Q4 2024 Inspire Medical Systems Inc Earnings Call
And 12 months ended December 31 2024.
The press release is available on our website.
On this call management will make forward looking statements.
Meaning of the federal Securities laws.
Looking statements.
Without limitation.
Through our operational financial results.
Investments in our business.
2025.
Operational outlook.
The market access are based upon our current estimates.
Sure.
These statements involve material risks and uncertainties that could cause actual results or events.
Different.
Accordingly, you should not place undue reliance on them.
Please see our filings with the securities.
Yes.
Including.
Our Form 10-K, which we filed with the us.
Earlier this afternoon for a description of these risks and uncertainties.
Inspire disclaims any intention or obligation except.
As required by law to update or revise any financial projections or forward looking statements.
Because of new information future events or otherwise.
Conference call contains time sensitive information.
Yeah.
Broadcast today February 10 2025.
Speaker Change: It is my pleasure to turn the call over to Tim Herbert Tim.
Tim: Thank you Ed.
Speaker Change: And thanks, everyone for joining our business update call for the fourth quarter and full year 2024.
2024 was filled with many important milestones.
Including surpassing 90000 patients treated with inspire therapy.
Speaker Change: 350 peer reviewed publications.
Speaker Change: The U S FDA approval of the inspire five neurostimulator.
Speaker Change: European Union matter medical device regulation approval, which included full body MRI compatibility.
Speaker Change: The approval of countrywide reimbursement in France.
Speaker Change: And our first full year of profitability.
Speaker Change: We continue to strengthen our leadership team and recently announced an organizational change aimed at fueling our future growth.
Speaker Change: We welcome the new Chief manufacturing and quality out Sir Jason Kelley, who will lead our supply chain quality assurance and regulatory teams.
Speaker Change: Carlton whether be it was promoted to the expanded role of chief strategy and growth Avatar and assumed leadership of the U S sales and marketing team teams Randy ban transition to the newly created role of executive Vice President of patient access and therapy development.
Our new team tasked with enhancing therapy outcomes and patient access.
Speaker Change: Increasing focus on research and clinical evidence development.
Speaker Change: And leading our key opinion leader communication and medical Society relationships.
Randy: Randy will also continue to lead our international teams.
Randy: The organization is energized by these enhancements and we look forward to another year of strong execution in 2025.
Randy: Earlier in the year, we pre announced that we generated revenue of $239.7 million, representing a 25% increase compared to the fourth quarter of 2023.
Randy: Given our strong performance, we are reiterating our full year 2025 revenue guidance of $940 million to $955 million, representing 17%, 19% growth year over year.
Randy: Yes.
Randy: Net income for the fourth quarter was $35 2 million compared to $14.8 million in the prior year period.
Randy: Represented diluted net income of $1.15 per share.
Randy: <unk> to <unk> 49 per share in the fourth quarter of 2023.
Randy: With this we are excited to announce that 2024 was our first full year of profitability with diluted net income of $1.75 per share compared to a loss of 72 cents.
2023.
Randy: Further we generated $130 million in operating cash flow for the full year and we plan to improve profitability in 2025.
Randy: As such in 2025, we expect diluted net income to be in the range of $2.10 to $2 20 per share.
Randy: As you know in 2024, we received FDA approval for the inspire five neuro stimulation system.
Randy: A key feature of the inspire five the bias is that it incorporates respiratory sensing internal to the neuro stimulator, eliminating the need to have plans to pressure sensing lead.
Randy: This feature is designed to provide benefit to the patient with one pure component.
Randy: To that position with reduce surgical time.
Randy: And to the company with reduced production complexity and cost.
Randy: Further the inspire five device provides the capability for future software based enhancements, including sleep detached Shen for auto activation.
Randy: Sleep performance tracking.
Randy: We have already gained valuable experience with the inspire five device with systems implanted in both Singapore and in the U S.
Randy: Early feedback has been positive.
Randy: We are continuing with our limited market release in the U S and.
Randy: And we will continue to get further experience with inspire five procedures at additional U S sites as we move towards full launch during the year.
Randy: The primary factor driving the timing of our fall launch remains building sufficient inventory to support expected demand in the U S.
Randy: For the procedures performed in the U S to date, all cases utilized CPT codes at 4568 and received prior authorization from the insurance carriers.
Randy: P T called 605 six it was originally used by inspire for the first eight years since our approval in 2014 and accurately describes in spite inspire five procedure, namely one neuro stimulator and one stimulation lead.
Randy: The current CPT code 64582 was only incorporated a few years ago and will continue to be used with all inspire four cases.
Randy: We want to emphasize that.
Randy: The professional fee and CPD code checked for 568 appropriately reflects the reduced work of implanting inspire five system, specifically the elimination of in planning the pressure testing lead.
Randy: The surgical placement of the sensing lead has long been a source of discomfort for anti surge it is not where they typically operate.
Randy: We believe the resultant reduction in surgical time associated with not placing the certainly will result in a comparable reimbursement rate for the surgeon on a time adjusted basis.
Randy: Further we believe the benefits of surgeon comfort and confidence with inspired by procedure will free up certain times to perform additional inspire cases.
Randy: Will encourage more surgeons to a dry adopt inspire therapy.
Randy: The new inspire sleep think programming system has been fully launched in the United States.
Randy: The goal for the new system is to provide more efficient patient programming and improved access to patient data to assist the health care provider in their decision making.
Randy: A key feature of this system is that health care providers may utilize their own laptop or tablet.
Randy: Simply log into sleep thick to access programming screens.
Randy: With this upgrade inspire is no longer required to provide laptops or tablets further reducing operational complexities.
Randy: With respect to our market development activities, we continue to advance our medical education programs and in 2024, we hosted over 300 advanced practice providers 300, anti residents and 150 sleep fellows at inspire training programs.
Randy: The primary focus of our ATP, our advanced practice provider initiative is to improve capacity in both sleep and antique clinics to meet the strong patient demand, we continue to see for inspire therapy.
Randy: In 2025, we plan to increase the investments, we're making in our medical education programs, including ongoing resident Fellowship in APB training.
Randy: Continued participation in cardiology and primary care conferences.
Randy: And initiating a continuing medical education program to support the awareness and adoption of inspire therapy in cardiology and primary care.
Randy: We focus our patient marketing and education programs to deliver broad therapy awareness as well as provide a pathway for patients to connect with a health care provider that offers inspire through our website and adviser care program.
Randy: In 2024, we designed our outreach programs to be more targeted and one example is with our digital advertising strategy, which has contributed to a significant increase in patient engagement at a lower cost in.
Randy: In 2025 and beyond we plan to continue to invest in a robust marketing programs with the goal of further enhancing patient awareness of inspire therapy and improving our page its ability to connect with a health care provider.
Randy: An exciting example to improve the patient experience is with digital scheduling.
Randy: An online tool used by our adviser care program to directly submit electronic appointment requests to qualified health care providers on behalf of prospective patients.
Randy: We currently have 300 centers using this tool and we plan to expand this program in 2025.
Randy: On the market access front, we continue to make progress updating our commercial payer policies to our expanded FDA label. Additionally, we facilitate patient access to inspire therapy by assisting patients and obtain a prior authorization coverage decisions from payers.
Randy: In this regard we have steadily expanded our prior authorization team to enhance our ability to provide this assistance.
Randy: Before I turn the call over to Rick I would like to provide one additional update on January 17th we received a civil investigated demand from the department of Justice. The CIB requests information relating to the marketing promotion and reimbursement practices associated.
Randy: With our products.
Speaker Change: We intend to fully cooperate with the investigation and provide the information requested.
Speaker Change: We are confident in the strength of our compliance programs and procedures and.
Speaker Change: And we remain committed to conducting our business ethically and in compliance with applicable laws and regulations.
Speaker Change: In summary, we remain focused on the patient to continue the growth and adoption of inspire therapy, we will execute our growth strategy of driving higher quality patient flow and increasing the capacity of our provider partners to effectively treat and manage more patients are key strategies that code.
Speaker Change: Adding advanced practice providers search.
Speaker Change: They're buying additional surge is qualified to implant inspire therapy and driving the adoption of sleep second our digital tools.
Speaker Change: All of which are embedded strategies in our commercial team's objective to increase provider capacity.
Speaker Change: Looking ahead, we remain excited about our future and are confident that we have the appropriate strategy in place to drive long term stakeholder value.
Rick: With that I'd like to turn the call over to Rick for his review of our financials.
Rick: Tim and good afternoon, everyone total revenue for the quarter was $239 7, million% to 25% increase from the $192 5 million generated in the fourth quarter of 2023.
Rick: U S revenue in the quarter was $231 6 million, an increase of 22% from the $189 4 million in the prior year period.
Rick: Revenue outside the U S was $8 1 million, which was 163% increase year over year.
Rick: In the fourth quarter, we added 72, new U S centers, bringing the total to 1435 active U S centers.
Rick: As well as 12, new U S sales territories, bringing the total to two to 335 U S sales territories.
Rick: Gross margin in the quarter was 85%.
Rick: Total operating expenses for the quarter were 171 8 million, an increase of 11% as compared to $155 2 million in the fourth quarter of 2023 <unk>.
This planned increase was primarily due to the expansion of our sales organization and increased general corporate costs, partially offset by a reduction R&D and patient marketing and education expenses year over year.
Rick: Interest and dividend income totaled $5 5 million in the quarter compared to $5 9 million in the prior year period.
Rick: Operating income for the quarter totaled $31 9 million compared to $9 3 million in the prior year period.
Rick: Net income for the quarter was $35 2 million or a 15% net income margin compared to net income of $14 8 million or 8% net income margin in the prior year period.
Rick: This represented diluted net income per share of $1 15.
Rick: Compared to 49 and.
Rick: In the fourth quarter of 2023.
Rick: Adjusted EBITDA totaled $62 7 million or a 26% adjusted EBITDA margin in the fourth quarter compared to adjusted EBITDA of $33 million or a 17% adjusted EBITDA margin in the fourth quarter of 2023.
Rick: The weighted average number of diluted shares outstanding in the quarter was $38 million.
We are excited to announce that we generated $69 million in operating cash flow during the fourth quarter, bringing the full year total to $130 million and increasing our total cash and investment balances to $517 million at December 31.
Rick: This strong cash position allows us to remain focused on executing our growth strategies.
Rick: For the full year 2024 revenue totaled $802 8 million a.
Rick: A 28% increase over $624 8 million in 2023.
Rick: U S revenue was $771 million, a 27% increase year over year, while revenue outside the U S totaled 31, 8, million% to 71% year over year growth.
Rick: Operating income totaled $36 1 million for full year 2024, compared to an operating loss of $40 3 million in 2023.
Rick: Net income was $53 5 million for full year 2024, 7% net income margin compared to a net loss of $21 2 million for full year, 2023% to 3% net loss margin.
Rick: Adjusted EBITDA totaled $157 8 million for 2024% to 20% adjusted EBITDA margin compared to adjusted EBITDA of $44 9 million and a 7% adjusted EBITDA margin in 2023.
Rick: Full year diluted net income per share totaled $1 75, compared to a net loss.
Rick: Of <unk> 72 per share in 2023.
Rick: Moving on to 2025 guidance, we continue to expect full year revenue to be in the range of $940 million to $955 million Rep.
Rick: Representing an increase of 17% to 19% compared to full year 2020 for revenue and we expect full year gross margin to be in the range of 84% to 86%.
Rick: We expect diluted net income for the full year 2025 will be between $2 10 to $2 20 per share.
Rick: As previously discussed we will no longer guide to our report on centers. However to give you a sense of how our commercial organization is scaling we will continue to provide territories and field clinical representatives going forward.
Rick: Although not formal guidance, we would like to provide additional color on 2025.
Rick: Now that we have reached profitability, we expect our reported tax rate in 2025 to be roughly 10% primarily related to state and local taxes.
Rick: Excluding the impact of any share repurchases that we make complete over the remainder of 2025, we expect our full year diluted shares outstanding to be approximately $31 million.
Rick: In conclusion, our strong performance and business momentum provide us with confidence in our outlook for 2025.
Rick: With that our prepared remarks are concluded.
Rick: You May now open 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.
Speaker Change: Your question. Please press star one again.
Speaker Change: We ask that you. Please keep your questions to no more than one question and one follow up and if time permits we'll be more than happy to take more questions. Please standby, while we compile the Q&A roster.
Travis Steed: I show. Our first question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.
Travis Steed: Hey, Thanks for taking the question I wanted to first ask about the EPS guidance should.
Travis Steed: Should we assume a linear path to profitability here, assuming there is some conservatism built into the 2025 EPS guidance and then also wanted to ask about the.
Travis Steed: The Doj CIB as well thanks a lot.
Travis Steed: Sure Hey, Travis.
Travis Steed: I'll take the first part of the question on earnings per share guidance.
Travis Steed: We are committed to improving our annual operating margin.
Travis Steed: On a year over year basis.
Travis Steed: And.
Travis Steed: Given our revenue seasonality that we've had traditionally from Q4 to Q.
Travis Steed: Q1, we do not expect to be profitable in the first quarter, but then we will have sequential improvement thereafter on a quarterly basis throughout the year.
Travis Steed: Okay.
And on the Doj Tid.
Travis Steed: Absolutely.
Travis Steed: Do we see that January 17th it's very new it's obviously active so there's only so much detail that we can provide but we're committed to working.
Travis Steed: With the inquiry provide the information thats necessary, we're committed of conducting our business ethically and in compliance with applicable laws and regulations and to working with our customers and other value partners continue to provide <unk>.
Travis Steed: High quality medical devices, we do not do not anticipate that the investigation will interfere with the important work we're doing.
Travis Steed: To improve the lives of patients who need our products. So as notice VA in the investigation remains ongoing as such really don't have additional comments or details at this time.
Travis Steed: Great I understand thanks, a lot. Thanks.
Speaker Change: Thanks Travis.
Travis Steed: Thank you.
Speaker Change: Our next question comes from the line of Danielle <unk> from UBS. Please go ahead.
Speaker Change: Hey, good afternoon, guys. Thanks, so much for taking the question.
Speaker Change: I wanted to follow up on the commentary around the 300 centers that are doing that the automated scheduling our online scheduling or how.
Speaker Change: However, you characterized it is sorry, if I'm mischaracterizing it but have you seen what have you seen from a growth perspective at those centers have you seen growth accelerate from a patient volume perspective, or maybe the right way to ask the question is more streamline process, maybe talk a little bit about what you've seen at those centers what kind of impact.
Speaker Change: It's having on the ability to work through volumes and one quick follow up question on inspire five and reimbursement your favorite topic.
Speaker Change: Hi, Danielle.
Speaker Change: Let's take it back a little bit you've been with us for a while tracking the story, we did a pilot program a few years ago and what we wanted to do is measure the success of patient appointments using digital scheduling as compared to the normal pathway, which would be through direct phone calls or via E mail between the center and the patient.
Speaker Change: And we saw significant advantage by using that digital scheduling meaning.
Speaker Change: Advisor program adviser care program has direct linkage into the center to send the patient appointment request directly and are really streamline that process. Therefore in 'twenty 'twenty four we started to ramp up the number of centers that we're participating in that program and we ended the year at about.
Speaker Change: 300 centers and it's a big initiative as we start this year to continue to take advantage of the technology to improve their patients' ability to make an appointment. So we're going to keep pushing that program based on the success of the pilot program. We saw a couple of years ago.
Speaker Change: Okay. That's helpful. And then just on inspire five reimbursement appreciate the commentary you've provided thus far I mean, one of the things we talk about and I know you and I have spoken about this in the past is physician reimbursement and maybe you could talk a little bit about what youre hearing from your physician then.
Speaker Change: Whether there be with reimbursement as it as it is or is that a barrier I guess.
Speaker Change: Should ask Q position during the procedure.
Speaker Change: <unk> does come down a little bit thanks, so much.
Speaker Change: Absolutely. Thanks, Danielle we don't believe thats going to be a very in fact, we think it's the opposite it's going to be opportunistic I think the purpose of inspire five was to remove a key barrier that we had with E&P surgeons and that was the placement of the pressure sensing lead in the chest wall of the peso.
Speaker Change: Which is just not where they operate everyday therefore with the accomplishment of five it is reduced work, but it's it's the right kind of reduction of work that so the emt's can focus on their strengths, placing the electrodes tunneling in place in the neuro stimulator and that's the feedback that we saw.
Speaker Change: With the cases in Singapore, and the centers that we already have in planning patients in the United States debate. The feedback is exactly that while we're not in planning the pressure sensing lead anymore and they are able to progress to the next case.
Speaker Change: And with that we believe theres going to be reduce surgical time.
Speaker Change: And the reimbursement will be on a time adjusted.
Speaker Change: Ah.
Speaker Change: Our rate will be consistent between inspire for an inspire five allowing them to do more cases in the day and the reimbursement for ambulatory surgical centers is actually higher so for those surgeons, who are have a stake in their ASC. There is a benefit to be able to bring more inspire cases too.
Speaker Change: To the ASC. So we don't think it's going to be a barrier I think that there is talk early on of course about the rates, but once we <unk>.
Speaker Change: Move further into a limited launch in the fall that we don't think this will be a barrier as physicians will quickly progressed, if I can add one more topic to this.
Speaker Change: What we talked about last year quite a bit with physician reimbursement or the professional fee is making sure that the e&ps have efficiencies and their practice and that's what we talk about when we talk about <unk> or advanced practice providers to ensure that the <unk> are able to educate the patient.
Speaker Change: The app is to be able to help streamline the patient flow or help them navigate through the practice and the surgeon focuses on performing the surgical implant of inspired thereby maximizing their time.
Speaker Change: And really taking care of the reimbursement. So we don't think it's going to be a barrier as we move into inspire for our inspire five as we progress into the year.
Speaker Change: Got you. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Robbie Marcus from Jpmorgan. Please go ahead.
Robbie Marcus: Oh, great. Thanks for taking my questions and very nice profitability.
Speaker Change: Robert.
Speaker Change: Maybe.
Speaker Change: Correct.
Speaker Change: Considering that we are having gone from a limited launch to a full launch.
Speaker Change: Spire five sometime during the year, how do you want us to think about the phasing of revenues and.
Speaker Change: Expenses and margin as we go through the year, you talked about negative EPS in the first quarter, but how should we think about where.
Speaker Change: How you want us maybe versus historical.
Speaker Change: Do you think the streets in a good spot for first quarter to start the year. Thanks.
Speaker Change: Hey, Thanks, Ravi, Yes, we normally don't don't discuss consensus but.
Speaker Change: Given the inspire five launch dynamics, we did make some comments earlier this year about Q1 and generally we are comfortable with Q1 estimates.
Speaker Change: But.
Speaker Change: We do expect to see sequential improvement in revenue throughout the year.
Speaker Change: After we have our seasonality in the first quarter and we're going to continue to make investments in our business and R&D.
Speaker Change: As well as continue with our expansion of our.
Speaker Change: Our footprint, we will continue.
Speaker Change: Adding sales territories and adding centers we're in.
Speaker Change: Not going to be guided to but generally it will probably be in line with our historical trend. So we will continue to increase expenses throughout the year.
Speaker Change: But with that increase.
Speaker Change: Sequential growth in revenue profitability will follow.
Speaker Change: Great and.
Maybe one.
Speaker Change: Just on <unk> I know, it's painful to bring it up but.
Speaker Change: It just got added to one of the labels for sleep apnea I wanted to see what if anything youre seeing in the field the clinical discussions and.
Speaker Change: Just the latest on how you see inspire fitting into the equation. Thanks, a lot Sharon. Thanks, Ravi we don't see GOP wanted a difficult subject because we spent a lot of time talking about it.
Speaker Change: As you realize that or just stated.
Speaker Change: Just came on label and I think we're still trying to.
Speaker Change: Understand.
Speaker Change: How it's going to be covered and really what the strategy is to be able to educate the sleep physicians than what the distribution plan is that being said, we haven't seen the tailwind yet, but we believe its coming what's going to really help patients lose weight and reduce their lateral wall collapse to be able to qualify for.
Speaker Change: For inspire we continue to believe that this is a benefit for inspire and for patients to help them lose weight whereby they wouldnt qualify for inspire so we continue to work with our sites. We have several single sites that are conducting.
Speaker Change: Early work to try and measure.
Speaker Change: The success of helping patients lose weight and qualify for inspire and we'll continue to monitor and report back, but I think it's still pretty early on and again, we haven't seen the tailwind yet.
Speaker Change: Thank you very much thanks.
Ravi: Thanks Ravi.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Chris Pasquale from <unk> Research.
Speaker Change: Yes. Thanks, Rick you made great progress in 'twenty four on profitability as I look at the 25 guidance.
Speaker Change: I know you said you're committed to improve margins for the year, but it doesn't seem like it's implying the same type of leverage that we saw last year. So when you think about the big buckets. We're spending R&D was down in 'twenty. Four I think you said the DTC was going to kind of flatten out should we expect any of those to really ramp up here or what else is implied in the earnings.
Speaker Change: <unk> that you guys gave.
Speaker Change: Sure.
Speaker Change: With with our guidance of $2 10 to $2 20 per share Chris We do expect that revenue growth will continue to outpace opex growth.
Speaker Change: DTC, we're expecting that to be flat year over year, so roughly $94 million.
Speaker Change: R&D will probably run mid teens as a percentage of revenue.
Speaker Change: And so and we also mentioned the tax rate will be roughly.
Speaker Change: 10%.
Speaker Change: And so it does imply with our guidance that we will have.
Speaker Change: Low single digit operating income margin, so there will be some improvement.
Speaker Change: But we are committed to improving our annual margin.
Speaker Change: Improvement and but we are going to continue to invest in long term growth, we're very lowly penetrated in our potential market as well as the number of surgeons as well as centers. So we're in this for the long term and on a longer term basis, we still believe that we can still reach 30% operating margins.
Speaker Change: And with the inspire five launch when you do make that transition is there any sort of near term.
Speaker Change: Impact on gross margin that we should think about it is that initial inventory coming through are we going to be higher cost of production or is that not a factor.
Speaker Change: No.
Speaker Change: No no factor, we did increase our year, our annual gross margin guidance to 84% to 86%.
Speaker Change: So that does include a tailwind in the gross margin from inspire five if theres any short term items, we don't see that at this time.
Speaker Change: Great. Thank you.
Chris: Chris can give you a shot all congratulations fly Eagles fly.
Speaker Change: Thanks, Tim.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Anthony Petrone from Mizuho Financial Group. Please go ahead.
Speaker Change: Thanks, and I'll second the congrats to Pasquale there was a great game for the Eagles.
Speaker Change: Maybe a couple on inspire five.
Speaker Change: Tim just when we think about.
Speaker Change: <unk> ended the year at a little bit over 1400 centers can you share how many centers in the United States actually have inspire five at this point.
Speaker Change: And at what point do you expect that to be fully launched throughout all all sites in the United States and a quick follow up will just be on the.
Speaker Change: The sites that are doing it in the United States and Singapore can you share how many cases they are doing per day like what is the uptick.
Speaker Change: In daily cases at those early adopter sites. Thanks.
Speaker Change: Absolutely. Thanks, I think the.
Speaker Change: Key is Singapore.
Speaker Change: Started earlier and we mentioned earlier in the year that they had done 40 of our planned I think.
Speaker Change: <unk> 46, and they've accomplished cut more since then but theyre going to complete that grew.
Speaker Change: Then we did the first cases in Pittsburgh as we mentioned earlier since we've opened up just a couple of additional sites.
Speaker Change: With several additional planned.
Speaker Change: In the next month, and we will keep ramping the limited market release as we move forward again, the limiting factor to our full launch is building of our product and that continues to be.
Speaker Change: We are progressing there so thats real positive, but we're learning quite a bit as we continue to.
Speaker Change: <unk> increased the number of centers doing.
Speaker Change: The limited market release, so we'll keep.
Speaker Change: Scaling up the LMR is through the year and when we have proper.
Speaker Change: Quantities to do the full launch we will broadly launch the product.
Speaker Change: Yeah.
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: Hi, Thanks for taking the question.
Speaker Change: I'll just try to squeeze two quick ones.
Speaker Change: Hi, Congrats on the on the profit this quarter I guess the first.
Speaker Change: I think you had spoken in the past about our back half versus first half weighting in part due to inspire five can you just reconcile that with the comment that you feel comfortable with <unk> and <unk>.
Speaker Change: Can you just help us understand what the magnitude of that first half second half might look like and then just second.
Speaker Change: In your 10-K, you said that you expect.
Speaker Change: You are looking to drive an increase in utilization that established centers or growth.
Speaker Change: Getting utilization I guess could you just.
Speaker Change: Talk about what exactly that means I know youre, not giving utilization growth guidance anymore, but just.
Speaker Change: Is there anything.
Speaker Change: And that that you can parse out for us. Thanks.
Speaker Change: Sure.
Speaker Change: Again.
Speaker Change: Regarding guidance, we provide annual guidance we don't.
Speaker Change: I'd like to speak too much on the quarterly breakdown, but.
Speaker Change: We do expect our seasonality we are comfortable with with Q1, where the estimates are at and we expect to have sequential growth thereafter.
Speaker Change: You can look back historically on what our sequential growth has been we're not signing off on that but.
Speaker Change: We're really expecting to have continued increase in our sequential revenue as we have done in the past.
Speaker Change: From a from a revenue standpoint.
Speaker Change: There's still a lot of moving parts with the inspire five launch and the biggest one is making sure we have adequate inventory on hand, but we're very excited this is our largest.
Speaker Change: Product launch in the history of the company and so we're excited to get the full launch going.
Speaker Change: And then on.
Speaker Change: Your second question.
Speaker Change: Okay.
Speaker Change: We are in.
Speaker Change: In our guidance assumptions.
Speaker Change: We are assuming the inspire five launch.
Speaker Change: In our guidance, but we're not really assuming much impact to our throughput.
Speaker Change: But what we didn't specify utilization rich so much but we did say that we're going to continue to expand our footprint of territories in centers and Thats generally in line with what.
Speaker Change: What we've done historically, but.
Speaker Change: We're no longer providing those metrics, but we will give you an update on sales reps and field clinical reps going forward.
Okay, but just to be clear there is no there is no major difference.
Speaker Change: First half second half seasonality versus prior years in your current guidance because of inspire five.
Speaker Change: No I mean, you've seen our historical build throughout the year right because we have because we have seasonality that resets in Q1, and then generally revenue build throughout the year.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of David Ross Scott from Baird. Please go ahead.
Speaker Change: Oh, great. Thanks for taking the questions and congrats on the finish of the year here.
Speaker Change: Two from Us and maybe I'll ask both of them upfront obviously.
Speaker Change: The comments on the cadence for the full year broadly I am curious if you can maybe parse out whether or not <unk>.
Speaker Change: National and specific as something that should be accretive to the growth.
Speaker Change: And then when you think about the pieces on the P&L for 2025 <unk> heard the comments on.
Speaker Change: Tax and spend but just curious what your assumption is maybe for interest income, which is a bigger component.
Speaker Change: The P&L. Thank you.
Speaker Change: Sure. Thanks for your questions.
Speaker Change: <unk> <unk> revenue, we still has has trended for quite some time.
Speaker Change: To be between three and 4% of our worldwide revenue that will continue.
Speaker Change: For the foreseeable future into 2025 as quickly as the U S withdrawing its hard to keep pace given.
Speaker Change: Between 3% and 4% of our worldwide revenue, we don't expect that to change in 2025.
Speaker Change: And then your other question interest income interest income.
Sure.
Speaker Change: Did you catch that $20 million for the year roughly $5 million per quarter for interest income.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Adam <unk> from Piper Sandler. Please go ahead.
Adam: Hi, Tim and Rick Congrats on the leverage in the quarter and thanks for taking the questions.
Speaker Change: I wanted to start with one on Gen five.
Speaker Change: <unk>, it's been pretty consistent the fifth Gen device showed a marked faster procedure times.
Speaker Change: And drive increased capacity, but I guess the question is how do you help kind of ensure that the extra or capacity is allocated to inspire versus the other E&P procedures that the Doc has on his or her played in.
Speaker Change: Is there anything that you can do to kind of help the Doc stack inspire cases, and then I had a follow up thanks, Yes, no I think that's a really important item and we work with the E&P is look at what are the other procedures that are demanding your time and we did a search on at all on our own with the CPT code.
Speaker Change: General anti procedures to look on a per minute basis, what competes with inspire and it turns inspire is at the higher end of the list for those procedures that are e&ps are performing the key to it is building the efficiencies towards such that the E&P is driving some of the e&ps.
Speaker Change: You talked about in your checks are the high volume and planners and they have support teams to be able to educate patients help navigate patients, whereas the surgeons can spend a lot of their time in the operating room.
And if they have partners that can also participate in doing implants, and so we need to make sure that we build the efficiencies. So they can do spend more time and DLR.
Speaker Change: And then the key is to set key states and that's really the priority for us this year to where when they come in the morning. They know this isn't inspire day and so it's not just for the surgeon is for everybody in the or suite. They know what procedure happening they know what equipment and what surgical.
Speaker Change: Trays to have in there and.
Speaker Change: And everybody can perform at a high level, it's even down to the reimbursement the reimbursement people know, it's an inspired data. So they know what codes to be able to use in that day for those cases, so it's about driving consistency and really starting to stack K.
Speaker Change: Dave and show the benefit of inspire five with the reduced time mixture the or supervisor understands that such as they add another case without risks risking going into a second shift on over time.
Speaker Change: On the other half they don't want the lights out in that or sweet either so it's all about building the efficiencies and we think.
Speaker Change: Inspired by is really going to build the confidence and the comfort for the e&ps to do so.
Speaker Change: Okay.
Speaker Change: That's really helpful color, Jim Thanks for all that and just one quick one on gross margin.
Speaker Change: Rick.
Speaker Change: 84% to 86% for the full year.
Speaker Change: Guidance.
Speaker Change: Just wanted to kind of maybe.
Speaker Change: Flesh out some of the key assumptions, there and I guess, specifically the impact from the Gen five launch.
Speaker Change: How much of a positive contributor is gen five.
Speaker Change: Gross margin this year.
Speaker Change: Or do we see more of kind of a pronounced impact benefit to gross margin and 26. Thank you.
Speaker Change: Sure.
Speaker Change: We did increase our guidance by 100 basis points at the mid point and we have assumed the inspire five launch.
Speaker Change: In our guidance.
Speaker Change: And we've I think we've captured it with the tailwind of inspire five but.
Speaker Change: 2026, what would be a first full year of the impact more so in 'twenty, 6% and 25 given that we're already into February.
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: Great. Good afternoon, thanks for taking the question Tim.
Speaker Change: Could you talk for a minute about just the logistics of transitioning back to the cranial nerve stimulation code, how does that work for Medicare and commercial patients and do you envision a period of time with centers to both inspire four five and I had one follow up.
Speaker Change: Sure I think.
Speaker Change: Three years ago, we transitioned from 656, 8% to six for five to eight two and here we are by eliminating the pressure sensor, we're transitioning right back.
Speaker Change: And so we've done this and we work with the payers and lot of them still have deal. The 600 <unk>. It's still in the system. The key to it is making sure we update the software at the payers and CMS such that when the.
Speaker Change: Hospitals are the centers that <unk> build that code that it goes through so we work with that repair to make sure that the policies are updated to include both codes, including with CMS to have both codes because to your point as they worked on the inspire.
Speaker Change: As far for inventory there may be a.
Speaker Change: Short period of time, where they are using both towards is no.
Speaker Change: Question about that and while we have several sites on the inspire five limited large now using six or 568. Those centers are in fact also doing inspire four cases, so it's a little bit of handholding upfront, but again as we mentioned we expect full launch through the year end transition by the end of the year.
Speaker Change: <unk>, so more sets of <unk> and the payers will now be transitioned over by that.
That's helpful. Tim what are you assuming in the guidance for competition and any potential warehousing.
Speaker Change: Patients before the full launch of inspire five thank you.
Speaker Change: Absolutely I think competition, we it's been very quiet, we don't know anything there and <unk>.
Have to do that inquiry on your own.
Speaker Change: But we know that if they get approval that there will be some experimenting.
Speaker Change: With some of the academic centers, we're prepared for that and we include that into our guide no question about that we also know that as we transition into five there will be patients who will want a way we believe that to be quite limited now, but there are patients who are aware of five and that's forthcoming and that.
They are they may wanted to choose to wait, but we don't think.
Speaker Change: We're seeing a lot of that yet, but as we continue to ramp up we will monitor that very closely but again, we do kind of build that into our guidance as well.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you and I show. Our next question comes from the line of <unk> Singh from RBC. Please go ahead.
Speaker Change: Okay, great. Thank you so much I guess, just a follow up on the Doj investigation.
You may be willing to share what your initial assessment as of the time and scope on this investigation any next steps or potential timeline, you can share and estimates around potential loss to be in good do you have a third party looking into this just curious if you can share anything in addition to what you already have.
Speaker Change: Sure Ed We just received in January 2017, we're just still in the very early stages.
Speaker Change: We're committed to conducting our business ethically and compliance with applicable laws and regulations.
Speaker Change: We'll work with our customers and other valued partners.
Speaker Change: Continue to provide the inspire products.
Speaker Change: We do not anticipate that the investigation will interfere.
Speaker Change: With the work that we do to improve the lives of our patients.
Again, so early on we just can't provide the details, but again, we have confidence in our.
Speaker Change: Policies and we'll continue to work closely with the investigation to provide the information that they need.
Speaker Change: Got it and then I was hoping you can touch a little bit on your guidance philosophy, obviously exiting 2024 on a pretty high note, 25% year over year growth, you're guiding to high teens.
Speaker Change: What are you assuming.
Speaker Change: In terms of the step down besides law of large numbers. It seems it's just that but then what factors can really help you.
Speaker Change: <unk> delivered another year of those 2025 growth it seems like the inspire sidelines you said, it's going to be.
Speaker Change: Data from phase to commercial landfill. So maybe help us think through how you thought about the guidance and what you factored in claims clarifies. Thank you. Thank.
Speaker Change: Thank you we build a detailed plan at the beginning of the year, we take into account all the elements that you identified Rick earlier, Ed had identified many of those elements as well as far as the tailwind.
Speaker Change: And even some challenges we see to build a detailed model.
Speaker Change: It's earlier in the year and so as we progress we see.
Speaker Change: We'll continue to open up new centers, but we expect the majority of our growth to come from increased.
Speaker Change: Our work at existing centers, we saw same store sales and we will continue to scale our field team to be able to continue our growth and can continue.
Speaker Change: Continue to invest in our growth going forward Rick talked about.
Speaker Change: <unk> continue our DTC program consistent with prior year, and we're going to continue to invest in our R&D and again very excited about.
Speaker Change: Lodging inspire five as we move into the year.
Okay.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Brett <unk> from Keybanc. Please go ahead.
Brett: Hey, Tim and Rick Thanks, so much for taking the questions.
Speaker Change: Just one for me was hoping you could provide a bit more color on where you currently stand around the inventory buildup for inspire five ahead of the full market launch it feels like this keeps coming up really is the primary driver of timing and then maybe if you could just touch on if there was any like barriers with the production process that was preventing us from <unk>.
Brett: Turning as fast as as you ideally wanted thank you.
Speaker Change: Sure. We are opening up a brand new production line or I should say we have opened.
Speaker Change: Brand New production line those are units of that line have been implanted in Singapore the first.
Speaker Change: Implants last year in the U S and additional sites here this year.
Speaker Change: It is an active production line, we are building inventory and we are starting to scale that production line. So with every new line.
Speaker Change: As you continue to scale up we continue to make sure that we find efficiencies and then we add to the capacity of that production line. So the team is there today and working hard to continue to produce product and scale that up we did not disrupt the inspire four production line, which.
Speaker Change: <unk> to manufacture product today is again once you transitioning United States, we do not have approval in Europe to be able to do inspire five so inspire for will be needed into the future. So we are building a brand new production line and just our normal process of.
Speaker Change: Going through the setup process. It's fully qualified is active and we are in the process of scaling right now.
Speaker Change: Okay Super helpful and just really quick follow up on that one is there a general target level of inventory either in dollars or maybe like weeks or pieces that youre trying to get to.
Speaker Change: Without specifically, stating a number of really what were preventing we don't want to start stop we will have inspire for but we once we transition a five we want to go and so we're going to keep on a limited launch as we build up that inventory and keep increasing the number of centers.
Speaker Change: As we scale up.
Speaker Change: But once you go into a full launch we want to make sure that we have inventory to go forward again, we just do not want to start stop and have it go back to four and then restart five so.
Speaker Change: To be a little bit careful about that.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Thank you.
Speaker Change: And I show. Our next question comes from the line of Jon Block from Stifel. Please go ahead.
Jon Block: Thanks, guys. Good afternoon, maybe just a follow up on that allows for inspire five I think I'm just trying to get a better feel.
Speaker Change: For <unk>.
Speaker Change: How back end weighted it is or how it ramps throughout the year.
Speaker Change: Tim is it fair to say look this is going to be less than 5% of the overall procedures in <unk>. It.
Speaker Change: It seems like Youre, certainly targeting full conversion in <unk> I mean, do we think about it is surpassing 50% of balls.
Jon Block: The third quarter, maybe you could just talk about the cadence and how we get there over the four quarters and then I'll ask a follow up yes, John I think it generally are describing it correctly as we start.
Speaker Change: To wrap it up I think that we wanted to be transitioned by the end of the year I think it certainly safe to say, we're less than 5% in the first quarter and then just kind of grow through the year as we progress so the way to describe it.
Jon Block: Generally.
Jon Block: We're comfortable with that.
Jon Block: Okay.
Jon Block: And then just to pivot and healthier coverage changes I think I've got this right it's sort of like.
Jon Block: Re implementing the dice.
Jon Block: The warnings a little awkward because the implementation of the absence of complete blockage.
Speaker Change: What do you think about those changes Tim do you expect them to stick.
Speaker Change: It was the implementation of the dice a little bit of a surprise, obviously with predictor seemingly youre, hoping to go the other way with these payers throughout 2025.
Speaker Change: Okay.
Speaker Change: Referring to like United.
Speaker Change: Yes, I thought I imagine you got it correct yes.
Speaker Change: Yes, I think we're working with United Dave made too many changes over a period of time, so we need to have discussions with them, but I think the intent they understand what predictors about and if there is a way to more efficiently.
Speaker Change: Work with patients to understand who can qualify for inspire united supportive of that but we need to continue to communicate with that.
Speaker Change: The physicians are doing a great job and documenting the study and preparing the manuscript so thats getting close to be able to be submitted.
Speaker Change: And we'll continue to work with the payers, but I don't think the intent is to really go back and forth that I think there's just more communication that has to happen to make sure. We clarify that but again, we're going to continue to work with other payers to not necessarily specify the need for guidance, but to make sure thats up to the physician to <unk>.
Speaker Change: Properly diagnose the patient so they are qualified for inspire.
Speaker Change: By using what method is appropriate for that patient that could be a days could be just BMI could be extra conference, but make sure. We have the flexibility built into the system. So it's up to the physician to make that determination.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: Thanks, John.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Michael <unk> from Wolfe Research. Please go ahead.
Michael: Hey, good afternoon. Thank you just one for me bigger picture I know the center disclosures going away in 'twenty five although Rick I did hear you say quarterly.
Michael: Quarterly adds probably about in the zone of what we've seen the last couple of years. So square there. It gets you at the end of 'twenty five to say <unk> hundred or <unk> hundred centers.
Michael: Just curious before this disclosure it goes away like can you update us on your longer term view of what.
Michael: A potential center base might look like what are you what are you planning for over a three to five year horizon, what's the.
Michael: The latest math there. Thank you.
Speaker Change: Thank you Mike I think we wanted to stay consistent and keep growing as we talked about with some of our.
Speaker Change: Organization, we have a group that's focused on a lot of our national contracts and <unk> and to be able to help transition when we get to five into some of those centers because we believe we can get an increase in <unk>.
Speaker Change: Utilization at those sites as well as grow same dose same store sales across the board. So we look at continually expanding we are at the very early stages as you know with <unk>.
Speaker Change: And even when we look at some of our national contracts are in the very early stages of adoption. So we have quite a long way to go and now we have a group specific to addressing those targets and helping those national accounts really be able to adopt inspire and really take advantage of the inspire five.
Speaker Change: Thank you.
Speaker Change: And I show. Our next question comes from the line of Mike Kratky from Leerink Partners. Please go ahead.
Speaker Change: Hi, everyone. Thanks for taking my question, Tim I'd Love to circle back on some of those comments on the ASC is so.
Speaker Change: To what extent does driving continued adoption among ASC is fit into your strategic priorities. This year and then can you just help us understand what kind of an impact that could have just based on the different economics in that setting.
Speaker Change: Absolutely I think one of the challenges we had was economics at AFC and specifically with the adjusted economic down solid.
Speaker Change: And that limits the ability of ASC to be able to adopt the strong inspire program going to the new CPT code $605 exceeded actually increases the reimbursement at AFC is approximately $1100 and that takes some from a breakeven or a loss situation into a slide.
Speaker Change: The positive in some of the locations and that really is the impetus to allow some of the physicians to take more cases, Medicare cases to the ASC. They can already bring the commercial cases, there, but there is a group of private practice.
Speaker Change: Pmt's, who do most of their implants in their ASC and they're unable to really participate with inspire today due to the economic so I think this new accounting change will certainly help them and we're going to put a concentrated effort to be able to help you. This is really grow the adoption.
Speaker Change: Understood Thanks very much.
Speaker Change: Thanks, Matt.
Speaker Change: Thank you.
Speaker Change: And I sure. Our last question in the queue comes from the line of Suraj Kalia from Oppenheimer <unk> co. Please go ahead.
Suraj Kalia: Hey, Tim or Mike can you hear me all right.
Suraj Kalia: Very good it's Raj.
Speaker Change: Perfect. Congrats on a strong end to the year, Tim I appreciate your comments about not.
Speaker Change: Providing any more commentary on the Doj investigation, it's early but maybe you can shed some color for US, let's say 30000 patients were implanted in FY 'twenty four.
Speaker Change: How many of them would you say have not tried CPAP.
Speaker Change: At all.
Speaker Change: I don't specifically know that but I think very few.
Speaker Change: Oh great.
Speaker Change: Thanks, Tim I appreciate your help Randy it's a pretty hard requirement that we have as well as the physicians as well as the payers, including government payers related to Doj like Medicare and Medicaid.
Speaker Change: Pretty hard standard debt.
Speaker Change: Everybody takes very seriously.
Speaker Change: Got it thank you.
Speaker Change: Thanks Raj.
Speaker Change: Thank you. This concludes the Q&A session for the conference and I'd like to turn it back to Tim for any closing remarks.
Speaker Change: Excellent. Thank you all for joining the call today as always I'm grateful to the growing team of dedicated inspire employees for their enthusiasm hard work and continued motivation to achieve successful and consistent patient outcomes. The team's commitment to patients remains unmatched and is the most important element.
Speaker Change: Through our success I wish to thank all of our employees as well as the health care teams for their continued efforts as we remain focused on further expanding our business in the U S Europe and Asia.
Speaker Change: 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: Thank you. This concludes today's conference call you may now disconnect.
Okay.
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