Q4 2023 Inspire Medical Systems Inc Earnings Call

Okay.

Operator: Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems fourth quarter and full year 2023 conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Good afternoon, My name is <unk> and I'll be your conference operator today at this time I'd like to welcome everyone to the inspire medical systems fourth quarter and full year 2023 conference call.

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

Operator: After the speaker's remarks, there will be a question and answer session. I'll now hand the call over to your first speaker, Ezgi Yaja, the Vice President of Investor Relations at Inspire. You may begin the conference. Thank you, Dylan, 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.

Speaker Change: I'll now hand, the call over to your first speaker Skeoch, our vice President of Investor Relations at inspire you may begin the conference.

Speaker Change: Thank you Don and thank you all for participating in today's call. Joining me are Tim Herbert President and Chief Executive Officer and.

Earl: Financial Officer Earl.

Ezgi Yaja: Earlier today, we released financial results for the 3 and 12 months and December 31st. A copy of the press release is available on our website at www.inspiremedical.com. On this call, management will make forward-looking statements within the meaning of the Federal Security Act. All forward-looking statements, including, without limitation, those relating to our operations. Financial Results and Financial Conditions. Investments in our business for the year 2024 Financial and Operational Outlook The Bulletproof Executive 2013, The following statements involve material risks and uncertainty that could cause actual results or events to materialize.

Speaker Change: Earlier today.

Speaker Change: Actual results.

Skeoch: 12 months ended December 31, 2023, a copy of the press release is available on our website.

Skeoch: On this call management will make forward looking statements.

Skeoch: The federal Securities laws, all forward looking statements, including without limitation those relating to our operations.

Skeoch: Actual results and financial condition investments in our business.

Skeoch: Our 2024 financial and operational outlook.

Skeoch: And market access are based upon a courthouse unless and various assumptions these states.

Skeoch: Once involve material risks and uncertainties that could cause actual results or events.

Ezgi Yaja: Accordingly, you should not place undue reliance on- See our filings with the Securities and Exchange Commission, including our Form 10-K, which we plan to file with the SEC on February 9th, 2024, for a description of these risks. Inspire disclaims any intention or obligation, except as required by law, to update or revise any financial projections of forward-looking states and many more, conference call, www.inspiredmedical. With that, it is my pleasure to turn the call over to www.inspiredmedical.com. Thank you, Erskine. And thank you everyone for joining our business update call for the fourth quarter of 2023. We are excited to report our first quarter of operating income and a very strong finish to the year. We know our focus and discipline on patient outcomes and ensuring that each patient has the best possible experience with Inspire Therapy is the foundation of our business, and we remain committed to this as our top priority.

Skeoch: Accordingly, you should not place undue reliance on these statements.

Skeoch: Please see our filings with the Securities and Exchange Commission.

Skeoch: Our Form 10-K, which we plan to follow with that.

Skeoch: February 9th 'twenty 'twenty four for a description of these risks and uncertainties.

Skeoch: As far 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.

Skeoch: This conference call contains time sensitive information.

Skeoch: The live broadcast today February.

Skeoch: Great.

Skeoch: 24.

Skeoch: With that it is my pleasure to turn the call over to Tim Herbert Ken.

Timothy P. Herbert: Thank you Abigail.

Timothy P. Herbert: And thanks, everyone for joining our business update call for the fourth quarter of 2023.

Timothy P. Herbert: We are excited to report our first quarter with operating income and a very strong finish to the year.

Timothy P. Herbert: We know our focused and disciplined on patient outcomes and ensuring that each patient has the best possible experience with inspire therapy is the foundation of our business.

Timothy P. Herbert: And we remain committed to this as our top priority.

Timothy P. Herbert: During today's call, we will highlight many accomplishments from 2023 that demonstrate our ongoing focus on patients, including improvements and access to therapy, technology advancements, and planned activities to broaden the population that can benefit from Inspire. We will also discuss our outlook for Fall 2024. We would like to take a moment to recognize two very special individuals who recently announced their retirement from the Inspire board following many years of service. Last week, we announced that Dr. Jerry Griffin, who, after 16 years on the Inspire board, is planning to retire following the conclusion of our 2024 Annual Meeting of Stockholders. Dr. Griffin is one of our original directors, having joined the board back in 2008 and has been an inspirational leader throughout our development and commercialization to maintain the important medical influence on our board. We recently announced that Dr. Miriam Kuret, a medical doctor with extensive business and med tech industry experience, was appointed to our board of directors. Secondly... And just yesterday, we announced the retirement of Marilyn Carlson Nelson from our Board of Directors. Marilyn joined the board as chair in 2018, following the passing of her husband, Dr. Glenn Nelson, Inspire's original chairperson.

Timothy P. Herbert: During today's call we will highlight many accomplishments from 2023 that demonstrate our ongoing focus on the patients including the improvements in access to the therapy.

Technology advancements and planned activities to broaden the population that can benefit from inspire.

Timothy P. Herbert: We will also discuss our outlook for full year 'twenty 'twenty four.

Timothy P. Herbert: We would like to take a moment to recognize two very special individuals who recently announced the retirement from the inspire board following many years of service.

Timothy P. Herbert: Last week, we announced that Doctor Gerry Griffin, who after 16 years on inspire board is planning to retire following the conclusion of our 2024 annual meeting of stockholders.

Timothy P. Herbert: Doctor Griffin is one of our original directors, having joined the board back in 2008.

It has been an inspirational.

Timothy P. Herbert: Either throughout our development and commercialization.

Timothy P. Herbert: To maintain the important medical influence on our board, we recently announced that Dr. Mary I'm correct, a medical doctor with extensive business and Med Tech industry experience was this was appointed.

Timothy P. Herbert: Two our board of directors.

Timothy P. Herbert: Secondly.

Timothy P. Herbert: And just yesterday, we announced the retirement of Marilyn Carlson Nelson from my Board of directors.

Timothy P. Herbert: Merrill Lynch joined the board as chair in 2018, following the passing of her husband Doctor Glen Nelson inspired original chair.

Timothy P. Herbert: Maryland has had a profound impact on our business and team members during her time on the board, and served as a great leader and mentor to me and many others across the organization. In conjunction with Maryland's retirement, I am humbled and honored to be appointed Chair of the Inspire Board of Directors and look forward to this added role in continuing to lead Inspire for many years of growth ahead. Finally, the board has appointed Gary Ellis to the role of lead director.

Timothy P. Herbert: Maryland has had a profound impact on our business and team members. During her time on the board and serve as a great leader and mentor to me and many others across the organization.

Timothy P. Herbert: In conjunction with Maryland retirement.

Speaker Change: I am humbled and honored.

Speaker Change: To be appointed chair of the inspire board of directors.

Speaker Change: And look forward to the added role and continuing to lead and inspire for many years of growth ahead.

Speaker Change: Finally, the board has appointed Gary Ellis to the role of lead director.

Timothy P. Herbert: Gary was appointed to the Inspire Board in 2019 following an extensive career as Chief Financial Officer of Medtronic, and he currently serves as the Chair of the Nominating and Corporate Governance Committee, while we will miss Jerry and Marilyn. They will remain in the Inspire family and will always be just a phone call away, and we sincerely thank them for their contributions to Inspire. Back to our review of 2023. The year was filled with many important milestones and achievements. We are excited to announce that during the year, over 60,000 patients have been treated with Inspire Therapy. We expanded indications and received FDA approval to provide Inspire to pediatric patients with Down syndrome, to increase the upper limit of the apnea hypotonic index from 65 to 100 events per hour, and to increase the body mass index warning from 32 to 40.

Speaker Change: Gary was appointed to the inspire born in 2019, following an extensive career as chief financial officer of Medtronic.

Speaker Change: And he currently serves as the chair of the nominating and corporate governance Committee.

Speaker Change: While we will Miss Jerry in Maryland.

Speaker Change: He will remain in inspire family and will always be just a phone call away.

Speaker Change: And we sincerely thank them for their contributions to inspire.

Speaker Change: Back to our review of 2023.

Speaker Change: The year was filled with many important milestones and achievements. We are excited to announce that exiting the year over 60000 patients have been treated with inspire therapy.

Speaker Change: We expanded indications and received FDA approval to provide inspired to pediatric patients with down syndrome.

Speaker Change: To increase the upper limit of the apnea <unk> index from 65 to 100 events per hour and to increase the body mass index warning from 32 to 40.

Timothy P. Herbert: With that, let's review our results. In the fourth quarter, we generated revenue of $192.5 million, representing a 40% increase compared to the fourth quarter of 2022. Our growth continues to be driven by increased utilization at existing centers, and is complemented by the activation of new centers. Fourth quarter U.S. revenue totaled $189.4 million, a 41% increase over the same period last year. International revenue declined 16% to $3.1

With that let's review our results.

In the fourth quarter, we generated revenue of $192 $5 million, representing a 40% increase compared to the fourth quarter of 2022.

Speaker Change: Our growth continues to be driven by increased utilization at existing centers and is complemented by the activation of new centers.

Speaker Change: Fourth quarter U S revenue totaled $189 4 million or 41% increase over the same period last year.

Speaker Change: International revenue declined 16% to $3 $1 million.

Timothy P. Herbert: As we previewed on our third quarter earnings call, during the fourth quarter, we depleted our supply of polyurethane-based leads in Europe, as we are still awaiting European Union Medical Device Regulation, or EU MDR, approval. We are working diligently to obtain EUMDR approval, and as a contingency, have received derogation authorization in the Netherlands and Belgium, and more recently in Germany and Switzerland.

Speaker Change: As we previewed on our third quarter earnings call during the fourth quarter, we depleted our supply our polyurethane based leads in Europe.

Speaker Change: As we are still awaiting European Union medical device regulation or E U M B our approval.

Speaker Change: We are working diligently to obtain <unk> approval as a contingency have received derogation authorization in the Netherlands, and Belgium, and more recently in Germany and Switzerland.

Timothy P. Herbert: This enables us to shift silicon-based needs in those countries while we continue to pursue EU MDR approval. Given the strength we are seeing in our business..., we are reaffirming our 2024 revenue guidance of $775 to $785 million, which represents 24 to 26% year-over-year growth over 2023 revenue of $624.8 million. We are thrilled to report our first quarter of operating income, which totaled 9.3 million dollars. Our net income for the fourth quarter was $14.8 million, compared to $3.2 million in the prior year period, and represented diluted net income per share of 49 cents compared to $0.10 per share in the fourth quarter of 2022.

Speaker Change: This enables us to ship silicon basically needs in those countries, while we continue to pursue EU MBR approval.

Speaker Change: Given the strength, we're seeing in our business. We are reaffirming our 2020 for revenue guidance of $775 million to $785 million, which represents 24% to 26% year over year growth over 2023 revenue.

Speaker Change: Of $624 $8 million.

Speaker Change: We are thrilled to report our first quarter with operating income.

Speaker Change: Which totaled $9 $3 million.

Speaker Change: Our net income for the fourth quarter was $14 $8 million compared to $3 $2 million.

Speaker Change: In the prior year period.

Speaker Change: Represented.

Speaker Change: Diluted net income per share up 49 cents.

Speaker Change: Compared to 10 cents per share in the fourth quarter of 2022.

Timothy P. Herbert: We will continue to focus on operating leverage in 2024 and beyond and plan to move toward steady profitability as we progress through the year. We will provide further guidance following our first-quarter earnings in the U.S. During the fourth quarter, we continued to increase our capacity to support the strong demand for Inspire Therapy by adding 78 new implanting centers, ending the quarter with a total of 1,180 centers. In 2024, we expect to activate 52 to 56 new centers per quarter, regarding the U.S. sales team. We created 13 new sales territories in the fourth quarter, bringing our total to 287. In 2024, we expect to add 12 to 14 new sales territories per quarter.

Speaker Change: We will continue to focus on operating leverage in 2024, and beyond and plan to move towards steady profitability as we progress through the year.

Speaker Change: We will provide further guidance following our first quarter earnings.

Speaker Change: In the U S. During the fourth quarter, we continued to increase our capacity to support the strong demand for inspire therapy by adding 78, new implanting centers.

Speaker Change: Ending the quarter with a total of 1180 centers.

Speaker Change: In 2024, we expect to activate 52 to 56 new centers per quarter.

Speaker Change: Regarding the U S sales team.

Speaker Change: We created 13, new sales territories in the fourth quarter, bringing our total to 287.

Speaker Change: In 2024, we expect to add 12 to 14 sales territories per quarter.

Timothy P. Herbert: One of our keys to success is our ability to drive awareness of Inspire Therapy through our direct-to-consumer program. As such, we were excited to launch a new and improved InspireSleep.com website in December, which features increased education on InspireTherapy, including new physician testimonials. After initiating a direct digital scheduling program through our advisor care program in 2022, we expanded the program in 2023 to over 100 centers and will continue focusing on this in 2024. We also continue to expand our patient nurturing program through an email campaign to patients who have visited InspireSleep.com or called our ACP and expressed continued interest in Inspire Therapy. Switching over to market access, our positive fourth quarter results reflect strong patient demand for Inspire Therapy and an increased number of prior authorization submissions, trends that we expect to continue in 2024.

Speaker Change: One of our keys to success is our ability to drive awareness of inspire therapy through our direct to consumer programs.

Speaker Change: As such we were excited to launch a new and improved inspire sleep dotcom website in December which features increased education and inspire therapy, including new physician testimonials.

Speaker Change: After initiating a direct digital scheduling program through our adviser care program at 2022, we expanded the program in 2023 to over 100 centers and we will continue focusing on this in 2024.

Speaker Change: We also continued to expand our patient nurturing program through an email campaign to patients who have visited and inspire sleep dot com or called our ACP and express continued interest in inspire therapy.

Speaker Change: Switching over to market access our positive fourth quarter results reflect a strong patient demand for inspire therapy and an increased number of prior authorization submissions.

Speaker Change: <unk> that we expect to continue in 2024.

Timothy P. Herbert: Further, we have onboarded a third-party vendor to assist our market access team with the prior authorization process, which increases our capacity to meet a strong and growing patient demand. The market access team has been actively engaging with payers on the clinical indication expansion approvals received this past year. The process involves our team providing payers with the necessary clinical information and requesting implementation into the payers' coverage policies.

Speaker Change: Further we have on boarded a third party vendor to assist our market access team with the prior authorization process, which increases our capacity to meet our strong and growing patient demand.

The market access team has been actively engaging with payers and <unk>.

Speaker Change: Clinical indication expansion approvals received this past year.

Speaker Change: The process involves our team providing payers with the necessary clinical information and requesting implementation into the payers coverage policies.

Timothy P. Herbert: We have already been successful with the implementation of numerous policies and expect further progress in 2024. We continue to make investments in our clinical research, as evidenced by the PREDICTOR study. We completed enrollment of the second subset of 300 patients early in the first quarter and expect to publish results once the full data set has been analyzed. Once results are available, we will work with payers to update their policies to provide flexibility in assessing which patients are ready for Inspire. The PREDICTOR study is designed to assess if and when an office-based assessment can effectively replace the long-standing drug-induced sleep endoscopy, or DICE.

Speaker Change: We have already been successful with the implementation into numerous policies and.

Speaker Change: We expect further progress in.

Speaker Change: In 2024.

Speaker Change: We continue to make investments in our clinical research at <unk>.

Speaker Change: Evidenced by the predictors study.

Speaker Change: We completed enrollment of the second subset of 300 patients early in the first quarter and expect to publish results. Once the full dataset has been analyzed.

Speaker Change: Once results are available we will work with payors to update their policies to provide flexibility and assessing which patients are ready for inspire.

Speaker Change: Predictors study is designed to assess to assess if and when an office based assessment can effectively replace the long standing drug induced sleep endoscopy or days.

Timothy P. Herbert: This office procedure will significantly improve the patient experience and should unlock physician capacity to perform additional Inspire procedures. On the product development side, our pipeline remains robust. The team is working diligently on our response to the FDA's questions on the Inspire 5 PMA supplement. Recall, the Inspire 5 system incorporates sensing capability into the neurostimulator using an accelerometer and removes the need for the pressure sensing lead.

Speaker Change: This office procedure will significantly improve the patient experience and should unlock physician capacity to perform additional inspire procedures.

Speaker Change: On the product development side, our pipeline remains robust.

Speaker Change: Team is working diligently on our response to the Fda's questions on the inspire five PMA supplement we call. The inspire five system incorporates sensing capability into the neuro stimulator, using an accelerometer and removes the need for the pressure sensing lead.

Timothy P. Herbert: We are completing system level and production qualification testing to submit to the FDA. With no more review time, we continue to expect approval and a limited market release in 2024, and we are targeting full commercial launch in 2025. Looking ahead to 2024, we will launch our new connected physician programmer in the U.S. called the SleepSync Programmer. This will allow physicians to access our programming screens from their own computers and eliminate the need for Inspire-provided tablets as part of the physician programming system, paving the way for future remote patient programming. We continue to increase the adoption of our SleepSync digital platform and work on enhancements to streamline the patient experience from initial contact through long-term longitudinal

Speaker Change: We are completing system level and production qualification testing to submit to the FDA with.

Speaker Change: With normal review time, we continue to expect approval in a limited market release in 2024, and we are targeting full commercial launch in 2025.

Speaker Change: Looking ahead to 2024, we will launch our new connected physician programmer and the U S called the sleep sync programmer.

Speaker Change: This will allow physicians to access our programming screens from their own computers and eliminate the need for inspire provided tablets as part of the physician programming system.

Speaker Change: Paving the way for future.

Speaker Change: Patient programmer.

Speaker Change: We continue to increase the adoption of our sleep sync digital platform and work on enhancements to streamline the patient experience from initial contact through long term longitudinal management.

Richard John Buchholz: In summary, we remain focused on patient outcomes and physician education to continue the adoption of Inspire Therapy. We will continue to increase utilization at our existing centers while adding capacity by opening new centers. We remain excited about 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 financial... Thank you, Tim. And good afternoon, everyone.

Speaker Change: In summary, we remain focused on patient outcomes and physician education to continue the adoption of inspire therapy, we will continue to increase utilization at our existing centers, while adding capacity by opening new centers.

Speaker Change: We remain excited about future prospects and are confident that we have the appropriate strategy in place to drive long term stakeholder value.

Speaker Change: With that I'd like to turn the call over to Rick for his reviews of our financials.

Rick: Thank you Tim and good afternoon, everyone total revenue for the fourth quarter was $192 5, million% to 40% increase from the $137 9 million generated in the fourth quarter of 2022.

Richard John Buchholz: Total revenue for the fourth quarter was $192.5 million, a 40% increase from the $137.9 million generated in the fourth quarter of 2022. U.S. revenue in the fourth quarter was $189.4 million, an increase of 41% from the $134.3 million in the prior year period. The primary growth driver in the U.S. 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. Revenue outside the U.S. was $3.1 million, which is a 16% decrease year over year. As Tim noted, this was due to the delay in the EU MDR approval that impeded our ability to ship silicone-based leads in Europe during the fourth quarter. The U.S. average selling price in the fourth quarter was $25,000, compared to $24,900 in the prior year period.

Rick: U S revenue in the fourth quarter was $189 4 million an increase of 41%.

Rick: From the $134 3 million in the prior year period.

Rick: The primary growth driver in the U S was 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.

Rick: Revenue outside the U S was $3 1 million, which is a 16% decrease year over year.

Rick: As Tim noted this was due to the delay of the EU MTR approval that impeded our ability to ship silicon based leads in Europe during the fourth quarter.

Rick: The U S average selling price in the fourth quarter was 25000 compared to 24900.

Rick: In the prior year period, we expect the U S asps to remain steady at the current level.

Richard John Buchholz: We expect the US ASP to remain steady at the current level. The ASP outside the U.S. was 19,900 during the quarter compared to 20,400 in the fourth quarter of 2022. Gross margin in the fourth quarter was 85.4% compared to 83.9% in the prior year period.

Rick: DSP outside the U S with 19900 during the quarter compared to 20400 in the fourth quarter of 2022.

Rick: Gross margin in the fourth quarter was 85, 4% compared to 83, 9% in the prior year period.

Richard John Buchholz: The year-over-year increase was driven by improved manufacturing yields and higher volume. Total operating expenses for the fourth quarter were $155.2 million, an increase of 34% as compared to $116.1 million for the fourth quarter of 2022. The 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. Interest and dividend income totaled $5.9 million in the fourth quarter compared to $3.4 million in the prior year period.

Rick: The year over year increase was driven by improved manufacturing yields and higher volumes.

Rick: Total operating expenses for the fourth quarter were $155 2 million, an increase of 34% as compared to $116 1 million in the fourth quarter of 2022.

Rick: This planned increase was due to the expansion of our sales organization.

Rick: Increased direct to consumer marketing programs continued product development efforts and general corporate costs.

Rick: Interest and dividend income totaled $5 9 million in the fourth quarter compared to $3 4 million in the prior year period.

Richard John Buchholz: This higher income was driven by higher interest rates on our increased cash and investment balances compared to a year ago. Net income for the fourth quarter was $14.8 million compared to $3.2 million in the prior year period, representing diluted net income per share of 49 cents compared to $0.10 per share in the fourth quarter of 2022. The weighted average number of diluted shares outstanding for the fourth quarter was 30.2 million.

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

Net income for the fourth quarter was $14 8 million compared to $3 2 million in the prior year period.

Rick: Representing diluted net income per share of <unk> 49.

Compared to <unk> 10 per share in the fourth quarter of 2022.

Rick: The weighted average number of diluted shares outstanding for the fourth quarter was $30 2 million.

Richard John Buchholz: We expect the first quarter weighted average shares outstanding to be approximately 29 points. Our total cash position increased by $18 million in 2023, and cash and investments were $470 million at year end. A 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. Looking ahead, we expect to generate positive cash flow for the full year 2024. In the full year 2023, revenue totaled $624.8 million, or a 53% increase over $407.9 million. U.S. revenue was $606.2 million, or 54% year-over-year growth, while revenue outside the U.S. totaled $18.6 million.

Rick: We expect the first quarter weighted average shares outstanding to be approximately $29 6 million.

Rick: Our total cash position increased by $18 million in 2023, and cash and investments were $470 million at year end.

Rick: 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.

Rick: Looking ahead, we expect to generate positive cash flow for the full year 2024.

For the full year 2023 revenue totaled $624 8 million or <unk>, 53% increase over $407 9 million.

Rick: U S revenue was $606 2 million or 54% year over year growth, while revenue outside the U S totaled $18 6, million% to 43% year over year growth.

Richard John Buchholz: 43% year-over-year growth. Moving on to 2024 guidance. With the strong trends we are seeing in our business, we continue to expect full-year revenue to be in the range of $775 to $785 million, representing an increase of $24 million, or 26% compared to full-year 2023 revenue. We expect full-year gross margin to be in the range of 83 to 85.

Rick: Moving on to 2020 for guidance.

Rick: The strong trends, we are seeing in our business. We continue to expect full year revenue to be in the range of $775 million to $785 million, representing an increase of 24 to.

Rick: 26% compared to full year 2023 revenue.

Rick: We expect full year gross margin to be in the range of 83% to 85%.

Richard John Buchholz: As Tim noted, we expect to activate 52 to 56 new U.S. centers and establish 12 to 14 new U.S. sales territories per quarter in 2024. As a reminder, given the prevalence of high-deductible health plans, we have historically seen seasonality in our business in the first quarter. Furthermore, the fourth quarter of 2023 was exceptionally strong based on the recovery from the third quarter.

Rick: As Tim noted, we expect to activate 52 to 56, New U S centers and established 12 to 14 new <unk>.

Rick: U S sales territories per quarter in 2024.

Rick: As a reminder, given the prevalence of high deductible health plans, we have historically seen seasonality in our business in the first quarter.

Rick: Furthermore, the fourth quarter of 2023 was exceptionally strong based on the recovery from the third quarter.

Operator: As such, we expect more pronounced seasonality in the first quarter of 2024 compared to historic levels. We expect our improved operating leverage will continue into 2024 and us to be profitable for the second half of 2021. We will provide additional details during our first quarter earnings call. In conclusion, our strong performance and business momentum provide us with confidence in our outlook heading into 2024. With that, our prepared remarks are concluded. D'Lem, you may now open up the line for questions. Thank you, sir. As a reminder, to ask a question, you will need to press star 11 on your telephone. For which question do you want to ask? Please press star 1 1 again.

Rick: As such we expect more pronounced seasonality in the first quarter of 2024 compared to historic levels.

Rick: We expect our improved operating leverage will continue into 2024 and to be profitable for the second half of 2024.

Rick: We will provide additional details during our first quarter earnings call.

Rick: In conclusion, our strong performance and business momentum provide us with confidence in our outlook heading into 2024.

Speaker Change: With that our prepared remarks are concluded dilemma you may now open up the line for questions.

Speaker Change: Thank you Sir.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to reach our your question. Please press star one again.

Adam C. Maeder: We ask that you please keep your questions to no more than one 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. And I will show our first question comes from the line of Adam Maeder from Piper Sandler. Please go ahead. Hi, Tim and Rick.

Speaker Change: We ask that you. Please keep your questions to no more than one and one follow up and if time permits we'll be more than happy to take more questions. Please standby, while we compile the Q&A roster.

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

Adam: Hi, Tim interact.

Timothy P. Herbert: Hope you can hear me okay. And congratulations on a nice finish to the year and great to see the leverage in the quarter. Maybe just to start on the guidance for 2024, the $775 to $785 million. Can you maybe go into a little bit more detail there? How are you thinking about utilization or same-store sales growth? What's assumed in the guidance around label expansion?

Adam: I Hope you can hear me, okay, and congrats on a nice finish to the year and great to see the leverage in the quarter.

Adam: Maybe just to start on the guidance for 2020 for the $775 million to $785 million can.

Adam: Can you just maybe go into a little bit more detail. There. How are you thinking about utilization or same store sales growth what's assumed in the guidance around label expansion.

Timothy P. Herbert: You know, the Gen 5 launch. Just walk us through some of those clicks and takes, and then I'll follow up. Thanks. Sure. Hi Adam.

Speaker Change: The Gen five launch just walk us through some of those puts and takes when I had a follow up thanks sure Hi, Adam I think number one I think we're seeing a trend that same store sales or the increased utilization at existing centers is the primary driver of our growth in 2023, and we expect that to continue into <unk>.

Timothy P. Herbert: I think, number one, we're seeing a trend that same-store sales or increased utilization at existing centers is the primary driver of our growth in 2023, and we expect that to continue into 2024. Now, we certainly are going to complement that with opening new centers, and we provided a guide on what we expect to open new centers as we go into the first quarter. But again, we're going to continue to focus on building ENT capacity and increasing the number of procedures done at existing centers. Would you make any comment, Tim, around the label expansion or the Gen 5 impact on those figures?

Speaker Change: 2024, now we certainly are going to complement that with opening new centers and we provided the guide on what we expect to open new centers as we go on to the <unk>.

Speaker Change: First quarter, but again, we're going to continue to focus on building E&P capacity and increasing the number of procedures done at existing centers.

Speaker Change: Got it.

Speaker Change: Okay.

Speaker Change: And any comment Jim around the label expansion.

Jim: Or is that the gen five impact and those figures.

Timothy P. Herbert: Sure, I don't think Gen 5 will have a big play because we'll be doing a limited launch of their plan in 2024, and we're planning for a full launch in 2025, so we'll have time to talk about that further on. I do think indication expansions will start to show in 2024, primarily with the high AHI, and the pediatric population with Down Syndrome is getting some strong awareness right now. Remember, the high BMI is really driven by the mechanism of action, and we use sleep endoscopy today to treat those patients that have tongue-based obstructions. And a high BMI with patients who have lateral wall obstructions, that's where we're having trouble. In fact, that's where some of those patients may benefit from GLP-1. That's a good color.

Jim: Sure I don't think the Gen. Five will have a big play because we'll be doing a limited launch is our plan in 2024, and we are planning for a full launch in 2025. So we'll have time to talk about that further on I do think the indication expansions will start to show and 2024, primarily with the high Hei.

Jim: And the pediatric population with down syndrome is getting some strong awareness right now remember the high BMI is really driven by mechanism of action and we use sleep endoscopy today.

Jim: Those patients that have tons based obstruction.

Jim: And a high BMI with patients who have lateral wallets directions, that's where we're having trouble in fact, that's where we are.

We're targeting some of those patients may benefit from <unk>.

Speaker Change: That's good color. Thank you and I feel like I have to ask about the leverage this quarter.

Richard John Buchholz: And I feel like I have to ask about the leverage this quarter, you know, the positive operating income. You know, I know there's some seasonal variability in models, but Rick, any constructs or frameworks you can give us as we think about 2024 and potential leverage this year?

Speaker Change: The positive operating income.

Speaker Change: I know theres, some seasonal variability to models, but.

Speaker Change: Rick any construct or framework you can give to us as we think about 2024 and potential leverage this year and I heard the commentary earlier it sounds like that is a focus in 'twenty four and I think I heard the phrase move towards steady profitability over the course of the year, but was.

Richard John Buchholz: And I heard the commentary earlier; it sounds like that is a focus in 24, and I think I heard the phrase move towards steady profitability over the course of the year, but was hoping you could just flesh that out for us in a little bit more detail. Thanks again for the question. Okay. Thanks, Adam.

Speaker Change: I was hoping you could just flush that out for us a little bit more detail. Thanks again for taking the questions.

Rick: Okay sure. Thanks, Adam Yeah, our focus does remain on driving top line growth as we as we grow the therapy adoption and we did demonstrate.

Richard John Buchholz: Yeah, our focus does remain on driving top-line growth as we grow therapy adoption. And we did demonstrate Strengthening of our Operating Leverage in the model. We definitely saw that in the fourth quarter, and we expect to see that again.

Speaker Change: A strengthening of our operating leverage and the and the bottle, we definitely saw that in the fourth quarter.

Speaker Change: And we expect to see that we do have seasonality, which we can touch on later I guess, but we do have.

Richard John Buchholz: We do have seasonality, which we can touch on later, I guess, but we do have seasonality in the first quarter, but we expect that leverage to improve, and that's why we stated that, you know, we expect that we plan to be profitable for the second half of 2020. Thank you. And I show our next question comes from the line of Travis Speed from Bank of America Securities. Please go ahead. Hi, this is Carolyn on behalf of Travis.

Speaker Change: Seasonality in the first quarter.

Speaker Change: But we expect that leverage to improve and that's why we stated that we expect that we plan to be profitable for the second half of 2024.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Thank you.

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

Speaker Change: Hi, This is Caroline on for <unk>. Thanks for taking my questions and congrats on the quarter I had a follow up on the revenue guidance for 'twenty four if you could just.

Carolyn: Thanks for taking my questions and congrats on the quarter. I had a follow-up question on the revenue guidance for 24. If you could just talk about what's baked into that guidance for the battery replacements that you expect to start coming through this year. So, follow-up on the first question and then a second question here. I heard the reiteration of the limited market release in 24 and then full launch in 25 for Inspire 5, and I wanted to see if you could also give us an update on where you're at with the submission to the FDA. Thank you. Thank you. Battery replacements are still going to be limited in 2024. We will start to see some of the early commercial patients coming through. We are still seeing patients who participated in the STAR trial coming through today. But the first year of commercialization was 2014, and if you add 10.5 years to 11 years, battery life puts us at 24, 20, 25.

Caroline: Talk about what's baked into that guidance for the battery replacement that you expect to start coming through this year. So.

Speaker Change: So I'll follow up on the first question and then a second question here I heard the reiteration of the limited market release in 'twenty four and then for launch in 'twenty five for inspire side and I wanted to see if you could also give us an update on where where youre at that submission to the FDA. Thank you.

Speaker Change: Thank you.

Speaker Change: Battery replacements is still going to be limited in 2024, we will start to see some of the early commercial patients coming through we are still seeing patients who participated in the star trial start coming through today, but the first year of commercialization was 2014.

Speaker Change: At 10, and a half years to 11 years battery life puts us at 21 2025, So we'll start to see that coming through.

Timothy P. Herbert: So we'll start to see that coming through in this coming year, but really won't have a significant impact for a couple more years yet until we get to larger volumes, but it's still very promising. As far as Inspire 5 submission, the team's doing a great job. We're going through just the final testing and documentation to be able to provide that information to the FDA. We're targeting approval for later in the year to provide an opportunity to do the limited launch later in 2024, and the team is working hard to be ready to do a full commercial launch in 2025. Thank you. Thank you. Thank you. And I assure you that our next question comes from the line of Robbie Marcus from J.P. Morgan. Please go ahead. Hi, this is actually Lily on behalf of Ravi.

Speaker Change: In this coming year, but really won't have a significant impact for a couple more years, yet till we get to larger volumes, but it's still very promising as far as inspire five submission team is doing a great job or gone through just the final testing and documentation to be able to provide that information to the FDA.

Speaker Change: We are targeting the approval for later in the year to provide opportunity to do the limited launch.

Speaker Change: Later in 2024, and the team is working hard to be ready to do a full commercial launch in 2025.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

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

Speaker Change: Hi, This is actually Lili on for Robbie Thanks for taking the question.

Lily: Thanks for taking the question. On international business, how should we be thinking about that growing this year in light of some of the supply challenges? And is there a timeline that we should be keeping in mind for when you can return to normal levels of revenue and supply? A very good question.

Lili: On the international business, how should we be thinking about that growing this year in light of some of the supply challenges and is there a timeline that we should be keeping in mind for when you can return to normal levels of revenue and supply.

Speaker Change: No very good question. Thank you very much way, we had our challenges with getting derogation approval, primarily in Germany in 2023, while that approval comes through the derogation does require us to do some labeling changes to identify that product being shipped in advance of <unk>.

Timothy P. Herbert: Thank you very much. We had our challenges with getting derogation approval, primarily in Germany, in 2023. While that approval comes through, the derogation does require us to make some labeling changes to identify that product being shipped in advance of the EU MDR.

Timothy P. Herbert: So we are shipping product today in Germany, and that's coming back up. But it's probably going to take a couple quarters to get them back to steady state. But we are a very promising movement, both with derogation in those countries we identified, but also making progress with the full EU MDR. And hopefully, we can get that done in a year to be able to provide silicone leads for the rest of Europe.

Speaker Change: So we are shipping product today in Germany, and Thats coming back up, but it's probably a couple of quarters to get them back to steady state.

But we are very promising.

Speaker Change: <unk> met both of a derogation in those countries were identified but also making progress getting the full EU MBR and hopefully we can get that done in the year to be able to provide silicon leads for the rest of <unk>.

Timothy P. Herbert: Thank you. One moment for our next question. And our next question comes from the line of Michael Ciccone from Jeffries. Please go ahead. Hey, good afternoon, and thanks for taking my question.

Speaker Change: Europe.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from the line of Michael Zaccone from Jefferies. Please go ahead.

Michael Zaccone: Hey, good afternoon, and thanks for taking my questions.

Michael Zaccone: Sure Michael.

Michael Ciccone: Just wanted to start, maybe you could just give us an update, if possible, on how activity is trending so far through the first quarter, and then maybe, you know, elaborate somewhat on how you're thinking about seasonality this year and quarterly sales cadence. Well, I think we felt very comfortable with the strength of the organization as we exited the fourth quarter, able to set our guide or reconfirm the guide that we initially pre-announced at the J.P. Martin Conference. But the progress continues to be steady. That's why we're comfortable with the guidance going forward. I'll let Rick touch on the cadence of quarters, specifically on seasonality here in the first quarter. Right, thanks for the question. As I mentioned in the prepared remarks, you know, we do have a stronger commercial mix with the high-deductible plans in the fourth quarter. So we generally see that seasonality in the first quarter, but we also did see a little recovery from the third. And so, you know, given the typical seasonality plus the stronger Q4, our seasonality into Q1, it could range from the mid to high teens sequentially.

Michael Zaccone: Just wanted to start maybe you can.

Michael Zaccone: Just give us an update if possible on how activity is trending.

Michael Zaccone: So far through the first quarter and then maybe.

Michael Zaccone: Elaborate somewhat on how youre thinking about seasonality this year in quarterly sales cadence.

Speaker Change: Absolutely right.

Speaker Change: Sure.

Speaker Change: We felt very comfortable with the strength of the organization as we were exiting in the fourth quarter be able to set our guide or reconfirm the guidance.

Speaker Change: Initially pre announce it at that.

Speaker Change: J P Morgan conference, but.

Speaker Change: <unk>.

Speaker Change: Progress continues to be excited that's why we're comfortable with.

Speaker Change: With the guidance going forward I'll, let Rick talk touch a little bit about.

Rick: Cadence of quarters, specifically on seasonality here in the first quarter.

Rick: Right. Thanks for the question so as I mentioned in the prepared remarks, we do have a stronger commercial mix with.

Rick: With the high deductible plans in the fourth quarter. So we generally see that seasonality in the first quarter, but but also we did see a little recovery from the third quarter into the fourth quarter. So we had a very strong.

Rick: <unk> fourth quarter.

Rick: And that's where he mentioned we might have some more pronounced seasonality.

Rick: And so given given the typical seasonality plus the stronger Q4.

Our seasonality into Q1, it could range from the mid to high teens sequentially.

Timothy P. Herbert: And then from there, we expect it to return and grow. And, you know, you've seen our... Our guidance is to have between 24% and 26% growth, $780 million at the end. Got it.

And then from there we expect it to return and grow and we have seen R. R.

Rick: Our guidance is to have between 24 and 26% growth.

Rick: $780 million at the midpoint.

Richard John Buchholz: And then just, I guess one follow-up on profitability, again, just to clarify, really, the target of hitting profitability in the second half of 2024, is that on both an operating income and a net profitability basis? Yes, as we sit here today, yep, that is the case, and that will be for the second half of the year. Right. All right. Great. Thank you. Thanks, Michael.

Speaker Change: Got it thanks, Rick and then just I guess, one follow up on profitability again, just a clarification really.

Speaker Change: Hitting profitability in the second half of 2024 is that on both in operating income and net profitability basis.

Rick: Yes, as we sit here today, yes that is the case and that will be for the second half of the of the year.

Speaker Change: Right Alright, great. Thank you. Thanks.

Speaker Change: Thanks, Michael.

Danielle Entalfie: Thank you. And the next question comes from the line of Danielle Entalfie from UBS. Please go ahead. Hey, good afternoon, guys.

Speaker Change: Thank you.

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

Danielle: Hey, good afternoon, guys. Thanks, so much for taking the question congrats on a strong end to 2023.

Timothy P. Herbert: Thanks so much for taking the question. Congratulations on a strong end to 2023 and looking forward to 2024. So, I guess, Tim, one question I wanted to ask you, I have two questions, just first on sleep centers. And I know, you know, getting patients through sleep centers has been a bobblehead. You've made some investments there.

Danielle: Looking forward to 2024 so.

Danielle: I guess the one question I wanted to I have two.

Danielle: Two questions just first on sleep centers, and I know getting patients through sleep centers, that's been a bottleneck you've made some investments there just curious to see what.

Timothy P. Herbert: Just curious to see how those investments have been panning out. And do sleep centers still represent a bobble neck, or is that starting to ease? And then, ahead of Surmount OSA coming, you know, at some point, maybe mid-year-ish, any more thoughts on how we should think about the impact of the funnel for Inspire in 2024 and 2025, assuming that they do get coverage for obstructive sleep apnea patients. Thanks so much.

Danielle: How those investments have been panning out and do you sleep centers still represent a bottleneck or is that starting to ease and then we'd just love to ahead of surmount OSA coming at some point, maybe mid year ish.

Speaker Change: And any more thoughts on how we should think about the impact of the funnel for inspire and 24% and 25, assuming that they do get coverage for obstructive sleep apnea patients. Thanks. So much. Thank you very much Daniel good to hear from you as far as sleep centers.

Timothy P. Herbert: Thank you very much, Daniel. It's good to hear from you. As far as sleep centers go, we've taken that even a step higher. We're spending a lot of time even educating and involving sleep physicians to be more involved with the patients and specifically with the longitudinal management. So while the focus today remains on building the capacity of the ENT, we know that the next challenge will be building enough capacity with the sleep physicians and specifically around the sleep centers. A lot of payers require sleep studies to be performed in a sleep lab for polysomnogram, but we do talk to them and show the value of home sleep testing.

Speaker Change: <unk> taken that even a step higher we're spending a lot of time, even educating and involving sleep physicians to be more involved with the patient and specifically with the longitudinal management. So while the focus today remains on building the capacity the E&P, we know that the next challenge.

Speaker Change: We'll be building enough capacity with the sleep physicians and specifically around.

Speaker Change: The sleep centers a lot of payers require sleep studies to be performed at an a sleep lab for a policy from nagra fee, but we do talk to them.

Speaker Change: So the value of home sleep testing and we've had opportunities to work with different parties to be able to provide home sleep testing or different areas to be able to help assess sleep and that's going to continue to be a focus going forward into 2024 and beyond and.

Timothy P. Herbert: And we've had opportunities to work with different parties to be able to provide home sleep testing or different areas to be able to help assess sleep. And that's going to continue to be a focus going forward into 2024 and beyond. And we're trying to make sure that that's not going to be a challenge going forward because we can get those patients properly diagnosed. And we do know most of the payers require a current sleep study within two years prior to moving on with Inspire. As far as the Simone OSA trial is concerned, yeah, hopefully that data will come out earlier in the year.

Speaker Change: We're trying to make sure that that's not going to be a challenge going forward because we can get those.

Speaker Change: <unk> properly diagnosed with you know most of the payers require.

Current sleep study within two years.

Speaker Change: Prior to moving on with inspire.

Speaker Change: As far as the surmount OSA trial, yes, hopefully that data will come out early in the year, we would like to hope it successful and can show a 50% reduction nahi, we know that's going to be a little bit of a challenge.

Timothy P. Herbert: We would like to hope it's successful and can show a 50% reduction in AHI. We know that's going to be a little bit of a challenge for the drug as long as the compliance and the weight loss are there to support that. But with the demographics of that study having a BMI of on average 40 and an AHI of average 50, we really need to see a 50% reduction to have those patients move into the approved indication for Inspire, and the majority of the patients in that study, when we look at the demographics, they really wouldn't qualify for Inspire today anyway because of the lateral wall collapse associated with the high BMI. So we look forward to seeing that data, but Thank you so much.

Speaker Change: The drug as long as the compliance of the warehouses there to support that but with the demographics of that study having a BMI.

Speaker Change: On average 40 and IHI in average of 50, we really need to see a 50% reduction to have those patients move into the.

Speaker Change: Approved inspire indication.

Speaker Change: And the majority of the patients in that study when we look at the demographics. They really won't qualify for inspire today anyways because of the lateral wall collapse associated with a high BMI.

Speaker Change: So we look forward to seeing that data, but we do not believe it's going to have any impact on our patient flow. This year and will tend to be positive as we kind of move forward after 2024.

Speaker Change: Thank you so much.

Timothy P. Herbert: Thank you. Thank you. And I show our next question comes from the line of Richard Newitter from Sherwood Securities. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Thank you.

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

Richard Newitter: All right, thanks for taking the questions. Congratulations on the quarter and the profitability as well. So, maybe two questions for me.

Richard: Alright, thanks for taking the questions.

Richard: On the quarter and the profitability.

As well.

Richard: So maybe two questions for me the first just with inspire five.

Timothy P. Herbert: The first, just with Inspire 5 coming, you have a preliminary launch, hopefully, and approval later this year. What, if anything, is contemplated in the outlook for people potentially delaying or wanting the next generation device if they know that it's coming, you know, doctors and patients alike? I'm just curious how you've contemplated that.

Richard: You have a preliminary launch hopefully an approval later this year I guess.

Richard: What if anything is contemplated the outlook for.

Richard: People potentially delaying are wanting the next generation device, if they know that it's coming.

Richard: And patients alike, I'm, just curious how you've contemplated that.

Timothy P. Herbert: Should we be expecting any impact there and if it is in the guide at all? We don't believe there will be a delay. We know that patients are motivated to receive therapy. Those patients who are untreated with moderate to severe sleep apnea have a significant challenge with quality of life, and they are motivated to receive therapy. Remember, we're talking about a device replacement, and so the Inspire4 system is a very strong system, has very strong outcomes, and also you're talking later in the year when we're dealing with high-deductible insurance plans as well. So we haven't built in any patient therapy delay into the model.

Richard: Should we be expecting any impact there.

Richard: It is in the guide at all.

Richard: We don't believe there will be a delay we know that patients are motivated to receive therapy those patients who are on.

Richard: Untreated with moderate to severe sleep apnea have a significant challenge with quality of life and and they are motivated to receive therapy remember, we're talking about the device replacement and so the inspire four system is.

Richard: Is a very strong system provides very strong outcomes and also youre talking later in the year. When we are dealing with the high deductible insurance plans as well. So we haven't built in any patient therapy delay into the model, we believe that the.

Timothy P. Herbert: We believe that the patients will continue on with therapy, and this is consistent with prior launches when we went from the Inspire2 device to the Inspire4 device and, to a lesser extent, with the new remote, going from polyurethane to silicone lead. So we are aware of that, we track that, we make sure we educate the patients appropriately, but we don't expect to see any delay and have not built that into our design. Great. And maybe just one more, Tim. You have a number of initiatives that, you know, hopefully looking to unlock some of the bottlenecks that exist, you know, and also some throughput areas. Inspire 5 will be one of them, you know, removing the dice unnecessarily where possible with the protected trial.

Richard: Patients will continue on with therapy and this is consistent with prior launches when we went from the inspire two device to the inspire four device and to a lesser extent with the new remote and gone from polyurethane Silicon leads. So we are aware of that we track that we make sure we educate patients appropriately but.

Richard: We don't expect to see any delay.

Richard: Delay and have not built that into our guidance.

Speaker Change: Great and maybe just one more Jim you have a number of initiatives.

Speaker Change: Hopefully looking to unlock some of the bottlenecks are.

Speaker Change: That exist.

Jim: And also some throughput areas inspire five will be one of them, we're moving the die unnecessarily.

Jim: Possible with the protect trial.

Timothy P. Herbert: It feels like a lot of those, though, won't kick in or have their intended impact, you know, really more so into the 2025 onward time. I'm just curious, what, what, what kind of threshold do you think there is or can you talk to us about to give us confidence that you won't potentially run into capacity issues before that 2025 timeframe? Is there a utilization level where, you know, capacity could become a problem?

Jim: It feels like a lot of those that won't kick in or have their intended impact.

Jim: Really more so into the 2025 onward timeframe.

Speaker Change: I'm just curious what what.

Speaker Change: What kind of threshold do you think there is or can you talk to us about to get give us confidence that you won't potentially run into capacity issues.

Speaker Change: Before that 2025 timeframe is there a utilization level, where capacity could become a problem and how do we think about that within the context of your of your your initial guidance.

Timothy P. Herbert: And how do we think about that within the context of your initial guidance? I think the real thing is to keep it simple, and let's talk about ENT surgeons today. And as we progress over the last several years, it's just a very stepwise increase in utilization, and the number one method to increase capacity is ENT confidence, and it's the ENT having gained additional experience and having a strong team. So the ENT is able to do more cases. They become more proficient, so it takes less time to do the procedure. They gain confidence in the procedure, but it's essential that they have a strong partnership with sleep physicians to be able to manage the patients longitudinally. Therefore, the team all know their roles at the centers.

Speaker Change: Sure I think.

Speaker Change: The real thing is is to keep it simple and let's talk about the Emt surgeons today.

And as we progressed over the last several years, it's just a very stepwise increase in utilization and the number one method to increase capacity is E&P confidence and it's the E&P, having gained additional experience and having a strong.

Speaker Change: Team.

Speaker Change: The E&P is able to do more cases to become more proficient it takes less time to do the procedure they gain confidence in the procedure, but it is essential that they have a strong partnership with sleep physicians to be able to manage the patients longitudinally.

Speaker Change: Therefore, the team all know their roles at the centers.

Timothy P. Herbert: And the centers that are progressing and fastest with utilization are those centers that have a strong team, an ENT who performs the procedure, and a sleep physician who can help diagnose but can also manage the longitudinal management of the patients, thereby keeping the ENTs available to do more implant procedures. We don't necessarily have challenges getting operating room time. We have challenges getting enough ENT time to be in the operating room to do the procedures.

Speaker Change: And the incentives that are progressing.

Speaker Change: Quickest with utilization are those centers that have a strong team of E&P, who performed the procedure a sleep physician, who can help diagnose but can also manage the longitudinal.

Speaker Change: Management of the patients, thereby keeping the e&ps available to more to do more implant procedures. We don't necessarily have challenges getting operating room time, we have challenges getting enough E&P type to be in the operating room to do the procedures and we certainly don't have challenge.

Timothy P. Herbert: And we certainly don't have challenges with patient flow. We know our direct-to-consumer model brings patients to the ENTs. So we're going to refine our programs a little bit, including the website, to make sure that patients have the best opportunity and can go to centers that have the ability to take care of them and have positive outcomes and really focus on utilization because we know the centers with the highest utilization get the best patient outcomes because they're more experienced.

Speaker Change: As with patient flow, we know our direct to consumer bring patients to the.

The e&ps, so we're going to refine our programs a little bit including the website to make sure that patients have the best opportunity and can go to centers that have the ability to take care of them and have positive outcomes and really focus on.

Speaker Change: On utilization, because we know the centers with the highest utilization get the best patient outcomes.

Speaker Change: They're more experienced.

Timothy P. Herbert: So, it's the simple things that are going to drive us in 2024, not to mention what we mentioned in the call about our technology development with our SleepSync system to help the patient's throughput and help the patient get appointments. So, there are multiple avenues we're going to go down in 2024 to continue to grow utilization. And then, as I mentioned, a couple key items later on will be the removal of DICE with PREDICTOR and Inspire 5 with reduced OR time.

So it's the simple things that are going to drive us in 2024.

Speaker Change: Not to mention what we mentioned slightly in the call about our technology development with our sleep <unk> system to help the patient throughput and help the patients get appointments. So theres multiple avenues, we're going to go down in 2024 to continue to grow utilization and then as you mentioned a couple of key items later on.

Speaker Change: B removal of dice with predictor and inspire five with reduced all of our time, but there is a lot of basic work we need to.

Timothy P. Herbert: But, there is a lot of basic work we need to..., to perform here in 2024 to continue. Okay, thank you very much. Thank you. And I take our next question comes from the line of David Rescott from Baird. Please go ahead.

Speaker Change: To perform here in 2020 forward to continue success.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you rich.

Speaker Change: Thank you.

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

David Rescott: Hey guys, thanks for taking the question. Congratulations on the strong finish to the year here. I wanted to start off by clarifying the comments you made around international growth contemplated in the guide this year. I know you mentioned that it should take a couple of quarters to get back to some of these normalized growth levels, but I'm just wondering if growth in 2024 in international markets would be a contributor to total company growth, just given some of the commentary around where you are with derogation and then returning to growth levels. Absolutely, that's a good question. I think Germany is really coming back strong now that we're able to start shipping product after the relabeling effort, and we know the Netherlands and Belgium are strong because they had derogations earlier in the 23rd and the fourth quarter to allow us to start shipping product there.

David: Hey, guys. Thanks for taking my question and congrats on the strong finish to the year here.

I wanted to start off by diving in a little bit into the clarifying the comments you made around international.

David: Contemplate in the guide this year I know you mentioned that you think a couple of quarters to get back to some of these normalized growth levels, but I'm just wondering if.

David: If growth in 2024 international markets would be accretive to total company growth just given some of the commentary around where you are with derogation and then returning to growth levels.

Speaker Change: Absolutely. That's a good question I think Germany is really coming back strong now that we're able to start shipping product after the relabeling effort, and we know that Netherlands and.

Speaker Change: Belgium are strong because they had derogation.

Speaker Change: Earlier in 2003 in the fourth quarter allow us.

Speaker Change: Started shipping product there.

Timothy P. Herbert: We're excited. We believe that France is going to announce the new coding along with full country-wide reimbursement in 2024 to be able to realize some growth in that country. So we're excited about the Lodge coming up in France.

Speaker Change: We're excited we believe that France is going to announce.

Speaker Change: The new coding along with.

Speaker Change: Full countrywide reimbursement.

Speaker Change: In 2004 to be able to realize some growth in that country. So we're excited about the launch coming up in France.

Timothy P. Herbert: We do have some polyurethane leads that we can now help deliver into the UK and Austria to continue doing implants in those countries, so we're going to be able to get back online in those countries as well. And then we're going to continue to work hard in Singapore and Japan. So we do see positive growth this year. Rick, any more comments on that?

Speaker Change: We do have some polyurethane leads that we can now help deliver into the U K and Australia continue doing implants in those countries. So we're going to be able to get back online.

Speaker Change: In those countries as well.

Speaker Change: And then we're going to continue to work hard in Singapore, and Japan. So we do see positive growth in the year and direct getting more comments on that yes, Hey, David.

Richard John Buchholz: Yeah, hey, Dave. I'd just further comment, you know, on a quarterly basis, given the dynamics of 2023, our growth rates have been a little lumpy, if you will, in the international markets. But on an overall basis, as we go forward, we still expect outside the U.S. revenue to be right around 3%, roughly, of our overall worldwide revenue. Okay, that's helpful.

Speaker Change: Just further comment on a quarterly basis, given the dynamics of 2023 are our growth rates there have been a little lumpy. If you will in the international markets.

Speaker Change: On an overall basis as we go forward, we still expect.

Speaker Change: Outside the U S revenue to be right around 3% roughly of our overall worldwide revenue.

Speaker Change: Okay. That's helpful.

David Rescott: And then maybe on the profit piece, I know, I appreciate the kind of commentary around second half 2024 being this sustained profit level. When you think about where you are from a penetration standpoint, and then you know, some of the investments over the next several years, you know, DTC getting more targeted. Is there any reason to think that this sustained level of profit in the second half of 2024 shouldn't be kind of a jumping off point as you go into 2025 and beyond?

Speaker Change: And then just maybe on the <unk>.

Speaker Change: Profit piece.

Speaker Change: I appreciate the commentary around second half of 2024 being this.

Speaker Change: Stained profit level.

Speaker Change: When you think about where you are from a penetration standpoint, and then some of the investments over the next several years.

Speaker Change: You see getting more targeted is there any reason to think that this sustained level of profit in the second half of 2024, it shouldnt be kind of a jumping off point as you go into 2025 and beyond.

Richard John Buchholz: Yeah, I mean, we provide guidance on an annual basis, but we're excited about the leverage that we demonstrated in the fourth quarter and the confidence we have in our revenue number for 2024. We have demonstrated leverage. We're going to lose some of that leverage with our more pronounced seasonality in Q1, but then we'll return that. Our comment was that we'll be profitable for the second half of 2024. But we're not being given any long-term guidance. But you know, we're continuing to build leverage on an annual basis. Alright, I had to ask.

Speaker Change: Yeah, I mean, we provide guidance on an annual basis, but we're excited about the leverage that we demonstrated in the fourth quarter.

Speaker Change: And the confidence we have in our revenue number for 2024, we have demonstrated leverage we're going to lose some of that leverage with our are more pronounced seasonality in Q1, but then we will return that in.

Speaker Change: Our comment was that we will be profitable for the second half of 2024, but.

Speaker Change: But we're not giving any long term guidance, but.

Speaker Change: We're continuing to build leverage on our <unk>.

Speaker Change: Annual basis as you've seen.

Speaker Change: Alright.

Anthony Charles Petrone: Thanks for taking the questions. Thank you. And I show our next question comes from the line of Anthony Petrone from Mizuho Group. Please go ahead.

Speaker Change: Thanks for taking the questions.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Anthony Petrone from Mizuho Group. Please go ahead.

Timothy P. Herbert: Thanks, Tam and Rick. Congratulations on the strong start, a strong end to the year and the solid guidance that you put out earlier at J.P. Morgan. Maybe one just on utilization, tackling it in a different way.

Anthony Charles Petrone: Thanks, Tim and Rick Congrats.

Anthony Charles Petrone: Strong start strong into the year.

Anthony Charles Petrone: Solid guidance that you put out earlier at Jpmorgan, maybe one just on utilization utilization tackling it a different way our math shows that you got to.

Timothy P. Herbert: Our math shows that you got to just north of two implants per center per quarter here exiting December. So just wondering, is two the right number now to jump off for the rest of the year, or will that just remain a little bit lumpy depending on how patient flow comes in? And then I'll have one quick follow up on UnitedHealthcare. Sure, thanks for the question. So that, just over two, just to clarify that that's two procedures per center per month. That's correct, yes. So yeah, we just had just over two and just under two a year ago in the fourth quarter.

Anthony Charles Petrone: Just north of two implants per center.

Anthony Charles Petrone: Per quarter here exiting December so just wondering as to.

Anthony Charles Petrone: A right number now to jump off for the rest of the year or will that just remain a little bit lumpy, depending how patient flow comes in and then I'll have one quick follow up on United Healthcare.

Sure. Thanks for the question so that just over two just to clarify that thats too.

Two procedures per center per month.

Speaker Change: That's correct, yes, just to clarify sorry, but so yeah. We just had just over two and just under two a year ago in the fourth quarter again as we continue to add add more centers. We are up to 1100 80 centers. It gets more difficult to move to move the needle on utilization, but we've continued to do that on a year over year basis. If you look.

Richard John Buchholz: Again, as we continue to add more centers, we're up to 1180 centers. It gets more difficult to move the needle on utilization, but we've continued to do that on a year-over-year basis. If you look at each quarter, that's one of our goals for 2024 and beyond. We think there's a lot of room to improve that utilization, but it does, it's more difficult to move the needle on that. You know, on an annual basis, if you look at our growth, 70% of our growth came from existing centers, and 30% of our growth came from new centers.

Speaker Change: At each quarter that's one.

Speaker Change: That's our goal for for 2024 and beyond we think.

Speaker Change: There is a lot of room to improve that utilization, but it does it's more difficult to move the needle on that.

Speaker Change: On an annual basis, if you look at our growth.

Speaker Change: 90% of our growth came from existing centers and 30% of our growth came from new centers.

Richard John Buchholz: So that kind of signifies a healthy business, and that's consistent with 2022. So if we can maintain that, continue to add new implanting centers, increase that utilization. I'm, If you look at our top quartile, they're doing well north of two procedures per month. And so we want to move all those buckets up, if you will.

Speaker Change: Can it signifies a healthy business and thats consistent with 2022. So if we can maintain that continue to add new implanting centers move that utilization.

Speaker Change: If you look at our top quartile there.

Speaker Change: Doing well well north of two procedures per month, and so we want it we want to move all those buckets up if you will so that's a real focus for us.

Timothy P. Herbert: So that's the real focus, and the follow-up was on United, you know, the positive announcement earlier in the year, Jan 1. They're basically in line with FDA on AHI and BMI thresholds, but they put the mandibular turnstile in there, if you will, maybe to slow it down a bit.

Speaker Change: And the follow up was on United positive announcements earlier in the year Jan one.

Speaker Change: Basically in line with FDA on Ehi, and BMI thresholds, but they put the mandibular.

Speaker Change: Turn style in there if you will maybe the slow it down a bit but net net it looks like a huge positive so maybe.

Timothy P. Herbert: But net-net, it looks like a huge positive. So maybe, you know, what do we expect from United Healthcare patient flow? And is there anything from other payers that you're hearing out there?

Speaker Change: What do we expect from United Health care patient flow and is there anything from other payers that you're hearing out there. Thanks.

Timothy P. Herbert: Thanks. Thank you very much. We don't think it's going to really affect UnitedHealthcare. They have some regional policies that actually deal with mandibular devices or oral appliances.

Speaker Change: Thank you very much.

Speaker Change: We don't think its going to really affect the unitedhealthcare. They had some regional policies actually deal with mandibular devices or oral appliances.

Timothy P. Herbert: In the past, we've been very careful to educate the centers when the physicians are preparing their notes and the sites prepare their prior authorization documentation that they include information in there in regards to the patient's qualifications and if they have the right anatomy or severity to be able to qualify for an oral appliance. So, we have a little bit of practice dealing with UnitedHealthcare on this subject. All the patients are prior-authorized, so we make sure that we put the necessary information provided by the centers into the submission, such that when we get the prior authorization approvals, we can just kind of move forward. So we don't see that from any other payers.

Speaker Change: In the past, we're very careful to educate the centers are one of the physicians are preparing their notes in the sites prepare the prior authorization.

Speaker Change: Documentation that they include.

Information in there in regards to the patient's qualifications and if they have the right anatomy or severity to be able to qualify for.

Speaker Change: Are the clients. So we have a little bit of practice dealing with United Health care on the subject all of the patients are prior authorized to really make sure that we put the necessary information.

Speaker Change: <unk> are provided from the center at the end of the submissions.

Speaker Change: That when we get the prior authorization approval as we can just kind of move forward. So we don't see that from any other payers that's kind of a unique.

Timothy P. Herbert: It's kind of a unique UnitedHealthcare. But to your point, it is a significant win for the patient, in that the expansion to a high AHI to 100 and the BMI warning to 40. And let's make sure we highlight the pediatric population with Down syndrome. So it's in there. We continue to work with UnitedHealthcare, and we'll continue to push back on them on that. But we don't see it being really

Speaker Change: United Healthcare, but to your point.

Speaker Change: It is a significant.

Speaker Change: Win for the patients.

Speaker Change: And that the expansion to a high hei to 100, and the BMI warning to 40, and let's make sure. We highlight the pediatric population went down syndrome. So.

Speaker Change: It's in there we continue to work with United Healthcare.

Speaker Change: We will continue to push back on them on that but we don't see it being really disruptive in the year.

Speaker Change: Thank you.

Speaker Change: Hugh.

Yes.

Brett Fishman: Thank you. And our next question comes from the line of Brett Fishman from KeyBank. Please go ahead.

Speaker Change: Thank you.

Hugh: And I show. Our next question comes from the line of Brett Fishman from Keybanc. Please go ahead.

Timothy P. Herbert: Hey, Tim and Rick, thank you so much for taking the questions. I just wanted to start off, you know, over the past month, we had a competitor announce their objective, you know, to launch a competitive hypoglossal nerve stem device later in 2024. So we're just hoping for a bit of an update from you guys about potential future competition in the US market. And then if you think you might have to do anything outside of the normal practices, just to protect that market share in the event that this does actually happen on time. We watch everybody. We know that the market that we have created and the market that we are developing, both in the U.S. and internationally, is quite attractive. We know it's one of the largest markets available in the medical technology industry. And, of course, we're going to have people pursuing different approaches, and while you mentioned one company coming up, there are several others who are in very early stages of development.

Brett Fishman: Hey, Tim and Rick. Thank you so much for taking my questions.

Brett Fishman: I'd like to start off over the past month, we had a competitor announce their objective.

Brett Fishman: To launch a competitive hypoglossal nerve stent device later in 2024. So I was just hoping for a bit of an update from you guys about how youre thinking about potential future competition in the U S market and then if you think you might have to do anything outside of the normal practices just to protect that market share in the event that this does actually happen on time.

We watch everybody, we know that the market that we have created in the market that we are developing both in the U S and international is quite attractive we know it's one of the largest markets available.

Brett Fishman: The medical.

Brett Fishman: Technology industry and of course, we're going to get people pursuing different.

Brett Fishman: Different approaches and while you mentioned one company coming out there are several others, who are in very early stages of development.

Timothy P. Herbert: We're not resting on what we currently have as technology, and we've already mentioned a little bit about Inspire 5 here on this call. But in the past, we've talked about Inspire 6 and 7 and continuing to grow the indications and be able to treat other groups with obstructive sleep apnea, not to mention our ability to manage these patients longitudinally through our SleepSync digital health system. So yeah, we're very well aware of all the competition out there. We know the challenges with some of the technology out there today. We know someone may be putting out some data, and we don't rest on our clinical evidence.

Brett Fishman: We're not resting on what we currently have is technology and we've already mentioned a little bit about inspire five here on this call, but in past, we've talked about inspire six and seven.

Brett Fishman: And.

Brett Fishman: Continuing to grow the.

Brett Fishman: The indications and be able to treat other.

Brett Fishman: Groups with obstructive sleep apnea not to mentioned our ability to manage these patients longitudinally through our <unk>.

Brett Fishman: <unk> digital health system. So, yes, we're well very well aware of other competition out there we know.

Brett Fishman: The challenges with some of the technology out there today.

Brett Fishman: We know some maybe putting out some data.

Brett Fishman: We don't rest on our clinical evidence and fact that clinical evidence of our product today is superior to the evidence that we were approved on with the Star trial. So we'll continue to take care of our patients and continue to do everything to grow the adoption of inspire.

Timothy P. Herbert: In fact, the clinical evidence for our product today is superior to the evidence that we were approved on with the STAR trial. So we'll continue to take care of our patients and continue to do everything to grow the adoption of Inspire. All right, great. Thanks for the color there.

Speaker Change: Alright, great. Thanks for the color there and then just for my follow up you talked about perhaps a little bit on the call today and I know part of the 2024 plan is potentially securing reimbursement in that territory. I am just curious if you could provide a little bit more detail on how you view the market opportunity.

Brett Fishman: And then just for my follow-up, you talked about France a little bit on the call today, and I know part of the 2024 plan is potentially securing reimbursement in that territory. I'm just curious if you could provide a little bit more detail on how you view the market opportunity and how reimbursement potentially accelerates commercialization into that region. Thanks so much again for taking the questions.

Speaker Change: While reimbursement potentially accelerates commercialization into that region. Thanks, So much guys for taking my questions.

Timothy P. Herbert: All right. Thank you very much, Brett. I think that in France, last year they announced that nationwide reimbursement had been approved in France, and it went to the next step, which was developing the coding criteria for physicians to implement the reimbursement, and that is progressing through the system.

Alright. Thank you very much Bret I think the in France last year, They announced countrywide reimbursement has been approved in France and it went to the next step which was developing the coding criteria for physicians to implement the reimbursement and that is progressing through the system. It has.

Timothy P. Herbert: It has not yet been formally announced yet, but we expect that to happen in the very near future. We do have a country manager that we have hired. We do have a team in France that is preparing for the launch, and we hope to be able to report some positive progress with that in 2024. So, pretty excited about France.

Speaker Change: Not yet been formerly formally announced yet we expect that to happen in the very near future. We.

Speaker Change: We do have a country manager that we have hired we do have that.

Speaker Change: Our team in France that is preparing.

Speaker Change: For the large <unk> and we hope to be able to report some positive progress with that.

Speaker Change: In 2024, so we're pretty excited about France is a very significant opportunity.

Timothy P. Herbert: It's a very significant opportunity for sleep apnea and for the Inspire technology, and with what we've been able to demonstrate in our growth in Germany, we believe that we're going to have a significant ramp-up in France. And then the other key area to look at ramping up, again, is going to be in Japan. So, we're very excited about France, and we're going to keep working with the authorities to get the announcement made and for our team to be able to lobby.

Speaker Change: Sleep apnea and for the inspire technology and with what we've been able to demonstrate in our growth in Germany. We believe that we're going to have a significant ramp in France and then the other key area.

Speaker Change: Look at wrapping again is going to be in Japan, So very excited about France, or we're going to keep working with the authorities.

Speaker Change: Get the announcement made in for our teams to be able to lobster.

Timothy P. Herbert: Thank you. One moment for our next question, and I assure you our next question comes from the line of Mike Kratke from Lear, Inc. Partners. Please go ahead. Hi, everyone.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And I show. Our next question comes from the line of Mike Kratky from Leerink Partners. Please go ahead.

Mike Kratke: Thanks for taking our questions. Regarding the recent policy changes by United, specifically the new requirement for oral appliance therapy, do you have a sense of what portion of patients getting Inspire Therapy today have not already tried and failed oral appliance therapy? And then I have a follow-up question. I think the majority of them have.

Mike Kratky: Hi, everyone. Thanks for taking our questions regarding the recent policy changes by United specifically on the new requirement of oral appliance therapy do you have a sense of what portion of patients getting inspire therapy today have not already tried and failed oral appliance therapy, and then I have a follow up.

Speaker Change: I think the majority of them.

Timothy P. Herbert: I think that most patients, well, most patients, if not all of them, have been introduced to or attempted CPAP. But oral appliances haven't been well documented for successful use with severe obstructive sleep apnea. In fact, they are most beneficial with snoring or mild, maybe slightly moderate.

Speaker Change: I think that most of the patients while most patients if not all of them have been.

Speaker Change: <unk> introduced two or attempted CPAP.

Speaker Change: But order of appliances haven't been well documented for successful use with severe obstructive sleep apnea in fact that.

Speaker Change: Is most beneficial with snoring or or mild maybe slightly moderate so I don't think I'm at Diavik. The majority of our patients have not been introduced to oral appliance and probably based on their anatomy wouldn't qualify for it anyways.

Timothy P. Herbert: So I don't think the majority of our patients have not been introduced to oral appliances and probably, based on their anatomy, wouldn't qualify for them anyway or have a desire to start using them because of the severity of their obstructive sleep apnea. Got it, understood. And then just as a quick follow-up, are most patients able to get oral appliance therapy without going to the dentist to get custom fitted, or is that a necessary part of the process? Part of the experience is going to the dentist because you need to be properly fitted to be able to make sure that if you're going to get an oral appliance, it will have enough forward movement of the lower jaw to be able to create sufficient volume behind the base of In some cases with moderate to severe sleep apnea, you may have to move that lower jaw forward as much as 10 millimeters, and you can imagine that's a pretty uncomfortable forward movement.

Speaker Change: Desire to start that because of the severity.

Speaker Change: They are obstructive sleep apnea.

Speaker Change: Got it understood and then just as a quick follow up on those patients able to get oral appliance therapy without going to the dentist, yet contemplated or is that a necessary part of the process.

That's part of the experience is good.

Speaker Change: One to your to the dentists, because you need to be properly fitted to be able to make sure that if youre going to get an.

Oral appliance it will have enough forward movement of the lower jaw to be able to create sufficient volume behind the base of the tongue.

Speaker Change: To be able to effectively address obstructive sleep apnea in some cases with moderate to severe sleep apnea, you may have to move that lower jaw forward as much as 10 millimeters and you can imagine that's a pretty uncomfortable.

Speaker Change: Forward movement.

Timothy P. Herbert: Therefore, it's pretty limited when you get to the more severe cases. Got it. Okay. Thanks for taking our questions. Thanks, Mike.

Speaker Change: Therefore, it's pretty limited when you get to the more severe cases.

Speaker Change: Got it okay. Thanks for taking my questions.

Larry Biegelsen: Thank you. And I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead. Hi, it's Leigh calling in for Larry.

Speaker Change: Thanks, Mike.

Speaker Change: Thank you.

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

Speaker Change: Hi, Lee calling in for Larry Thanks for taking my question.

Richard John Buchholz: Thanks for taking my question. First, just a clarification on Q4. You mentioned there was some catch-up in Q4 because of delays in Q3 procedures. Are you able to quantify how much that catch-up was? You know, maybe 5, 10, no, and kind of a good number. Related to that, you also talked about headwinds outside of the U.S. I think irrigation in Germany came in perhaps a little bit later.

Lee: First just a clarification on Q4 please.

Lee: And then there was some catch up in Q4 with strong potential claims in that case.

Lee: Christine.

Speaker Change: Are you able to quantify how.

Speaker Change: How much of that catch up was.

Speaker Change: Maybe.

Christine: The number will be.

Christine: Later, you'll.

Christine: You also talked about headwinds.

Christine: Outside of U S.

Christine: Okay.

Richard John Buchholz: So, obviously, that had some impact in Q4. Are you able to quantify that number? And I have a follow-up. Hi Leigh.

Christine: So obviously that impacted Q4.

Christine: Are you able to quantify that number.

Christine: Follow up.

Speaker Change: Sure highlight.

Richard John Buchholz: First, we haven't quantified the strength in Q4. We had mentioned before, you know, some of the procedures did not get scheduled or completed in Q3, but we haven't quantified it. There are some procedures done in the fourth quarter, and some will carry into the first and second quarters of 2024. Regarding outside the U.S., we had mentioned before that we could see a $4 million headwind in the fourth quarter. That's about what we saw in the fourth quarter. Will we see that come through in the first quarter? Probably not.

Speaker Change: First we.

Speaker Change: We haven't quantified that the strength in Q4, we had mentioned before.

Some of the procedures Duncan did not get schedule are completed in Q3, but we haven't quantified. It there's some procedures done in the fourth quarter and some will carry into first and second quarter of 2024 regarding the outside the U S. We had mentioned before that we would we could see a 4 million.

Speaker Change: Headwind in the fourth quarter, that's about what we saw roughly.

Speaker Change: In the fourth quarter.

Speaker Change: Will we see that come through in the first quarter, probably not that will be that will take a few quarters to clear that so there won't be a bolus in the first or second quarter.

Richard John Buchholz: That will take a few quarters to clear, so there won't be a bolus in the first or second quarter. But we'll work through that. As Tim mentioned, we did get a Germany derogation last time.

Speaker Change: But we'll work through that as Tim mentioned, most recently, we did get Germany Derogation, we had to work through some logistics and on the labeling for that and so that really started in late January.

Richard John Buchholz: We had to work through some logistics and on the labeling for that. And so that really started in late January, but we are now shipping there. But again, we won't see that come through in a bolus. Okay, that's super helpful. Thank you. And my follow-up question relates to Inspire 5. Can you clarify, are you still planning to file in early 24, so perhaps in Q1? Is that how you think about early 24?

Speaker Change: But we are now shipping there, but again, we won't see that come through in a bolus amount.

Speaker Change: Okay. Thank you Super helpful. Thank you and my follow up question.

Speaker Change: To inspire five.

Speaker Change: Can you clarify are you still planning to file in early 'twenty Corso capital Q1.

Leigh: And talk about your confidence and the confidence level in getting it approved in 2024. Are we still talking Q2, Q3? I think I heard the comment about later 24.

Speaker Change: How you think about early 'twenty, four and talk about your confidence.

Speaker Change: The confidence level in getting it approved in 'twenty 'twenty four or are we still talking Q2 Q3.

Speaker Change: Thank you I heard the comment about later 24 thank.

Timothy P. Herbert: Yeah, thanks, Clay. I think that we have confidence in our development of the technology and the teams working on the final submissions. We're not putting out the specific date on when that submission is going in as we work with the FDA, but the submission will include both the Inspire 5 Neural Stimulator, the Patient Programmer software changes, and the Physician Programmer software changes.

Speaker Change: Thank you.

Speaker Change: Yeah. Thanks, Larry I think that we have confidence in our development of the technology and the team is working on the final.

Speaker Change: Submissions were not putting out a specific date on when that space is going in as we work with the FDA.

Speaker Change: But the submission will include both the inspire five neurostimulator the patient programmer software changes the physician programmer software changes, it's a full <unk>.

Timothy P. Herbert: It's a full system-level submission, and we do not only want to have approval in 2024, but we want to do a limited launch in 2024 as well. So, we're pretty consistent with the targets that we laid out previously. Okay, thank you. So no additional color on the Q3 versus, sorry, Q2 versus Q3 timing of the approval, you know, whether or not the clock is reset. Yeah, we're going to continue to work with the FDA to drive the review process, and the FDA has its time to review, so yeah, we'll be careful about putting any more color in there.

Speaker Change: System level submission.

Speaker Change: We do not only want to have approval and 2024, but we wanted to do a limited launch in 2024 as well so we're pretty consistent with that.

Speaker Change: The targets that we laid out previously.

Speaker Change: Okay. So no additional color on the Q3.

Speaker Change: Q2 versus Q3 timing on the approval.

Speaker Change: How the clock as we said yes.

Speaker Change: Yes, we're going to continue to work with the FDA to drive.

Speaker Change: The review process and FDA has their time to review so we'll be careful about putting anymore.

Timothy P. Herbert: Fair enough, thank you. Thank you. And I show our next question comes from the line of John Block from Cecil. Please go ahead. Thanks, guys, and solid quarter, Rick and Tim. Maybe just two for me.

Speaker Change: Color into that.

Speaker Change: Fair enough. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Jon Block from Stifel. Please go ahead.

Jonathan David Block: Thanks, guys.

Jonathan David Block: Solid quarter, Rick and Tim maybe just two for me.

Jonathan David Block: Rick, for 1Q24US revs to be down mid to high teens Q over Q, I need to get 1Q24 year-over-year utilization down 2% to 3% year-over-year. And, you know, that would be the first down year-over-year utilization since arguably the throes of COVID. And now you've got broader labels.

Jonathan David Block: Rick for $1 24, U S revenue to be down mid to high teens Q over Q.

Jonathan David Block: I need to get <unk> 24 year over year utilization down.

Jonathan David Block: Down 2% to 3% year over year.

Jonathan David Block: That would be the first down year over year utilization.

Jonathan David Block: Since arguably the throes of Covid and now you've got broader labels you got the pediatric opportunity in some of those facilities. I think you said you could even see some <unk> through 'twenty three ongoing flop into $1 24. So can you just explain.

Richard John Buchholz: You've got the pediatric opportunity in some of those facilities. I think you said you could even see some 3Q23 ongoing flop into 1Q24. So can you just explain, you know, why we would see sort of that level of a fall-off in utilization, the down low single digits again, to sort of foot back on your sequential decline of down mid to high teens. Yeah, I mean, you have to look back.

Why we would see sort of that level of a fall off in utilization the down low single digits again, just sort of put back to your sequential decline of down mid to high teens.

Speaker Change: Yes, I mean, you have to look back. Thanks for the question John you put back in in the first quarter of 2023 remember we had a 400 basis point benefit in our growth last year from the delayed orders that when we introduce the.

Richard John Buchholz: Thanks for the question, John. You have to look back at the first quarter of 2023. Remember, we had a 400 basis point benefit in our growth last year from the delayed orders when we introduced the silicone leads in the U.S. last year. So there's some of that at play.

Speaker Change: Silicone Leeds in the U S last year, so there's some of that at play.

Timothy P. Herbert: But you know, we are excited for 2024 with the guidance that we set forth and we're going to strive to increase utilization, and we talked about a lot of the different areas that we're going to focus on. So that's our plan to achieve that. Okay, that's helpful.

Speaker Change: But we are excited for 2024 with the guidance that we set forth and we're going to strive to to increase utilization and we talked about a lot of different areas that we're going to focus on so that's our plan is to to achieve that.

Timothy P. Herbert: And then to shift gears, Tim, just as Samantha was saying, I think I heard you correctly before where, you know, it seems to be like a 50% AHI reduction, you know, would be beneficial for the business. And I believe you laid out the reasons why.

Speaker Change: Okay. That's helpful. Thank you and then to shift gears, Tim just for Simona was say I think I heard you correctly before where.

Timothy P. Herbert: It seems to be like a 50% NHI reduction you think could be beneficial for the business and I believe you laid out the reasons why just push you there like whats not beneficial in other words is it a 60% reduction is at 65, 60% rough numbers Youre AHRI goes from $50 down to two.

Timothy P. Herbert: Just to push you there, like, what's not beneficial? In other words, is it a 60% reduction? Is it 65?

Timothy P. Herbert: You know, at 60%, rough numbers, your AHI goes from 50 down to 20. United's cutoff is 20, not 15. Just to, you know, take a step back, are there any levels of AHI reduction where you sort of step away and say, this might not be a TAM expander at the end of the day? Thanks for your time. Yeah, in the end, John, we don't care about AHI. What we care about is the mechanism of action. And what we believe the mechanism that the GOPs act upon is reducing the lateral wall collapse. And we know that we stimulate the hypoglossal nerve that moves the base of the tongue forward.

<unk> United's cutoff is 20, not 15, just to take a step back are there any levels of EHR reduction, where you sort of step away and so this might not be a tam expander at the end of the day. Thanks for your time.

EMEA: In the EMEA and John we don't care about HCI, what we care about is mechanism of action and while we believe the mechanism that the GOP.

John: Act upon is reducing the lateral wall collapse, and we know that we stimulate the hypoglossal nerve that moves the base of the tongue forward.

Timothy P. Herbert: It's very difficult for our patients to be able to get that level of reduction in AHI. But we want the patient to lose weight, and have relaxation of the lateral wall, so that is not a contributing factor to AHI. And a patient with a higher AHI can obviously get a higher percent reduction because they can lose neck circumference and have a relaxation of the lateral wall collapse, thereby presenting as tongue base collapse, which is the majority of the lower BMI patients. But if you're a low BMI, it's very difficult to have a significant AHI reduction.

John: Every difficult for patients to be be able to get that level of reduction.

John: And IHS, but we want to we want the patient to lose weight have relaxation of the lateral walls. So that is not a contributing factor to hei and a patient with a higher Hai can obviously get a higher percent reduction because they can lose weight lose next conference and have a.

John: Relaxation of the lateral wall collapse, thereby presenting as tongue based class, which is the majority of.

John: The lower BMI patients, if you're a low BMI.

John: It's very difficult to have a significant <unk> reduction so I think youre going to see a variable reduction <unk> as you go from low BMI to high BMI again, we're more focused on the GOP, what's helping the patients lose weight reduce their next conference and relieve the lateral wall collapse there.

Timothy P. Herbert: So, I think you're going to see a variable reduction in AHI as you go from low BMI to high BMI. Again, we're more focused on the GOP1s, helping the patients lose weight, reduce their neck circumference, and relieve the lateral wall collapse, thereby presenting as a tongue-based collapse for which Inspire can treat them. Thanks for the time, guys. Thanks, John. Thank you. And I show our last question comes from the line of Suraj Kalia from Oppenheimer & Co. Please go ahead. Gentlemen, can you hear me all right? Yes, Suraj. How are you?

John: By presenting as a tank based class for which inspire can treat them.

Thanks for the time guys.

Speaker Change: Thanks, John.

Speaker Change: Thank you.

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

Suraj Kalia: Gentlemen, can you hear me alright, yes, suraj how are you.

Timothy P. Herbert: Tim, congrats on a nice quarter. So, Tim, I guess the first question for Rick: Rick, you mentioned 70-30 between same store and new store sales. If you could just refine it a little further, maybe in terms of implants per quarterbook site. Should I think about FY23 exiting, let's say, round numbers, six, 20 million, give or take. There was a 200 million year-over-year pop.

Tim Congrats on a nice quarter.

Speaker Change #101: So Tim.

Suraj Kalia: I guess the first question for Rick Rick You mentioned 70, 30 split between same store new store sales.

Suraj Kalia: If you could just refine it a little further maybe in terms of implants per quarter book site.

Suraj Kalia: You should I think about FY 'twenty, three exiting let's say round numbers $20 million give or take.

Suraj Kalia: There was a $200 million year over year.

Suraj Kalia: You know, 70% of it comes from same-size. Is that the right way to think about it, or not? Is there some other math that you're applying to the 70-30 split?

Suraj Kalia: <unk>.

Suraj Kalia: 70% of it comes from same site is that the right way to think about it or.

Some other math.

Suraj Kalia: You are applying to 70 30 split.

Richard John Buchholz: Yeah, Suraj, thanks for the question. What I'm talking about is the percentage of our growth, not the composition of our revenue, but more of the growth came from 70 percent from our existing customers and the remaining 30% from new. Okay. Fair enough. And Tim, just more on a pedantic level, the average number of days of CPAP usage that is documented by a potential patient, let's say Suraj comes in, he's either failed or intolerant of CPAP, then you file the documentation. What is the average number of days of failure or intolerance shown for getting a GNS authorization?

Yes, suraj. Thanks for the question what Im talking about is the percentage of our growth not not of the composition of our revenue, but more of the growth came from 70% from our existing centers.

Suraj Kalia: And the remaining 30% from new centers.

Suraj Kalia: Okay.

Suraj Kalia: Our growth.

Speaker Change #102: Fair enough and just more on a pedantic level, yes, the average.

Speaker Change #102: Rich number of days of CPAP usage that is documented by a potential patient, let's say suraj comes in he's either failed or intolerant of CPAP.

Speaker Change #102: And then your final documentation what is the what are the average number of days.

Speaker Change #102: <unk> or intolerant Sean.

Speaker Change #103: Forgetting Aegean this authorization. Thank you for taking my questions. Thanks, Raj Suraj I think that that's all over the place that last number for the most part the patients who come in they receive inspire therapy.

Timothy P. Herbert: Thank you for taking my questions. Thanks, Suraj. I think that that's all over the place, that last number. For the most part, the patients who come in to receive Inspire Therapy are not tolerant to Inspire, I'm sorry, they are not tolerant to CPAP, therefore they have zero utilization, and very few come in if they are using CPAP for the numbers of, what is it, four hours a night for five of seven nights, and if they're compliant So the majority of our patients have been introduced to CPAP, they've tried CPAP, maybe they've had some benefit from it, but they are not using CPAP, they're not tolerant to it, and so it's really not a big barrier for physicians to document that those patients are unable to benefit from CPAP and are able to move forward with their lives.

Suraj Kalia: Are not tolerant to inspire I'm, sorry are not tolerant to CPAP. Therefore, they have zero utilization.

Suraj Kalia: Very few come in if they are using CPAP into the numbers, what's what is it.

Suraj Kalia: Four nights for hours a night for five of seven nights and if theyre compliant to that it's kind of difficult to get.

Suraj Kalia: Insurance approval because their compliance to C. Pap. So the majority of our patients they've been introduced the CPAP they've tried CPAP, maybe they've had some benefit with it but they are not using CPAP theyre not tolerant to it and so it's really not.

Suraj Kalia: A big barrier for the physicians to document that those patients are unable to benefit from CPAP and are able to move forward with.

Timothy P. Herbert: So, thank you very much, Suraj. Hey, just wanted to make one last note to everybody. I wanna thank everybody 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 team's commitment to patients remains unmatched and is the most important element to our success. I wish to thank all of our employees as well as the healthcare teams for their continued efforts as we remain focused on further expanding our business in the United States, in Europe, and in Asia. For all of you on the call, we appreciate your continued interest and support of Inspire and look forward to providing you with further updates in the months ahead. This concludes today's conference call. You may now disconnect.

Suraj Kalia: With therapy.

Suraj Kalia: So thank you very much suraj.

Suraj Kalia: Just wanted to.

Speaker Change #104: One last note to everybody I want to thank everybody 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 team's commitment to patients remains unmatched.

Speaker Change #104: And is the most important element to our success.

Speaker Change #104: 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 United States in Europe and in Asia.

Speaker Change #104: For all of you on the call. We appreciate your continued interest and support of inspire and look forward to providing you with further updates in the months ahead.

Speaker Change #105: This concludes today's conference call you may now disconnect.

Timothy P. Herbert: ... Thanks for watching!

Speaker Change #105: Okay.

Speaker Change #105: Okay.

Speaker Change #105: [music].

Speaker Change #105: Okay.

Yes.

Speaker Change #105: Okay.

Speaker Change #105: [music].