Inspire(INSP) - 2022 Q2 - Quarterly Report

Part I. Financial Information Consolidated Financial Statements Inspire Medical Systems, Inc.'s financial statements as of June 30, 2022, show decreased total assets and stockholders' equity, alongside increased revenue but wider net losses for the three and six months ended Consolidated Balance Sheets As of June 30, 2022, total assets decreased slightly to $292.0 million from $295.1 million, with cash and cash equivalents falling to $186.6 million, while total stockholders' equity also declined Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $186,570 | $214,467 | | Inventories | $21,857 | $17,231 | | Total current assets | $263,133 | $268,537 | | Total assets | $292,002 | $295,084 | | Liabilities & Equity | | | | Total current liabilities | $46,853 | $41,307 | | Total liabilities | $65,018 | $66,036 | | Total stockholders' equity | $226,984 | $229,048 | Consolidated Statements of Operations and Comprehensive Loss Revenue significantly increased to $91.4 million in Q2 2022 and $160.8 million for H1 2022, yet net loss widened to $14.5 million and $31.2 million respectively, compared to prior-year periods Key Operating Results (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $91,386 | $52,959 | $160,768 | $93,311 | | Gross Profit | $77,213 | $45,441 | $136,591 | $79,812 | | Operating Loss | $(14,007) | $(12,544) | $(30,063) | $(28,233) | | Net Loss | $(14,490) | $(13,088) | $(31,184) | $(29,304) | | Net Loss Per Share | $(0.53) | $(0.48) | $(1.13) | $(1.08) | Consolidated Statements of Cash Flows Net cash used in operating activities improved to $18.7 million for the six months ended June 30, 2022, but increased investing activities led to an overall $27.9 million decrease in cash and cash equivalents Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,702) | $(20,515) | | Net cash used in investing activities | $(12,884) | $(477) | | Net cash provided by financing activities | $3,663 | $7,029 | | Decrease in cash and cash equivalents | $(27,897) | $(13,977) | Notes to Consolidated Financial Statements The notes detail the company's business as a medical technology firm specializing in OSA solutions, its revenue recognition policies, and significant increases in advertising expenses and outstanding credit facility debt - The company is a medical technology firm focused on developing and commercializing minimally invasive solutions for patients with obstructive sleep apnea (OSA) and its proprietary Inspire system is an FDA-approved neurostimulation technology[33] Revenue by Geographic Region (in thousands) | Region | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $87,876 | $49,353 | $154,302 | $87,122 | | All other countries | $3,510 | $3,606 | $6,466 | $6,189 | | Total revenue | $91,386 | $52,959 | $160,768 | $93,311 | - Advertising expenses increased significantly, totaling $18.0 million for Q2 2022 and $33.5 million for H1 2022, compared to $11.5 million and $20.6 million in the respective prior-year periods[73] - As of June 30, 2022, the company had $21.4 million outstanding under its credit facility, which matures in March 2024[86] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 72.6% Q2 2022 revenue growth to market penetration and awareness, despite increased net loss due to higher cost of goods sold and operating expenses, while maintaining strong liquidity Overview Inspire Medical Systems, a medical technology company, commercializes an FDA-approved neurostimulation treatment for Obstructive Sleep Apnea (OSA), expanding its sales force and securing broad reimbursement coverage - The company's direct sales force expanded to 191 U.S. territories, and the number of U.S. medical centers implanting Inspire therapy grew to 785 as of June 30, 2022[135] - New Category I CPT codes for the implant procedure and a related diagnostic procedure (DISE) became effective on January 1, 2022, formalizing reimbursement pathways[123] - The company is seeing increased patient inquiries about Inspire therapy, believed to be partially driven by the Philips Respironics CPAP recall[134] - Recent product development achievements include FDA approval for full-body MRI compatibility (July 2022) and a Bluetooth-enabled patient remote (December 2021)[131] Results of Operations Q2 2022 revenue increased 72.6% to $91.4 million, primarily from U.S. growth, but operating expenses rose 57.3% due to increased headcount and marketing, resulting in a wider operating loss Q2 2022 vs Q2 2021 Performance (in thousands) | Metric | Q2 2022 | Q2 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $91,386 | $52,959 | $38,427 | 72.6% | | Gross Profit | $77,213 | $45,441 | $31,772 | 69.9% | | R&D Expenses | $14,534 | $9,288 | $5,246 | 56.5% | | SG&A Expenses | $76,686 | $48,697 | $27,989 | 57.5% | | Operating Loss | $(14,007) | $(12,544) | $(1,463) | 11.7% | - U.S. revenue growth was driven by increased market penetration, expansion into new territories, and a list price increase that began to be phased in during May 2022[153] - The increase in SG&A expenses was primarily driven by a $16.7 million rise in compensation-related costs from increased headcount and a $7.8 million increase in marketing expenses, including new national TV ads[158] Liquidity and Capital Resources As of June 30, 2022, the company held $196.3 million in cash and investments, with working capital at $216.3 million, and believes its capital is sufficient for at least the next 12 months despite cash decreases from operations and investments - The company had cash, cash equivalents, and available-for-sale securities of $196.3 million as of June 30, 2022[170] - The company had $21.4 million of outstanding borrowings under its credit facility as of June 30, 2022, with principal payments having commenced in April 2022[172] - Management believes existing cash, along with cash flow from operations, will be sufficient to meet cash needs for at least the next 12 months[177] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks relate to interest rate fluctuations on cash equivalents and variable-rate debt, with no material changes in exposure to credit, foreign currency, or inflation risks since year-end 2021 - The primary market risk is from interest rate fluctuations, which affects cash equivalents and variable-rate debt, and a hypothetical 1% change in interest rates would not have had a material impact[187] - There have been no material changes in the company's exposure to credit risk, foreign currency risk, or inflation risk since the end of fiscal year 2021[188] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[189] - No changes occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[190] Part II. Other Information Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - The company is not party to any material legal proceedings[192] Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021[193] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[194] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act and the Inline XBRL documents - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files[199]