Core Viewpoint - Inspire Medical Systems, Inc. reported disappointing second-quarter earnings and lowered its annual guidance, leading to a significant decline in its stock price [1][5]. Financial Performance - The company reported sales of $217.09 million for the second quarter, an 11% increase year-over-year, surpassing the consensus estimate of $214.48 million [1]. - Adjusted earnings per share were 45 cents, significantly higher than the consensus estimate of 21 cents [2]. - The gross margin for the second quarter was 84%, slightly down from 84.8% in the same quarter of the previous year [4]. - Operating loss was $3.3 million, a decline from an operating income of $5.1 million a year ago [4]. Guidance and Forecasts - The company revised its fiscal 2025 earnings per share guidance from a range of $2.20-$2.30 to $0.40-$0.50, compared to the consensus of $2.27 [5]. - Sales guidance for 2025 was also cut from $940 million-$955 million to $900 million-$910 million, against a consensus of $949.36 million [6]. Market Reactions - Keybanc downgraded the stock from Overweight to Sector Weight, while JPMorgan downgraded it from Overweight to Neutral, lowering the price forecast from $195 to $110 [6]. - Other firms, including Stifel, Piper Sandler, and RBC Capital, maintained their ratings but adjusted their price targets downward [7]. - The stock price of Inspire Medical Systems fell by 41.90%, reaching $76.50 at the time of publication [8].

Core Insights - Inspire Medical Systems, Inc. is under investigation by Holzer & Holzer, LLC for potential non-compliance with federal securities laws following the announcement of its second quarter 2025 results [1] - The company reported that the U.S. commercial launch is progressing slower than expected, and the timeline for the full transition to Inspire V has been extended, which will negatively impact financial results for the year [1] - Following this announcement, Inspire Medical's stock price experienced a decline [1] Company Performance - Inspire Medical announced its second quarter 2025 results on August 4, 2025, indicating challenges in its commercial launch and transition timeline [1] - The company has updated its 2025 outlook, suggesting a more cautious financial forecast due to the slower-than-expected progress [1] Legal Context - Holzer & Holzer, LLC is a law firm specializing in securities litigation and is reaching out to investors who may have suffered losses from their investment in Inspire Medical [2] - The firm has a history of representing shareholders and recovering significant amounts for those affected by corporate misconduct [3]

Core Insights - Inspire Medical Systems, Inc. (INSP) reported an earnings per share (EPS) of 45 cents for Q2 2025, reflecting a year-over-year increase of 40.6% and exceeding the Zacks Consensus Estimate by 104.6% [1][10] - The company's revenues reached $217.1 million in Q2 2025, marking a 10.8% increase year-over-year and surpassing the Zacks Consensus Estimate by 0.9% [2][10] Revenue Analysis - U.S. revenues amounted to $207.2 million, up 10.3% from the same quarter last year, while revenues from all other countries totaled $9.9 million, representing a 23% year-over-year increase [4][5] - The overall revenue growth was attributed to increased market penetration and heightened awareness among physicians and patients regarding the Inspire system, although this was partially offset by capacity constraints among ENT surgeons and delays in therapy adoption by some U.S. patients and physicians [3][10] Margin and Expense Overview - Gross profit for Q2 2025 increased by 9.9% year-over-year to $182.4 million, but the gross margin contracted by 74 basis points to 84% [6][10] - Selling, general, and administrative expenses rose by 20.8% year-over-year to $159.5 million, while research and development expenses decreased by 9.2% to $26.2 million [6] Financial Position - As of the end of Q2 2025, Inspire Medical had cash and cash equivalents and short-term investments totaling $300.9 million, down from $369.2 million at the end of Q1 2025 [8] - The cumulative net cash used in operating activities was $4 million, compared to net cash provided of $8.8 million in the previous year [8] Outlook and Guidance - The company has revised its revenue outlook for 2025 to a range of $900 million to $910 million, down from a previous estimate of $940 million to $955 million [11] - EPS guidance for 2025 has also been lowered to between 40 cents and 50 cents, significantly down from the prior forecast of $2.20 to $2.30 [12] Market Reaction - Following the earnings report, shares of Inspire Medical experienced a decline of nearly 24.9% in pre-market trading [3]

Group 1 - U.S. stock futures are higher, with Dow futures gaining around 0.1% [1] - Inspire Medical Systems, Inc. shares fell 25% to $98.00 in pre-market trading after reporting second-quarter results and cutting FY25 guidance below estimates [1] - Ichor Holdings, Ltd. declined 24.3% to $15.24 in pre-market trading due to worse-than-expected second-quarter adjusted EPS results and below-estimate third-quarter adjusted EPS guidance [3] Group 2 - Gartner, Inc. shares fell 15% to $287.20 after issuing soft FY25 guidance [3] - Vertex Pharmaceuticals Incorporated declined 14.5% to $403.85 following second-quarter financial results and Vx-993 Phase 2 trial results [3] - Semrush Holdings, Inc. fell 14.1% to $7.91 after reporting a second-quarter EPS miss [3] - Navitas Semiconductor Corporation shares dropped 14.1% to $6.92 after issuing third-quarter sales guidance below estimates [3] - Kyndryl Holdings, Inc. fell 12.2% to $32.21 after reporting a first-quarter revenue miss [3]

Company Performance - Inspire Medical Systems reported quarterly earnings of $0.45 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and up from $0.32 per share a year ago [1] - The earnings surprise for this quarter was +104.55%, following a previous surprise of +143.48% when the company reported earnings of $0.1 per share against an expected loss of $0.23 per share [2] - The company achieved revenues of $217.09 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.95% and increasing from $195.88 million year-over-year [3] Market Outlook - Despite the positive earnings report, Inspire shares have declined approximately 32% since the beginning of the year, contrasting with the S&P 500's gain of 6.1% [4] - The future performance of Inspire's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [5][6] - The current consensus EPS estimate for the upcoming quarter is $0.59 on revenues of $239.64 million, and for the current fiscal year, it is $2.26 on revenues of $949.14 million [8] Industry Context - The Medical Info Systems industry, to which Inspire belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [9] - The performance of Inspire's stock may also be influenced by the overall industry outlook, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $217.1 million, an 11% increase from $195.9 million in Q2 2024 [24] - U.S. revenue was $207.2 million, a 10% increase from $187.8 million in the prior year [24] - Gross margin decreased to 84% from 84.8% year over year, primarily due to a $2.1 million charge for excess INSPIRE IV subcomponents [24] - Operating loss for the quarter was $3.3 million compared to an operating income of $5.1 million in the prior year [26] - Net loss for the quarter was $3.6 million, compared to a net income of $9.8 million in the prior year [26] - Adjusted EBITDA for the quarter was $44.1 million, a 14% increase compared to $38.7 million in the prior year [27] - Adjusted net income per share increased by 40% year over year to $0.45 [27] Business Line Data and Key Metrics Changes - The majority of units sold in Q2 were INSPIRE IVs, leading to minimal inventory destocking [10] - Over 50% of U.S. centers have completed the implementation of SleepSync, which is crucial for the transition to INSPIRE V [9] - The company is experiencing a 20% increase in patient implants at U.S. centers that have transitioned to INSPIRE V compared to the same period in 2024 [15] Market Data and Key Metrics Changes - Revenue outside the U.S. was $9.9 million, a 23% increase year over year [24] - The approval of CPT code 64568 for INSPIRE V for Medicare patients was announced in April, with billing starting on July 1 [11] - The national average Medicare hospital reimbursement for CPT code 64568 is proposed to increase to $32,000, a 4% increase from 2024 [17] Company Strategy and Development Direction - The company is focused on transitioning customers to INSPIRE V and has ramped up marketing and footprint expansion efforts in the second half of the year [12][13] - The company aims to drive high-quality patient flow and increase provider capacity through training and certification of additional surgeons [21] - The company has become a corporate champion of the American Academy of Otolaryngology, enhancing its brand and trust within the ENT community [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the commercial rollout of INSPIRE V, including delays in training and implementation at centers [7] - The company adjusted its full-year revenue guidance to a range of $900 million to $910 million, reflecting a 4% reduction at the midpoint [14] - Management expressed confidence in overcoming current headwinds and achieving long-term growth [21] Other Important Information - The company ended the quarter with $411 million in cash and investments, allowing it to focus on executing growth strategies [28] - A personnel announcement was made regarding the retirement of Randy Bann, Executive Vice President, Patient Access and Therapy Awareness, in January 2026 [19][20] Q&A Session Summary Question: Can you provide more detail on the revised guidance and the headwinds faced? - Management identified the completion of training and the ability to bill Medicare as the primary factors affecting guidance [34][35] Question: What is the expectation for revenue growth in 2026? - Management expects revenue growth to exceed the 12% to 13% guidance for FY 2025 [37] Question: Can you clarify the EPS guide change? - The reduction in EPS guidance is primarily due to lower revenue expectations and increased marketing costs [41][42] Question: What is the status of the Q3 guidance? - Management anticipates a 1% to 3% sequential increase in Q3 revenue based on patient flow trends [46] Question: What are the underlying volume trends and pressures? - Management noted that the transition to INSPIRE V and the ability to bill Medicare are key factors affecting volume trends [54][55] Question: How is the company addressing the increase in accounts receivable? - The increase is attributed to a transition to a new billing service, which caused temporary delays in invoicing [77] Question: What is the outlook for the fourth quarter? - Management expects a seasonal increase in revenue from Q3 to Q4, consistent with historical trends [96]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $217.1 million, an 11% increase from $195.9 million in Q2 2024 [23] - U.S. revenue was $207.2 million, a 10% increase from $187.8 million in the prior year [23] - Gross margin decreased to 84% from 84.8% year over year, primarily due to a $2.1 million charge for excess INSPIRE IV subcomponents [23][24] - Operating loss for the quarter was $3.3 million compared to an operating income of $5.1 million in the prior year [25] - Net loss for the quarter was $3.6 million, representing a loss per share of $0.12 compared to net income of $0.32 per share in Q2 2024 [25][26] - Adjusted EBITDA for the quarter was $44.1 million, a 14% increase compared to $38.7 million in the prior year [26] Business Line Data and Key Metrics Changes - The majority of units sold in Q2 were INSPIRE IVs, leading to minimal inventory destocking [9] - The transition to INSPIRE V faced challenges, with many centers not completing necessary training and onboarding [6][7] - Over 50% of U.S. centers have completed the implementation of SleepSync, which is crucial for the transition to INSPIRE V [8] Market Data and Key Metrics Changes - Revenue outside the U.S. was $9.9 million, a 23% increase year over year [23] - The approval of CPT code 64568 for INSPIRE V for Medicare patients was announced in April, but billing could only begin on July 1, impacting the transition [10] Company Strategy and Development Direction - The company is focused on advancing the transition to INSPIRE V and has ramped up marketing and footprint expansion efforts in the second half of the year [11][12] - Investments in digital scheduling and community health talks are aimed at increasing patient awareness and building capacity [12] - The company aims to drive high-quality patient flow and increase provider capacity through training and certification of additional surgeons [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the commercial rollout of INSPIRE V but remains confident in the platform's potential [6][21] - The company adjusted its full-year revenue guidance to $900 million to $910 million, reflecting a 4% reduction at the midpoint from previous guidance [13] - Management expressed optimism about future growth, expecting revenue growth to exceed 12% to 13% in 2026 [38] Other Important Information - The company announced the retirement of Randy Bann, Executive Vice President, Patient Access and Therapy Awareness, effective January 2026 [19][20] - The national average Medicare hospital reimbursement for CPT code 64568 is proposed to increase to $32,000, a 4% increase from 2024 [16] Q&A Session Summary Question: Can you provide more detail on the revised guidance and the headwinds faced? - Management identified the completion of training and the ability to bill Medicare as the primary factors impacting guidance [33][34] Question: Will revenue in 2026 accelerate beyond the 12% to 13% growth expected for 2025? - Management indicated that they expect revenue growth to exceed the current guidance for 2025 due to ongoing investments [38] Question: Can you clarify the EPS guidance change? - The reduction in EPS guidance is primarily due to lower revenue expectations and increased direct-to-consumer spending [42] Question: What is the current uptake of Medicare billing since the software update? - Uptake has been limited as many sites were not fully operational until they could bill Medicare [87] Question: What is driving the 20% increase in patient implants for INSPIRE V? - The increase is attributed to reduced surgical complexity and improved capacity at centers that have transitioned to INSPIRE V [75]

Company Overview - Inspire Medical Systems has an underpenetrated U S market exceeding $10 billion[7,9,26] - The company achieved over $800 million in revenue in 2024, demonstrating a 28% year-over-year growth[7,10] - Inspire therapy has established reimbursement in all 50 U S states, covering over 300 million lives[7,9] - Over 100,000 patients have received Inspire therapy, highlighting a significant first-mover advantage[7,8,9,33] Financial Performance & Growth Strategy - The company projects FY2025 revenue between $900 million and $910 million, representing a 12%-13% growth over FY2024[65] - The gross margin for FY2025 is expected to be between 84% and 86%[65] - Inspire initiated the full launch of the Inspire V system in the U S in May 2025[70,71] - Second quarter revenue reached $217 1 million, an 11% increase year-over-year, with a gross margin of 84%[70] Therapy & Market - Inspire therapy demonstrates a median Apnea-Hypopnea Index (AHI) reduction from 33 0 events/hr at baseline to 10 2 events/hr at 12 months[43] - Inspire patients reported a median Epworth Sleepiness Scale (ESS) score reduction from 11 0 at baseline to 6 0 at the 12-month visit[44] - 91% of patients say Inspire is better than CPAP, and 93% would recommend Inspire to a friend or family member[46]

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the report's forward-looking statements and associated risks and uncertainties - The report contains forward-looking statements covered by safe harbor provisions, including future financial results, business strategy, product approvals, reimbursement expectations, R&D costs, and sales initiatives[8](index=8&type=chunk) - Key risks and uncertainties include operating losses, dependency on the Inspire system, market acceptance, reimbursement levels, competition, ability to expand indications, supply chain disruptions, and macroeconomic conditions[9](index=9&type=chunk)[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part contains the company's unaudited interim financial statements and management's analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and accompanying notes [Balance Sheets](index=5&type=section&id=Balance%20Sheets) This section details the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $106,927 | $150,150 | | Investments, short-term | $193,968 | $295,396 | | Accounts receivable, net | $137,687 | $93,068 | | Inventories, net | $121,633 | $80,118 | | Total current assets | $573,189 | $630,806 | | Total assets | $802,193 | $808,383 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $93,359 | $88,501 | | Total liabilities | $124,379 | $118,688 | | Total stockholders' equity | $677,814 | $689,695 | | Total liabilities and stockholders' equity | $802,193 | $808,383 | - Total assets decreased slightly from **$808.4 million** at December 31, 2024, to **$802.2 million** at June 30, 2025, driven by reductions in cash and short-term investments[17](index=17&type=chunk) - Accounts receivable and inventories increased significantly, indicating **higher sales activity and inventory build-up**[17](index=17&type=chunk) [Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section reports the company's revenues, expenses, and resulting profit or loss over specific periods Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $217,086 | $195,885 | $418,403 | $359,895 | | Cost of goods sold | $34,672 | $29,843 | $65,381 | $54,600 | | Gross profit | $182,414 | $166,042 | $353,022 | $305,295 | | Operating (loss) income | $(3,316) | $5,099 | $(4,801) | $(10,119) | | Net income (loss) | $(3,592) | $9,793 | $(600) | $(212) | | Basic net income (loss) per share | $(0.12) | $0.33 | $(0.02) | $(0.01) | | Diluted net income (loss) per share | $(0.12) | $0.32 | $(0.02) | $(0.01) | - Revenue increased by **10.8%** for the three months and **16.3%** for the six months ended June 30, 2025, compared to the prior year periods[20](index=20&type=chunk) - The company reported a **net loss of $3.6 million** for Q2 2025, a significant decline from a **net income of $9.8 million** in the same period last year[20](index=20&type=chunk) [Statements of Stockholders' Equity](index=7&type=section&id=Statements%20of%20Stockholders'%20Equity) This section shows changes in the company's equity from net income, share repurchases, and other activities Consolidated Statements of Stockholders' Equity (in thousands) | Item | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :--------------------- | | Total Stockholders' Equity | $689,695 | $677,814 | | Common Stock (shares) | 29,740,176 | 29,569,477 | | Additional Paid-In Capital | $981,043 | $969,903 | | Accumulated Deficit | $(291,914) | $(292,514) | | Net income (loss) for the period | N/A | $(3,592) | | Share repurchase of common stock | N/A | $(75,009) | | Stock-based compensation expense | N/A | $72,780 | | Stock options exercised | N/A | $8,615 | - Total stockholders' equity decreased from **$689.7 million** to **$677.8 million**, primarily due to share repurchases and net loss[22](index=22&type=chunk) - The company repurchased **442,649 shares for $75.0 million** during the first half of 2025 under its share repurchase program[22](index=22&type=chunk)[103](index=103&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(4,019) | $8,782 | | Net cash provided by (used in) investing activities | $45,009 | $(13,915) | | Net cash (used in) provided by financing activities | $(84,063) | $7,855 | | Net (decrease) increase in cash and cash equivalents | $(43,223) | $2,498 | | Cash and cash equivalents at end of period | $106,927 | $188,035 | - Operating activities shifted from providing **$8.8 million** in cash in H1 2024 to using **$4.0 million** in H1 2025[28](index=28&type=chunk)[211](index=211&type=chunk) - Investing activities provided **$45.0 million** in H1 2025, a significant improvement from using **$13.9 million** in H1 2024[28](index=28&type=chunk)[213](index=213&type=chunk) - Financing activities used **$84.1 million** in H1 2025, largely due to **$75.0 million in share repurchases**[28](index=28&type=chunk)[216](index=216&type=chunk) [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) This section provides detailed disclosures and explanations of the company's accounting policies and figures [1. Organization](index=10&type=section&id=1.%20Organization) This note describes the company's business, products, and markets - Inspire Medical Systems, Inc is a medical technology company specializing in minimally invasive solutions for obstructive sleep apnea (OSA)[30](index=30&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with **U.S. GAAP** for interim reporting[31](index=31&type=chunk) - The company's functional and reporting currency is the **U.S. dollar**[35](index=35&type=chunk) - Investments are classified as **available-for-sale** and reported at fair value[38](index=38&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Fair value measurements are categorized into a **three-tier hierarchy (Level 1, 2, 3)** based on input observability[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - Credit risk is mitigated by investing in high-quality debt securities and a diversified customer base[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Inventories are valued at the lower of cost or net realizable value (FIFO basis), with a reserve for excess and obsolete inventory of **$1.9 million** as of June 30, 2025[57](index=57&type=chunk)[58](index=58&type=chunk) - Property and equipment are stated at cost less accumulated depreciation[59](index=59&type=chunk)[61](index=61&type=chunk) - An impairment charge of **$4.0 million** was recognized on strategic investments in H1 2025[62](index=62&type=chunk) - Revenue from product sales is recognized when the customer obtains control, typically upon shipment[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Cost of goods sold includes acquisition costs, overhead, scrap, inventory obsolescence, and warranty replacement costs[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Stock-based compensation expense is recognized on a straight-line basis over the service period[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - Operating leases are recognized on the balance sheet as ROU assets and liabilities[81](index=81&type=chunk)[83](index=83&type=chunk) - A **full valuation allowance** is maintained against deferred tax assets due to cumulative net loss[84](index=84&type=chunk) - Comprehensive income (loss) includes net income (loss) and changes in unrealized gains/losses on investments and currency translation[85](index=85&type=chunk) - Basic and diluted net income (loss) per share are calculated, with dilutive shares excluded during net loss periods[86](index=86&type=chunk) - The company is evaluating the impact of new accounting pronouncements ASU 2023-09 and ASU 2024-03[87](index=87&type=chunk)[90](index=90&type=chunk) [3. Leases](index=21&type=section&id=3.%20Leases) This note details the company's operating lease agreements, assets, and liabilities - The company leases approximately **106,000 sq ft** for its corporate headquarters through May 2035[92](index=92&type=chunk) - An additional warehouse and office space lease for **22,000 sq ft** was entered through May 2035[93](index=93&type=chunk) Lease Balances (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Operating lease right-of-use assets | $24,524 | $23,314 | | Total operating lease liabilities | $33,059 | $31,793 | | Remaining lease terms (weighted average) | 9.9 years | N/A | | Weighted average discount rate | 4.9% | N/A | [4. Employee Retirement Plan](index=21&type=section&id=4.%20Employee%20Retirement%20Plan) This note describes the company's defined contribution 401(k) plan and matching contributions - The company sponsors a defined contribution plan, matching **50% of the first 6%** of employee contributions[97](index=97&type=chunk)[99](index=99&type=chunk) - Matching contributions totaled **$3.3 million** for H1 2025, up from **$2.6 million** in H1 2024[99](index=99&type=chunk) [5. Stockholders' Equity](index=22&type=section&id=5.%20Stockholders'%20Equity) This note provides details on the company's share repurchase program - In August 2024, the Board authorized a **$150.0 million** share repurchase program[100](index=100&type=chunk) - An accelerated share repurchase (ASR) agreement in November 2024 resulted in the repurchase of **409,043 shares**[101](index=101&type=chunk)[102](index=102&type=chunk) - During H1 2025, an additional **442,649 shares were purchased for $75.0 million**, leaving no amount available for future repurchases[103](index=103&type=chunk) [6. Stock-Based Compensation](index=22&type=section&id=6.%20Stock-Based%20Compensation) This note details the company's equity incentive plans, including options, RSUs, PSUs, and the ESPP - As of June 30, 2025, **1,376,932 shares** were available for issuance under the equity incentive plan[104](index=104&type=chunk) - **$11.2 million in accelerated expense** was recorded in Q2 2025 for retirement-eligible employees due to policy changes[105](index=105&type=chunk)[106](index=106&type=chunk) - Stock options have a four-year service period, vesting 25% after the first year and monthly thereafter[109](index=109&type=chunk) Stock Option Activity (in thousands, except shares) | Item | Options | Weighted Average Exercise Price | | :------------------------------------ | :-------- | :------------------------------ | | Outstanding at December 31, 2024 | 2,160,149 | $168.33 | | Exercised (H1 2025) | (118,184) | $73.96 | | Forfeited/expired (H1 2025) | (53,993) | $228.35 | | Outstanding at June 30, 2025 | 1,987,972 | $172.27 | | Unearned stock-based compensation (June 30, 2025) | N/A | $41.8 million | | Weighted average recognition period | N/A | 1.6 years | - Restricted Stock Units (RSUs) vest over three or four years for employees and one or three years for directors[116](index=116&type=chunk) Restricted Stock Units Activity (in thousands, except shares) | Item | Restricted Stock Units | Weighted Average Grant Date Fair Value | | :------------------------------------ | :--------------------- | :------------------------------------- | | Unvested at December 31, 2024 | 679,905 | $195.63 | | Granted (H1 2025) | 579,469 | $182.09 | | Vested (H1 2025) | (201,502) | $205.09 | | Forfeited (H1 2025) | (42,073) | $190.92 | | Unvested at June 30, 2025 | 1,015,799 | $186.21 | | Unearned stock-based compensation (June 30, 2025) | N/A | $152.1 million | | Weighted average recognition period | N/A | 2.1 years | - Performance Stock Units (PSUs) are earned based on performance against pre-established three-year goals[119](index=119&type=chunk) Performance Stock Units Activity (in thousands, except shares) | Item | Performance Stock Units | Weighted Average Grant Date Fair Value | | :------------------------------------ | :---------------------- | :------------------------------------- | | Unvested at December 31, 2024 | 323,302 | $220.82 | | Granted (H1 2025) | 236,333 | $199.70 | | Vested (H1 2025) | (143,518) | $228.48 | | Forfeited (H1 2025) | (24,459) | $223.34 | | Unvested at June 30, 2025 | 391,658 | $205.20 | | Unrecognized stock-based compensation (June 30, 2025) | N/A | $47.2 million | | Weighted average recognition period | N/A | 1.9 years | - The Employee Stock Purchase Plan (ESPP) allows employees to purchase stock at a **15% discount**[121](index=121&type=chunk) [7. Income Taxes](index=25&type=section&id=7.%20Income%20Taxes) This note discusses the company's income tax expense, deferred tax assets, and valuation allowance - A **full valuation allowance** is recorded against all deferred tax assets due to the company's cumulative net loss position[122](index=122&type=chunk)[126](index=126&type=chunk) Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Three Months Ended June 30, | $1,260 | $1,053 | | Six Months Ended June 30, | $2,427 | $1,703 | - As of December 31, 2024, the company had **$51.2 million in federal NOL carryforwards** and **$88.0 million in state NOL carryforwards**[123](index=123&type=chunk) - An analysis confirmed that a 2018 ownership change did not cause federal NOLs or R&D credits to expire unused[125](index=125&type=chunk) - The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA)[127](index=127&type=chunk) [8. Segment Reporting and Revenue Disaggregation](index=27&type=section&id=8.%20Segment%20Reporting%20and%20Revenue%20Disaggregation) This note provides revenue and asset data by geographic region, confirming a single operating segment - The company operates as a **single operating segment**[129](index=129&type=chunk) - The Chief Operating Decision Maker (CODM) uses consolidated net income (loss) to assess performance[130](index=130&type=chunk) Revenue by Geographic Region (in thousands) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $207,150 | $187,808 | $400,756 | $343,579 | | All other countries | $9,936 | $8,077 | $17,647 | $16,316 | | Total revenue | $217,086 | $195,885 | $418,403 | $359,895 | - U.S. revenue accounted for **95.8% of total revenue** in H1 2025, showing continued strong domestic focus[135](index=135&type=chunk) Long-lived Tangible Assets by Geographic Location (in thousands) | Region | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | United States | $84,397 | $71,008 | | All other countries | $877 | $917 | | Total | $85,274 | $71,925 | [9. Income (Loss) Per Share](index=29&type=section&id=9.%20Income%20(Loss)%20Per%20Share) This note presents the calculation of basic and diluted net income (loss) per share Net Income (Loss) Per Share | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(3,592) | $9,793 | $(600) | $(212) | | Basic EPS | $(0.12) | $0.33 | $(0.02) | $(0.01) | | Diluted EPS | $(0.12) | $0.32 | $(0.02) | $(0.01) | | Weighted average shares outstanding (basic) | 29,506,807 | 29,728,849 | 29,604,043 | 29,672,006 | | Weighted average shares outstanding (diluted) | 29,506,807 | 30,408,439 | 29,604,043 | 29,672,006 | - For periods with a net loss, diluted net loss per share is the same as basic because all potentially dilutive shares were antidilutive[138](index=138&type=chunk) Antidilutive Common Stock-Based Awards Excluded from Diluted EPS | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | 1,794,133 | 1,536,085 | 1,849,317 | 2,187,189 | | Restricted stock units | 897,705 | 105,622 | 592,677 | 102,969 | | Total | 2,691,838 | 1,641,707 | 2,441,994 | 2,290,158 | [10. Related Party Transaction](index=29&type=section&id=10.%20Related%20Party%20Transaction) This note discloses a cost-sharing agreement with an entity controlled by the company's CEO - The company entered a cost-sharing agreement with an entity controlled by its CEO for a corporate suite at a sports venue[140](index=140&type=chunk)[142](index=142&type=chunk) - Expense recognized for the suite was less than **$0.1 million** for Q2 2025 and **$0.1 million** for H1 2025[142](index=142&type=chunk) [11. Commitments and Contingencies](index=30&type=section&id=11.%20Commitments%20and%20Contingencies) This note details ongoing legal proceedings, including class actions, government investigations, and patent litigation - The company is involved in various claims and litigation in the ordinary course of business[143](index=143&type=chunk) - A federal securities class action lawsuit was **dismissed with prejudice** on March 24, 2025[144](index=144&type=chunk) - A related stockholder derivative lawsuit was **voluntarily dismissed** on September 5, 2024[145](index=145&type=chunk) - On January 17, 2025, the company received a **Civil Investigative Demand (CID)** from the Department of Justice[146](index=146&type=chunk) - On May 30, 2025, Inspire initiated a **patent infringement lawsuit** against Nyxoah SA and Nyxoah, Inc[147](index=147&type=chunk)[149](index=149&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides its perspective on financial condition, operational results, and key business developments [Overview](index=32&type=section&id=Overview) This section provides a high-level summary of the company's business, products, market, and recent performance - Inspire Medical Systems is a medical technology company focused on minimally invasive solutions for obstructive sleep apnea (OSA)[151](index=151&type=chunk) - The company sells its Inspire system to hospitals and ASCs in the U.S, Europe, and Japan through a direct sales force[152](index=152&type=chunk) - Inspire therapy is covered by major U.S commercial payors, representing over **300 million lives**[153](index=153&type=chunk) - For H1 2025, **95.8% of revenue** was from the U.S and **4.2%** from outside the U.S[154](index=154&type=chunk) - The company relies on third-party single-source suppliers and maintains higher inventory levels to mitigate supply disruptions[155](index=155&type=chunk)[156](index=156&type=chunk) Financial Performance Summary (in thousands) | Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :---------------- | :------ | :------ | :------ | :------ | | Revenue | $217,100 | $195,900 | $418,400 | $359,900 | | Gross Margin | 84.0% | 84.8% | 84.4% | 84.8% | | Net Income (Loss) | $(3,600) | $9,800 | $(600) | $(200) | | Accumulated Deficit (as of June 30, 2025) | $(292,500) | N/A | N/A | N/A | - The launch of the next-generation **Inspire V system** in May 2025 is expected to impact revenue through the end of 2025[159](index=159&type=chunk)[160](index=160&type=chunk) - Direct-to-consumer marketing efforts are being refined and expanded to increase patient awareness[161](index=161&type=chunk)[162](index=162&type=chunk) - The sales and marketing organization is expanding, with **348 U.S. sales territories** as of June 30, 2025[163](index=163&type=chunk) - The rise of **GLP-1 drugs** for OSA may reduce demand in some patients but could also increase the number of eligible patients[164](index=164&type=chunk) [Macroeconomic Environment](index=34&type=section&id=Macroeconomic%20Environment) This section discusses the potential impact of global economic conditions on the company's business - The global economy faces increased inflationary pressures and market instability[165](index=165&type=chunk) - These conditions may lead to customers decreasing or delaying product orders[166](index=166&type=chunk) [Components of Our Results of Operations](index=35&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section breaks down the key drivers of the company's revenue and expenses - Revenue is primarily derived from sales of the Inspire system to hospitals and ASCs[167](index=167&type=chunk) - Revenue has historically experienced seasonality, with higher sales in Q4 and lower sales in Q1[168](index=168&type=chunk)[178](index=178&type=chunk) - Gross margin is affected by manufacturing costs, selling prices, and inventory obsolescence[170](index=170&type=chunk)[171](index=171&type=chunk) - R&D expenses are expected to increase with the development of next-generation products[174](index=174&type=chunk) - SG&A expenses are projected to rise due to expansion of commercial infrastructure and increased headcount[176](index=176&type=chunk) - Other income, net, primarily consists of interest income and foreign currency impacts[177](index=177&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of financial results for recent periods [Comparison of the Three Months Ended June 30, 2025 and 2024](index=37&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This subsection analyzes the financial performance for the second quarter of 2025 versus 2024 Key Financials (Three Months Ended June 30, in thousands) | Item | 2025 | 2024 | $ Change | % Change | | :------------------------------------ | :----- | :----- | :------- | :------- | | Revenue | $217,086 | $195,885 | $21,201 | 10.8% | | Cost of goods sold | $34,672 | $29,843 | $4,829 | 16.2% | | Gross profit | $182,414 | $166,042 | $16,372 | 9.9% | | Gross margin | 84.0% | 84.8% | -0.8% | | | Operating (loss) income | $(3,316) | $5,099 | $(8,415) | (165.0)% | | Net income (loss) | $(3,592) | $9,793 | $(13,385) | (136.7)% | - U.S. revenue increased by **10.3%** and international revenue increased by **23.0%**, partially offset by Inspire V and GLP-1 trial delays[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - Gross margin decreased to **84.0%** from 84.8%, primarily due to a **$2.1 million charge** for excess Inspire IV components[184](index=184&type=chunk)[185](index=185&type=chunk) - R&D expenses decreased by **9.2%** to $26.2 million due to lower costs for next-gen products[186](index=186&type=chunk) - SG&A expenses increased by **20.8%** to $159.5 million, driven by higher compensation, marketing, and general corporate costs[187](index=187&type=chunk) - Other income, net, decreased by **82.9%** due to a **$4.0 million impairment charge** on a strategic investment[188](index=188&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=39&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This subsection analyzes the financial performance for the first half of 2025 versus 2024 Key Financials (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | $ Change | % Change | | :------------------------------------ | :----- | :----- | :------- | :------- | | Revenue | $418,403 | $359,895 | $58,508 | 16.3% | | Cost of goods sold | $65,381 | $54,600 | $10,781 | 19.7% | | Gross profit | $353,022 | $305,295 | $47,727 | 15.6% | | Gross margin | 84.4% | 84.8% | -0.4% | | | Operating (loss) income | $(4,801) | $(10,119) | $5,318 | (52.6)% | | Net income (loss) | $(600) | $(212) | $(388) | 183.0% | - U.S. revenue increased by **16.6%** and international revenue increased by **8.2%**[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Gross margin decreased to **84.4%** from 84.8%, primarily due to the **$2.1 million charge** for excess Inspire IV components[193](index=193&type=chunk)[194](index=194&type=chunk) - R&D expenses decreased by **6.4%** to $54.0 million due to lower costs for next-gen products[195](index=195&type=chunk) - SG&A expenses increased by **17.9%** to $303.8 million, driven by higher compensation and general corporate costs[196](index=196&type=chunk) - Other income, net, decreased by **$5.0 million** due to a **$4.0 million impairment charge** on a strategic investment[197](index=197&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial position, sources of liquidity, and capital needs - Existing cash, cash equivalents, and investments are believed to be sufficient to cover needs for at least the next **12 months**[199](index=199&type=chunk)[207](index=207&type=chunk) - As of June 30, 2025, cash, cash equivalents, and available-for-sale debt securities totaled **$410.7 million**[201](index=201&type=chunk) - Working capital decreased by **$62.5 million** to $479.8 million, primarily due to share repurchases and inventory purchases[201](index=201&type=chunk)[202](index=202&type=chunk) - The decrease in working capital was partially offset by a **$44.6 million increase in accounts receivable** and a **$41.5 million increase in inventories**[202](index=202&type=chunk) - The investment policy focuses on preserving capital while maximizing income[203](index=203&type=chunk) - SG&A and R&D expenditures are expected to increase in H2 2025, potentially reducing cash flow from operations[204](index=204&type=chunk) - Capital expenditures were **$17.4 million** in H1 2025, mainly for manufacturing equipment for Inspire V[205](index=205&type=chunk) [Cash Flows](index=42&type=section&id=Cash%20Flows) This section provides a detailed analysis of cash flows from operating, investing, and financing activities [Operating Activities](index=42&type=section&id=Operating%20Activities) This subsection details the cash generated from or used in the company's principal revenue-producing activities - Net cash used in operating activities was **$4.0 million** for H1 2025, a shift from **$8.8 million provided** in H1 2024[210](index=210&type=chunk)[211](index=211&type=chunk) - The H1 2025 usage was due to a net loss and an **$86.0 million increase in net operating assets**[211](index=211&type=chunk) - The increase in accounts receivable was partly due to a temporary delay in customer invoice delivery[211](index=211&type=chunk) [Investing Activities](index=42&type=section&id=Investing%20Activities) This subsection details cash flows related to the acquisition and disposal of long-term assets and other investments - Net cash provided by investing activities was **$45.0 million** for H1 2025, a significant increase from **$13.9 million used** in H1 2024[210](index=210&type=chunk)[213](index=213&type=chunk) - This was driven by **$173.7 million in proceeds** from sales/maturities of investments, offset by purchases and capital expenditures[213](index=213&type=chunk) [Financing Activities](index=43&type=section&id=Financing%20Activities) This subsection details cash flows resulting from changes in the size and composition of equity capital and borrowings - Net cash used in financing activities was **$84.1 million** for H1 2025, a reversal from **$7.9 million provided** in H1 2024[210](index=210&type=chunk)[216](index=216&type=chunk) - The H1 2025 usage was primarily due to **$75.0 million in share repurchases** and **$20.9 million in taxes paid** on equity awards[216](index=216&type=chunk) [Contractual Obligations and Commitments](index=43&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms there have been no material changes to contractual obligations since the last annual report - There have been **no material changes** to the company's contractual obligations since the Annual Report[218](index=218&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms there have been no material changes to critical accounting policies since the last annual report - **No material changes** to critical accounting policies and estimates have occurred since the Annual Report[219](index=219&type=chunk) [Recent Accounting Pronouncements](index=43&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to the financial statement notes for information on new accounting standards - A discussion of recent accounting pronouncements is included in Note 2 to the financial statements[220](index=220&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to interest rate, credit, and foreign currency risks [Interest Rate Risk](index=43&type=section&id=Interest%20Rate%20Risk) This subsection describes the company's exposure to fluctuations in interest rates - Interest rate risk is primarily limited to cash equivalents and short-term investments[221](index=221&type=chunk) - A hypothetical **1% change in interest rates** would have impacted interest income by approximately **$2.0 million** for H1 2025[221](index=221&type=chunk) [Credit Risk, Foreign Currency Risk, and Inflation Risk](index=43&type=section&id=Credit%20Risk,%20Foreign%20Currency%20Risk,%20and%20Inflation%20Risk) This subsection confirms no material changes to other market risks since the last annual report - **No material changes** to credit, foreign currency, and inflation risks have occurred since the Annual Report[222](index=222&type=chunk) - Cash balances exceed insured limits, posing a risk in case of institutional failure[223](index=223&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and changes in internal financial reporting controls [Evaluation of disclosure controls and procedures](index=44&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) This subsection provides management's conclusion on the effectiveness of disclosure controls - Management concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[224](index=224&type=chunk) [Changes in internal control over financial reporting](index=44&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This subsection reports on any significant changes to internal controls during the quarter - There were **no changes** in internal control over financial reporting during Q2 2025 that materially affected controls[225](index=225&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, and other corporate matters [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed information on legal proceedings from the financial notes - The company is involved in claims and litigation in the ordinary course of business[227](index=227&type=chunk) - Information on legal proceedings is incorporated by reference from **Note 11**[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[227](index=227&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing potential fluctuations in financial results - **No material changes** to the risk factors disclosed in the Annual Report have occurred, other than those discussed[228](index=228&type=chunk) - Quarterly and annual results may fluctuate significantly due to factors like **seasonality** and delays in elective surgeries[230](index=230&type=chunk) - The launch of **Inspire V** is expected to impact consolidated revenue through H2 2025 as customers destock Inspire IV[231](index=231&type=chunk) - Other factors causing fluctuations include changes in payor coverage, reimbursement challenges, and new product offerings[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities to report - None to report[234](index=234&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities - None to report[235](index=235&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable - Not applicable[236](index=236&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section provides information on Rule 10b5-1 trading arrangements by directors and officers Rule 10b5-1 Trading Arrangements by Directors and Executive Officers | Name | Title | Action | Rule 10b5-1 Adoption/Termination Date | Aggregate Number of Shares of Common Stock to be Sold | Expiration Date | | :----------- | :-------------------------------- | :--------- | :------------------------------------ | :---------------------------------------------------- | :-------------- | | John Rondoni | Chief Product and Innovation Officer | Adopt | May 28, 2025 | 39,659 | May 12, 2026 | | John Rondoni | Chief Product and Innovation Officer | Terminate | May 13, 2025 | 21,832 | May 30, 2025 | - The reported shares include those issuable from unvested RSUs and PSUs, subject to vesting and performance conditions[238](index=238&type=chunk) - No other Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter[239](index=239&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents[240](index=240&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the official signatures of the company's certifying officers - The report is signed by Timothy P. Herbert, CEO, and Richard J. Buchholz, CFO, on August 4, 2025[244](index=244&type=chunk)

Exhibit 99.1 Inspire Medical Systems, Inc. Announces Second Quarter 2025 Financial Results and Updates 2025 Outlook MINNEAPOLIS, MN - August 4, 2025 - Inspire Medical Systems, Inc. (NYSE: INSP) (Inspire, or the company), a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea, today reported financial results for the quarter ended June 30, 2025. Recent Business Highlights "The full launch of our FDA-c ...