Inspire Medical Systems, Inc. (NYSE:INSP) Q1 2025 Earnings Call Transcript

Inspire Medical Systems, Inc. (NYSE:INSP) Q1 2025 Earnings Call Transcript May 5, 2025

Inspire Medical Systems, Inc. beats earnings expectations. Reported EPS is $0.1, expectations were $-0.23.

Operator: Good afternoon. My name is Dilem and I’ll be your conference operator today. At this time, I would 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. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I’ll now hand the call over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Ezgi Yagci: Thank you, Dilem and thank you all for participating in today’s call. Joining me are Tim Herbert, Chairman and Chief Executive Officer; and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the three months March 31st, 2025. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including, without limitation, those relating to our operations, financial results and financial condition, investments in our business, full year 2025 financial and operational outlook and changes in market access, are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. 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. Inspire disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, May 5, 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 call for the first quarter of 2025. We achieved 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. 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. We also recently announced the appointment of Dr. Paul Hoff and Dr. Ruchir Patel as Vice President and Senior Medical Directors. Dr. Hoff and Dr. Patel are both highly experienced in treating sleep apnea patients including with Inspire therapy.

Dr. Hoff brings a focus from the ENT surgeons perspective, while Dr. Patel will leverage his expertise in sleep medicine. They will play key roles in guiding Inspire’s medical education, training and technology development activities. In addition to their focus on these newly appointed physicians, both Dr. Hoff and Dr. Patel will maintain their clinical practices independent from Inspire. In the first quarter, we continued to expand the limited market release of the Inspire V system in The U.S. and with this gain meaningful experience with the Inspire V while concurrently solidifying our inventory levels. As such, we are incredibly excited to announce that, we are ready and we will begin the full launch of the Inspire V system in The U.S. this month.

The Inspire V system kick starts the next generation of therapy with the release of this new platform, incorporating sensing into the neuro-stimulator provides a stable sensing environment, which is key to our differentiated closed loop hypoplast nerve stimulation system. The added technical capabilities of the device, provide the basis for future therapy enhancements including sleep detection and broader therapy indications. 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. Net income for the first quarter was $3 million represented diluted net income of $0.1 per share as compared to a net loss of $10 million representing a net loss of $0.34 per share in the first quarter of 2024.

Looking forward to the balance of 2025, we are reiterating our full year 2025 revenue guidance of $940 million to $955 million, representing 17% to 19% growth year-over-year. Regarding profitability, we are increasing our full share diluted net income guidance to be in the range of $2.2 to $2.3 per share. As we initiate the full launch of the Inspire V system, we anticipate the second quarter will be a transition quarter as we work through the steps necessary to launch this system. For centers, this process includes contract amendment, implementation of the new physician programmer and working through their Inspire IV inventory. Our experience to date with the Inspire V system has been very positive and well received by healthcare providers especially with ENT surgeons.

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. This led to an increased general awareness of the pending Inspire V launch. And late in the first quarter and continuing into the second quarter, we started to see evidence of patients waiting for the new device. Combining this with centers working through the launch process, we expect the second quarter to be a transition quarter and for revenue to grow mid to high single-digits sequentially. As the full launch of Inspire V 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. Detailed performance data in the Inspire V System is being closely tracked and initial data will be presented at the upcoming Sleep Conference.

Regarding reimbursement of the Inspire V System, on our last call, we detailed the transition to CPT code 64568. 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. We expect to submit for regulatory approval of the Inspire V system in Europe and in Asia this year, and will continue to provide the Inspire IV system during the review processes. We also plan to initiate a focused patient marketing and education program to announce the full launch of the Inspire V system. Prior to launching Inspire V, we had deliberately pulled back on patient marketing, but expect to step this up in the second quarter and throughout the rest of 2025.

This will focus on the education and awareness of the Inspire V system and aim to increase patients visiting our website and inquiring about making contact with a healthcare provider. To further support this, during the early part of the year, we continued our efforts to expand utilization of digital scheduling with implanting centers. As a reminder, digital scheduling is an online tool used by our Advisor Care Program to submit appointment request to qualified healthcare providers on behalf of prospective patients. Digital scheduling significantly streamlines a patient’s request to schedule that important first appointment. With respect to our market development activities, we continue to advance our medical education programs. In the first quarter, we hosted over 300 physicians at Inspire programs, including 120 soon to be graduating ENT physicians, over 110 sleep fellows and introduced Inspire therapy to 90 new ENT residents.

We remain committed to our mission to educate the next generation of sleep and ENT leaders. In addition, this year we trained over 100 advanced practice providers, bringing the total inception to date to over 400 APPs trained. We plan to increase the investments we are making in our medical education programs, including ongoing resident, fellowship and APP training, 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. 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 high-quality patient flow and increasing the capacity of our provider partners to effectively treat and manage more patients.

Our key strategies included adding advanced practice providers, certifying additional surgeons qualified implant inspired therapy, and driving the adoption of SleepSync and our digital tools, all of which are embedded strategies in our commercial team’s objective to increase provider capacity. 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. With that, I’d like to turn the call over to Rick for his reviews of our financials.

Rick Buchholz: Thank you, Tim, and good afternoon, everyone. Total revenue for the quarter was $201.3 million, a 23% increase from the $164 million generated in the first quarter of 2024. U.S. revenue in the quarter was $193.6 million, an increase of 24% from the $155.8 million in the prior year period. Revenue outside The U.S. was $7.7 million which was a 6% decrease year-over-year. 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 fleets. 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, an increase of 11% as compared to $154.5 million in the first quarter of 2024.

This planned increase 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. Interest and dividend income totaled $5.1 million in the quarter compared to $5.9 million in the prior year period. Operating loss for the quarter totaled $1.5 million, compared to $15.2 million in the prior year period. 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. This represented diluted net income per share of $0.1 compared to a net loss of $0.34 in the first quarter of 2024. Adjusted EBITDA totaled $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.

The weighted average number of diluted shares outstanding in the quarter was 30.5 million. We ended the quarter with $414 million in cash and investment balances. The reduction in our cash position is attributed to $75 million of share repurchases and cash used in operating activities, including building Inspire V inventory balances. The strong cash position allows us to remain focused on executing our growth strategies. Moving on to 2025 guidance. We continue to expect full year revenue to be in the range of $940 million to $955 million, representing an increase of 17% to 19% compared to full year 2024 revenue. As Tim noted, we are initiating the full launch of Inspire V this month. As such, the second quarter will be a transition quarter and we may see some inventory destocking of Inspire IV and patient warehousing for Inspire V.

Therefore, we expect to grow revenue sequentially from Q1 to Q2 by mid to high single-digits. We continue to expect full year gross margin to be in the range of 84% to 86%. We now expect diluted net income for the full year 2025 will be $2.2 to $2.3 per share, an increase from our previous range of $2.1 to $2.2 per share. We ended the quarter with 343 U.S. territories and 245 U.S. field clinical representatives. We continue to expect our reported tax rate in 2025 to be roughly 10%, primarily related to state and local taxes. We expect the full year diluted shares outstanding to be approximately 31t million. As previously noted, our products are currently sourced and assembled primarily in The U.S. and our exposure to recently-implemented tariff policies is de minimis.

In conclusion, our strong performance and business momentum provide us with confidence in our outlook for 2025. With that, our prepared remarks are concluded. Dilem, you may now open the line for questions.

Q&A Session

Operator: Thank you, sir. [Operator Instructions] Our first question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Travis Steed: Hi. Thanks for taking the question. And first, congrats on profitability this quarter, but actually wanted to focus on the Q2 revenue guidance and the destock and the patient warehousing that you mentioned. I think it’s in the 10-K as well or 10-Q. First of all, maybe just like what happened kind of versus expectations there? Is the impact in the quarter basically the kind of $12 million delta between your 2Q guidance and the Street number? And how do you read it at the full year guidance? Do you expect that to kind of be made up in Q3 and Q4 to be able to read out the full year guidance?

Tim Herbert: Yes. Hi, Charles. I think as we started to expand the Inspire V limited market release, work got out and the awareness of the technology and the pending launch, became more prevalent and we started to see more of the patient warehousing and we knew as we were going to launch, Inspire V, there would be a transition period with centers working through the contracts, working through getting the new physician programmer as well as working through their Inspire IV inventory. So that’s why we expect with the number of patients waiting for therapy with the V 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 in Q2, but as we mentioned in the mid to high single-digits. And yes, we do plan to make that up throughout the year, as we continue to launch and grow the utilization of Inspire V.

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

Danielle Antalffy: Hi, good afternoon, guys. Thanks so much for taking the question. Congrats on a really strong start to the year. 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 IV 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 Q4. Just curious about what level of visibility you guys have into that, 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.

Tim Herbert: Absolutely, Danielle. Thank you very much. We have close knowledge of the inventory on the field. The majority of centers only have a couple of units on the shelf. 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 a significant number of implants on a monthly basis. So they’ll be able to work through the majority of that inventory, in a short period of time in the second quarter. And once they work through that Inspire IV inventory, there’s a replacement with the Inspire V inventory. So we do have confidence in this back half of the year, as we continue to ramp and expand the full launch of V. But we do closely monitor existing four inventory and that’s why we have confidence that the majority of the units and the inventory burn downs will be accomplished in the second quarter.

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

Robbie Marcus: Great. I’ll add my congratulations on a nice quarter. Sorry to keep on this, but maybe just a follow-up on the question there. And is the way we should be thinking about this, you had very good procedure volume growth in sales in first quarter. There’s some lower number of procedures in second quarter, call it, the $10 million to $15 million that’s getting — that’s lower than The Street, but maybe not quite as much as that because you’re eating into existing inventory. And then, we’ll get that restocking in third and into fourth quarter. And I guess the question I really have is, 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 warehoused that gives you the confidence 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.

Tim Herbert: Got you. Thanks, Robbie. Great question. Getting into detail, the first thing that’s always strong with the patient outcomes and our awareness programs, the patient follow 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 remains very, very strong and that’s what gives us confidence going forward. We do know that, we have to work the process of activating these centers and we do have to burn down the Inspire IV inventory. But the key is to continue to grow the number of implants and you kind of hinted at that in your question that, yes, we’re going to still do implants with Inspire IV in the second quarter, but you’re going to see a little bit of a shift until the Inspire V inventory comes in and replaces that.

So while we are doing the full launch this month, there is a little bit of a transition process for centers to, get up and running with V. But the strength that we have is the demand with the patient flow remains very, very strong and that’s what’s really encouraging to us, as we look forward to have confidence going in to the second half of the year.

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

Adam Maeder: 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. The level of confidence that you have to kind of take that next step from a launch standpoint really just around manufacturing, reimbursement and device performance. Presumably you’re pleased with the progress you made in each of those different areas, but there has been some speculation around why the rollout hasn’t gone faster. So just wanted to give you the opportunity to add a little bit more color there, with what you’re seeing and the progress that you’re making in those different areas. Thank you.

Tim Herbert: Okay. Sure, Adam. Thanks very much. First off, the device is fully approved. And so, we submitted to the FDA the full data set that we had, the full qualification. And so, it’s been under tight review and we’re very confident in the performance of the device. We have done the work in Singapore. As you recall, we have done significant number centers and implants in our limited market release. So full confidence in product moving forward. The cash flow that we had is ramping up the manufacturing facility to have standard processes, such that we could have the throughput and the starting inventory to support the full launch. And we do a significant number of implants on a monthly basis, more so than we did obviously when we did Inspire IV 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 V technology and we’re really liking the response that we’re seeing from the healthcare providers, specifically the Inspire V, experienced surgeons who don’t no longer have to implant the pressure sensing lead, which we all know has been the most uncomfortable step of the process, for Inspire implanting with the NC surgeons. So we just needed to make sure that, we were ready that we had all the 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, we’re ready to throw the switch and be able to move into full launch.

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

Richard Newitter: Hi. Thanks for taking the questions. Nice first quarter here. Maybe you can frame for us the reiterated revenue range for the year. One, when you originally provided that guidance, what was assumed, or were you assuming any transition situation that would require kind of inventory work down? And then, B, can you talk to the bottom and top-ends of your range right now? We’re just trying to figure out what kind of cushion is built in and how much you ate into what normally is a cushion provided guidance range. So if you could just talk to what gets you to the upper end, what gets you to the lower end with respect to the various components of capacity, Inspire V and enabling increased capacity and kind of some of the dynamics now that you’re introducing with the 2Q revenue push out? Thank you.

Tim Herbert: Got you, Rich. Well, the key is from a full year, we haven’t changed and we still have confidence in that full year. And we knew we were going to do an Inspire V launch during the year sometime and we would be working through the inventory. So not a lot of change there. 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 of the patient awareness and wanting to wait for the new device. And I think, that’s become evident really most recently late Q1 and into the second quarter that we started to see that. And that kind of shifts the mix or the timing of the revenue and where Inspire V 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 IV inventory since the timing issue, as we do the full launch in the second quarter and hand off to Rick for additional comments.

Rick Buchholz: Yes. We did say at the beginning of the year that we did expect our full year revenue to be a little more heavily back-end weighted. 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.

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

Kallum Titchmarsh: Thanks for taking the question guys. From your initial rollout of Inspire V in the limited launch, I assume the majority of these surgeons were sleep specialists. But I’m curious if you’re 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 on-boarding these generalist DNTs, as you enter the full market launch in May and how that may differ from your strategy with the bulk of active implants today? Thanks a lot.

Tim Herbert: No, absolutely. Thank you. I think the key is when we do new launches like this, when we do clinical studies, when we do research, obviously we partner with a lot of our key physicians at the academic centers. 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 ENTs to get a good balance, when we do that limited launch. 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 V. So we have had the ability to talk with both groups and have confidence with our training programs. So as we introduce V broadly in The U.S. that the training programs will go very swiftly. The ENTs that have done performed Inspire V implant have responded very favorably and we expect a pretty seamless transition moving forward.

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

David Rescott: Great. Thanks for taking the questions and congrats on the start to the year here. Wanted to ask about OpEx so far and what’s implied in the guide. If you look at the past couple of quarters, you’ve grown OpEx well below half of that of what the top-line is. And if you continue that for the rest of the year, you’re getting somewhere ahead of what the EPS guidance for 2025 at this point. So I’m just curious on what your assumptions are in the implied guide on EPS this year and whether or not we should be thinking out about some incremental step-up or acceleration and spend behind the Inspire V launch? Thank you.

Rick Buchholz: Yes. 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 on an annual basis will outpace OpEx growth, but really we are going to continue to slightly increase our DTC on a year-over-year basis. We are going to spend more in patient marketing with the Inspire V launch as Tim mentioned. R&D is going to continue to run-in mid teens that does fluctuate a little bit. And then stock based compensation on an 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 an annual basis.

Operator: Thank you. And I show our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead.

Michael Sarcone: Good afternoon. Thanks for taking my question. Just one on the Inspire V launch and CPT code 64568. It’s been a few months of the limited market release now. I was wondering, if you could just give us some commentary on how physicians are responding to the lower professional fee that comes with the 64568 code? And are you seeing any increased procedures in the data offset that? We’d love to hear, what the experience has been so far. Thank you.

Tim Herbert: Absolutely. Thanks, Michael. I think we’re going to track that very closely going forward. We have confidence in the reimbursement levels with 64568 and $200 reduction with Medicare across the board. I think a lot of the limited lab centers were academic, so they’re not as effective. But equally balanced is the commercial centers with, as we talked about general ENTs from a couple of questions earlier on that, they’re comfortable with the procedure. I think a lot of excitement around Inspire V not putting in the pressure sensing lead will far outweigh the extra work it takes to do that part of the procedure, and 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 physicians is very excited and not have to deal 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-sensing lead.

So we’re going to continue to monitor this as we go through the year, to make sure that, physicians are coupled with 64568 and the reimbursement levels. The other key to it though is, we’re going to track their acceptance of Inspire V and we really accept strong acceptance from the surgeons with the simplicity of the procedure compared to Inspire IV. And also remember there is an increased payment to ambulatory surgical centers with the new code as well. So I think the payers who have all been very accepting going to 64568. I think the surgeons will be accepting doing the more simpler procedure with the reduced time with the reimbursement level that’s available and we’ll continue to monitor that closely and continue to provide feedback throughout the year.

Operator: 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 in inventory dynamics in Q1? On Q2, any color on EPS versus prior consensus at $0.41? And then, I have a follow-up.

Rick Buchholz: Yes. Hi Shagun. Regarding Q2, we talked about mid to high single-digits sequential revenue growth. And so with that, we are going to spend more in patient marketing with the Inspire V launch, but we do expect to be profitable in Q2, and then to improve that profitability sequentially throughout the year. So maybe a little bit lower in Q2, but lower than current consensus, but we’re going to grow that sequentially.

Shagun Singh: But you should also expect sequential EPS growth Q2 versus Q1. Got it. And what was the impact of pausing an inventory dynamic in Q1?

Rick Buchholz: 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.

Shagun Singh: Got it. And then just as a follow-up, I was wondering if you can comment on procedure profitability. It seems like we’ve gotten mixed feedback on that. And I’m just wondering, why don’t you think that could be a barrier to broader adoption? Thank you for taking the questions.

Tim Herbert: Yes, absolutely. Thank you. I think as we work with surgeons and work to help streamline their practice, practices and how they introduce their Inspire systems, we can improve 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 is a much more efficient way for patients and for physicians to build their practices. And this is pretty common across the higher volume centers, where they can build efficiencies by having the surgeons spend more time in the operating room to do more procedures and with the reduced OR time to be able to further build on the profitability. I think in the academic centers and sub centers that don’t do the same level of procedures, it’s more difficult and maybe that’s where some of the feedback comes from.

But in the high productive accounts, the ones that do that greatest number of implants, they understand throughput. They know how to leverage APPs. They have strong partnerships with sleep physicians to manage the patients longitudinally and have really built efficiencies into the practice to be profitable.

Operator: Thank you. I show our next question comes from the line of Chris Pasquale from Nephron Research. Please go ahead.

Chris Pasquale: Thanks. Tim, you talked about some early data on Inspire V being presented at some of the upcoming meetings. Curious what you expect that to show. 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 could actually do a better job with respiratory gating. So do you expect that to manifest in any tangible outcome improvements?

Tim Herbert: Yes, I think that’s kind of the key to it. Yes, everybody is excited, because they want to hear numbers about reduced OR time. 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. But from a patient outcome standpoint that Chris we always talk about how that’s such a high priority for us, we believe that, accelerometer does provide a more stable sensing environment and the data that we provided to the FDA, as part of our approval process, did show an 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 not sure that AHI data will be available, but that is something we are also tracking, as well as we’ll continue to track feedback from all The US centers as part of the limited launch. So, yes, when we’re coming up by June, we will want to talk about outcomes, more so beyond just the what people always talk about with reduced OR time and we’ll talk about surgical times as well. But to us, it really is a focus on those critical patient outcomes that we believe, that with the improved sensing and we have new algorithms in the device that, we think can further improve our already-strong patient outcomes.

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

Larry Biegelsen: Hi guys. Thanks for taking the question. Hey Tim, just a multipart question. So when do you expect to complete the transition to Inspire V? Last call it was Q4. And so, my question is, why won’t these factors that you mentioned impact also Q3 given the full launch won’t complete until Q4? And second, Tim, our checks also suggest that, just linking the Inspire V CPT code to the ICD 10 code for sleep apnea can also slow things down. What are you seeing on that as well? Thank you.

Tim Herbert: Got you. We talked last call that, yes, we would complete the transition by the end of the year. 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. We don’t expect to have too much carryover in the third quarter. As Rick mentioned that, we expect to have a stronger Q4 than normal. And again, we’re reiterating full year guidance. So we’re going to work hard. The field and the physicians are excited for Inspire V. The contracting as you recall is quite simple, because it’s just a one page or multi page, a small contract amendment just to change from four to five.

So that should be pretty simplistic. And the new physician programmer, which was launched last year, most centers are ready to take on 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. And Rick talked about the cadence for the second half of the year. As far as the linking to the ICD 9 or ICD 9 diagnostic code, we’re already working with CMS to get that done. And as we mentioned before, we already have 80% of our $300 million covered lives. That does include Medicare. That does include commercial payers. That does include the VA. And we have overcome that connection that you’re talking about, because we address that right upfront.

Operator: Thank you. And I show our next question comes from the line of Anthony Petrone from Mizuho Financial Group. Please go ahead.

Anthony Petrone: Thanks and congrats on the quarter here. Maybe just a question on capacity into the second half. Specifically, you mentioned Tim, there you’re adding ENT general surgeons and obviously we have a little bit of backlog that’s pushed into the second half. Just wondering, where that ENT capacity sits today and is it enough 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 SleepSync and how that’s evolving your front end of the funnel? Thanks.

Tim Herbert: Absolutely. Thank you. Talking about capacity first, there’s several elements that are in play there. Number one, the Inspire V device is a shorter procedure allowing existing surgeons to do additional cases, in any given day. Number two, we believe that, once they start doing the Inspire V and they’re comfortable that they no longer have to put in the pressure sensing lead. Again, remember, think of ENT, putting a sensor into the chest wall, that will give additional confidence to schedule more cases as well thereby increasing capacity. Two, we believe, there are a number of ENT surgeons that just were reluctant to do the Inspire procedure solely because of that pressure sensing leak. So as we move through the year, we’re going to be reaching out to those surgeons to make sure that, they understand Inspire V is now available to be able to make this an important part of their practice going forward.

Number three, we talked about, our medical education and the significant number of new ENTs graduating and coming out and excited about including Inspire into their new practices as they go forward. We’re going to continue to add new centers as we work through the year, especially those centers coming on training directly into Inspire V. So, it’s really going to continue to be a strong focus to build this capacity, because it continues to be the limiting factor for us, from beginning of the call, one of the earlier questions talked about 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. Your second part of your question is very strong.

When we start talking about SleepSync, as we increase the number of patients treated, SleepSync provides an opportunity for the sleep physicians to manage a greater number of patients on a longitudinal basis. The majority of the high volume centers already have SleepSync as part of their practice and they can leverage that to streamline patient flow and how they manage their patients. What’s key to Inspire V is Inspire V 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 in. 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 SleepSync, to really help the patient be part of their own care with the app.

But really they’ll also be able to help, patient monitoring and help physicians be able to track how well their patients are doing, with Inspire therapy. So pretty in-depth question and hopefully I got the right answers out to you there.

Operator: Thank you. And I show our next question comes from the line of Jon Block from Stifel. Please go ahead.

Jon Block: Great. Thanks guys. Good afternoon. Maybe two parter. Of the 1,500 centers, Tim, what was the sort of incoming where delays were or are taking place? I’m just curious, was it a couple of 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, 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 on the last call, all the centers trained by the end of 2025. I think you were citing like full conversion by the end of 2025. 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 put patient safety and patient priority first? Thanks.

Tim Herbert: Got it. Thanks, Jon. I think from your first part of the question, it’s more of a qualitative feel for patients delaying to get to Inspire V more than it is having specific quantities around that. And of the 1,500 centers, let’s talk about the high-volume centers. It become word gets out as the limited market release centers do cases and communicate that with their partners and with other centers and people become aware of it. Yes, people listen to our earnings calls, they do read your note and the others’ notes on Inspire V and the pending launch. 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 without putting specific numbers to it.

And going back to the previous question that you talked about in part two, is, I mean we’re continuing to focus on the training of all the centers and this month we’re going to do the full launch to make Inspire V available. That’s not committing 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 V, 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 in the May timeframe certainly gives us the opportunity to pull that full penetration up quite a bit. So we’ll keep tracking that and we’ll continue to report back to you on that.

Operator: Thank you. And I show our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets. Please go ahead.

Brett Fishbin: Hi. Good evening. Thanks for taking the questions. Just wanted to switch gears a little bit to the marketing strategy for Inspire V. It sounds like you’re going to be stepping up the D2C spend a little bit, ahead of the launch, which makes sense. And really just curious like how you’re thinking about changing the external messaging to potential patients, if you’re going to be focusing on specifically some of the improvements to the procedure, or if that’s like too in the weeds for general consumption. Maybe just like a little bit more about how you’re thinking about that. Thank you.

Tim Herbert: Yes. I think we’ll do a little bit of both. We’ll continue with our own outreach programs that are very strong and be able to get patients awareness and to get them to the website. Our website will talk about Inspire V and we’ll have 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 V, coming in with confidence, 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, left our 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 that have visited Inspire over the years, and let them know that yes, Inspire V 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 the word out even further.

Operator: Thank you. And our next question comes from the line of Michael Polark from Wolfe Research. Please go ahead.

Michael Polark: Afternoon. Thank you. Two quick ones. How many Inspire V implants to date worldwide, if you said it, I missed it. I’m just curious for the evidence-based, the size of it ahead of launch. And then, with all of the sequential phasing discussion, I’m interested if you’re willing to put a finer point on 3Q. I hear the 2Q guidance. If I look at the last two years, 3Q has been up low single-digits versus 2Q. 2Q sounds suppressed. Should we compare our 3Q to 1Q and do it that way, or what kind of progression growth wise would you expect? And I’m really getting to like how loaded the guide is into 4Q. Thank you.

Tim Herbert: Sure, Mike. Let me tackle the first one and, I’ll give Rick that second one. First so we haven’t really put out how many Inspire V we’ve done. But we did, early work prior to approval. We submitted that data to the FDA. And that’s where we’re able to collect devices or collect data with Inspire IV patients and using external five with to use those patients as their own comparisons. We have evidence going in that gave us confidence with the therapy. That, of course, is the qualification data we have significant, evidence from that standpoint. And now of course, post approval with a lot of commercial lymphatics both Singapore and through the limited release. And we’ll be pulling a lot of that information together and you’ll see, some of that come out during the upcoming Sleep Meeting in Seattle in June.

Rick Buchholz: Yes, regarding the second half of the year, Mike, Q4 is historically our strongest quarter, and I did talk a little bit earlier in the with my 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.

Operator: And I show our last question comes from the line of Mike Kratky from Leerink Partners. Please go ahead.

Unidentified Analyst: Hi, guys. This is Brett on for Mike. Thanks for taking the question and congrats on a good quarter. 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 that how you’re thinking about the progression of gross margin over the course of the year as this Inspire V mix increases?

Rick Buchholz: Yes. 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 a price change that our gross margin is accretive with Inspire V. And we’re going to continue to manufacture Inspire IV throughout 2025, because we’re going to continue to sell it internationally 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 — or for Inspire IV can be used for Inspire V 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.

Unidentified Analyst: Understood. That’s helpful. And if I get one follow-up just on the O-U.S. 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 FX that was impacting that?

Rick Buchholz: No real FX in the first quarter, but we are seeing some in the second quarter.

Operator: Thank you. This concludes the Q&A session for the conference. I would now like to turn the call back to Tim for any closing remarks.

Tim Herbert: 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 to our success. 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.

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