Inspire Medical Systems, Inc.

Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems fourth quarter and full year 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I'll now hand the call over to your first speaker, Eski Yaja, the Vice President of Investor Relations at Inspire. You may begin the conference.

Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, Chairman and Chief Executive Officer, and Matt Osberg, Chief Financial Officer. Earlier today, we released financial results for the three and 12 months ended December 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 2026 financial and operational outlook, and changes in market access and different aspects of coding or reimbursement are based upon our current estimates and various assumptions. Forward-looking 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. For a discussion of these risks and uncertainties, please see our filings with the Securities and Exchange Commission, including our periodic reports on Form 10-K and 10-Q, as well as the Form 10-K, which we expect to file later this week with the SEC for the fiscal year ended December 31st, 2025. 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, February 11th, 2026. With that, it is my pleasure to turn the call over to Tim Herbert.

Tim? Thank you, Esgie. And thanks everyone for joining our business update call for the fourth quarter and full year 2025. On this call, I will start by providing an update on reimbursement of our Inspire 5 system, followed by some key takeaways of our fourth quarter and full year results. Then Matt will provide a financial review of our fourth quarter and full year 2025 results and our full year 2026 outlook. we would then open the call for questions. The key challenge for our business since late last year is, of course, the coding of the INSPIRE 5 procedure. A few weeks ago at an investor conference, we shared that we were actively engaging with key government agencies and physician societies regarding the use of CPT code 64568 versus, excuse me, sorry, caught a bug. versus CPD code 64582 with a dash 52 modifier for the INSPIRE V procedure. In the last week, we received clarification regarding the coding that should be used for the INSPIRE V procedure. Currently, healthcare centers and physicians should build the most recent healthcare policies, be it a MAC or a commercial payer. Based on the clarification, we believe the code will transition to CPT code 64582 for the Inspire 5 procedure, including the use of a Dash 52 modifier. We estimate that the reduction to the professional fee associated with applying the Dash 52 modifier could range from approximately 10% to 50% of the base rate. The actual reduction may vary by MAC, and we will not know the precise impact until sufficient claims data have been submitted and processed across payers. In any case, we believe that a significant decrease in the professional fee resulting from use of the Dash-52 modifier will likely influence physicians' willingness to perform the INSPIRE V procedure and may limit the number of cases they choose to undertake. We intend to address these challenges by focusing on short and long-term initiatives. Over the short term, as we work through 2026, we plan to work with the appropriate stakeholders on initiatives intended to minimize the actual reduction applied to the professional fee, as well as to drive consistency across the country. As an initial observation, we believe there is strong justification for applying a smaller reduction given the markedly higher surgical skill and complexity associated with implanting the stimulation lead compared to the sensing lead. Furthermore, because of the excellent progress made with the launch of INSPIRE V to close out 2025, Significant coding experience now exists for the Inspire 5 procedure. CPT code 64568 was used for approximately 10,000 Inspire 5 procedures in 2025, which provides a basis for professional reimbursement. The professional fee for a CPT code 64568 is approximately 10% less than the reimbursement for CPT code 64582 used for INSPIRE IV procedures and reflects the reduced work associated with implanting the pressure sensing lead. As a note, we are nearing the completion of manufacturing of the INSPIRE IV systems. However, we believe that we have sufficient inventory available for centers who may choose to remain with the INSPIRE IV system for the foreseeable future. Given this dynamic reimbursement landscape, we have revised and widened our full-year revenue guidance for 2026 to reflect the broad range of possible impacts that we may experience throughout the year. Over the long term, we will be focused on developing a new CPT code. With clarity on the coding of Inspire 5 procedures, as well as hospital and ASC site of service reimbursement, and an action plan to clarify the professional fee payment, we can return to patient care. And I will start by reiterating our commitment to put the patient first and deliver strong patient outcomes. Over the past few months, we had the privilege to show data from the Singapore study and the US limited market release, and we are excited and energized by the strong performance of the INSPIRE V system. Being more specific, the INSPIRE V system has demonstrated superiority over INSPIRE IV as the data has shown, a reduction in surgical time with the INSPIRE V system, inspiratory overlap, which is the essential factor for closed-loop therapy, has shown to be significantly improved with the INSPIRE-5 system, and the AHI in the Singapore study has demonstrated a 79.5% responder rate using the SHARE criteria, which is far superior to the 66% responder rate demonstrated in the STAR Phase III pivotal trial in 2012. INSPIRE system reliability continues to improve year over year, and the 2025 data to date has shown a 0.5% occurrence of device explants and a 1.5% occurrence of revisions. With respect to the INSPIRE 5 US launch, the team has made significant progress in the fourth quarter, and we are excited to report that physician training is complete. Contracting is over 95% complete for our centers and sleep sync onboarding is complete for over 90%, bringing the total to over 90% of our centers in planning Inspire 5 today. We expect to have stable product inventory for Inspire 5 through all 2026. And we anticipate transitioning the existing Inspire 4 IPG line to Inspire 5 later in 2026. Switching to our quarterly results, we are very pleased with the strong revenue performance and cost discipline we delivered in the fourth quarter, which enabled us to deliver positive operating incomes and earnings. We ended the year with 295 U.S. territories and 275 U.S. field clinical representatives. As we enter 2026, we are being more strategic in our approach to territory management and optimizing our model through targeted territory consolidation and increased field clinical reps. We hired seven field clinical reps in the quarter consistent with our strategy to get the ratio closer to one-to-one territory manager to field clinical rep. On patient marketing, we had a very strong finish to 2025 regarding patient demand for Inspire Therapy, including a significant increase in the fourth quarter, and social media activity. We believe that this increase is related to the incremental growth investments we made in the back half of 2025. The WISER program, which is a government initiative requiring prior authorization of Medicare cases in six pilot states, kicked off in mid-January of 2026. To date, many Medicare cases have been submitted and approved. However, there have also been denials for multiple reasons, including medical criteria, inconsistencies in the AI software, as well as coding. We continue to provide prior authorization support to our centers as they work through the WISER implementation, and we'll update you as we have more information. but the WISER program has affected Medicare patient procedures in these six states in the first quarter. With respect to our R&D initiatives, we recently began testing a prior authorization feature in SleepSync, which will provide a simplified uploading of patient data to support preparation of prior authorization submissions. We believe this is an important initiative to enhance patient access to Inspire Therapy And we continue to look for additional ways to increase the utility of SleepSight. We're also excited to announce that we recently received FDA approval for a three Tesla MRI compatibility. In addition, in 2026, one of our primary product development programs will be INSPIRE 6, which will include sleep detection and auto activation, meaning The device will turn itself on when the patient falls asleep and turn itself off when the patient awakens, maximizing therapy adherence. In summary, we remain focused on the patient to continue the growth and the 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 include training advanced practice providers, certifying additional surgeons qualified to implant Inspire Therapy, and driving the adoption of SleepSync and our digital tools, all of which are embedded strategy in our commercial team's objective in enhancing patient access to Inspire Therapy. Looking ahead, we are excited about our future, and we believe that we have the appropriate strategies in place to drive long-term stakeholder value, and we are focused on addressing reimbursement as I described above. Looking beyond 2026, we continue to take actions to position the company for profitable growth. As we close 2025, I would like to thank Rick Buchholz for his many years at Inspire. With the close of 2025, Rick will move on to his new opportunity and we wish him well. He joined INSPIRE in 2014 and was a key contributor to bringing INSPIRE to where it is today. With that, it is also my pleasure to introduce you to Matt Osberg for his initial earnings call at INSPIRE.