Q1 2025 Inspire Medical Systems Inc Earnings Call

DeLem: 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 First Quarter 2025 conference call. All lines have been placed on mute to prevent any background noise.

DeLem: After the speakers remarks, there will be a question and answer session. To ask a question during the session, you will need to first start 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To rejure your question, please first start 1-1 again.

Please be advised that today's conference has been recorded.

DeLem: I will now hand the call over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Thank you, Dilemma, and thank you all for participating in today's call. Joining me are Tim Herbert, Chairman and Chief Executive Officer and Rick Duholz, Chief Financial Officer.

Speaker Change: Earlier today, we released financial results for the three months and in March 31, 2025. A copy of the press release is available on our website.

Speaker Change: On this call, management will make for-looking statements within the meeting of the federal securities laws. All for-looking statements, including, without limitation those relating to our operations, financial results and financial conditions.

Speaker Change: Investments in our business, full-year 2025 financial and operational outlook, and changes in market access are based upon our current estimates and various assumptions.

Speaker Change: These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements.

Speaker Change: Please see our filings with the Securities and Exchange Commission, including our Form 10-Q which we filed with the SEC earlier this afternoon for a description of these risks and uncertainties.

Speaker Change: Displains any intention or obligation, accepted as required by law, to update or revise any financial projections or forelooking statements, whether because of new information future events or otherwise.

Speaker Change: This conference call contains time-sensitive information and speaks only as of the live broadcast today May 5th, 2025. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Tim Herbert: Thank you, Ezgi. And thanks everyone for joining our business update called for the first quarter of 2025.

Tim Herbert: We achieve many important milestones to start the year as our patients remain our top focus. We are proud to announce that since the inception of Inspire, we have surpassed 100,000 patients who have received Inspire Therapy.

Tim Herbert: Even with this key milestone, there is so much more in front of us as we remain lightly penetrated in our target market and we are just getting started.

Tim Herbert: We also recently announced the appointment of Dr. Paul Haft, Dr. Rehear Patel, as Vice President and Senior Medical Directors.

Tim Herbert: Dr. Hopper and Dr. Patel are both highly experienced in treating sleep and new patients, including with Inspire Therapy.

Tim Herbert: Dr. Hofgren, the focus from the ENT Surgeons perspective, while Dr. Patel will leverage his expertise in sleep medicine.

Tim Herbert: They will play key roles in guiding inspires medical education, training and technology development activities.

Tim Herbert: In addition to the focus on these newly appointed positions, both Dr. Haft and Dr. Patel will maintain their clinical practices independent from Inspire.

Tim Herbert: In the first quarter, we continued to expand the limited market release of the Inspire 5 system in the US and with this gave meaningful experience with Inspire 5 while can currently solidifying our inventory levels.

Tim Herbert: As such, we are incredibly excited to announce that we are ready, and we will begin the full launch of the Inspire 5 system in the US this month.

Tim Herbert: The Inspire 5 system kick starts the next generation of therapy with the release of this new platform. Incorporating sensing into the neural stimulator provides a stable sensing environment which is key to our differentiated closed loop hyperbossal nerve stimulation system. [inaudible]

Tim Herbert: The added technical capabilities of the device provide the basis for future therapy enhancements including sleep protection and broader therapy indications.

Tim Herbert: From a financial perspective, we had a strong first quarter generating revenue of $201.3 million representing a 23% increase compared to the first quarter of 2024.

Tim Herbert: Net income for the first quarter was $3 million, represented diluted net income of 10 cents per share.

Tim Herbert: As compared to a net loss of $10 million representing a net loss of 34 cents per share in the first quarter of 2024.

Tim Herbert: Looking forward to the balance of 2025, we are reiterating our full year 2025 revenue guidance of 940 to 955 million dollars, representing 17 to 19% growth year-over-year.

Tim Herbert: Regarding profitability, we are increasing our full share diluted net income guidance to be in the range of $2.20 to do $2.30 per share.

Tim Herbert: As we initiate the full launch of the Inspire 5 system.

Tim Herbert: We anticipate the second quarter will be a transition quarter as we work through the steps necessary to lodge this system.

Tim Herbert: For Centers, this process includes a contract amendment, implementation of the new physician programmer, and working through their Inspire 4 inventory.

Tim Herbert: Our experience today with the Inspire Fight System has been very positive and well received by health care providers, especially with ENT Surgeons.

Tim Herbert: Since the start of the limited market release last year, we have continued to add additional centers and increase the number of patients receiving the new device.

Tim Herbert: This led to an increased general awareness of the pending Inspire 5 Lodge.

Tim Herbert: and laid in the first quarter and continuing into the second quarter, we started to see evidence of patients waiting for the new device.

Tim Herbert: As the full launch of Inspire 5 system progresses, we expect a strong second half of 2025 and as such we are reiterating a full year revenue guidance and raising our EPS guidance.

Tim Herbert: Detail performance data and the InspireFive system is being closely tracked, an initial data will be presented at the upcoming sleep conference.

Tim Herbert: regarding reimbursement of the InspireFive system. On our last call, we detailed the transition

Tim Herbert: We are happy to announce that this code has been incorporated into policies covering approximately 80% of our over 300 million covered lives. This includes commercial payers, Medicare and the VA system.

Tim Herbert: We expect to submit for regulatory approval on the Inspire 5 system in Europe and in Asia this year.

Tim Herbert: and will continue to provide the Inspire IV system during the review processes.

Tim Herbert: We also plan to initiate a focused, patient marketing and education program to announce the full launch of the Inspire 5 System.

Tim Herbert: Prior to launching Inspire 5, we had deliberately pulled back on pace of marketing, but let it step, expect to step this up in the second quarter and throughout the rest of 2025.

Tim Herbert: This will focus on the education and awareness of the inspired by the system and aim to increase patients visiting our website and employing about making contact with a health care provider.

Tim Herbert: Deferter support this during the early part of the year. We continued our efforts to expand utilization of digital scheduling within planning centers, in planning centers.

Tim Herbert: As a reminder, digital scheduling is an online tool used by an advisor care program to submit appointment requests to qualified healthcare providers on behalf of prospective patients.

Tim Herbert: Digital scheduling significantly streamlines patients' requests to schedule that important first appointment.

Tim Herbert: With respect to our market's relevant activities, we continue to advance our medical education programs.

Tim Herbert: In the first quarter, we hosted over 300 positions and Inspire programs, including 120 soon-to-be graduating E&T positions, over 110 sleep bells, and introduced Inspire therapy to 90 new E&T residents.

Tim Herbert: We remain committed to our mission to educate the next generation of sleep and auntie leaders.

Tim Herbert: In addition, this year we trained over 100 advanced practice providers, bringing the total inception to date to over 400 APP's trained.

Tim Herbert: We plan to increase the investments we are making on our medical education programs, including ongoing residents, fellowships, and ATP training.

Tim Herbert: Participating in Cardiology and Primary Care Conferences and a continuing medical education program to support the awareness and adoption of Inspire Therapy in Cardiology and Primary Care.

and Summary.

Tim Herbert: We remain focused on the patient to continue the growth and adoption of Inspire Therapy.

Tim Herbert: We will execute our growth strategy of driving high quality patients below and increasing the capacity of our provider partners to effectively treat and manage more patients.

Tim Herbert: Our key strategies included adding advanced practice providers, certifying additional surgeons, qualified to implant Inspire Therapy.

Tim Herbert: and driving the adoption of SleepSync and our digital tools, all of which are embedded strategies in our commercial teams objective to increase provider capacity.

Tim Herbert: Looking ahead, we remain excited about our future and our 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 reviews of our financials.

Rick: Thank you, Tim, and good afternoon, everyone. Total revenue for the quarter was 201.3 million, a 23 percent increase from the 164 million generated in the first quarter of 2024.

Rick: U.S. revenue in the quarter was $193.6 million, an increase of 24% from the $155.8 million in the prior year period.

Rick: As a reminder, European revenue in the first quarter of 2024 benefited from the pent-up demand created by the supply shortage resulting from the EU-MDR approval delay in the fourth quarter of 2023 and as we transition from polyurethane to silicone-based leads.

Rick: Gross margin in the quarter was 84.7%, which was stable with the prior year period.

Total operating expenses for the quarter were 172.1 million.

Rick: An increase of 11% as compared to 154.5 million in the first quarter of 2024.

Rick: This plan increased was primarily due to the expansion of our sales organization and increased general corporate costs, partially offset by a reduction in R&D and patient marketing expenses year over year.

Rick: Interest and dividend income told 5.1 million in the quarter compared to 5.9 million in the prior year period.

Rick: Operating loss for the quarter told 1.5 million compared to 15.2 million in the prior year period.

Rick: Net income for the quarter was 3 million or a 1% net income margin compared to a net loss of 10 million or a 6% net loss in the prior year period.

Rick: This represented deluded net income per share of 10 cents compared to a net loss of 34 cents in the first quarter of 2024.

Rick: Adjusted EBITDA total 33.2 million or a 16% adjusted EBITDA margin in the first quarter compared to 11.9 million and 7% respectively in the first quarter of 2024.

Rick: The weighted average number of diluted shares outstanding in the quarter was 30.5 million. [inaudible]

Rick: We ended the quarter with 414 million in cash and investment balances. [inaudible]

Rick: The reduction in our cash position is attributed to 75 million of share repurchases and cash used in operating activities, including building inspired five inventory balances.

Rick: The strong cash position allows us to remain focused on executing our growth strategies.

Rick: Moving on to 2025 guidance, we continue to expect full-year revenue to be in the range of 940 to 955 million, representing an increase of 17 to 19 percent compared to full-year 2024 revenue.

Rick: As Tim noted, we are initiating the full lodge of Inspire 5 this month.

Rick: As such, the second quarter will be a transition quarter and we may see some inventory destocking of Inspire 4 and patient warehousing for Inspire 5.

Rick: Therefore, we expect to grow revenue sequentially from Q1 to Q2 by mid to high single digits.

Rick: We continue to expect full-year gross margin to be in the range of 84 to 86 percent.

Rick: We now expect deluded net income for the full year 2025 will be 220-230 per share, an increase from our previous range of 210-220 per share.

We ended the corridor with 343 U.S. territories. We ended the corridor with 343 U.S. territories.

and 245 U.S. Field Clinical Representatives. Thank you.

Rick: We continue to expect our reported tax rate in 2025 to be roughly 10%, primarily related to state and local taxes.

Rick: We expect the 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. Do Lem, you may now open the line for questions.

Thank you, sir.

Speaker Change: As a reminder, to ask a question, you will need to first start 1-1 on your telephone. So, withdraw your question, please first start 1-1 again.

Speaker Change: We ask that you please keep your questions to no more than one question and one follow up and at time permits will be more than happy to take more questions.

Please stand by while we compile the Q&A roster.

Speaker Change: I sure our first question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Speaker Change: The de-stock in the patient warehousing that you mentioned, I think it's in the 10K as well, or 10Q.

Speaker Change: First of all, maybe just like what happens, kind of versus expectations there, is the impact in the quarter, basically the kind of $12 million dealt up.

Speaker Change: between your two cute guidance and the street number. And how do you rid it before your guidance? Do you expect that to kind of be made up in Q3 and Q4 to be able to rid it before your guidance?

Speaker Change: Yeah, hi, Travis. I think as we started to expand the Inspire 5 Limited Market release, work out loud and the awareness of the technology and the pending launch.

Speaker Change: We became more prevalent, and we started to see more of the patient wear housing, and we knew as we were going to launch Inspire 5, there would be a transition period with centers working through the contracts, working through...

Speaker Change: The Getting the New Physician Programmer, as well as working through their Inspire for Inventory. So that's why we expect with the number of patients waiting.

Speaker Change: for therapy with the five until such time as it's available that we would see the second quarter affected and that's why we will still see a good step up.

Speaker Change: and Q2, but as we mentioned in the mid-high single digits and yes, we do plan to make that up throughout the years as we continue the launch and grow the utilization of Inspire 5.

Great, thank you. Thanks, Travis.

Thank you.

Speaker Change: And I show a next question, comes from the line of Danielle Antalffy from UBS, please go ahead.

Danielle Entalfi: Very good afternoon guys, thanks so much for taking the question and grappling a really strong start to the year.

Danielle Entalfi: Just if I could follow up on the cadence commentary for the year, I guess how much confidence do you have in, as far as how much inspire for inventories in the marketplace right now? And I guess sort of that number you're putting out there for Q2 and that you can sort of make up for some of that in Q3 and for just curious about what level of visibility you guys have into that.

Danielle Entalfi: and how confident can we be? Because obviously back half loaded guidance can sometimes make people a little nervous. So just wondering if you could give a little bit more color. Thanks so much. Absolutely, Danielle. Thank you very much. We have...

Speaker Change: Close knowledge of the inventory on the field. The majority of centers only have a couple units on the shelf.

Speaker Change: Those centers that are the high volume centers will have a higher number of Inspire, but they also do, they tend to be the core trial one centers that do significant number implants. Thank you for your time.

Speaker Change: on a mugly basis, so they'll be able to work through the majority of that inventory. I'm very worried.

Speaker Change: in a short period of time in the second quarter, and once they work through that Inspire Formatory, there's a replacement with Inspire 5 inventory.

Speaker Change: So we do have confidence in this back half of the year.

Speaker Change: as we continue to wrap and expand the full launch of Biden, but we do have a can closely monitor existing for inventory and that's why we have confidence that the majority of the units in the inventory burn down will be accomplished in the second quarter. [inaudible]

Thank you.

Thank you.

Speaker Change: and I show our next question, comes from the line of Robbie Marcus from JPM, please go ahead.

Oh great, I'll add my congratulations on a nice quarter

Thank you.

Speaker Change: Sorry to keep on this, but maybe just a follow-up on the question there.

Speaker Change: Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com. All information on this website is purely information and should not be used as the sole basis for making financial decisions. To determine whether or not to invest in a company, consult your financial advisor prior to investing.

Speaker Change: Procedure, Volume Growth, and Sales, and First Quarter. There's some lower number of procedures in second quarter. Call it the 10 to 15 million, that's...

Speaker Change: Getting that's lower than the street, but maybe not quite as much as that because you're eating into existing inventory.

and then...

Speaker Change: We'll get that restocking and third and into fourth quarter, and I guess the question I really have is...

Speaker Change: How should we think about the balance of restocking and how should we think about the sizing of the pent-up demand and is the system ready? Is it a big amount of patients that are being warehouse that give you the confidence?

Speaker Change: in the back half of the year and it's just you're seeing some bleed down of inventory and some delay of procedures and that's why you're not raising guidance for the year.

Speaker Change: Thanks, Travis. Great question. Getting into the detail, the first thing that's always trying with the patient outcomes and our...

awareness programs.

Speaker Change: The patient fellow always remains strong and we continue to add centers and we continue to grow the utilization and we continue to help patients make that first connection. So the front of the funnel we made very, very strong and that's what gives us confidence going forward.

Speaker Change: We do know that we have to work the process of activating these centers and we do have to burn down the Inspire for inventories.

Speaker Change: But the kids continue to grow the number of implants and you kind of hinted at that in your question. Yes, we're going to still do implants with Inspire 4 in the second quarter, but you're going to see a little bit of a shift until the Inspire 5 inventory comes in and replaces that. So while we are doing the full launch of this month.

Speaker Change: There is a little bit of a transition process for centers to get up and running with five.

Speaker Change: But the strength that we have is the demand with the patient's role remains very, very strong. And that's what's really encouraging to us, is really important to have confidence going in to the second half of the year.

Great. Thanks a lot Tim. Uh-huh.

Thank you.

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

Speaker Change: Hi, good afternoon. Thank you for taking the questions and congrats on a nice quarter and the full launch of Gen 5 this month. I wanted to ask maybe just one more on Gen 5.

Speaker Change: You know, the level of confidence that you have to kind of take that next step from a...

Speaker Change: You know, a launch standpoint, really, just around manufacturing, reimbursement and device performance. You know, presumably you're pleased with the progress you made in each of those different areas, but. [inaudible]

Speaker Change: You know, there has been some speculation around why the rollout hasn't gone faster so, you know, just wanted to give you the opportunity to add a little bit more color there with.

Speaker Change: What you're seeing and the progress that you're making in those different areas. Thank you. Okay, sure Adam, thanks very much. Well first off, the device fully approved and so we submitted to the FDA the poll. Thank you very much.

Speaker Change: Data set that we had the full qualification and so it's been under tight review and we're very confidence in the performance of the device.

Speaker Change: We have done the work in Singapore as you recall, we have done significant...

Speaker Change: Number of centers and implants in our limited market release.

Speaker Change: The challenge that we had is wrapping up the manufacturing facility to have standard processes such that we could have the throughput.

and the starting inventory to support the full launch.

Speaker Change: and we do a significant number of implants on a monthly basis.

More so than we did, obviously, when we did. [inaudible]

Speaker Change: Inspire 4 back in 2018. So we needed a strong inventory level to do the full launch and we now have stable manufacturing. We do have good inventory levels. We've always had confidence in the Inspire 5 technology.

Speaker Change: and we're really liking the response that we're seeing from the healthcare providers, specifically the Inspire 5.

Experience Surgeon, who don't no longer have to implant...

Speaker Change: The pressure sensing lead, which we all know has been the most uncomfortable step of the process for our Inspire and Planings with the NC Surgeon.

Speaker Change: Key elements in order, and so from a technology to a product, to the approval, to the reimbursement, as we mentioned, and the support with the policies with the new code 64568, and finally with the proper inventory levels.

Speaker Change: We're ready to throw the switch and be able to move into full launch.

Thanks, Tim.

Speaker Change: Thank you. And I'll show our next question comes from the line of Richard Newitter from Truist. Please go ahead.

Richard Neuwirth: Hi, thanks for taking the questions. Nice first quarter here.

when you were originally provided at guidance.

What was assumed or were you assuming any, you know? [inaudible]

Richard Neuwirth: in the transition situation that would require inventory work down. [inaudible]

Richard Neuwirth: What kind of question is it's built in and how much you ate into? Thank you.

What normally is a cushion provided guidance range? [inaudible]

Richard Neuwirth: So you can just talk to what gets you to the upper end, what gets you to the lower end with respect to the various components of the system.

Capacity, Inspire 5, and enabling increased capacity.

Richard Neuwirth: and some of the dynamics now that you're introducing with the two-queue revenue push-up. Thank you. Gotcha, Rich. Well, the key is from a whole year that we haven't changed, and we still have...

Richard Neuwirth: Conference of that foe year, and we knew we were going to do an Inspire 5 Lodge during the year sometime, and we would be working through the inventory, so not a lot of change there.

Richard Neuwirth: and really what's clarifying here is our ability to do the full launch right now, and with our limited release we saw a little bit more...

Richard Neuwirth: of the patient awareness and wanting to wait for the new device. And I think that's become...

Evan and really most recently, late Q1 and...

Richard Neuwirth: of the revenue and where Inspire 5 comes in. So not a lot of changes in our overall annual planning, but again, we knew we were going to work through the Inspire 4 inventory since the timing issue as we do the full launch and...

Richard Neuwirth: The second quarter, and handoff to Rick for additional comments.

Rick Neuwirth: and given the Q2 launch dynamics as we talked about, we are expecting some utilization improvements in the second half and we expect Q4 to be a little bit stronger than our historical levels.

Thank you for watching!

Thank you.

Speaker Change: And I show our next question comes from the line of Kallum Titchmarsh from Morgan Stanley . Please go ahead.

Kaylin Titchmarsh: Thank you for taking the question, guys. From your initial roll-up of Inspire 5 in the limited launch, I assume the majority of these surgeons were sleep specialists, but I'm curious if you were able to target any of those generalist ENTs that you think could eventually be the driver of a broadening surgeon pool, just maybe talk us through how you plan on onboarding these generalist ENTs as you enter the full market launch in May, and how that may differ from your strategy with the bulk of active implants this today. Thanks a lot. Thanks a lot.

Speaker Change: Absolutely, thank you. I think the key is when we do new launches like this, when we do critical studies, when we do research, obviously we partner with a lot of our key positions at the academic centers.

Speaker Change: But in our limited market launch, in that it is a commercial launch, albeit limited, we do want to involve the commercial centers and the general practice aunties to get a good balance when we do that limited launch.

Speaker Change: So it is a balance between the two groups, both academic as well as the general ENTs, and that gives us confidence to move forward with the full launch of Inspire 5. So we have had the ability to talk with both groups.

Speaker Change: and have confident with our training programs so as we introduce five broadly in the U.S. that the training programs will go very swiftly.

Speaker Change: The Antis that have done, performed Inspire 5 implant have responded very favorably and we expect a pretty seamless transition moving forward.

Thank you. Thank you.

Speaker Change: Thank you. And I show our next question, comes from the line of David Rescott from Beard. Please go ahead.

David Rescott: Oh, great. Thanks for taking the questions and congrats on the start to the year here. I wanted to ask about, you know, op-x so far, you know, and what's what's inviting the guy, you know, if you look at the past couple quarters, you've grown op-x well below half of that of about the top line, isn't it? If you continue that for the rest of the year, you're getting somewhere, you know, ahead of what the EPS guide and score for 0.25 at this point. So I'm just curious on what your assumptions are in the implied guide on EPS this year and

David Rescott: and whether or not we should be thinking about some incremental step up or acceleration and spend behind the Inspire 5 launch. Thank you.

David Rescott: Yeah, thanks for the question. We're going to continue to invest in our operating expenses to drive top line and we continue to expect that revenue

David Rescott: on an annual basis will outpace op-ex growth, but really we are going to continue to slightly increase our D.T. and a year-over-year basis.

David Rescott: We are going to spend more in patient marketing with the Inspire 5 launch, as Tim mentioned.

David Rescott: R&D is going to continue to run at mid-teens, that does fluctuate a little bit, and then...

David Rescott: Stock-based compensation on annual basis, too, is going to continue to increase. And with that, that net net is really going to get us to mid-single digits from an operating margin standpoint on annual basis.

Thank you.

Thank you.

Speaker Change: And I show our next question, comes from the line of Michael Sarcone from Jefferies. Please go ahead.

Good afternoon. Thanks for taking my question.

Speaker Change: and are you seeing any increased procedures in a data offset that? We'd love to hear what the experience has been so far. Thank you.

Speaker Change: Absolutely, thanks for the ride. I think we're going to track that very closely. Going forward, we have confidence. Thank you very much.

and a $200 reduction with Medicare.

Speaker Change: Across the board. I think a lot of the limited live centers were academics, so they're not as effective, but equally balanced is that the commercial centers with, as we talked about, General ENTs from a couple questions earlier on.

Speaker Change: that they're comfortable with the procedure. I think a lot of excitement around Inspire 5 not putting in the pressure-sensing lead will far outweigh the extra work it takes.

to do that part of the procedure.

Speaker Change: Not getting paid for the work that they don't do, I think it's been quite balanced so far and the feedback from the physician.

is very excited and not have to deal.

Speaker Change: with the pressure sensing lead, with the reduced OR time, and just with the ability for them to plan their time consistently.

Without having to implant that pressure something lead.

Speaker Change: So, we're going to continue to monitor this as we go through the year to make sure that...

Speaker Change: really accept strong acceptance from the surgeon with simplicity of the procedure compared to Inspire Borg.

And I'll show you remember, they're the increased...

Payment to Amritory Searchable Centers with the new code as well.

Speaker Change: So I think the payers have all been very accepting, going in 6, 4, 5, 6, 8. I think the surgeons will be accepting during the more simpler procedure with the reduced time, with the reimbursement level that's available.

Speaker Change: and we'll continue to monitor that closely and continue to provide feedback throughout the year.

Great, thank you. Thank you.

Speaker Change: Thank you and I show our next question comes from the line of Shagun Singh from RBC. Please go ahead.

Shagun Singh: Great, thank you so much and congratulations. Just a couple of quick ones for me. So what was the impact of pausing an inventory dynamics in Q1 on Q2, any color on EPS versus prior consensus at 41 cents and then I have a follow-up?

Yes, say, Shagun. Regarding Q2, we talked about...

Shagun Singh: Mid-to-high single-digit sequential revenue growth, and so with that we are going to spend more in patient marketing with the Inspire 5 launch, but we do expect to be profitable in Q2.

Q2 versus Q1. [inaudible]

Shagun Singh: Carrot, and what was the impact of pausing an inventory dynamic in Q1?

Thank you.

Shagun Singh: We didn't, I mean, it would have been really difficult to tell there weren't really a lot of one-time items and as we said, the patient warehousing didn't manifest until later in Q1, so it would be really difficult to quantify that, nothing to call out.

Speaker Change: Karit, and then just as a follow up, you know, I was wondering if you can comment on procedure profitability. It seems like we've gotten mixed feedback on that. And you know, I'm just wondering, you know, why don't you think that could be a barrier to broader adoption? Thank you for taking the questions.

Speaker Change: Absolutely, thank you. I think as we work with surgeons and work to help streamline their practice,

Practices in how they introduce their inspired systems we can improve.

Speaker Change: and their profitability by streamlining their processes. We mentioned earlier that we have trained 100 APPs, advanced practice providers, that can really help streamline patient flow through centers and a much more efficient way.

for Patience and for Physicians too.

Speaker Change: where they can build efficiencies by having the surgeons spend more time in the operating room to do more procedures and with the reduced of our time to be able to further build on the profitability.

Speaker Change: I think in the academic centers and some centers that don't...

Do the same level of...

Speaker Change: Procedures, it's more difficult, and maybe that's where some of the feedback comes from. But in the high productive accounts, there was to do that greatest number of implants. They understand throughput, they know how to leverage APPs, they have strong partnerships with sleep positions.

Speaker Change: to manage a patient's lung eternally and have really built efficiencies into the practice to be profitable.

Thank you for watching!

Thank you. Thank you.

Speaker Change: I share our next question comes from the line of Chris Pasquale from Neifern Research. Please

Speaker Change: Thanks. Tim, you talked about some early data on Inspire 5 being presented to some of the upcoming meetings.

Speaker Change: Chris, what do you expect that to show? You know, most of the focus has been on the increased convenience of this form factor. But I think you've also said that you think the accelerometer to actually do a better job with respiratory gating. So, do you expect that to manifest in any tangible outcome improvements?

Speaker Change: Yeah, I think that's kind of the key to it. Yes, everybody's excited because they want to hear numbers about, we do still our time.

Speaker Change: The safety performance, what kind of, have you seen any adverse events? Is all procedures completed successfully? And the feedback has been very strong on all of those fronts?

Speaker Change: But from a patient outcome standpoint that Chris, where we talk about how that's such a high priority for us, we believe that if Selleron or does provide a more stable sensing environment and the data that we provided to the FDA as part of our approval process did show.

Speaker Change: in improved stability. And in Singapore, we actually did a little bit more of a detailed clinical study to capture that data and to capture the utilization or the patient adherence to therapy. And I'm not sure that AHI data will be available, but that is something we are also tracking. Thank you very much.

Speaker Change: As well as we all continue to attract feedback from all the U.S. Centers as part of the limited loss. So yes, we will come up by June , we will want to talk about outcomes.

Speaker Change: Morso, beyond just what people always talk about with the reduced OR time, and we'll talk about surgical time as well.

But to us, it really is a focus on...

those critical patient outcomes that we believe.

Speaker Change: that was the improved setting and we have new algorithms in the device site we think can further improve our already struck patient outcomes. Thank you very much.

Thanks, thank you.

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

Larry Begelson: Hey guys, thanks for taking the question. Hey Tim, just a multi-part question. So when do you expect to complete the transition to Inspire 5? Last call it was, you know, Q4. And so my question is, why won't these factors that you mentioned?

Larry Begelson: Impact, also Q3, given the full launch, won't complete until...

Q4, and second attempt. [inaudible]

Larry Begelson: Our checks also suggest linking the Inspire 5 CPT code to the ICT-10 code for sleep apnea can also slow things down. What are you seeing on that as well? Thank you.

Larry Begelson: Gotcha. We talked last call that, yes, we would complete the transition by the end of the year.

Larry Begelson: When we stated that, of course, we didn't have the full launch date announced at that time either. So now that we're doing the full launch date, we're going to do everything we can to really pull the individual centers forward.

Too much carry over into third quarter as Rick mentioned. Thank you again.

Larry Begelson: that we expect to have a stronger Q4 than normal and again we're reiterating. Thank you.

Larry Begelson: Full Year Guidance. So, we're going to work hard that the field and the positions are excited.

Larry Begelson: Inspire 5, the contracting, as you recall, is quite simple because it's just a one-page.

Larry Begelson: or multiple small contract amendments just to change from four to five, so that should be pretty simplistic.

Larry Begelson: and the new physician programmer, which was launched last year, most centers are ready to take out the new physician programmer. So the transition should not be that difficult. We're going to work very hard in the second quarter, but we'll track that as we get into Q3.

Rick Neuwirth: and Rick talked about the cadence for the second half of the year. As far as the linking...

Rick Neuwirth: to the ICD 9 diagnostic code. We're already working with CMS to get that done. Let's go on in.

Rick Neuwirth: Covered Lines, that does include Medicare, that does include commercial pairs, does include the VA, and we have overcome that connection that you're talking about because we address that right up front.

Thank you.

Thank you.

Speaker Change: Thank you, and I show our next question comes from the line of Anthony Petrone from Mizzouhu Financial Group. Please go ahead.

Anthony Petroni: Thanks and congrats on the quarter here. Maybe just a question on capacity into the second half.

Specifically, you mentioned, Tim, you're adding E&T General Surgeons. You're adding E&T General Surgeons.

Anthony Petroni: and obviously we have a little bit of backlog that's pushed into the second half. [inaudible]

Speaker Change: Just wondering where that ENT capacity sits today and is it enough?

Speaker Change: to handle this bolus of volumes in the second half. And the quick follow-up there would just be if you can give us any update on sleep sync, you know, and how that's evolving your front end of the funnel. Thanks.

Speaker Change: Absolutely, thank you. Talk about capacity first. There's several elements that are in play there. Number one, the Inspired Five Device is a shorter procedure allowing existing...

Speaker Change: Surgeons to do additional cases in any given day. Number two, we believe that once they start doing this for five and they're comfortable, that they know a lot we have to put in the pressure of something lead. Again, remember, think of ENT.

Speaker Change: Putting a scepter into the chest wall, that will give additional confidence to schedule more cases as well thereby increasing capacity.

Speaker Change: Two, we believe there are a number of anti-surgeons that just were reluctant to do the Inspire Procedure solely because of that pressure, sadly.

Speaker Change: So as we move to the year we're going to be reaching out to those surgeons to make sure that they understand Inspire 5 is now available to be able to make this an important part.

Speaker Change: of their practice going forward. Number three, we talked about our medical education and the significant number of new ENTs graduating coming out and excited about including Inspire into their new practices as they go forward.

for we're going to continue to add.

New Centers, as we worked through the year.

Speaker Change: especially those centers coming on, training directly into Inspire Fires. So it's really going to continue to be...

Speaker Change: Strive Focus to build this capacity because it continues to be the limiting factor for us.

Speaker Change: from beginning of a call that one of the earlier questions talked about. Thank you very much.

Speaker Change: The number of patients still coming into the pipeline is overwhelming by the capacity that we have to serve these patients. So, really going to be a key focus element to it.

Speaker Change: The second part of your question is very strong when we're starting to talk about sleep strength. As we increase the number of patients treated, sleep strength provides an opportunity for the sleep positions to manage a greater number of patients on a longitudinal basis. [inaudible]

Speaker Change: Inspired by the new physician programmer, leverages SleepSync and logs into SleepSync to be able to provide data directly into that cloud-based patient management system. So those centers that are on SleepSync, have an easy transition yet.

Speaker Change: and as Rick mentioned on our R&D investments going forward, we're going to continue to invest heavily in our digital tools and a lot of that is all about sleep-sync to really help the patient be part of their own care with the app.

Speaker Change: or really to also be able to help patient monitoring and health physicians be able to track how well their patients are doing with Inspire Therapy.

Speaker Change: So, a pretty intense question and hopefully I got the right answers out to you there. All good. Thank you. Talk soon.

Speaker Change: Thank you. And I show our next question, comes from the line of John Block from Seafull. Please go ahead.

John Block: A couple hundred centers that heard about five, was it much more pervasive than that and across most of the centers any details would be appreciated and then...

John Block: You know, this is sort of a follow up to a prior question, but I just want to make sure I've got it clear. So the prior plan was to have I think of the last call.

John Block: All the centers trained by the end of 2025, I think you were citing like full conversion by the end of 25.

John Block: Are you now talking about full conversion by call it end of 2Q and if so, what gives you the confidence and at the end of the day that you're still able to, you know, put patient safety and patient priority first? Next.

Speaker Change: Thank you, John . I think from your first part of the question, it's more of a qualitative

Speaker Change: Field for patients delaying to get to inspire five more than it is having specific quantities around that and of the 1500 centers. Let's talk about the high volume centers.

Speaker Change: If you come, we're going to solve it as the limited market release centers, do cases and communicate that with their partners.

Speaker Change: and with other centers and people become aware of it. Yes, people listen to our earnings calls, they read your note and the other's notes on Inspire 5 in the pending.

Speaker Change: Lodge, and I think that just continued to grow the awareness and so qualitatively we're really starting to hear a little bit more about that across the board with all putting specific numbers to it.

Speaker Change: and going back to the previous question that you're talking about in part two is I mean we're continuing to focus on

Speaker Change: The training of all the centers and this month we're going to do the full launch to make Inspire 5 available. That's not committee that we're going to have every center trained by the second quarter, but certainly we're going to focus on the high quartile centers first to make sure that they're up and running with five. We're going to focus on the first quarter. We're going to focus on the first quarter.

Speaker Change: But we're going to make sure that we have full transition by the end of the year and being that we're able to do the strong launch or the full launch right here and in the May time frame, certainly gives us the opportunity to pull that. [inaudible]

Speaker Change: Full penetration up quite a bit. So we'll keep tracking that and we'll continue to report back to you on that.

Thank you.

Brett Fishbin: and I show our next question comes from the line of Brett Fishbin from Keybank Capital Markets. Please go ahead.

Brett Fishbin: Hey, good evening. Thanks for taking the questions. Just wanted to switch gears a little bit to the marketing strategy for Inspire 5. Sounds like you're going to be stepping up the DTC spend a little bit ahead of the launch.

Brett Fishbin: which makes sense and really just curious like how you're thinking about changing the external messaging, type of potential patients, you know, if you're going to be focusing on specifically some of the improvements to the procedure, or if that's like two-in-a-weeds per general consumption, maybe just like a little bit more about how you're thinking about that. Thank you.

Brett Fishbin: Yeah, I think we'll do a little bit of both. We'll continue with our own outreach programs that's very strong and be able to get patients awareness and to get them to the website. Our website will talk about Inspire 5, and we'll have to...

Brett Fishbin: to provide that necessary information to the patient, so they understand the therapy going in, and so when they are able to make that appointment with their healthcare provider, that they're coming in with knowledge of five, coming in with confidence.

Brett Fishbin: in the therapy and understanding of the process overall. We will be doing individual communications with patients who have come to our website in the past.

Brett Fishbin: Let's contact information and if there is new information coming out to please, let them know about the new information so we will go back and reach back to all the patients that have previously come to Inspire and that's a significant number of patients.

Brett Fishbin: that have visited Inspire over the years and let them know that yes, Inspire 5 is now available, it is in the full launch aspects of it. So it's going to be a multiple faceted marketing program to be able to get that get the word out even further.

Thank you for watching!

Thank you.

Speaker Change: and I show our next question comes from the line of Michael Polark from Wolf Research. Please go ahead.

If I look at the last two years...

Speaker Change: 3Q has been up low single digits versus 2Q, 2Q sounds suppressed, should we compare R3Q to 1Q and do it that way?

Speaker Change: or what kind of progression, growth lies would you expect? And I'm really getting to like how loaded the guide is into 4Q. Thank you.

Speaker Change: Sure, let me tackle the first one and we'll give you a rick that second one. First of all we haven't really put out how many inspired fights we've done but we did early work. [inaudible]

Prior to approval, we submitted that data to the FDA. Thank you very much.

Speaker Change: and that's where we're able to collect data with Inspire 4 patients and using external 5 to use those patients as their own comparisons. We have evidence going in that give us confidence with the therapy, then of course with the qualification.

Speaker Change: Data, we have significant evidence from that standpoint and now of course.

Speaker Change: Post-approval with a lot of commercial impressed both Singapore and through the limited release. And we'll be pulling a lot of that information together, and you'll see, excuse me, some of that come out during the upcoming sleep meeting in Seattle in June .

Yeah, regarding the second half of the year, Mike, Q4s historically are strongest quarters, and I did talk a little bit earlier in the...

Speaker Change: with by earlier responses that we expect even Q4 to be even stronger this year given the Q2 launch of dynamics and how we expect utilization improvements to occur in the second half of the year.

Thank you for watching!

Thank you.

Thank you.

Speaker Change: and I show our last question, comes from the line of Mike Kratky from Learing Partners. Please go ahead.

Speaker Change: Hey guys, this is Brett on from Mike. Thanks for taking the question and congrats on a good quarter.

Speaker Change: Thank you. For the inventory days, obviously, we've spoken about this at length on this call, but it increased by almost a full quarter's worth of inventory. So just want to see how you're thinking about the regression of gross margin over the course of the year as this inspired five next increases. Thank you.

Speaker Change: Yeah, we reiterated our gross margin guidance of 84 to 86%. We did increase that this year compared to a year ago and we have stated that without

Speaker Change: A price change that our gross margin is accretive with Inspire 5 and we're going to continue to manufacture Inspire 4 throughout 2025 because we're going to continue to sell it internationally.

Speaker Change: as we await approval, and we want to make sure we have sufficient Inspire IV inventory on hand, until Inspire V is approved outside the U.S. And also keep in mind that a lot of the components for Inspire V can be used.

Speaker Change: Or Inspire 4 can be used for Inspire 5 as well. So we're going to continue to build sufficient inventory and we're excited about the launch and we're in a good spot for that this month.

Speaker Change: Understood. That's helpful. And if I get one follow-up just in the OUS side, I don't know if we touched on it too much, but obviously you said a tough comp and it was down sequentially. So, was there any effects that was impacting that? [inaudible]

Speaker Change: No real effects in the first quarter, but we are seeing some in the second quarter.

Okay, thank you guys.

Speaker Change: Thank you. This concludes the Q&A session for the conference. I'd now like to turn the call back to 10 for any closing remarks.

Speaker Change: Thank you all for joining the call today. As always, I'm grateful to the growing team of dedicated Inspire Employees for the enthusiasm, hard work and continued motivation to achieve successful and consistent patient outcomes.

Speaker Change: The team's commitment to patience remains unmatched and is the most important element to our success.

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

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