Inspire Medical Systems Q1 2026 Earnings Call - Coding Chaos and WISeR Delays Cut Full-Year Outlook

Delemm, Conference Operator, Inspire Medical Systems: Good afternoon. My name is Delemm, I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Inspire Medical Systems First Quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there’ll be a question-and-answer session. I’ll now hand the conference over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Ezgi Yagci, Vice President of Investor Relations, Inspire Medical Systems: Thank you, Delemm, 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 3 months ended March 31st, 2026. 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 ten-Q, as well as the Form 10-Q, which we filed this afternoon with the SEC for the quarter ended March 31st, 2026. 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 4th, 2026. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you, Ezgi. Thanks everyone for joining us today. On the call today, I will start by providing some key takeaways of our first quarter results, including an update on coding and reimbursement. I will also provide some insight into our revised outlook for the year. I will then turn it over to Matt, who will provide additional insights on our first quarter and full year financials. We will open up the call for questions. First, I wanna highlight how pleased we are with the team’s execution in the first quarter. Despite challenges related to coding and reimbursement uncertainty, as well as the WISeR program, the organization delivered revenue growth and improved adjusted operating income and operating cash flow compared to the prior year period. In this environment, it is critical that we focus on the factors within our control.

Our first quarter results demonstrate this, as well as our focus on prioritizing revenue-generating activities and maintaining disciplined cost management while continuing to make targeted investments to support long-term growth. We believe these actions position the company well, both in the near and long term. As we progressed through the first quarter, we saw many developments with respect to coding and reimbursement, and we are diligently working to establish a consistent methodology to coding of the Inspire V procedure in the short term. The long-term solution is to establish a new CPT code for a single-lead Inspire system. This is a long process, and if approved, we expect this new CPT code to become effective on January 1, 2028. Therefore, we are establishing short-term remedies for the various payers to bridge until the new CPT code is in place.

For centers concerned with the Inspire V reimbursement, we have inventory of Inspire IV, which has proven itself to be an extremely effective therapy with clear coding and reimbursement. As for coding for Inspire V systems, we are working with physicians, centers, and payers to establish clear and consistent coding and reimbursement guidelines, and there was progress in the first quarter. For Medicare patients, the Centers for Medicare & Medicaid Services, or CMS, announced the creation of a C-code to be used with Inspire V procedures. The Medicare Administrative Contractors, or MACs, are beginning to incorporate the C-code into their local policies. This provides a reliable solution for hospitals and ambulatory surgical centers. Importantly, the facility payment is equal to the Inspire IV CPT code 64582.

Staying with Medicare, for physicians, currently, the MACs list the Inspire IV CPT code 64582 without the use of a modifier. The majority of Medicare cases this year have been billed without the use of a modifier, and we will continue to monitor this throughout the year. At this point, the commercial payers continue to list CPT code 64568 for Inspire V procedures. There is guidance provided by societies, including a non-binding newsletter from the American Hospital Association recommending the use of an unlisted CPT code, specifically 64999. The use of an unlisted code requires manual reviews and additional support from centers. Many centers and payers may be reluctant to adopt the use of this unlisted code.

The good news for commercial payers is each case is prior authorized, meaning the billing code is approved in the prior authorization before the procedure, significantly reducing payment uncertainty for the center. We recommend consistent coding practices as defined by the payer, Medicare Advantage patients are also prior authorized. Although challenging, there has been progress in coding and reimbursement, We’ve seen initial billing practices being established by physicians and centers in response to the changes in coding. However, we recognize that significant uncertainty remains, We will continue to support our customers as they navigate the path forward. This coding uncertainty has adversely impacted the number of patients in the pipeline, including the number of prior authorizations submitted to commercial payers as we moved through the first quarter.

We expect this trend to reverse and improve in the remainder of the year as we continue to support prior authorizations and build confidence in the coding processes and guidelines. To further support patient access to therapy, we are increasing our assistance to customers by providing additional proactive education relating to prior authorization and billing processes, and we are adding to our field reimbursement team. Our goal is to provide as much clarity to our customers as possible to mitigate disruptions to patient access to care. Switching to the WISeR program. WISeR is a government initiative requiring AI-reviewed prior authorization for Medicare cases in 6 pilot states, and the program kicked off in mid-January of 2026. During the first quarter, the WISeR program created prior authorization delays for traditional Medicare procedures in the 6 WISeR states, resulting in a headwind to our first quarter revenue.

As we continue to gain experience working with the new systems in these states, we anticipate the headwinds to abate in the remainder of the year. With the ongoing coding and reimbursement challenges and the WISeR program impact, we are revising our full-year revenue outlook. In light of our lower revenue outlook, and as we demonstrated in the first quarter, we will continue to be disciplined with our spending and focus on prioritizing revenue-generating activities while still making progress long-term growth investments. In addition to enhancing our support to customers for proactive education and assistance with prior authorization and billing processes, we are also prioritizing projects to drive and improve patient care pathway, enhanced marketing effectiveness, improved digital product experience, continued R&D for new product development, and operational efficiencies.

We believe that these projects in these areas can begin to deliver returns in the second half of 2026 and accelerate in 2027. We continue to remain focused on our commitment to put the patient first and deliver strong patient outcomes. We continue to believe that there is a large untreated population of people struggling with sleep apnea that can benefit from Inspire therapy, and we continue to be encouraged by the strong adoption of Inspire V and the positive data we continue to collect. At the upcoming SLEEP 2026 in Baltimore in June, we will be presenting the full results from the Inspire V trial conducted in Singapore.

While we have previewed some of the early data points, including inspiratory overlap, this is the first time we will be showing the full trial results, including the ability of the new accelerometer-based sensing technology and the safety and efficacy of the Inspire V implant. Additionally, the Inspire ADHERE trial is now complete. The data from the 5,000 patient cohort will be presented at SLEEP 2026. This is a real-world cohort demonstrating the effectiveness of Inspire as it is delivered today and builds upon our previous safety and efficacy trials.

We will further highlight the effects of Inspire therapy on cardiovascular outcomes utilizing a large claims database to retrospectively examine incident cases of cardiovascular disease after Inspire implantation as compared to a matched group of patients receiving CPAP therapy and those not receiving treatment. At the sleep conference, we will present this study on the cardiovascular outcomes along with 2 other independent studies using 2 different claims databases to compare the use of various claims databases in the demonstration of improved cardiovascular and respiratory outcomes associated with Inspire therapy. In addition, a third independent study from Virginia Commonwealth University was just published in a peer-reviewed journal. The data demonstrated that the Inspire patient cohort had significantly lower odds of stroke, myocardial infarction, atrial fibrillation, acute heart failure, acute respiratory failure, and hospitalization, to name a few, with at least 2 years follow-up.

These strong results suggest Inspire provides systemic cardiovascular and respiratory health benefits and reduces healthcare burden compared to CPAP. We expect further studies to support these findings. We are happy to report that the PREDICTOR manuscript has been accepted by a major medical journal, and we look forward to the publication in the coming weeks. As you are aware, PREDICTOR is the 600 patient study we conducted to demonstrate alternative screening options to replace the drug-induced sleep endoscopy, or DISE procedure, for a large subset of eligible patients, improving the patient experience and reducing the timeline to implant. Last but not least, last month, we published our 2025 patient experience report. Highlighted in the report is a continued improvement in our revision and expand rates, which were 1.7% and less than 1% respectively for full year 2024.

In summary, we remain focused on providing the best therapy solution for patients and helping our customers navigate what we believe will be a temporary market disruption related to coding and reimbursement and the WISeR program. We are actively addressing the challenges posed by this disruption, and we remain excited about our product and the market opportunity to improve the lives of our patients as we’ve already done for over 135,000 patients since our inception. We will continue to take actions to position the company for long-term profitable growth, and we believe that we have the right strategies in place to drive long-term stakeholder value. I’ll now turn the call over to Matt for his review of our financial performance.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Thank you, Tim, and good afternoon, everyone. First, I’ll begin with the review of the first quarter results and then follow with commentary on our outlook for the remainder of 2026. Revenue increased 1.6% to $204.6 million, primarily driven by increased market penetration. As Tim mentioned, in the first quarter, we experienced disruption related to coding and reimbursement challenges and the WISeR program, and we estimate that these items adversely impacted revenue by approximately $20 million. Operating margin and adjusted operating margin improved primarily driven by gross profit expansion due to a higher sales mix of Inspire V systems.

The effective tax rate increased to 571.2%, primarily driven by tax shortfalls related to our stock-based compensation, which were created by a decline in our stock price at award vesting date compared to the stock price at grant date. Additionally, in the prior year period, we maintained a full valuation allowance against federal and state deferred tax assets. The adjusted effective tax rate, which removes the impact of stock-based compensation, was 25.7%. As we mentioned on our fourth quarter call, as we are in a situation where our pre-tax income is relatively small base, certain discrete tax charges can have a material impact on our tax rate.

Due to the fact that we have a significant amount of stock-based compensation outstanding and due to the volatility of our stock price, the tax impact of stock-based compensation on our effective tax rate can be material and could have significant variability from year to year. We expect the tax impact from stock-based compensation will be concentrated in the first quarter of the year as that is when the majority of our vesting of our RSUs and PSUs occur. Diluted EPS was a loss of $0.39 and adjusted diluted EPS was $0.10 for the quarter. Our adjusted EBITDA margin, which excludes the impact of stock-based compensation, improved 100 basis points to 17.5%. Turning to cash flow and the balance sheet.

Operating cash flow was $12.8 million for the quarter, an improvement of $20 million compared to the first quarter of the prior year, primarily driven by improved working capital, partially offset by a higher net loss in the current period. Our balance sheet remains strong with no debt and $400 million in cash and investments at the end of the quarter. Our strong cash position allows us to remain focused on making investments to drive profitable growth. We ended the quarter with 284 U.S. territories and 288 U.S. field clinical representatives. We are being strategic in our approach to territory management and optimizing our model through targeted territory consolidation. We hired 13 field clinical reps in the quarter and are now at our goal of 1 territory manager to 1 field clinical rep.

Turning now to our 2026 outlook. We are revising our full year revenue outlook to be in the range of $825 million to $875 million. This range incorporates updated assumptions of the expected impact on our full year results from continued coding and reimbursement uncertainty and the WISeR program. As I mentioned, our first quarter revenue was adversely impacted by coding and reimbursement challenges in the WISeR program by an estimated $20 million. We expect the adverse impact of these items to increase to approximately $40 million to $50 million in the second quarter as we see a more dramatic impact on our second quarter revenue due to the decline in pre-authorizations in the first quarter, as changes in pre-authorization rates typically impact revenue on a 1-quarter lag.

We expect the adverse revenue impact from these items to improve sequentially from the second quarter as we progress into the third and fourth quarters as our customers receive more education and build experience with coding and billing processes, and as we continue to gain experience working with the WISeR state systems. For the full year, we are currently estimating the total impact of these items to be in a range of $120 million-$150 million. Due to the nature of the items noted, the estimated impact of these factors on our first quarter results and full year outlook reflect high level assumptions based on currently available data and incorporate inherent uncertainty related to quantifying how each of these items impacts customers, physicians, and patients.

The ultimate impact of these items may differ materially from current expectations based on how quickly coding and reimbursement clarity evolves over the fiscal year. Although we believe there is a long-term benefit to our market from GLP-1s as prospective patients lose weight and become eligible for Inspire therapy, we also believe that in the short term, our revenue is being adversely impacted by their increasing prevalence and adoption. Our ability to estimate the potential impact of GLP-1 therapies on revenue is subject to meaningful uncertainty and relies on limited and evolving data regarding patient behavior, physician prescribing patterns, referral dynamics, and payer coverage decisions, and may not fully capture developments in longer term treatment options for obstructive sleep apnea. In addition to revising our revenue outlook, we are also revising our outlook on profitability metrics for the year.

We now expect adjusted operating margin in the range of 2%-4%, diluted EPS in the range of $0.07-$0.62, and adjusted diluted EPS in the range of $0.75-$1.25. The changes to these metrics primarily represent the impact of the lower revenue outlook, partially offset by continued actions to reduce operating expenses. Our updated outlook assumes an effective tax rate of 65%-70% and an adjusted effective tax rate of 27%-29%. The increase in the effective tax rates as compared to our previous outlook primarily relates to lower expected pre-tax income. Our outlook assumes estimated weighted average diluted shares outstanding of approximately 29.4 million and capital expenditures between $40 million and $45 million.

Looking at the cadence of the year, we are forecasting a 9%-11% year-over-year revenue decline in the second quarter of 2026 due to the expected ongoing impact of coding and reimbursement uncertainty, the impact of the WISeR program, and lower expected commercial procedures driven by a reduction in pre-authorizations in the first quarter. Additionally, we expect an adjusted operating loss in the second quarter of $10 million-$15 million, primarily due to our lower revenue expectation and sequentially higher operating expenses as compared to the first quarter, primarily due to higher stock-based compensation expense. We expect sequential improvement from Q2 in both our revenue and adjusted operating income in the back half of the year, with the fourth quarter having the highest levels of the year.

As we demonstrated in the first quarter, we will continue to be disciplined with our spending and focus on prioritizing revenue generating activities while still making investments in long-term growth. In closing, despite the dynamic reimbursement landscape, our team remains committed to providing strong patient outcomes and supporting our customers. As we look ahead to the remainder of 2026, we will continue to emphasize execution and remain focused on what we can control in order to drive long-term shareholder value. This concludes our prepared remarks. Gulen, you may now open the line for questions.

Delemm, Conference Operator, Inspire Medical Systems: Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. To withdraw your question, please press star one one again. Due to the essence of time, we ask that you please limit your questions to no more than 1. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Robbie Marcus from JPMorgan. Please go ahead.

Lily, Analyst, JPMorgan: Hi, this is Lily on for Robbie. Thanks so much for taking the question. Just starting with the guidance, I was hoping you could walk through your thinking behind the updated range. I think what we’re all trying to figure out is how de-risked the guide is now. Can you walk through the assumptions that you’re making around reimbursement and the confusion around the reimbursement and what that looks like the rest of the year? Why are you confident that this is now the right range, and it’s one that you can not just meet, but hopefully exceed? Thanks so much.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you very much, Lily, and thanks for the question. I do wanna just highlight a little bit on the reimbursement. Each center looks at it a little bit differently. What our goal is to really focus the centers in providing education and a methodology that they’re comfortable with to consistently start coding and billing for patients, both Medicare and commercial. Our assumptions is that will improve as we progress through the year. We know as Matt mentioned, there’s a one-quarter lag in prior authorization. As the coding impact or uncertainty unfold in the beginning of the year, a lot of centers put on the brakes to make sure they understood it before they proceeded forward with prior authorization.

Our core assumption, and I’ll let Matt jump in, our core assumption is that we are going to be able to build that confidence as we move through the quarter and improve prior authorization during the second quarter and beyond, and that will show a net benefit or a benefit in implants and revenue as we progress through the year.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Yeah. Hey, Lily, it’s Matt. Maybe following up on what Tim said. You know, as I pointed out, we saw a $20 million impact in Q1. We’re estimating that accelerates and gets to $40 million-$50 million in Q2. Then I think if you look at the range for the year and back into what Q3 and Q4 might be, you can still see there’s fairly significant impacts on the third and fourth quarter, although they’re improving from the impact that we had in Q2. We still have risk in for the remainder of the year, although that’s, that risk is abating a bit from the second quarter.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our next question comes from the line of Jon Block from Stifel. Please go ahead.

Jon Block, Analyst, Stifel: Great. Thanks, guys. Good afternoon. I’ll adhere to the 1 question, maybe one and a half. Just first, you know, in terms of the $120 million-$150 million impact for the year from reimbursement headwinds, you know, Tim Herbert, where do those revenues go? Maybe importantly, what can the company do to ensure they sort of stay hot leads at some point and don’t leave, you know, whether that’s coming back in 2027 or even beyond. Maybe you can talk to that a bit. Then just to push on the improvement into the back part of the year, if I’m framing that correctly, if there’s this 1 quarter lag from pre-authorization to getting through the funnel, call it, I mean, are you starting to see anything thaw, right? It’s early May.

You are anticipating some sort of improvement two Q to three Q. Maybe help us out. Just like real time, are there any green shoots that’s starting to take place? Thanks, guys.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Absolutely. Very good. Jon, great point on the hot leads. Yes, we make sure we work with our centers to keep track of the patients. We do work with them on their prior authorization and help them get those submissions in. We also help patients make that first appointment. We’re trying to make sure we stay in contact with all these patients to give them the opportunity to receive Inspire therapy. We know they are there and still require treatment. We’re doing everything we can to make sure we continue to communicate with them and work with the centers to track them and work with their prior authorizations.

As far as seeing some improvements, I think with Medicare and the changes that we have there with the new C-code and that being incorporated into the MAC LCDs, Local Coverage Determinations, we’re starting to see a little headway there, and that’s important. As well as surgeons having experience billing the Inspire IV code without modification. The more experience we get there, I think we’ll, that will build on itself. Even if there’s a modifier down the road that we would minimize any kind of negative impact to that.

Secondly, when we start looking at the WISeR cases, when we gain experience in those 6 states to be able to work through the prior authorization and be able to improve that process, and that will continue to improve as we get to 2nd, 3rd, and 4th quarters.

Jon Block, Analyst, Stifel: Thank you.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our next question comes from the line of Adam Maeder from Piper Sandler. Please go ahead.

Adam Maeder, Analyst, Piper Sandler: Hi. Good afternoon. Thank you for taking the questions. I guess I wanted to ask just one kind of bigger picture question on the revised outlook. Just wanted to confirm, Tim or Matt, that the guidance cut is entirely related to the reimbursement coding uncertainty plus headwind from WISeR. Is that the case? Or, you know, GLP-1s did come up, I think, towards the end of the prepared remarks. I’m not sure if you’re baking in a little bit of more conservatism for those or if you’re seeing anything from a competitive standpoint. Just would love just to, I guess, kind of, flesh out all those different components. Thank you.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Yeah. Hey, Adam. It’s Matt. I’ll jump in on that one. I think if you do the math and from where we started at the beginning of the year on our outlook and then what it’s implied now.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: You say the 120-150 is due to some of the reimbursement headwinds. There’s a gap there. It’s a smaller gap obviously, but there’s a gap. That’s coming from a number of different things. Some of those are hard to put your finger on. You know, we do think we’re being impacted by GLP-1s, but harder to put your finger on what’s driving some of that other impact. But we definitely think that the main part of the revenue, takedown in our outlook is due to the reimbursement headwinds.

Adam Maeder, Analyst, Piper Sandler: Thank you.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Chris Pasquale from Nephron Research. Please go ahead.

Chris Pasquale, Analyst, Nephron Research: Thanks. Tim, I was hoping to talk a little bit more about the current state of the sales force. Your U.S. territory count has contracted three quarters in a row, now down high teens from where you were a year ago, which is a pretty big adjustment. How much of that has been an intentional rethinking of your commercial organization versus unplanned attrition? Are you kinda simultaneously dealing with new reps or reps with expanded territories having to establish new relationships while you’re going through this period where your customers kinda need you even more?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Gotcha. Thanks, Chris. We do see field adjustments in the field. Yes, it’s a combination of both factors that you talked about. We did our own adjustments with our realignment of our territories, as you described, and also increase in the number of field clinical reps wanting to get our ratio back to 1 to 1. That started beginning of the year. I think we performed pretty well with that in the first quarter by achieving the implants and the revenue that we did, albeit, as Matt mentioned, impacted by the coding and the reimbursement environment as well as WISeR in those 6 states. I think it’s purposeful for where we are, and we’ll continue to add territory managers as we deem appropriate. I think the field team’s doing quite well.

We have a pretty experienced team right now. Complementing those sales territory managers along with a strong field clinical representative, I think we’re handling that very well, and that allows us to address issues such as this coding and reimbursement uncertainties.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Anthony Petrone from Mizuho Financial Group. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group: Thanks. You know, maybe sticking with WISeR here specifically, you know, it’s across six states. It sounds like there’s a, you know, a higher prior authorization hurdle here. You know, are those procedures, should we kinda consider those backlog, or are they sort of just pushed out indefinitely as you navigate WISeR? Just billing on the codes, the CPT codes, some of these policies are, the managed care policies specifically still have the Inspire IV code. They’ve introduced 64999. You know, why is it not just the case that they can bill to the code in the policy? Why is there ambiguity? Sorry for the two-part question there.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: No, that’s okay. Good. That’s great. WISeR, as you mentioned, with a prior authorization previously, in the other, non-WISeR states, Medicare does not prior authorize. This is a new requirement that was placed on centers starting middle of January. Yeah, we believe the majority of those patients exist, but as time goes on, they may get frustrated. That’s why we wanna act quickly. As we submit prior authorizations, we continue to learn, and centers are able to provide improvements in those prior authorizations to ask questions or be able to understand the WISeR requirements that they’re placing on them. What we’ve learned is all 6 of the WISeR states have a different system, and there’s variability in each.

We’re trying to work through that and the sites and ourselves are getting smarter to be able to work with WISeR in a more efficient manner. As far as CPT coding goes, these are contracted rates with both facilities and payers. Payers want to have centers work within their policies, and that’s what we’re recommending as well. As we mentioned before, the good news is that these patients do carry a prior authorization. When we submit the initial application, it does have the CPT code that will be used during the procedure. Once we receive approval, that really kind of prevents a lot of post-procedure challenges. Using a 64999 code is confusing because it does take additional work. It does take manual reviews.

It does take additional communication from the sites to the payers. I think right now we continue to work with centers and payers and use the codes that are in the existing policies.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Travis Steed from Bank of America. Please go ahead. Mr. Steed, if you have your phone on mute, please unmute your line.

Anthony Petrone, Analyst, Mizuho Financial Group7: I do. Sorry. Thanks for taking the question. On the $20 million impact, maybe if you could kind of go through some of the math behind that. You know, there’s a lot of factors you’re calling out, but we’re curious, how do you kind of get confidence in that $20 million number? When you look at the prior auths, are they just billing 64568 for commercial? Just curious why products are dropping if they can just bill a 64568 for commercial, especially given UnitedHealthcare, I think, just moved April 1st as well to that code.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Yeah, Travis, this is Matt. Maybe I’ll take the first half of that question. Tim, grab the second one. Obviously, $20 million is an estimate. We’ve got some data, and we’re triangulating some different trends in the business to come up with that, looking at, you know, data we’ve got quarter over quarter and versus last year and our expectations coming into the year. It’s a way for us to triangulate it. Obviously, there’s estimation involved with that, and we think we’re triangulating it to $20 million in a reasonable range.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: As far as the commercial payers, you’re correct that when we support centers with doing the prior authorizations, we use the code that’s in the policy. You’re correct, UnitedHealthcare just adopted 64568 into their policy. We don’t expect a lot of the commercial policies to move away from that. Although the whole coding and reimbursement environment put challenges on the centers to understand what code that they want to use, and it causes a slowdown that we see with the reduction of prior authorizations. The implants, commercial implants in the first quarter, tend to be the prior authorizations submitted in the fourth quarter that were not completed within that quarter. That kind of drove a lot of the revenue.

Now the implants in the second quarter are gonna be reflective of the centers slowing down to make sure they understand the coding coverage situation before they wrap up submission of commercial cases. With that, we believe we’re gonna continue to gain confidence, and that’s what you’ll see will continue to improve as here in the second quarter and beyond through the continuation of the year.

Anthony Petrone, Analyst, Mizuho Financial Group7: Great. Thank you.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

Larry Biegelsen, Analyst, Wells Fargo: Good afternoon. Thanks for taking the question. Hey, Tim, one, I guess technical coding and reimbursement question. The 10-Q states that the MACs identify CPT code 64582 as the appropriate code for Inspire V, but commercial payers continue to pay, you know, 64568. Why would there be a different code for Medicare and commercial payers? Is this common to have two different codes? The 10-Q also states that you believe that it’s appropriate to bill 64582 without a modifier, but 64582 includes a respiratory sensor. Why would it not be appropriate to use a modifier as you expected, I think, on the Q4 call? Thanks.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: I think Larry, thank you. I think your question really kinda laid out the coding and reimbursement uncertainty in the quarter. With an ideal situation long term with the new CPT code, Medicare Advantage commercial will all use the same CPT code. Where we are today, we do have that variance. With the MACs currently identifying 64582 for positions to bill, I understand that the work related to Inspire 4 and 5 for the pressure sensor is that not that significant and the Medicare difference in payment is only $70 between the two procedures. They have updated their Local Coverage Determinations to not specify the use of a modifier and for surgeons to use 64582 for both the Inspire 4 and Inspire 5 cases.

Back a little bit overlapping, Travis asked a good question. With commercial payers, why would they move away from 64568? The answer is they don’t really have to. That is the what they have in their policy. It’s the contracted rates that they have with the centers, and we expect that we will stay at 64568 as long as they’re in the policies and recommend centers follow the policies and submit prior authorizations to policies. It does cause some confusion, as you can imagine, with the payers within the system, and it’s just simply not typical. You just don’t see events like this, and it really puts us in a unique situation, and every center kind of uses it a little bit differently.

I think we’re gaining experience with it, and that’s why we believe with the prior authorization we’ll see challenges in the 2nd quarter but be able to build through that in the 2nd half of the year and get back to growth in 2027.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our next question comes from the line of Richard Newitter from Truist Securities. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group4: Hi. Excuse me. Thank you for taking the questions. Tim, just on your last comment there, I think you said there were a few MACs where you’re saying they updated to, say, 64582 but no modifier required. I guess you know, in most instances, they had 64582, and there was nothing about a modifier, but they never updated to 64568 to begin with. I guess when they put out their updated policies, technically they’re not. There is no update. What gives you the confidence to say that those policies are updated saying you don’t need to use a modifier, and is there risk that they could change to use a modifier?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Sure. Very good comment. Very good comment, Richard, and thank you. If I misspoke, and I think I probably did. The LCDs identify 64582 as the only code, and they don’t say, "Do not use a modifier." They just are silent on that, and they don’t have any language in there on a modifier. There are three MACs who have updated to include the new C-code but remain silent on any modifier. There are several other MACs who, you are correct, did not switch over to 64568. At this point, there is no MAC that identifies the use of a modifier with Inspire V cases, and they remain silent on that. Is there risk to it if they wanna come back and review this in the future?

That’s something that we will continue to monitor and will, certainly, monitor if there are surgeons who have used a modifier and what template they used and is there any or what level of reduction there was with the payment between the two. We do know that the difference in payment between 64582 and 64568 is only $70.

Anthony Petrone, Analyst, Mizuho Financial Group4: Got it.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: with you, Rich, if that makes sense.

Anthony Petrone, Analyst, Mizuho Financial Group4: It does. Thank you. Just what’s your definition of growth for 27? I appreciate, you know, 26 is hard enough, so I’m not asking you to pinpoint us on 27. You did say a return to growth in 27. It’s an opportunity to kind of corral the sheep, if you will. Any, you know, where would you presume, you know, consensus should fall? What’s your definition of growth at this juncture to be prudent?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Yeah. Thanks, Rich. We have to be careful with that ’cause we have a lot of work to do, as you heard from some of the questions right before here in our prepared remarks on working through and getting consistency and confidence in a coding and reimbursement environment to allow centers to open up and increase their utilization again is really kind of our focus. Keep asking that question through the year as we go, and we’ll provide updates to it. We are committed to getting back to growth. You just gotta be careful about really kinda putting too much of a detail to that.

Anthony Petrone, Analyst, Mizuho Financial Group4: Okay. Thank you, Tim.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Mike Polark from Wolfe Research. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group2: Hey, good afternoon. I’m interested in an update on the Inspire IV versus Inspire V mix. Tim, I heard you say you still have inventory of Inspire IV for centers that have concerns about Inspire V billing. Where does that stand? Is the company thinking about maybe reinvesting in Inspire IV to navigate this difficult period? Thank you.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Sure. We did build up an inventory as you probably saw from the financials. We do have good inventory of 4 to be able to offer that to centers in the U.S., as well as to continue to support ongoing implants in Europe and Asia. As we started the year and as we went through the first quarter, implants are predominantly Inspire V. I think when centers start doing Inspire V, they wanna work through the coding and reimbursement. They wanna have a solution to that. There are centers that have different levels of Medicare reimbursement, as you know, from geographically adjusted, that they do adopt, they continue with Inspire IV. While we make it, we’re gonna make it available to them.

I think once centers convert over to 5, they kind of want to stay there. They just want confidence in having a good coding solution and to have proper reimbursement.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Hey, Mike, this is Matt. I’d just add to that, you know, as Tim said, predominantly the mix in Q1 was fives, and that mix really didn’t change very much from what we saw in Q4. We’re gonna continue to monitor it, but so far it’s been predominantly fives. As Tim said, we’ve got inventory of fours should that mix tick up a little bit.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Shagun Singh from RBC Capital Markets. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group5: Great. Thank you so much for taking the question. Tim, I was intrigued that while you were providing your guidance, you indicated that it’s based on some high level assumptions. You know, this quarter you’re talking about the WISeR program a little bit more than you have in the past. I think some of our checks were suggesting there could be a little bit of overutilization there. You’re also mentioning GLP-1s, and some of our checks were suggesting that it’s driving a bit of a lag between when patients do come in eventually to get the Inspire therapy, and it could be over 1 year. You know, can you put a finer point on your 20... You know, just the comment around returning back to growth.

you know, why should you return back to growth any time before January 1, 2028, when you do have a new code? Thank you.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you very much. I think as Matt went through in his comments, the impact on our revenue this year and which is reflected in our updated guide, is really based on coding and reimbursement uncertainty, as well as negative impact from the WISeR program and delaying procedures due to prior authorization. We make mention of the GLP-1s as a broader topic, but not specifically having a significant part of that revenue adjustment. I think if we can focus our activities on gaining confidence with a solid methodology for coding and reimbursement and continue to learn to work with the WISeR systems to gain prior authorizations, that we can continue to see improvements through the year to get back to a growth situation.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of David Rescott from Baird. Please go ahead.

David Rescott, Analyst, Baird: Oh, great. Thanks for taking the questions. Tim, you mentioned I think a couple of times that, you know, despite this uncertainty, the company’s continuing to prioritize investing in these revenue-generating activities. When I, when I think about, you know, the existing accounts that potentially are revenue-generating and, you know, the prior algorithm for growth of adding new accounts, is it fair to assume that the focus at this point is primarily on the accounts that you have today, where you can capture that untapped or push through some of those revenue opportunities?

Should we assume, you know, as we’re looking into the back half of the year and into 2027, that still bringing on new accounts, maybe is a way in which you expect to grow next year? Just any more granularity on those prioritized investments would be helpful. Thank you.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you, David. Yeah, the answer is both. I think you ask a very clear question on, do we focus on existing centers? The number 1 focus area is to make sure our existing centers have a solid pathway in coding and reimbursement. I know we’ve repeated this over and over, but once that is in place and they understand how they can code both Medicare commercial and Medicare Advantage, and they have confidence in the reimbursement that they’re going to receive, that they can increase the use of Inspire therapy, and we’ll be able to see that with increased prior authorization submissions and the ability to take on more patients.

As we work through this, the inherent question in there is the challenges of opening new centers in the first quarter with this coding uncertainty also existed, but we’re gonna continue to lean into that because we still don’t have the capacity to treat the patient demand that we have. We will continue to open new centers or train additional surgeons at existing sites. That was one of the key benefits that we talked about with Inspire V last year, but have been unable to kinda lean into until we get the coding taken care of. Yeah, the priority is certainly open up and increase utilization at existing centers, but we are still gonna be leaning in to open new centers as well.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group0: Good afternoon, and thanks for taking the question. Tim, you talked about getting accounts comfortable with the billing and coding situation. I guess, what does it take? I know this can vary by account, but when you think about it, what does it take to get an account comfortable? Do they have to submit 1 and then maybe wait for reimbursement, then submit 2 more? I guess, how long does it take for, you know, the average account to get comfortable here?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: It’s experience. What we do is we make sure that we proactively conduct business reviews with centers. We want them to understand what the coding and billing is, and as we mentioned from prior questions with Larry about the one code for Medicare, different code for commercial. To make sure that the coding personnel at the facility understands what the right code is to use to be able to send that code in and then closely monitor the payment when it comes back or if it’s denied, did it have to go back to an appeal to be able to do that. As we work through the first quarter, we’re starting to pick up that experience, and we’re gonna continue to lean in on that as we work through the year.

That’s what we define kinda as confidence in their coding. Once they have a methodology and have a good pathway with the bridge that we’re establishing to the new CPT code, and if we have some consistency there, we can really ramp up. I guess it’s simply having experience with positive experience with their coding processes.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Yeah, the only thing I’d add to add to this is, you know, a lot of what’s are experiencing our customers is, it’s really unique. It’s really understanding what their challenge is and how we can help them. It’s not a, kind of a broad one-size-fits-all solution across our customer base. It’s really, for us, it’s important we work with our customers and help them in the challenges that they’re having.

Anthony Petrone, Analyst, Mizuho Financial Group0: Great. Thank you.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thank you.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. Our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets. Please go ahead.

Brett Fishbin, Analyst, KeyBanc Capital Markets: Hey, guys. Thank you for taking the questions. Was just hoping you could address the competitive landscape, mainly with a competitor now being launched for a few quarters here in the U.S. Just wondering if you’re seeing, you know, maybe an impact from centers filing the new device or shifting their mix in any tangible way, and then how you’ve updated the guidance to account for any changes there. Thank you so much.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: definitely, Brett. I think that when we did our initial guidance out there, we made note that, yeah, there is a competitive presence out there. I think with the coding and the reimbursement uncertainty, and then certainly in the six states with the WISeR accounts, I think we’re really focused on addressing those two key challenges. That, that predominantly drives the actions of the centers, much less having the ability to introduce a new topic. I think all the centers are really focused on that as our team is, and we’re gonna continue to stay there as we work through the second quarter and through the duration of the year.

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Brett, I would say we didn’t introduce anything new in terms of some of the revised outlooks specifically related to competition.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our next question comes from the line of Daniel Markowitz from Evercore ISI. Please go ahead.

Daniel Markowitz, Analyst, Evercore ISI: Hey, thanks for taking my question. I just wanted to follow up on the question on what will it take for centers to feel like they have a handle on this. I guess what gets you confident that we can get to the point that these centers are comfortable before there’s coding uniformity across payer types? Then just a brief follow-up on that, could we possibly see some pent-up as we potentially return to hopeful growth in 2027, just given that, you know, the number of procedures have been sort of put on hold?

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Well, let me answer the last one first and kind of work back to getting confidence with centers. I do think that centers understand when they are able to do Inspire V procedures, the benefits that that may have, and their ability to take care of more patients as the procedure is more comfortable for an ENT surgeon as compared to an Inspire IV. Again, we haven’t had the ability to really lean in on that and really push the clinical evidence that comes with the Inspire V procedure. I think that will be in the future, and I think that will kinda help with the growth in 2027 and beyond certainly.

Again, it’s just experience with centers to be able to submit cases and see positive acceptance of prior authorizations, positive acceptance of billing using the new coding methodology, and then certainly receiving expected payment or expected reimbursement. That will continue to grow confidence and allow us to open the gates more and continue to increase volume.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. I show our last question in the queue comes from the line of Mike Kratky from Leerink Partners. Please go ahead.

Anthony Petrone, Analyst, Mizuho Financial Group1: Hey, everyone. Thanks for taking our questions. Just to drill down on rest of year cadence and growth implications, I mean, you provided some helpful color on the second quarter and the dollar impact from reimbursement and WISeR. What are going to be the key points of sensitivity that could get you to the high end versus low end of the range in 3Q and 4Q?

Matt Osberg, Chief Financial Officer, Inspire Medical Systems: Yeah. I think the main thing, as we’ve been talking about, is how quickly that we can move customers through their challenges with coding and reimbursement, right? If some of those remain for longer periods, then you’re looking at the higher end of the range. If customers are able to move through that quickly, more quickly, then you’re looking at the lower end of the range.

Tim Herbert, Chairman and Chief Executive Officer, Inspire Medical Systems: Thanks, Mike. Hey, thanks all for joining the call today. As always, I’m grateful to our team of dedicated 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. For all of you on the call, we appreciate your continued interest in and support and look forward to providing you with further updates in the months ahead.

Delemm, Conference Operator, Inspire Medical Systems: Thank you. This concludes today’s conference call. You may all disconnect.