Title

Presentation

Inspire Medical Systems, Inc. beats earnings expectations. Reported EPS is $0.1, expectations were $-0.27533.

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

Ezgi Yagci: Thank you, Dylan, and thank you all for participating in today’s call. Joining me are Timothy P. Herbert, Chairman and Chief Executive Officer, and Matthew Osberg, Chief Financial Officer. Earlier today, we released financial results for the three months ended 03/31/2026. 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, 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 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 Forms 10-K and 10-Q, as well as the Form 10-Q, which we filed this afternoon with the SEC for the quarter ended 03/31/2026. Inspire Medical Systems, Inc. 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, 05/04/2026.

With that, it is my pleasure to turn the call over to Timothy P. Herbert. Tim?

Timothy P. Herbert: Thank you, Ezgi, and 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 and will then turn it over to Matthew, who will provide additional insights on our first quarter and full year financials. We will then open up the call for questions. First, I want to 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 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, and 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 and, 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. As such, 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 nonbinding newsletter from the American Hospital Association recommending the use of an unlisted CPT code, specifically 64999. However, the use of an unlisted code requires manual reviews and additional support from centers.

Because of this, 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. Medicare Advantage is managed by commercial payers; we recommend consistent coding practices as defined by the payer, and Medicare Advantage patients are also prior authorized. Although challenging, there has been progress in coding and reimbursement, and we have seen initial billing practices being established by physicians and centers in response to the changes in coding. However, we recognize that significant uncertainty remains, and 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 six pilot states, and the program kicked off in 2026.

During the first quarter, the WISER program created prior authorization delays for traditional Medicare procedures in the six 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 on 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 an improved 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 can begin to deliver returns in 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 conference 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 thousand-patient cohort will be presented at the SLEEP conference. 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 two other independent studies using two 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 two years of follow-up. These strong results suggest Inspire provides systemic cardiovascular and respiratory health benefits and reduces health care 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 explant 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 have already done for over 135 thousand patients since our inception. We will continue to take action 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 will now turn the call over to Matthew for his review of our financial performance.

Matthew Osberg: Thank you, Tim, and good afternoon, everyone. First, I will begin with a 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 pretax income is a 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 one territory manager to one 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 and 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.

Changes in prior authorization rates typically impact revenue on a one-quarter lag. We expect the adverse revenue impact from these items to improve 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 to $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% to 4%, diluted EPS in the range of $0.07 to $0.62, and adjusted diluted EPS in the range of $0.75 to $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% to 70%, and an adjusted effective tax rate of 27% to 29%. The increase in the effective tax rates as compared to our previous outlook primarily relates to lower expected pretax 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% to 11% year-over-year revenue decline in 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 prior authorizations in the first quarter. Additionally, we expect an adjusted operating loss in the second quarter of $10 million to $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. Tim, you may now open the line for questions.

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Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone. To withdraw your question, please press 1-1 again. Due to the essence of time, we ask that you please limit your questions to no more than one. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robert Justin Marcus from J.P. Morgan. Please go ahead.

Analyst: This is Lily on for Robbie. Maybe just starting with the guidance, I was hoping you could walk through your thinking behind the updated range. I think what we are all trying to figure out is how de-risked the guide is now. Can you walk through the assumptions that you are 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 is one that you can not just meet but hopefully exceed? Thanks so much.

Timothy P. Herbert: Thank you very much, Lily, and thanks for the question. I would just highlight a little bit on the reimbursement, and each center looks at it a little bit differently. Our goal is to really focus with centers on providing education and a methodology that they are comfortable with to consistently start coding and billing for patients, both Medicare and commercial. Our assumption is that will improve as we progress through the year. But we know, as Matthew mentioned, there is a one-quarter lag in prior authorization. As the coding uncertainty unfolded 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 is that we are going to be able to build that confidence as we move through the quarter and improve prior authorizations during the second quarter and beyond, and that will show a benefit in implants and revenue as we progress through the year.

Matthew Osberg: Hey, Lily, maybe following up on what Tim said. As I pointed out, we saw a $20 million impact in Q1. We are estimating that accelerates and gets to $40 million to $50 million in Q2. If you look at the range for the year and back into what Q3 and Q4 might be, you can still see there are fairly significant impacts in the third and fourth quarters, although they are improving from the impact that we had in Q2. That risk is abating a bit from the second quarter.

Operator: Thank you. Our next question comes from the line of Jonathan David Block from Stifel. Please go ahead.

Jonathan David Block: I will keep it to one question. In terms of the $120 million to $150 million impact for the year from reimbursement headwinds, where do those revenues go? What can the company do to ensure they stay hot leads at some point and do not leave, whether that is coming back in 2027 or even beyond? And then, to push on the improvement into the back part of the year, if there is this one-quarter lag from prior authorization to getting through the funnel, are you starting to see anything thaw? It is early May. You are anticipating some sort of improvement 2Q to 3Q. Are there any green shoots starting to take place?

Timothy P. Herbert: Absolutely, great point on the hot leads. We make sure we work with our centers to keep track of the patients. We work with them on their prior authorizations and help them get those submissions in, and we also help patients make that first appointment, 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. As far as seeing some improvements, with Medicare and the changes we have there with the new C-code and that being incorporated into the MAC local coverage determinations, we are starting to see a little headway, and that is important, as well as surgeons having experience billing the Inspire IV code without modification.

The more experience we get there, the more it will build on itself, and even if there is a modifier down the road, we would minimize any negative impact. Secondly, as we gain experience with the WISER cases in those six states, we are improving the prior authorization process, and that will continue to improve as we get to the second, third, and fourth quarters.

Operator: Thank you. Our next question comes from the line of Adam Carl Maeder from Piper Sandler. Please go ahead.

Adam Carl Maeder: Hi, good afternoon. Thank you for taking the question. On the revised outlook, I just wanted to confirm that the guidance cut is entirely related to the reimbursement coding uncertainty plus headwind from WISER. Is that the case? GLP-1s did come up toward the end of the prepared remarks. Are you baking in a little bit more conservatism for those, or are you seeing anything from a competitive standpoint? Would love to flesh out those different components.

Matthew Osberg: Hey, Adam. If you do the math from where we started at the beginning of the year on our outlook and then what is implied now, and you say the $120 million to $150 million is due to some of the reimbursement headwinds, there is a gap. It is a smaller gap, but there is a gap. That is coming from a number of different things. Some of those are hard to put your finger on. We do think we are being impacted by GLP-1s, but it is harder to quantify what is driving some of that other impact. We definitely think the main part of the revenue takedown in our outlook is due to the reimbursement headwinds.

Operator: Thank you. Our next question comes from the line of Christopher Thomas Pasquale from Nephron Research. Please go ahead.

Christopher Thomas Pasquale: Thanks. Tim, can you talk a little bit more about the current state of the salesforce? 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 simultaneously dealing with new reps or reps with expanded territories having to establish new relationships while you are going through this period where your customers need you even more?

Timothy P. Herbert: Thanks, Chris. We do see adjustments in the field and, yes, it is a combination of both factors that you mentioned. We did our own adjustments with a realignment of our territories, and we increased the number of field clinical reps to get back to a one-to-one ratio. That started at the beginning of the year. I think we performed well in the first quarter by achieving the implants and revenue that we did, albeit impacted by the coding and reimbursement environment as well as WISER in those six states. It is purposeful for where we are, and we will continue to add territory managers as we deem appropriate. The field team is quite experienced right now, complemented by strong field clinical representatives. That allows us to address issues such as the current coding and reimbursement uncertainties.

Operator: Thank you. Our next question comes from the line of Anthony Charles Petrone from Mizuho. Please go ahead.

Anthony Charles Petrone: Thanks. Sticking with WISER, it is across six states and sounds like there is a higher prior authorization hurdle. Should we consider those procedures a backlog, or are they pushed out indefinitely as you navigate WISER? Then on CPT codes, some of the managed care policies still have the Inspire IV code and have introduced 64999. 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.

Timothy P. Herbert: That is great. On WISER, previously, in the non-WISER states, Medicare does not prior authorize. This is a new requirement placed on centers starting in January. We believe the majority of those patients exist, but as time goes on, they may get frustrated, which is why we want to act quickly. As we submit prior authorizations, we continue to learn, and centers are improving submissions as they understand WISER requirements. All six WISER states have different systems, with variability in each. We are working through that, and sites and our team are getting smarter to work with WISER more efficiently. As far as CPT coding, these are contracted rates with both facilities and payers. Payers want centers to work within their policies; that is what we are recommending as well.

The good news is that these patients carry a prior authorization. When we submit the initial application, it includes the CPT code that will be used during the procedure, and once we receive approval, that prevents a lot of post-procedure challenges. Using a 64999 code is confusing because it requires additional work, manual reviews, and additional communication from the sites to the payers. We continue to work with centers and payers and use the codes that are in the existing policies.

Operator: Thank you. Our next question comes from the line of Travis Lee Steed from Bank of America. Please go ahead.

Travis Lee Steed: Thanks for taking the question. On the $20 million impact, can you go through some of the math behind that? There are a lot of factors you are calling out. How do you get confidence in that $20 million number? And when you look at prior auth, are they not just billing 64568 for commercial? Curious why procedures are dropping if they can just bill 64568 for commercial, especially given UnitedHealthcare moved April 1 to that code.

Matthew Osberg: Travis, $20 million is an estimate. We have data, and we are triangulating different trends in the business to come up with that, looking at data quarter over quarter and versus last year and our expectations coming into the year. There is estimation involved, and we think we are triangulating it to $20 million in a reasonable range. As far as commercial payers, you are correct that when we support centers with prior authorizations, we use the code that is in the policy, and you are correct UnitedHealthcare adopted 64568 into their policy.

Timothy P. Herbert: We do not expect many commercial policies to move away from that. Although the overall coding and reimbursement environment put challenges on centers to understand what code they want to use, it caused a slowdown that we see with the reduction of prior authorizations. Commercial implants in the first quarter tend to be the prior authorizations submitted in the fourth quarter that were not completed within that quarter, which drove a lot of the revenue. The impacts in the second quarter will reflect centers slowing down to make sure they understand the coding and coverage situation before they ramp up submission of commercial cases. We believe we will continue to gain confidence, and we expect improvement in the second quarter and beyond through the continuation of the year.

Operator: Thank you. Our next question comes from the line of Lawrence H. Biegelsen from Wells Fargo. Please go ahead.

Lawrence H. Biegelsen: Good afternoon. Thanks for taking the question. A 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 64568. Why would there be a different code for Medicare and commercial payers? Is this common to have two different codes? And the 10-Q also states that you believe it is 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 on the Q4 call?

Timothy P. Herbert: Thank you, Larry. Your question really lays out the coding and reimbursement uncertainty in the quarter. In an ideal situation long term with the new CPT code, Medicare, Medicare Advantage, and commercial will all use the same CPT code. Where we are today, we do have that variance. The MACs currently identify 64582 for physicians to bill. The work related to Inspire IV and V for the pressure sensor is not that significant, and the Medicare difference in payment is only about $70 between the two procedures. The MACs have updated their local coverage determinations to not specify the use of a modifier and for surgeons to use 64582 for both Inspire IV and Inspire V cases. Overlapping with Travis’s question: commercial payers do not have to move away from 64568.

That is what they have in their policies; it is the contracted rate with the centers, and we expect they will stay at 64568 as long as it is in the policies. We recommend centers follow the policies and submit prior authorizations consistent with those policies. It does cause confusion within the system, and it is not typical. It puts us in a unique situation, and every center approaches it a little differently. We are gaining experience, and that is why we believe we will see challenges in the second quarter but will build through that in the second half of the year and get back to growth in 2027.

Operator: Thank you. Our next question comes from the line of Richard Samuel Newitter from Truist Securities. Please go ahead.

Richard Samuel Newitter: Thank you for taking the questions. Tim, you said there were a few MACs where you are saying they updated to say 64582, but no modifier required. In most instances, they had 64582 and there was nothing about a modifier, but they never updated to 64568 to begin with. When they put out their updated policies, technically, there is no update. What gives you the confidence to say those policies are updated saying you do not need to use a modifier? Is there risk that they could change to use a modifier? And as a follow-up, what is your definition of growth for 2027?

Timothy P. Herbert: Very good comment, Rich, and thank you. If I misspoke, I apologize. The LCDs identify 64582 as the only code, and they do not say “do not use a modifier.” They are silent on that and do not have language on a modifier. There are three MACs that have updated to include the new C-code but remain silent on any modifier. Several other MACs, 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; they remain silent. Is there risk that they could revisit this? We will monitor it, and we will monitor if there are surgeons who have used a modifier, what template they used, and any level of reduction in payment between the two. We know the difference in payment between 64582 and 64568 is only about $70.

On 2027, we have to be careful. We have a lot of work to do to achieve consistency and confidence in the coding and reimbursement environment to allow centers to increase utilization again. We are committed to getting back to growth, but it is premature to put too much detail around that today.

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

Michael K. Polark: I am interested in an update on the Inspire IV versus V mix. Tim, I heard you say you still have inventory of IV for centers that have concerns about V billing. Where does that stand? Is the company thinking about maybe reinvesting in IV to navigate this period?

Timothy P. Herbert: We did build up inventory, as you probably saw from the financials, and we have good inventory of IV to offer 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 went through the first quarter, implants are predominantly Inspire V. When centers start doing Inspire V, they want to work through the coding and reimbursement and have a solution, but there are centers with different levels of Medicare reimbursement, geographically adjusted, that continue with Inspire IV. We will make it available to them. Once centers convert to V, they tend to want to stay there; they just want confidence in having a good coding solution and proper reimbursement.

Matthew Osberg: I would add that the mix in Q1 was predominantly Vs, and that mix really did not change much from Q4. We will continue to monitor it. We have inventory of IVs should that mix tick up.

Operator: Our next question comes from the line of Shagun Singh Chadha from RBC Capital Markets. Please go ahead.

Shagun Singh Chadha: Thank you for taking the question. While providing guidance, you indicated it is based on high-level assumptions. You are talking about the WISER program a little more than you have in the past; some of our checks suggested potential overutilization. You also mentioned GLP-1s; some checks suggest it is driving a lag before patients come in for Inspire therapy, potentially over a year. Can you put a finer point on your comment around returning back to growth? Why should you return to growth anytime before 01/01/2028 when you have a new code?

Timothy P. Herbert: Thank you. As Matthew went through in his comments, the impact on our revenue this year, reflected in our updated guide, is really based on coding and reimbursement uncertainty as well as negative impact from the WISER program delaying procedures due to prior authorization. We mention GLP-1s as a broader topic but not as a significant part of the revenue adjustment. If we 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, we believe we can see improvements through the year to get back to a growth situation before 2028.

Operator: Thank you. Our next question comes from the line of David Kenneth Rescott from Baird. Please go ahead.

David Kenneth Rescott: Thanks for taking the questions. You mentioned prioritizing investing in revenue-generating activities. When I think about existing accounts versus adding new accounts, is the focus primarily on current accounts where you can capture untapped opportunities, or should we assume bringing on new accounts remains a growth driver into the back half and into 2027?

Timothy P. Herbert: Thank you, David. The answer is both. The number one focus is to make sure our existing centers have a solid pathway in coding and reimbursement. Once that is in place, and they understand how to code Medicare, commercial, and Medicare Advantage, and have confidence in reimbursement, they can increase the use of Inspire therapy, seen in increased prior authorization submissions and ability to take on more patients. There were challenges opening new centers in the first quarter with this coding uncertainty, but we are going to continue to lean into that because we still do not have the capacity to treat the patient demand that we have. We will continue to open new centers and train additional surgeons at existing sites.

That was a key benefit we talked about with Inspire V last year but have been unable to fully lean into until we get the coding taken care of. Priority one is increasing utilization at existing centers, but we will also continue opening new centers.

Operator: Thank you. Our next question comes from the line of Analyst from Jefferies. Please go ahead.

Analyst: You talked about getting accounts comfortable with billing and coding. What does it take for an account to get comfortable? Do they have to submit one, wait for reimbursement, then submit more? How long does it take for the average account to get comfortable?

Timothy P. Herbert: It is experience. We proactively conduct business reviews with centers. We want them to understand the coding and billing, including the use of one code for Medicare and a different code for commercial. We make sure the facility’s coding personnel understand the right code to use, submit that code, and closely monitor the payment when it comes back, or if it is denied, whether it needs to go to appeal. As we worked through the first quarter, we started to pick up that experience, and we will continue to lean in as we go through the year. Once they have a methodology set and a good pathway with the bridge we are establishing to the new CPT code, and we have some consistency, we can really ramp up. It is simply having positive experience with their coding processes.

Matthew Osberg: I would add that many challenges our customers face are unique to them. It is really understanding each customer’s challenge and how we can help. It is not a one-size-fits-all solution, so it is important we work closely with our customers.

Operator: Thank you. Our next question comes from the line of Brett Adam Fishbin from KeyBanc Capital Markets. Please go ahead.

Brett Adam Fishbin: Thanks for taking the question. On the competitive landscape, with a competitor now launched for a few quarters in the U.S., are you seeing any impact from centers trialing the new device or shifting their mix in any tangible way? How have you updated the guidance to account for any changes there?

Timothy P. Herbert: When we issued initial guidance, we noted a competitive presence. With the coding and reimbursement uncertainty and the WISER situation in six states, we are really focused on addressing those two key challenges. That predominantly drives the actions of the centers right now, with less ability to introduce a new topic. Centers are really focused on coding and WISER, as is our team. We did not introduce anything new in the revised outlook specifically related to competition.

Operator: Thank you. Our next question comes from the line of Daniel Markowitz from Evercore ISI. Please go ahead.

Daniel Markowitz: Following up on what it will take for centers to feel like they have a handle on this, what gets you confident that we can get to the point where centers are comfortable before there is coding uniformity across payer types? Could we see some pent-up demand as we potentially return to growth in 2027, given that procedures have been put on hold?

Timothy P. Herbert: On pent-up demand, centers understand the benefits when they are able to do Inspire V procedures, including the ability to take care of more patients as the procedure is more comfortable for an ENT surgeon compared to Inspire IV. We have not had the ability to fully lean into that and push the clinical evidence with Inspire V. That will come, and it should help with growth in 2027 and beyond. On confidence before uniformity, it comes from centers submitting cases and seeing positive acceptance of prior authorizations, positive acceptance of billing with the new coding methodology, and receiving expected reimbursement. That will continue to grow confidence and allow us to open the gates more and increase volume.

Operator: Thank you. Our last question in the queue comes from the line of Michael Kratky from Leerink Partners. Please go ahead.

Michael Kratky: Thanks for taking the question. On the rest-of-year cadence and growth implications, you provided helpful color on the second quarter and the dollar impact from reimbursement and WISER. What will be the key points of sensitivity that could get you to the high end versus low end of the range in 3Q and 4Q?

Matthew Osberg: The main thing is how quickly we can move customers through their challenges with coding and reimbursement. If those challenges remain for longer, you are looking at the higher end of the impact range. If customers are able to move through more quickly, then you are looking at the lower end of the impact range.

Timothy P. Herbert: Thanks all for joining the call today. As always, I am 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. We appreciate your continued interest and support and look forward to providing you with further updates in the months ahead.

Operator: Thank you. This concludes today’s conference call. You may all disconnect.

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