another good quarter. Maybe, my first question-

Alright, Thanks for taking my questions guys nice job on the on another good quarter maybe.

Richard Newitter: You know, I know in the past you've talked about all these initiatives that you have to increase throughput, efficiency. One of them is getting more physicians per implanting center. So do you have an update on the kind of the percent of your centers or installed base that have more than one physician? And then where do you think, you know, how should we think about that over the next few quarters?

My first question.

I know in the past you've talked about.

All of these initiatives that you have to increase throughput efficiency one of them is getting more physicians per implanting centers. So do you have an update on the on the kind of the percent of your centers are installed base that have more than one physician.

And then where do you think how should we think about that that over the next few quarters.

Tim Herbert: Yeah, absolutely. Don't have a specific number for you. We know that continues to grow, and that's a primary factor when reps go in to make sure we, number one, have a backup. Who's your backup? If the surgeon goes away or is unable to perform procedures, as just a routine measure, we wanna always have a backup. The other thing is we always look at a lot of our surgeons have multiple sites of service, so they can do procedures at a hospital, but they also have a backup at an ASC, per se. A lot of surgeons have multiple hospitals and an ASC. So for the most part, we're getting to the point we have multiple surgeons in most facilities, but most surgeons also have multiple sites of service. So it kinda counteracts itself from that standpoint.

Yes, absolutely I don't have a specific number for you we know that continues to grow and as.

A primary factor when reps go and to make sure. We number one have a backup lose your backup if the surgeon goes away is unable to perform procedures as just a routine measure we want to always have a backup.

Other thing is we always look at a lot of resurgence have multiple sites of service. So they can do procedures at a hospital, but they also have a backup.

At AFC per se that as surgeons have multiple hospitals and an ASC. So for the most part we're getting to the point, we have multiple surgeons in most facilities, but most surgeons also have multiple sites of service so kind of counteract itself from that standpoint, what we're really excited about both.

Tim Herbert: What we're really excited about, both from ENT and Sleep, is we have a very active fellows program. We wanna capture the surgeons as they graduate and go forth into their first job, to make sure that they're bringing their Inspire experience with them. And what we're doing is very actively training them before they start their jobs, to really focus on making sure Inspire is part of their practice as they get going. And we're doing that again, both with ENT and Sleep. We just finished our annual fellows course, and we had quite a few ENTs. I'm not sure the exact numbers on those, of the ENTs that graduated this year, but we're looking about a 50% conversion of those surgeons being able to do Inspire procedures in their first year.

From E&P and sleep.

As we have a very active fellows program, we want to capture.

Surgeons as they graduate and go forth into their first job to make sure that they are bringing their and inspire experience with them and what we're doing is very actively training them before they start their jobs to really focus on making sure inspire as part of their practice as they get going.

And we're doing that again, both with MTN sleep, we just finished our annual.

Fellows course.

And.

We had quite a few e&ps I'm not sure the exact numbers on those of the E&ps that graduated this year, but we're looking about a 50% conversion of those surgeons being able to do inspire procedures in their first year and that same thing goes forward with.

Tim Herbert: And that same thing goes forward with sleep physicians. So we're gonna continue to expand that program going forward and get Inspire taught more in the, at the medical school level.

Sleep physician, so we're going to continue to expand that program going forward in and get inspired taught more in.

At medical school level.

Richard Newitter: Great. And then, you know, kind of a generic question that, with respect to the, you know, utilization backdrop for a number of elective procedures out there, it's been strong in the first half, above trend. I know you guys are in a different situation, so underpenetrated into this huge TAM. But I'm curious the extent to which, you know, you're seeing any kind of backlog or pent-up demand that's continuing to come in and if you are, what the outlook is from a contribution standpoint as we move into the back half.

Great and then.

Kind of a generic question.

With respect to the utilization backdrop for a number of elective procedures out there. It's been strong in the first half above trend I know you guys are in a different situation. So underpenetrated into this huge tam, but I'm curious the extent to which you are seeing any kind of backlog or pent up demand that's continuing to come.

In and support strong results and if you are what the outlook is contribution standpoint, as we move into the back half.

Tim Herbert: Yeah, we are. I think we're seeing continued growth across all of our centers. Obviously, same store sales drove the growth in Q2 as it did in Q1. And I think we'll continue to do so as we move forward. I think that we're excited again about the pop that we saw with Medicare in the second quarter, and I think that kind of overwhelmed a little bit more of the commercial cases, which will come on strong in the second half. So the demand continues to be there. As you mentioned, Rich, we continue to be underpenetrated in the TAM, and we still have limitations on the number of surgeons performing the procedures. So we still need to continue to address that and work the backlog of patients.

Yes, we are I think we're seeing.

Continued growth across all of our centers, obviously same store sales drove the growth in Q2 as it did in Q1.

And I think we will continue to do so as we move forward I think that we're excited again about the pop that we saw with Medicare.

In the second quarter and I think.

That kind of overwhelmed a little bit more of the commercial cases, which will come on strong in the second half. So the demand continues to be there as you mentioned rich we continue to be underpenetrated in that Tam.

We still have.

Limitations on the number of surgeons performing the procedure. So we still need to continue to address that and work the backlog of patients but.

Tim Herbert: Absolutely, people wanna have step in and have their obstructive sleep apnea taken care of. Our demand from our direct-to-consumer continues to be very effective. Our contacts are high, our efficiency and conversions of patients through impact continues to be strong. We just got to continue to open up more OR time by training and getting ENTs to commit more of their time to these patients.

Absolutely people want to have.

Step in and have their obstructive sleep apnea taken care of.

Demand from our direct to consumer continues to be.

Very effective our contacts are higher efficiency and conversions of patients through impact continues to be strong. We just got to continue to open up more or time by training and getting E&P to commit more of their time to these patients.

Richard Newitter: Thank you.

Thank you.

Tim Herbert: Thanks, Rich.

Thanks Rich.

Operator: Thank you. I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Larry <unk> from Wells Fargo. Please go ahead.

Lei Huang: Hi, it's Lei calling in for Larry. Thanks for taking my question. Congratulations on the quarter. Just on the guidance, you raised the revenue, the full-year revenue guidance by a little more than the beat. That seems implied in the second half, your top line growth is closer to 30%, whereas you grew over 70% in the first half. So if you can just talk about, you know, why the deceleration, is there something other than conservatism? And just general confidence in the second half outlook. And I have a follow-up.

Hi, its play calling in for Larry Thanks for taking my question congratulations on the quarter.

Just on the guidance.

Great.

Revenue in the full year revenue guidance by a little more than the beat.

That seems to imply in the second half your topline growth is closer to 30%.

Grew over 70% in the first half if.

If you can just talk about why the deceleration.

Is there something other than conservatism and just general confidence in the second half outlook and I have a follow up.

Tim Herbert: Yeah. Hi, Lei, it's Rick. We haven't changed our guidance strategy. And so we put forth guidance that we believe in and we can stand behind. We did talk about, you know, that the mix of Medicare and commercial. And so with that said, you know, we expect a real strengthening of the commercial procedures as we enter into Q4. Despite that, you know, we're very proud of the Inspire's team the first half of the year, and we have increased guidance. So, really similar to previous years on how our revenue will kind of roll out for the year.

Richard Newitter: Yeah. Hi, Lei, it's Rick. We haven't changed our guidance strategy. And so we put forth guidance that we believe in and we can stand behind. We did talk about, you know, that the mix of Medicare and commercial. And so with that said, you know, we expect a real strengthening of the commercial procedures as we enter into Q4. Despite that, you know, we're very proud of the Inspire's team the first half of the year, and we have increased guidance. So, really similar to previous years on how our revenue will kind of roll out for the year.

Yes, Rick.

We haven't changed our guidance strategy.

And so we put forth guidance set that we believe in and we can stand, but Sam behind we did talk about the mix of Medicare and commercial and so with that said, we expect a real strengthening of the commercial procedures as we enter into the fourth quarter. Despite that we are.

We're very proud of the inspire team the first half of the year and we have increased it.

Increased guidance so.

Really similar to previous years on how our revenue will what kind of rollout for the year.

Lei Huang: Got it. Okay. And then just my second question. Tim, you talked about the new head of strategy that you just hired. What will be his focus? The company has, you know, close to $500 million cash. Should we read that as perhaps an increased interest in expanding your portfolio, either inside sleep apnea or, you know, even outside of sleep apnea? Thanks again.

Got it Okay and then just my second question Ken.

Can you talk about the new head of strategy that you just hired.

What will be his focus the company has close to 500 million cash should we read that as perhaps an increased interest in expanding your portfolio either inside sleep apnea or even outside of sleep apnea. Thanks again.

Tim Herbert: Sure, great question. Carlton's a great talent, and as we continue to grow, we need that leadership to be able to scale our business. I definitely see where you're coming from, that our investments in the past are focused on technical tools that can help us grow the adoption of Inspire. That's not changing. I think we're gonna focus on our building the Inspire business to treat obstructive sleep apnea. Nothing has changed there. Yes, we've been successful at making sure we have a strong balance sheet, but our focus today remains with obstructive sleep apnea and leveraging tools, as we have with Ognomy and EnsoData, to be able to help patients make appointments with physicians, to integrate in with a SleepSync system.

Sure Great question, Carl is a great talent and as we continue to grow.

Do we need that leadership to be able to scale our business.

Definitely see where youre coming from that our investments in the past our focus on tactical tools.

That can help us grow the adoption of inspire.

That's not changing I think we're going to focus on our building the inspire business to treat obstructive sleep apnea nothing has changed there and yes, we have been.

Successful that making sure we have a strong balance sheet, but our focus today remains with obstructive sleep apnea and and <unk>.

Leveraging tools as we have with agnomen anthro data to be able to help patients make appointments with physicians to integrate in with our sleep <unk> system, but again, we're keeping we're keeping our focus we're growing the adoption of inspire and Carlos is going to be just instrumental and helping us win.

Tim Herbert: But again, we're keeping, we're keeping our focus, we're growing the adoption of Inspire, and Carlton's gonna be just instrumental in helping us with our overall strategy plan and understanding what this organization looks like when we go to $1 billion, $2 billion in annual revenue. And what does the organization need to look like, not only from our external team, but from our operational side, our clinical evaluation, our quality, and our overall company as a whole?

Our overall strategy plan and understanding what this organization looks like when we go to $1 billion 2 billion in annual revenue and what does the organism organization need to look like not only from our external team, but from our operational side, our clinical evaluation of our quality and our <unk>.

Overall company as a whole.

Operator: Thank you. Thank you. I show our next question comes from the line of Anthony Petroni from Mizuho Americas. Please, please go ahead.

Thank you.

And I show. Our next question comes from the line of Anthony Petrone from Mizuho Americas. Please. Please go ahead.

Anthony Petrone: Thanks, and congrats on another strong quarter here. Maybe a quick one just on Inspire V, just, just to sort of clarify the pricing strategy for, for the latest gen system as, as we look toward a rollout, how will it stack up against the existing, the existing systems out there? And then a quick follow-up would be, when we look at the two themes of GLP-1s, potentially lowering BMI for even patients now contraindicated above 40 BMI, but with that label expansion up to 40 BMI. When you think of those two, you know, out there now concurrently, how many patients can that actually bring into the category where they would be eligible for hypoglossal nerve stimulation? Thanks.

Alright, thanks, and congrats on another strong quarter here.

A quick one just on inspire five years, just to sort of clarify the pricing strategy for for the latest Gen system as we look toward a rollout how will it stack up against the existing.

The existing systems out there and then a quick follow up would be when we look at the two themes of GOP ones potentially lowering BMI.

Or even patients now contra indicated above 40, BMI, but what that label expansion up to 40 BMI. When you think of those two.

Out there now concurrently how many patients cannot actually bring into.

The category, where they would be eligible for hypoglossal nerve stimulation.

Tim Herbert: Got it. Thanks very much. As far as, Inspire V comes out, we're still, evaluating that on what our pricing strategy be, will be when we launch that. It will be a change, because again, we won't be, moving, selling this, the pressure sensing lead either. So a little bit of time yet to come on that. We're still doing ongoing evaluation. I always said in the past that we tend to do price increases with technology improvements, and this is certainly a strong technology improvement, not only with Inspire V, but it opens up the platform, allowing us to go to six and seven and beyond. So a lot more to come on that, and we'll report back, in the future. As far as GLP-1, you put out a note yesterday.

Got it thanks, very much as far as I inspire five comes out we're still evaluating that on what our pricing strategy will be when we launch that it will be a change.

Because again, we won't be me.

Moving selling pressure sensing lead either so a little bit of time, yet to come on that we're still doing ongoing evaluation every as I always said in the past that we tend to do price increases with technology improvements and this is certainly a strong technology improvement not only with inspire five but it opens up platform, allowing us.

To go to six and seven and beyond so a lot more to come on that and we'll report back.

In the future.

GOP one you put a note yesterday you did.

Tim Herbert: You did a call with a doctor that was very intriguing in regards to their take on what GLP-1 is gonna do with addressing Inspire and how it's gonna do with overall weight loss; it is a very interesting discussion. I think what we're seeing is, we know that when you get a BMI above about 35, we can screen out well over 30 percent, a third of the patients due to complete concentric collapse or lateral wall collapse that's associated with a larger neck circumference. As we go to a BMI of 37, even up to a 40, that's when you're gonna screen out 50% or higher.

I'll cover the Doctor that was very intriguing in regards to their take on what <unk> is going to do.

With.

Addressing inspire in housing can do with overall weight loss is very interesting disc.

Discussion.

What we're seeing is we know that when you get a BMI.

Above about 35%, we can screen out well over 30, a third of the patients due to complete.

Complete concentric collapse or lateral wall collapse is associated with a larger next conference as we go to a BMI of 37, even up to a $40, that's when you're going to screen, all 50% or higher.

Tim Herbert: And so if you can just look at the number of patients up there, when we're able to help them with a GLP-1, to be able to lose weight and re-relax the lateral wall component of their obstructive sleep apnea, that's gonna have a significant impact on the Inspire business. The key is gonna be. It will take time. I think in your report highlighted that there's not a lot of activity that you've seen to date yet. We haven't heard a lot subjectively from the field on progress made with GLP-1, but we do know that's coming in the future.

And so if you can just look at the number of patients up there when we're able to help them with the GOP wanted to be able to lose weight and we relaxed the lateral wall component of their obstructive sleep apnea, that's going to have a significant impact on the inspire business. The key is going to be it will take time I think.

In your report highlighted that Theres not a lot of activity that you've seen to date, yet we haven't heard a lot subjectively from the field on progress made with GOP, one, but we do know that's coming.

In the future.

Anthony Petrone: Thank you very much.

Thank you very much.

Operator: Thank you.

Tim Herbert: Thank you.

Thank you. Thank you.

Operator: And I show our next question comes from the line of David Rescott from Baird. Please go ahead.

And I show. Our next question comes from the line of David <unk> from Baird. Please go ahead.

David Rescott: Oh, great. Hi. Thanks for taking the questions, and congrats on the strong quarter here. Just first on utilization in the US, I'm wondering, maybe what's dri-- not what's driving that, but when we think about kind of the bell curve of physicians that maybe are centers or maybe toward the upper end, middle end, and lower end of this range, is increasing utilization kind of coming from any one of those specific segments, or is it more or less broad across the kind of spectrum of centers? And then when we think about maybe those toward the higher end of that range, are there still improvements in utilization coming from those centers, or are they approaching maybe some of a, somewhat of a capping out kind of level?

Great Hi, thanks for taking the questions and congrats on the strong quarter here.

Just first on utilization in the U S. I am wondering maybe what's driving that what's driving that but when we think about kind of the bell curve of physicians that maybe your centers or maybe towards the upper and middle land at lower end of this range is increasing utilization kind of coming from any one of those specific segments or is it more more or less broad.

Frost across the kind of spectrum of centers and then when we think about maybe those towards the higher end of that range or are there still improvements of utilization coming from those centers or are they approaching maybe some of a somewhat of a capping out kind of level.

Tim Herbert: Yeah, I don't... Hi, thanks for the question. I think we still have quite a ways to go as far as utilization. We can talk about the characteristics of the higher-end sites, and the key characteristic is team. And what that means is the surgeons can focus on those aspects of their practice, and they can rely on sleep physicians who will do a lot of the longitudinal management of the patients, a lot of the programming of the device. And so the highest utilizing centers have multiple surgeons, and they have a well-defined team to know who does what with the patients. And it's easy for the patients to see their process through, from the initial screening, through the implant, through the longitudinal patient management.

Yes.

<unk>.

Hi, Thanks for the question I think we still have quite a ways to go as far as utilization, we can talk about the characteristics.

<unk>.

The higher end sites and the key characteristic is team.

And what that means is the surgeons can focus on those aspects of their practice.

And they can rely on sleep physicians, who will do a lot of the large.

A large general management of the patients a lot of the programming of the device and so the highest utilizing centers have multiple surgeons and they have a well defined team to know who does what would the patient and it's as.

It's easy for the patients to see their process through.

From the initial screening through the implant through the longitudinal patient management and SaaS kind of the key that we try to educate the tier two and the tier three sites with is you got to be able to have the team. We have great respect for our friends, who are those E&P surgeons who are doing.

Tim Herbert: I think that's kind of the key that we try to educate the tier two and the tier three sites with, is you gotta be able to have a team. We have great respect for our friends who are those ENT surgeons who are dual board certified in sleep medicine, because those are the early adopters. They've been with us since the very beginning. But they need to transition a little bit to have partnership with sleep physicians and others, other surgeons to really help them build their capacity. And what's important here is we know centers with the highest capacities also have the highest patient outcomes. Well, that's natural because everybody at that facility knows their job, everybody at that facility is experienced, and they know what a good patient outcome is.

Board certified in sleep medicine, because those are the early adopters they have been with us since the very beginning but they need to transition a little bit to have partnership with sleep physicians and others. Other surgeons to really help them build their capacity and what's important here is we know centers with the highest capacity.

You also have the highest patient outcomes, but thats natural because everybody at the facility knows their job everybody at that facility is experienced and they know what a good patient outcome is and so we keep pushing utilization and I think you highlighted that in your.

Tim Herbert: And so we keep pushing utilization, and I think you highlighted that in your initiation report on that as well. So, I think that's really kind of a key, is we're gonna keep pushing utilization as we move forward.

Initiation report on that as well so.

I think thats really kind of a key is we're going to keep pushing utilization as we move forward.

David Rescott: Okay, great. Thanks. Just second one from us on the expanded AHI, BMI labels. I know you guys provided some comments around the impact there. But just thinking or wondering, I guess, more towards the top of the funnel, I guess to the extent of which you're able to see. You know, if maybe you've heard anything anecdotal, just around physicians, you know, more or less at the margin, maybe considering offering the therapy to a broader number of patients, given that those labels have been bumped up a little bit. Thank you.

Okay, great. Thanks, just second one from us on the expanded <unk> label that you guys provided some comments around the impact there, but I'm just thinking or wondering I guess more toward the top of the funnel I guess to the extent of which youre able to see.

If maybe you've heard anything anecdotal just around physicians.

More or less at the margin, maybe considering offering the therapy to a broader number of patients given that those labels have been bumped up a little bit. Thank you.

Tim Herbert: Absolutely. Thank you. High AHI, absolutely. We made sure all the physicians knew about the high AHI approval right away. We're working with the commercial payers on an update to their policies on that, among other things, including the pediatric population as well. The key is gonna be that's, that's an important because those patients just don't have many other options. As far as the high BMI, as we've been talking about with the GLP-1, we're being very careful about jumping too fast into the high BMI ring, because those patients will have a higher probability of being screened out with the DICE procedure because of complete concentric collapse or the lateral wall collapse, and those are the concerns. Those are the patients we think can benefit from the GLP-1 drugs.

Thank you Hi, ehi absolutely.

We've made sure that physicians knew about the high na approval right away, we're working with the commercial payers on an update to their policies at that amongst other things, including the pediatric population as well.

The key is going to be that that's an important because those patients just don't have many other options as far as the high BMI as we've been talking about with the GOP, one we're being very careful about jumping too fast into the high BMI.

Because those patients will have a higher probability of being screened out with the dice procedure because their complete concentric collapse or the lateral wall collapse.

Those are the concerns of those locations, we think can benefit from the GOP one drugs are being very careful about BMI.

Tim Herbert: So we're being very careful about BMI, pushing really hard on high AHI, pushing very hard on pediatrics with Down syndrome, and then we'll talk more in the near future about transition of DICE to that, that whole predictor. That'll also be a key component with payers.

Pushing really hard on high AHRI, pushing very hard on pediatrics with down syndrome, and then we'll talk more in the near future about transition of dice to that therefore predictor that will also be a key component with payors.

David Rescott: Great. Thank you.

Alright, great. Thank you.

Tim Herbert: Thank you.

Thank you.

Operator: Thank you. I show our next question comes from the line of Matthew Mishan from KeyBanc. Please go ahead.

Thank you.

And I show. Our next question comes from the line of Matthew <unk> from Keybanc. Please go ahead.

Matthew Mishan: Hey, great. Thank you for taking the questions. I wanted to talk a little bit about SleepSync and kind of how many of these new centers that you're adding are also kind of adopting SleepSync? And then kind of where are they in, like, the pathway, and what are some of the larger centers in the pathway towards reimbursement for remote patient monitoring?

Okay, great. Thank you for taking the questions.

I wanted to talk a little bit that sleep sync.

And kind of how many of these new centers that you're adding are also adopting sleeps Inc.

Kind of where are they in like the parkway what are some of the larger centers pathway.

Towards.

Reimbursement for remote patient monitoring.

Tim Herbert: Great question. Thank you very much. The Bluetooth remote that was launched last year really is the big change to SleepSync. It provided the utility of the system to directly interface the patient's device with SleepSync, so the physicians and the healthcare providers can now have a real-time view of how those patients are doing. When we open new centers, as we have for the last several quarters, new centers being trained are automatically put on SleepSync. Our process is going back to the older centers that have been around for a while and starting to train them to add SleepSync to their process. But as far as new centers goes, it's standard requirement right up front. We train all of them to make sure they're a part of it. It's necessary to have this direct communication.

Great question. Thank you very much.

The Bluetooth remote that was launched last year.

Really is the big change to sleep. It provided the utility of that system to directly interface the patients device with sleep.

Physicians.

Health care providers can now have a real time view of how those patients are doing when we open new centers as we have for the last several quarters new centers being trained are automatically put out sleep sync and our processes going back to the older centers that are better off for a while and starting to train.

Them to add sleep sync to their process.

Far as new centers goes.

It's standard requirement right upfront, we train all of them to make sure. They are a part of it it's necessary to have this direct communication and as we mentioned we already have the new physician programmer approved.

Tim Herbert: As we mentioned, we already have the new physician programmer approved, and we're gonna launch that in the beginning of next year. All the actions taken with the physician programmer are automatically stored in SleepSync. All the information from the patient remote from the implanted product is transitioned via the patient's smartphone to SleepSync. We're gonna be introducing tools, such as a sensor that goes under patients' mattresses, to be able to record and monitor a patient's quality of sleep. That will be part of SleepSync. We are interfacing with our minority investments, Ognomy and EnsoData, so their data automatically uploads to SleepSync. What SleepSync is gonna be is gonna be all-encompassing patient management tool that's gonna have not only the objective evidence for the quality of sleep, but they'll also be able to input the subjective data from the patient.

And we're going to launch that in the beginning of next year all of the actions taken with the physician programmer are automatically stored and sleep sack.

And all of the information from the patient remote from the implant product as transition via the patient smartphone to sleep sack and we're going to be introducing tools.

As a sensor.

Sensor that goes under patients mattresses to be able to record and monitor a patient's quality of sleep that'll be part of sleep sake, we are interfacing with our minority investments <unk> and <unk> data so their data automatically uploads to sleep sync and what slips into is going to.

B is going to be all encompassing patient management tool, that's going to have not only the objective evidence for the quality of sleep.

But they'll also be able to input the subjective data from the patient how do they feel when they do a telemedicine right what kind of complaints do they have is evident working fine with them.

Tim Herbert: How do they feel when they do a telemedicine, right? What kind of complaints do they have? Is everything working fine with them? And then the next step after this with SleepSync is we're gonna be able to start taking action from a physician's office to a patient's home with remote patient programming. That's gonna be tremendous. We're already working on that, in-house. We're already in communication with FDA as well on that. So that's gonna be a key step, going forward.

And then the next step after this with sleep, saying is we're going to be able to start taking action from a physician's office to a patient's home with remote patient programming, that's going to be tremendous we're already working on that.

In house, we're already in communication with FDA as well on that so that's going to be a key step.

Going forward.

Matthew Mishan: Okay, great. And I'll just ask one last on all these new centers that you're adding. Is this really a push from your sales force, or is it a pull from these kind of centers, as these centers basically asking, saying, "We need to add this to our practice?

Okay, Great I'll, just ask one months on all of these new centers that you're adding is this really a push from your sales force or is it a pull from these kind of centers the centers basically asking.

To add this to our practice.

Tim Herbert: Where we are today, we're still a pull. When we do our direct-to-consumer, yes, we are creating a brand, and a lot of patients see that. They come to our website. Well, physicians see this as well. We haven't mentioned this at all today, but we get general practitioners, family practice doctors; they see those outreach programs as well. They come to our website saying: "Look, my patient's gonna ask me about this. I need to know how to communicate with my patients." So we have a large educational process with general practitioners or family practice doctors on how to talk to their patients and how to refer their patients to the ENTs. And so today, we're still responding to outside demand that we need to have this in our, in our practice.

Where we are today, we're still a Paul.

Where do our direct to consumer yes, we are creating a brand.

And a lot of patients see that they come to our website.

While physicians see this as well we haven't mentioned this at all today.

But we get general practitioners.

Family practice doctors, they see those outreach programs as well they come to our website, saying my patients are going to ask me about this I need to know how to communicate with my patients. So we have a large.

Educational process with general practitioners are family practice doctors at how to talk to their patients and how to refer their patients to the emts and so today, we're still responding to outside demand that we need to have this in our in our practice and the first thing we do when we get an inbound call.

Tim Herbert: The first thing we do when we get an inbound call from a center is we kind of make them fill out an application. I know that sounds arrogant, but it's not. What it is, it's an organizational form that helps them identify who's who in the zoo. Who's the ENT? Who's the sleep physician? Do you have support from the C-suite? Do we have a proper navigator? Do we have the OR team? Who's gonna do sleep endoscopy? How are you tied into your sleep practices? So we really kind of coordinate all the key functions that are necessary for centers to come on board and be come on board with a high utilization. So we're still in that early stage where we're bringing on patients and we just don't have capacity in centers yet. We need...

From a center as we kind of make them fill out an application I know thats out there again, but it's not what it is is the organizational form that helps them identify who's who in the zoo, who is the anti who is the sleep physicians. They have support from the seats. We do we have a proper navigate or do we have the <unk> team who is going to slip in.

<unk> how are you tied into.

Youre asleep practices. So we're really kind of coordinate all the key functions that are necessary for centers to come on board and be come onboard with the high utilization. So we're still in that early stage, where we're bringing on patients in and we just don't have capacity at centers, yes, we need to.

Tim Herbert: or a capacity in cities yet. So we need to continue to grow the number of centers that we're training.

Eric capacity in.

And cities yet so we need to continue to grow the number of centers that we're training.

Matthew Mishan: Thank you, Tim.

Thank you Dave.

Tim Herbert: Thank you.

Thank you.

Operator: Thank you. Our last question comes from the line of Suraj Kalia from Oppenheimer & Co. Please go ahead.

Thank you.

And I'm sure. Our last question comes from the line of Suraj Kalia from Oppenheimer <unk> co. Please go ahead.

Suraj Kalia: Hi, Tim. Can you hear me all right?

Hi, Tim can you hear me alright, yes.

Tim Herbert: Yes, Suraj, how are you?

Suraj Kalia: Good. Congrats on the quarter. So Tim-

Yes, Suraj how are you good congrats on the quarter. So Tim I'll take you through all my questions quickly all of them directly to you.

Tim Herbert: Thank you.

Suraj Kalia: I'll throw in all my questions quickly, all of them directed to you.

Tim Herbert: Okay.

Suraj Kalia: So, Tim, on your comments on GLP-1s, appreciate the color. Maybe you can walk us through... I look upon this as a two-tailed curve, right? You were talking about high BMI getting pulled in, and your comments about lateral collapse, I appreciate that. How do you look upon the net change? Because patients that are 30 to 35, 37, they're gonna drop also. So I'm curious, how do you all stratify what is the influx minus the outflux? So that's one question.

On your comments on <unk> appreciate the color.

Maybe you can walk us through I look upon this as a two tailed curve right you were talking about high BMI getting pulled in and your comments about lateral collapsed I appreciate that.

How do you look upon the net change because patients that are 30% to $35 37, they're going to drop also.

So I'm curious how do you stratify what does the influx minus the outflux. So that's one question.

Tim Herbert: Mm-hmm.

Suraj Kalia: The second question, Tim, and please stop me if I ask me again. Second question would be, what percent of your patients currently are getting hypoglossal nerve stim, but haven't even tried a CPAP?

And the second question Tim.

Please stop me if I.

Ask me again second question would be what person to fewer patients.

Currently are getting hypoglossal nerve stem, but haven't even tried CPAP.

Tim Herbert: Mm.

Suraj Kalia: Tim, the remote programming component, can you give us a specific example where remote programming has been done, whether it's neuromodulation, anything? The reason I ask is general otolaryngologists, at least our field, you and I have talked about this in the past, also offline-

And.

The remote programming component can you give us a specific example, where remote programming.

Has been done visits Neuromodulation anything and the reason I ask is general otolaryngologist at least our future you're going to have talked about this in the past also offline there.

Tim Herbert: Mm.

Suraj Kalia: You know, they are sort of disconnected with the, with the programming component of it, they hand it off. So I'm curious if you could, in the remaining time, just walk me through. Sorry, I threw all of this in. Any questions, answers to any questions would be great. Thank you, gentlemen.

Sort of disconnected with the with the programming component of it the $100. So I'm curious if you could the remaining time just walk me through sorry, yet through all of those and any question and answers to any questions would be great. Thank you gentlemen, those are all really really good let me walk through I kind of want to go into reverse, but im not going to okay BMI and.

Tim Herbert: No, those are all really, really good. Let me walk through... I kind of want to go in reverse, but I'm not going to. Okay, BMI influx, outflux. You have knowledge on this, and that's why it's, it's so key to talk about this. It's a percent of patients with a high BMI that actually have a lateral wall collapse, and as you highlight, not everybody does. And a lot of patients with a BMI of 37 only have tongue-based collapse, and so they will pass a sleep endoscopy and go right on to Inspire. The challenge that you're highlighting is how many patients do you have to see that will actually pass a DICE to be able to move on to Inspire, and how much capacity did you eat up in that ENT's practice with patients that aren't able to get Inspire? So it's a very good question.

<unk> do.

Do you have knowledge on this and that's why it's so key to talk about this it's a percent of patients with a high BMI that actually have a lateral wall collapse and as you highlight that everybody does and a lot of patients with a BMI of 37 only have ton based collapse and so they will pass a sleep endoscopy and.

Right on to inspire the challenge that you are highlighting is how many patients do you have to see that will actually pass it days to be able to move on to inspire and how much capacity did you eat up in that Ent's practice with patients that are unable to get inspire such a.

Tim Herbert: That's why we're being very careful with the high BMI. The good news is, with Predictor, airway exam, we can do a soft review in an office setting to see if a patient's likely to have a lateral wall collapse, and we're already in the next 300. So a lot more to come on that to really start stratifying those groups. But I think the GLP-1s are gonna take those patients with a lateral wall collapse or the complete concentric collapse. And ideally, now we need to see how this works in practice, ideally, lower their BMI, and have them present really ideally as only a tongue-based collapse. So we need to track that going forward. Your second question was with what percent of our hypoglossal nerve stimulation patients have actually tried CPAP?

Very good question and that's why we're being very careful with the high BMI. The good news is with predictor that airway exam, we can do a soft review in an office setting to see if a patient likely to have lateral wall collapse and we're already in the next 300, so a lot more to come on that.

<unk> to really start stratify those groups.

But I think the the GOP ones are going to take those patients with a lateral wall collapse of the complete concentric collapse.

And ideally now we need to see how this works out practice ideally lower their BMI.

And have them present really ideally as only a tongue based collapse.

So we need to track that going forward. Your second question was with what percent of our hypoglossal nerve stimulation patients have actually tried CPAP and the referring to this is with the Philips recall did we get a significant amount of patients that we're able to bypass CPAP or go right to inspire I think the real answer.

Tim Herbert: The reference to this is, with the Philips recall, did we get a significant amount of patients that were able to bypass CPAP and go right to Inspire? I think the real answer to that is probably not.... I think the great majority of our patients have all tried CPAP, and I think that's a gate that the insurance companies always ask. I am sure there's a small percent that have been able to go through because they're unable to get a CPAP machine because there wasn't inventory there from ResMed, or there wasn't an inventory, obviously, from Philips because of the recall. But I think historically, I think very few of our patients actually get through bypassing CPAP, so I think probably it really has no impact on the inventory side.

Sort of that.

Is probably not I think the great majority of our patients have all tried CPAP and I think that is a gate that the insurance companies always asked I.

Im sure Theres, a small percent that have been able to go through because they are unable to get a CPAP machine because there was an inventory there from reservoir there wasn't a inventory obviously from.

Fill us because of the recall, but I think historically I think very few.

A few of our patients actually get through bypassing CPAP. So I think probably it really has no impact on the inventory side Neuroma I think Abbott has approval for some of their.

Tim Herbert: Neuromod, I think Abbott has approval for some of their diabetes products. And so if you look at the way SleepSync is set up, and we look at the screens of SleepSync, they really are modeled after our good friends at ResMed. And ResMed did a really good job with their Brightree system, having a patient management system that the sleep physicians know how to manage their patients. And if we could model our screens after those, the sleep physicians would be comfortable using SleepSync, and that's kind of the tool we're using. And those are the sleep physicians, those are the ones that manage the patients longitudinally, and those are the ones that the remote program is designed for.

Diabetes products and so if you look at the way sleep <unk> set up and we look at the screens of fleets that are saying they really are modeled after our good friends at resume and resume did a really good job with the <unk> system, having a patient management system that the sleep physicians know how to manage their patients.

And if we could model our screens after those the sleep physicians will be comfortable using sleep zinc and thats kind of the tool we are using and those are the sleep physicians those are the ones that manage the patients longitudinally and those are the ones that the remote program is is designed for now you may have <unk>.

Tim Herbert: Now, you may have ENTs that are dual board-certified in sleep, and they do the longitudinal management, but we're really kind of building SleepSync for the longitudinal management and the remote programming. And FDA has approved that, for implanted products in the past, so we do have precedence, for which to move forward with. So thank you very, very much on that, Suraj. I know we're over time, but I just want to make one last note. I want to thank you 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 consistent patient outcomes. The Inspire team, the Inspire, Inspire team's commitment to patients remain unmatched and is the most important element to our success.

Dual board certified slip and they do the longitudinal management, but we're really kind of building sleep thing for the longitudinal management. They were more programming and FDA has approved that vary in platinum products in the past. So we do have precedence.

For which to move forward with.

So thank you very very much on that Suraj I know, we're over time, but I just want to make one last note I want to thank you all for joining the call today as always I am.

Grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve successful and consistent patient outcomes. The inspire team it's Barry.

By our team's commitment to patients remain unmatched and is the most important element to our success I 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.

Tim Herbert: I wish to thank all of our employees, as well as the healthcare teams, for the continued efforts as we remain focused on further expanding our business in the US, Europe, and in Asia. For all of you on the call, we appreciate your continued interest in and support of Inspire, and look forward to providing you with further updates in the months ahead. Please stay safe and healthy. Thank you very much.

For all of you on the call. We appreciate your continued interest in and support of inspire and look forward to providing you with further updates in amounts ahead. Please stay safe and healthy. Thank you very much.

Operator: This concludes today's conference call. You may now disconnect.

This concludes today's conference call you may now disconnect.

Okay.

[music].

Okay.

Q2 2023 Inspire Medical Systems Inc Earnings Call

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