insp-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

________________________________


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024 or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-38468

______________________________

Inspire Medical Systems, Inc.

(Exact name of registrant as specified in its charter)

______________________________


Delaware			26-1377674
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
5500 Wayzata Blvd., Suite 1600 Golden Valley, MN			55416
(Address of principal executive offices)			(Zip Code)

(844) 672-4357

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

INSP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2024, the registrant had 29,821,707 shares of common stock, $0.001 par value per share, outstanding.

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		Page
	Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION	5
Item 1.	Consolidated Financial Statements	5
	Balance Sheets	5
	Statements of Operations and Comprehensive Income (Loss)	6
	Statements of Stockholders' Equity	7
	Statements of Cash Flows	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

	Signatures	42

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements, including, without limitation, statements regarding our future results of operations and financial position, business strategy, the impact of macroeconomic trends on our business, financial results and financial position, prospective products, international product approvals and commercializations, our expectations regarding the final reimbursement levels for Inspire therapy procedures, research and development costs, timing and likelihood of success, other insurance providers' plans to begin approving our Inspire therapy, our sales and marketing initiatives, potential supply chain disruptions, and the plans and objectives of management for future operations.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties, and assumptions, including, but not limited to:

•our history of operating losses and dependency on our Inspire system for revenues;

•commercial success and market acceptance of our Inspire therapy;

•our ability to achieve and maintain adequate levels of coverage or reimbursement for our Inspire system or any future products we may seek to commercialize;

•competitive companies and technologies in our industry;

•the impact on our business, financial condition, and results of operation from public health crises and pandemics;

•our ability to expand our indications and develop and commercialize additional products and enhancements to our Inspire system;

•future results of operations, financial position, research and development costs, capital requirements, and our needs for additional financing;

•our ability to forecast customer demand for our Inspire system and manage our inventory;

•our dependence on third-party suppliers, vendors, and contract manufacturers;

•risks related to consolidation in the healthcare industry;

•our ability to expand, manage, and maintain our direct sales and marketing organization, and to market and sell our Inspire system in markets outside of the United States;

•our ability to manage our growth;

•our ability to hire and retain our senior management and other highly qualified personnel;

•risks related to product liability claims and warranty claims;

•our ability to address quality issues that may arise with our Inspire system;

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•our ability to successfully integrate any acquired business, products, or technologies;

•changes in global macroeconomic conditions;

•any failure of key information technology systems, processes, or sites or damage to or inability to access our physical facilities;

•our ability to commercialize or obtain regulatory approvals or certifications for our Inspire therapy and system, or the effect of delays in commercializing or obtaining regulatory approvals or certifications;

•any violations of anti-bribery, anti-corruption, and anti-money laundering laws;

•our ability to use our net operating losses and research and development carryforwards;

•risks related to the increasing and evolving focus on sustainability and environmental, social, and governance initiatives;

•U.S. Food and Drug Administration ("FDA") or other United States or foreign regulatory actions affecting us or the healthcare industry generally, including risks associated with regulatory approvals, certifications, or healthcare reform measures in the United States and international markets;

•our ability to establish and maintain intellectual property protection for our Inspire therapy and system or avoid claims of infringement;

•changes in U.S. and foreign tax laws;

•risks related to our common stock; and

•other important factors that could cause actual results, performance, or achievements to differ materially from those contemplated that are found in "Part I, Item 1. Business," "Part I, Item 1A. Risk Factors," and "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 1A. Risk Factors" in this Quarterly Report.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Unless the context requires otherwise, references to “Inspire,” the “Company,” “we,” “us,” and “our,” refer to Inspire Medical Systems, Inc.

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PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Inspire Medical Systems, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)


	June 30, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	188,035	$	185,537
Investments, short-term	251,629		274,838
Accounts receivable, net of allowance for credit losses of $515 and $1,648, respectively	79,716		89,884
Inventories, net	59,025		33,885
Prepaid expenses and other current assets	28,755		9,595
Total current assets	607,160		593,739
Investments, long-term	26,344		9,143
Property and equipment, net	61,701		39,984
Operating lease right-of-use assets	22,189		22,667
Other non-current assets	10,995		11,278
Total assets	$	728,389	$	676,811
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	33,621	$	38,839
Accrued expenses	32,036		39,266

Total current liabilities	65,657		78,105

Operating lease liabilities, non-current portion	24,512		24,846
Other non-current liabilities	149		1,346
Total liabilities	90,318		104,297
Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common Stock, $0.001 par value per share; 200,000,000 shares authorized; 29,805,301 and 29,560,464 issued and outstanding at June 30, 2024 and December 31, 2023, respectively	30		30
Additional paid-in capital	983,791		917,107
Accumulated other comprehensive (loss) income	(115)		800
Accumulated deficit	(345,635)		(345,423)
Total stockholders' equity	638,071		572,514
Total liabilities and stockholders' equity	$	728,389	$	676,811

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Inspire Medical Systems, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	195,885	$	151,092	$	359,895	$	278,989
Cost of goods sold	29,843		24,252		54,600		44,140
Gross profit	166,042		126,840		305,295		234,849
Operating expenses:
Research and development	28,859		30,821		57,709		56,340
Selling, general and administrative	132,084		112,618		257,705		214,606
Total operating expenses	160,943		143,439		315,414		270,946
Operating income (loss)	5,099		(16,599)		(10,119)		(36,097)
Other (income) expense:
Interest and dividend income	(5,882)		(4,922)		(11,805)		(9,195)

Other expense, net	135		61		195		44
Total other income	(5,747)		(4,861)		(11,610)		(9,151)
Income (loss) before income taxes	10,846		(11,738)		1,491		(26,946)
Income taxes	1,053		214		1,703		430
Net income (loss)	9,793		(11,952)		(212)		(27,376)
Other comprehensive income (loss):
Foreign currency translation (loss) gain	(39)		72		(173)		177
Unrealized (loss) gain on investments	(200)		(1)		(742)		12
Total comprehensive income (loss)	$	9,554	$	(11,881)	$	(1,127)	$	(27,187)
Net income (loss) per share:
Basic	$	0.33	$	(0.41)	$	(0.01)	$	(0.94)
Diluted	$	0.32	$	(0.41)	$	(0.01)	$	(0.94)
Weighted average shares outstanding:
Basic	29,728,849		29,229,922		29,672,006		29,160,323
Diluted	30,408,439		29,229,922		29,672,006		29,160,323

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Inspire Medical Systems, Inc.

Consolidated Statements of Stockholders' Equity (unaudited)

(in thousands, except share amounts)


	Six Months Ended June 30, 2024
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
Balance at December 31, 2023	29,560,464	$	30	$	917,107	$	800	$	(345,423)	$	572,514
Stock options exercised	88,276	—		3,616		—		—		3,616
Vesting of restricted stock units	41,185	—		—		—		—		—
Shares held for tax withholdings	(14,373)	—		(2,848)		—		—		(2,848)
Issuance of common stock	543	—		101		—		—		101
Stock-based compensation expense	—	—		26,322		—		—		26,322
Other comprehensive loss	—	—		—		(676)		—		(676)
Net loss	—	—		—		—		(10,005)		(10,005)
Balance at March 31, 2024	29,676,095	30		944,298		124		(355,428)		589,024
Stock options exercised	88,328	—		5,517		—		—		5,517
Vesting of restricted stock units	21,340	—		—		—		—		—
Shares held for tax withholdings	(10,985)	—		(1,862)		—		—		(1,862)
Issuance of common stock	365	—		85		—		—		85
Issuance of common stock for employee stock purchase plan	30,158	—		3,431		—		—		3,431
Stock-based compensation expense	—	—		32,322		—		—		32,322
Other comprehensive loss	—	—		—		(239)		—		(239)
Net income	—	—		—		—		9,793		9,793
Balance at June 30, 2024	29,805,301	$	30	$	983,791	$	(115)	$	(345,635)	$	638,071

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Inspire Medical Systems, Inc.

Consolidated Statements of Stockholders' Equity (unaudited)

(in thousands, except share amounts)

Six Months Ended June 30, 2023

Common Stock

Amount

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
(Loss) Income

Accumulated
Deficit

Total
Stockholders'
Equity

Balance at December 31, 2022

29,008,368