Inspire Medical Systems Q4 2025 Earnings Call - Coding Shift to CPT 64582 with -52 Modifier Threatens Physician Fees and 2026 Guidance

Dilem, Conference Operator: Good afternoon. My name is Dilem, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Inspire Medical Systems fourth quarter and full year 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. I’ll now hand the call 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, Dilem, and 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 and 12 months ended December 31, 2025. 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 10-Q, as well as the Form 10-K which we expect to file later this week with the SEC for the fiscal year ended December 31, 2025. 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, February 11, 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, and thanks everyone for joining our business update call for the fourth quarter and full year 2025. On this call, I will start by providing an update on reimbursement of our Inspire 5 system, followed by some key takeaways of our fourth quarter and full year results. Then Matt will provide a financial review of our fourth quarter and full year 2025 results and our full year 2026 outlook. We will then open the call for questions. The key challenge for our business since late last year is, of course, the coding of the Inspire 5 procedure. A few weeks ago at an investor conference, we shared that we were actively engaging with key government agencies and physician societies regarding the use of CPT code 64568 versus CPT code 64582 with a -52 modifier for the Inspire 5 procedure.

In the last week, we received clarification regarding the coding that should be used for the Inspire 5 procedure. Currently, healthcare centers and physicians should bill the most recent healthcare policies, be it a MAC or a commercial payer. Based on the clarification, we believe the code will transition to CPT code 64582 for the Inspire 5 procedure, including the use of a -52 modifier. We estimate that the reduction to the professional fee associated with applying the -52 modifier could range from approximately 10%-50% of the base rate. The actual reduction may vary by MAC, and we will not know the precise impact until sufficient claims data have been submitted and processed across payers.

In any case, we believe that a significant decrease in the professional fee resulting from use of the -52 modifier will likely influence physicians’ willingness to perform the Inspire 5 procedure and may limit the number of cases they choose to undertake. We intend to address these challenges by focusing on short and long-term initiatives. Over the short term, as we work through 2026, we plan to work with the appropriate stakeholders on initiatives intended to minimize the actual reduction applied to the professional fee, as well as to drive consistency across the country. As an initial observation, we believe there is strong justification for applying a smaller reduction given the markedly higher surgical skill and complexity associated with implanting the stimulation lead compared to the sensing lead.

Furthermore, because of the excellent progress made with the launch of Inspire 5 to close out 2025, significant coding experience now exists for the Inspire 5 procedure. CPT code 64568 was used for approximately 10,000 Inspire 5 procedures in 2025, which provides a basis for professional reimbursement. The professional fee for CPT code 64568 is approximately 10% less than the reimbursement for CPT code 64582 used for Inspire 4 procedures and reflects the reduced work associated with implanting the pressure sensing lead. As a note, we are nearing the completion of manufacturing of the Inspire 4 systems. However, we believe that we have sufficient inventory available for centers who may choose to remain with the Inspire 4 system for the foreseeable future.

Given this dynamic reimbursement landscape, we have revised and widened our full year revenue guidance for 2026 to reflect the broad range of possible impacts that we may experience throughout the year. Over the long term, we will be focused on developing a new CPT code. With clarity on the coding of Inspire 5 procedures, as well as hospital and ASC site of service reimbursement, and an action plan to clarify the professional fee payment, we can return to patient care, and I will start by reiterating our commitment to put the patient first and deliver strong patient outcomes. Over the past few months, we had the privilege to show data from the Singapore study and the U.S. limited market release, and we are excited and energized by the strong performance of the Inspire 5 system.

Being more specific, the Inspire 5 system has demonstrated superiority over Inspire 4, as the data has shown, a reduction in surgical time with the Inspire 5 system, inspiratory overlap, which is the essential factor for closed-loop therapy, has shown to be significantly improved with the Inspire 5 system, and the AHI in the Singapore study has demonstrated a 79.5% responder rate using the SHER criteria, which is far superior to the 66% responder rate demonstrated in the STAR phase III pivotal trial in 2012. Inspire system reliability continues to improve year-over-year, and the 2025 data to date has shown a 0.5% occurrence of device explants and a 1.5% occurrence of revisions. With respect to the Inspire 5 U.S.

Launch, the team has made significant progress in the fourth quarter, and we are excited to report that physician training is complete, contracting is over 95% complete for our centers, and SleepSync onboarding is complete for over 90%, bringing the total to over 90% of our centers implanting Inspire 5 today. We expect to have stable product inventory for Inspire 5 through all 2026, and we anticipate transitioning the existing Inspire 4 IPG line to Inspire 5 later in 2026. Switching to our quarterly results, we are very pleased with the strong revenue performance and cost discipline we delivered in the fourth quarter, which enabled us to deliver positive operating incomes and earnings. We ended the year with 295 U.S. territories and 275 U.S. field clinical representatives.

As we enter 2026, we are being more strategic in our approach to territory management and optimizing our model through targeted territory consolidation and increased field clinical reps. We hired 7 field clinical reps in the quarter, consistent with our strategy to get the ratio closer to 1-to-1 territory manager to field clinical rep. On patient marketing, we had a very strong finish to 2025 regarding patient demand for Inspire therapy, including a significant increase in the fourth quarter in social media activity. We believe that this increase is related to the incremental growth investments we made in the back half of 2025. The WISeR program, which is a government initiative requiring prior authorization of Medicare cases in 6 pilot states, kicked off in mid-January of 2026. To date, many Medicare cases have been submitted and approved.

However, there have also been denials for multiple reasons, including medical criteria inconsistencies in the AI software as well as coding. We continue to provide prior authorization support to our centers as they work through the WISeR implementation, and we’ll update you as we have more information. But the WISeR program has affected Medicare patient procedures in these six states in the first quarter. With respect to our R&D initiatives, we recently began testing a prior authorization feature in SleepSync, which will provide a simplified uploading of patient data to support preparation of prior authorization submissions. We believe this is an important initiative to enhance patient access to Inspire therapy, and we continue to look for additional ways to increase the utility of SleepSync. We are also excited to announce that we recently received FDA approval for 3 Tesla MRI compatibility.

In addition, in 2026, one of our primary product development programs will be Inspire 6, which will include sleep detection and auto activation, meaning the device will turn itself on when the patient falls asleep and turn itself off when the patient awakens, maximizing therapy adherence. In summary, we remain focused on the patient to continue the growth and the adoption of Inspire therapy. We will execute our growth strategy of driving high-quality patient flow and increasing the capacity of our provider partners to effectively treat and manage more patients. Our key strategies include training advanced practice providers, certifying additional surgeons qualified to implant Inspire therapy, and driving the adoption of Sleep Sync and our digital tools, all of which are embedded strategy in our commercial team’s objective in enhancing patient access to Inspire therapy.

Looking ahead, we are excited about our future, and we believe that we have the appropriate strategies in place to drive long-term stakeholder value, and we are focused on addressing reimbursement, as I described above. Looking beyond 2026, we continue to take actions to position the company for profitable growth. As we close 2025, I would like to thank Rick Buchholz for as many years at Inspire. With the close of 2025, Rick will move on to his new opportunity, and we wish him well. He joined Inspire in 2014 and was a key contributor to bringing Inspire to where it is today. With that, it is also my pleasure to introduce you to Matt Osberg for his initial earnings call at Inspire. Thank you, Tim, and good afternoon, everyone.

I’m excited to be part of the Inspire team, and I look forward to getting to know each of you in the coming months. Now let’s review our 2025 fourth quarter and full year financial results. Fourth quarter revenue increased 12% to $269 million, and full year revenue increased 14% to $912 million, with both increases primarily driven by growth at existing centers and new center additions. Fourth quarter and full year operating margin improved primarily due to sales leverage and a higher sales mix of Inspire 5 systems. As expected, fourth quarter and full year income tax was a significant benefit, primarily driven by the previously disclosed release of the company’s income tax valuation allowance of our net deferred tax assets in the fourth quarter of 2025. Fourth quarter net income per diluted share increased $3.51 to $4.66. Full year net income per diluted share increased $3.09 to $4.89.

Fourth quarter adjusted net income per diluted share increased $0.51 to $1.65. Full year adjusted net income per diluted share increased $0.80 to $2.42. Fourth quarter operating cash flow was $52 million, bringing the full year total operating cash flow to $117 million. We completed $50 million of share repurchases in the fourth quarter, bringing the full year total to $175 million, and we ended the quarter with $405 million in cash and investments. Our strong cash position allows us to remain focused on making investments to drive profitable growth. Turning to our 2026 outlook, we are revising our full year revenue outlook to be in the range of $950 million-$1 billion, representing 4%-10% growth.

This range reflects the expected impact on our first quarter from coding uncertainty, as well as the range of outcomes that exist by adopting CPT code 64582 with the -52 modifier and the related physician reimbursement rates for the full year. The low end of our outlook contemplates a 50% discount to the physician fee, while the high end of our outlook contemplates a 10% discount. As we progress through the first half of the year, we expect to gain further insights on the professional fee associated with the use of this modifier. Additionally, we expect adjusted operating margin in the range of 6%-8%, net income per diluted share in the range of $1.23-$1.81, and adjusted net income per diluted share in the range of $1.85-$2.35.

Our outlook assumes an effective tax rate of 44%-49% and an adjusted effective tax rate of 26%-28%. As we are in a situation where our pre-tax 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, including moving from a tax expense to a tax benefit between years. Therefore, we have excluded the tax impact of stock-based compensation in our adjusted income tax expense and our adjusted effective tax rate.

The ultimate amount of tax impact will primarily be determined by the difference in the value of the stock at the grant date as compared to the vesting date for RSUs and PSUs, or the grant date versus the exercise date for options. 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 the vesting of our RSUs and PSUs occur. Our outlook assumes estimated weighted average diluted shares outstanding of approximately 29.4 million and capital expenditures between $45 million-$50 million. Looking at the cadence of the year, due to the expected impact on our first quarter for coding uncertainty, we expect revenue in the first quarter of 2026 to be approximately flat to prior year.

Additionally, we expect a net loss in the first quarter due to our revenue expectation and forecasted year-over-year higher operating expenses. We expect sequential improvement in both our revenue and net income throughout the year, with the fourth quarter having the highest levels of revenue and profit in the year. Finally, in addition to revenue, we plan to focus more of our communications on measures such as operating income, operating margin, and net income per diluted share, as well as adjusted operating income, adjusted operating margin, and adjusted net income per diluted share. These changes more closely align our reporting with our medical device peer group and give our shareholders a better understanding of our recurring operations.

As we have not previously reported on adjusted operating income and adjusted operating margin, we have included a reconciliation of these measures for each quarter and the full year 2025 in our press release and investor presentation. In closing, despite the dynamic reimbursement landscape, our team remained focused on the fundamentals to drive strong performance in the fourth quarter of 2025. As we look ahead to 2026, we will continue to emphasize execution and remain focused on what we can control. I’m excited to be part of the Inspire team and excited about the opportunities we have to drive continued profitable growth and long-term shareholder value. With that, our prepared remarks are concluded. Dilem, you may now open the line for questions. Thank you, sir. As a reminder, to ask a question, you will need to press star 11 on your telephone.

To withdraw your question, please press star 11 again. We ask that you please limit your questions to no more than one question and one follow-up. Please stand by while we compile the Q&A roster. And our first question comes from the line of Adam Maeder from Piper Sandler. Please go ahead. Hi, Tim, Matt, Ezgi. Thank you for taking the questions, and apologies for the background noise. I wanted to start on reimbursement, and I guess the first question is just around the physician fee with Gen 5 using the 82 code and the -52 modifier. And the 10%-15% reduction is obviously a wide range. So the question is, when do you expect to have more clarity on exactly where that shakes out from the various payers? I think you said you have a strong case to come out closer to the 10% haircut.

So maybe just elaborate on that. And what can the company and the medical societies do from an involvement standpoint in those discussions? Thanks. Hi, Adam. Thanks very much. I think, first off, there’s existing policies in place. So step number one is for facilities and professionals to bill to the current policy. So this evolution to -52 is going to be a little bit of a process as it kind of works forward. Number two, we want to be proactive, working initially with the MACs, but then eventually also working with commercial payers too. But initially with the MACs, we can describe the differences between Inspire 4 and Inspire 5, the history using Inspire 5 with CPT code 64568 in 2025, and document the reduction in the work performed in 64582 to be able to get alignment with the MACs and, more importantly, to drive consistency.

So yeah, we expect that, and we believe that we’re going to work with these societies and with the physician groups to make sure that we can drive that consistency so they have predictability to be able to move forward with implants. Okay. That’s helpful. And for the follow-up, I guess maybe just talk about kind of the pathway forward here in terms of Gen 5. And I think you mentioned you’re pursuing a dedicated code. Just key steps and timelines in that process. And I guess one question that I have, sorry, to take it on is, why not push the Gen 4 system a little bit more aggressively, just given that the reimbursement is, I’ll call it, buttoned up with 64582 until we really have Gen 5 kind of fully situated? Thank you for taking the question. I understand that.

I think a couple of things that you talk about in that discussion. Number one, we do want to pursue a new CPT code for the simple reason there has been public discussions that using a -52 modifier is not a long-term solution. That is really used for special cases, and so that’s important for us to be able to address that. Number two, if you look at the payers, we believe that they are going to minimize that reduction because if they’re going to pay for an Inspire 5 procedure of a 50% reduction, that could be $350-some compared to $700 for an Inspire 4. So we think CMS will prevail. We will.

We believe that we can work with the payers and the societies to get alignment, to be able to continue to offer Inspire 5 because that is a product that has shown effectiveness, even as compared to Inspire 4. That being said, to the last part of your discussion, we do have inventory of Inspire 4 available to those physicians and those centers that wish to continue with that by submitting a CPT code now. The timing of that is such that that would come online with a RUC process near January 1st, 2028. So that is a two-year period. So it’s important that we work through to minimize the reduction with the -52 modifier, but also have Inspire 4 available. Thank you. Thanks, Adam. Thank you. And I show our next question comes from the line of John Block from Citi. Please go ahead. Great. Thanks, guys. Good afternoon.

Tim, I guess I’m just curious. At the revision to the 2026 revenue guidance, what’s specific to the new reimbursement landscape, the 82 code with the modifier, versus what you’re seeing with the WISeR program? Because you did call out just some early findings there, some headwinds. So is there a way to delineate one versus the other, or how do we think that through? Hi, John. I think the WISeR program is the government program to require prior authorizations in six pilot states. Now, those six states are significant contributors of procedures, and so that’s why we’re working very diligently to solve the technical challenges with the portal that WISeR has implemented. And WISeR program didn’t allow any implants until January 15th because they think there was awareness that there would be challenges as they fired up the program.

We do see the WISeR will be able to get our arms around that and work with our centers to be able to get the prior authorizations once the portal is streamlined and we’re able to work through the bug. A little bit more of just a Q1 phenomena with the WISeR. What was the first question? The primary reason for our revenue reduction, though, is the coding uncertainty and the potential shift to the -52 modifier for the remainder of the year. WISeR is causing a little bit of disruption in those six states, but the bigger issue is the updated reimbursement guidance. Okay. That’s helpful context. I just wanted to, to that last point, make sure that was all embedded in the revision.

Then maybe just a quicker follow-up is, Tim, can you remind us in terms of the physicians, what % are salary-based, what % are RVUs? And I’m just curious, anecdotally, any feedback you’re getting, right, for those that have built and seen the modifier, what you’re hearing from the field, from the physicians, or from the reps? Thanks, guys. Sure. I think that a majority of our physicians are private practice. Any physician who’s associated with a large medical practice or a large hospital system would be salary-based. Physicians who are part of an academic center tend to be salary-based, so it doesn’t have the same level of impact with them, but also, a lot of them are the key opinion leaders that help drive this process.

So they will be working with us in detail to try and minimize this reduction of the reimbursement going forward. What we’ve said, John, in the past is that, on average, 30% of our centers are academic centers. I think you can take that as a proxy for implanting surgeons. Okay. Thank you, guys. Thank you. And our next question comes from the line of Robbie Marcus from JPMorgan. Please go ahead. Oh, great. Thanks for taking the questions. Just one for me. Tim, I imagine the first quarter kind of flat is based on what you’re seeing so far in the quarter. I guess, how do you get comfort with the 4%-10%, especially if the low end is a 50% cut with the 52 modifier? That would probably assume high single to close to double-digit for the rest of the year.

How do you get comfortable with that, and why couldn’t it be even lower? Oh, gotcha. We ran our models, and we based what Ezgi just kind of commented on, the percent of our surgeons that are at academic or large facilities versus private practice, also looking at the timing of any implementation from both Medicare as well as commercial payers with the -52 modifier. And so when we ran through our models, we believe that we’re comfortable with the range. And it’s our desire to and we believe that if we can work with the Max to minimize any reduction on that -52 modifier, that we can be on the higher end of that range. All right. I said one, but I got to follow up. And I also apologize, Matt. Welcome and congratulations. Look forward to working with you. Thanks, Robbie. Tim, just a quick follow-up to that.

Does that guide $4-$10 assume that something improves from here on out? Or if everything stays the same, do you feel comfortable you could still hit that? And I’ll leave it there. Thanks a lot. Thank you. Well, I think, really, the -52 really hasn’t modified right now, hasn’t really kicked in right now. And so I think that that’s where the range is kind of based on what we believe the impact would be, given the variable situations in there with the reimbursement from 10%-50%. Obviously, the WISeR’s having a short-term impact in Q1 as we work through the logistics. But I think once we get more clarity, we’ll get more comfort around this. Yeah. And Robbie, I’d just add to that. I think you heard in my prepared remarks, the bottom end of that range, is it more of the 50% reduction?

The top end, does it get closer to that 10% reduction? So it kind of depends on how things play out within that range as we see things in the next few months. Thanks a lot. Thank you. And our next question comes from the line of Travis Steed from Bank of America Securities. Please go ahead. Hi, everybody. Just wanted to ask about the pathway to getting a new code. Is there the temporary code, miscellaneous code, that you’d go to while transitioning? And kind of what happens to the doc payment during that process and how you get comfort that the reimbursement of payments couldn’t go lower with a new code? Oh, sure. Good question. I think the new code application process is well-documented, and I think the application will go in in the near future.

That starts with the initial review with the AMA CPT panel. If we get that approved, then it moves on to the RUC process to be able to do the evaluation of it. As you say, that’s an evaluation process to weigh the time it takes to do the procedure, and they try to get an accurate measure. But in the meantime, we will run with 64582, so we won’t be using any kind of miscellaneous code, any kind of temporary code, or any kind of category III code. Right now, our intention is to go to a new category I code through the full process, which includes a RUC. With that, yes, there’s always risk that the RUC would identify a lower payment from where 64582 is today. Helpful.

On kind of the ability to still kind of grow earnings and expand margins here with lower revenue growth, I’d assume it’s probably a little harder to get leverage. And so just kind of thinking about the puts and takes and how your ability to continue to grow earnings in a slower revenue environment. Thanks. I think we’ve had good cost discipline over the last several quarters. We’ll continue to do that. Again, we’re going to be working the reimbursement as a priority to minimize that payment. And if we minimize that payment, we get to the higher end of our range, obviously, we’re able to get leverage from those numbers. But we’re going to be diligent with our spending, and as we learn more about that reduction, being able to be flexible. Great. Thank you. Thanks, Travis. Thank you.

I show our next question comes from the line of David Rescott from Baird. Please go ahead. Great. Thanks. I heard the comments around the initiatives to minimize this actual reduction applied to the professional fee and wondering if there’s any appetite to minimize, from your end, the impact that hospitals will see. I think pricing potentially could be a lever there. So wondering if, at all, that is something you’re thinking about and, generally, how we should be thinking about device pricing in 2026. Great. Thank you, David. I think, for pricing, I think, going back with 64582, it aligns pretty well with where our current pricing model is. So as it stands today, we believe we’re going to just have consistent product pricing going forward, but that’s certainly always something that is something that we can review. Okay.

I think maybe midway through last year, when you lowered the 2025 guide, there was a comment about maybe some newer centers that were meant to be coming online or getting trained on the system were getting delayed. So wondering just how you’re thinking about your installed base, we’ll call it, of trained accounts on the Inspire system and how those progressed throughout 2025 and then how that impacts the ramp that you will see from a utilization perspective as some of the delays, we’ll say, of newer centers coming online progressed throughout 2025. Thank you. Great. As you recall, David, back last year, we held back on opening centers in the first half of the year and wrapped that up more diligently in the second half of the year. I think we’re going to want to keep that rate moving forward.

Obviously, it will have impact based on the reduction of the physician fee, but we want to be able to maintain that rate, if you will. So the centers that came on late in the year are brought on with the expectation to have strong utilization and be able to move forward. Thank you. And I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead. Good afternoon. Thanks for taking the question. Welcome, Matt. There are two for me. Tim, could you talk about the clarification you got this week or within the last week? Who was it from? What did it say that led you to the conclusions you provided today? And I had one follow-up.

Really, we just have been as we said before, we’ve been working with all the societies, all the agencies to be able to identify and gain clarity on the coding. We still contend that 64568 is a descriptor that most closely matches the Inspire 5 procedure. There’s an economic discussion in there now that showed that that’s not being supportive, especially with the number of procedures that we perform. So without getting too specific into the details of who went and how, we have got to the point that we know that 64582 will be the code going forward, including with that -52 modifier. Thanks. Tim, can you talk about competition? We all saw the Nyxoah Q4 results. There was probably some stocking there, but we do see a lot of posts on LinkedIn. So what are you assuming in the guidance from the impact of competition?

Just secondly, do you know if they’re going to have to use the 52 modifier or there’ll be any difference in their reimbursement? Thank you. Thanks, Larry. I will not comment on their coding strategy. You’ll have the opportunity, I’m sure, to ask both of those companies on their respective strategies. But as far as what we see out in the field, we have great confidence in our technology, especially the Inspire 5 and the data that we have seen, both from Singapore and the limited market release and the early experience. And the safety profile has been strong. So yes, you’re saying one-off opening of a center here and there, but we did build a little impact into our guide for competition, but we still believe that we’re in a very strong position from an overall market. Thank you. Thanks, Larry. Thank you.

Our next question comes from the line of Chris Pasquale from Nephron Research. Please go ahead. Thanks. Tim, could you talk about your expectation for commercial payers? You talked about providers billing with whatever the most recent guidance was. We obviously know the MACs have gone away from 64568, but I would imagine that it varies on the commercial side. Do you expect some of the large payers to continue to allow cases to be submitted under 64568, or do you expect them also to go to 64582 with the modifier? No, I think, currently, they do allow 64568. That is their policy, and we, of course, have to bill to their policy. Now, the difference, Chris, with commercial payers, including Medicare Advantage, remember, these are all prior authorized.

And so when they’re prior authorized, we do have the specific CPT code in the prior authorization, including per their policy. So it’s a little bit of a lesser impact on commercial payers initially. But in time, we do believe that they will transition over to 64582 and likely to include the -52 modifier. And at that point, we do have to work with them on their global contracts to make sure that they have the proper physician reimbursement. Okay. And then your territory count is down by 40, I believe, from a year ago. How much of that was sort of intentional or rethinking of the U.S. sales organization? And can you give us an update on the number of centers those reps are serving? Your rep-to-center ratio over time had stayed relatively stable. Did you expand your installed base in 2025? Any numbers there would be great. Gotcha.

It is intentional. We know that, as we were ramping up territories, we were more strategic with the numbers that you quoted to more closely align with strategic territories to allow improved utilization and improved use of the team. But with each of those decisions, we also were adding field clinical reps so we can have the field clinical reps work one-on-one with the centers on case management and training, and we can have the territory managers working out front with referrals, adding centers, adding capacity, and keeping the commitment of the surgeons and the practices. So really kind of a focus on the role of the territory managers and an expanded role for the field clinical reps. So that is an intentional move that we made. And then the second question, generally, generally, it’s maybe 5 centers per territory? Okay. Thank you. Thanks, Chris. Thank you.

I show our next question comes from the line of Anthony Petrone from Mizuho Americas. Please go ahead. Thanks, and good evening, everyone. I’ll stay on topic here. Tim, you mentioned there in your prepared remarks, you’re going to need a certain level of claims data to make the determination on whether you’re at the lower or upper end of the 10%-50% pro-fee cut. So I’m wondering, how much claims data do you need? Will you have that in hand by the end of one Q, or does that bleed into two Q? Because then it kind of sets up a moving target in terms of guidance. And then I’ll have one quick follow-up.

I think that it’d be nice to have some data by the time we get to the Q1 call, but it also is in regards to the policies getting updated with the MACs. And again, our leading statement is we need to build to the most current policy, so we’ll be working with the MACs. And some of those may not have the modifier in place yet. So we’re going to watch that to see how we can pick up that data and minimize the reduction in that surgeon fee, but we may not have full exposure to that by the time we get to the Q1 call. I guess, how many MACs already have the mapping to the 52 modifier? I think it’s 3 of 7, and I guess you’re waiting on the other 4 to actually have that 52 modifier in place? Yeah.

Anthony, currently, in the policies, none of the MACs have a mapping to a -52. There is some commentary with one of the MACs, but currently, we’re billing 64582 with those MACs, and we’re going to be working closely with them to communicate when or if they’re going to implement the -52. And then real quick, just a follow-up would be, you have some evidence here, initial observation, that there could be a smaller reduction based on the surgical skill. You had that in the prepared comments. It almost reads like there’s a dual path here that you’ll pursue a new coding structure on one path but then sort of show evidence here that the reduction should be lower. Is that the right way to think about it, or is this just a one-track path that you’re pursuing a new code? Thanks. No, you are absolutely correct.

It’s a dual path. There’s a short-term, address the current situation with 64582 and when the -52 modifier gets implemented, and then, long-term, it is go to a whole new category one CPT code. But that code would be in place January 1, 2028. Thanks. Thank you. And our next question comes from the line of Richard Newitter from Truist. Please go ahead. Hi. Thanks for taking the questions. Maybe just the first, I guess, it was asked earlier as to whether or not there was a CPT3 code, maybe a dual track, while you pursue your CPT1. And I’m curious as to why you’re not pursuing that. The reason being, I would have thought that, at least, would have allowed you to pivot away from any modifier requirements, and you get to go back to a stable, appropriate payment system, at least during 2027.

So just help me understand why that isn’t a viable or worthwhile path while you’re pursuing the Category I as well that doesn’t go into effect until 2028. And then I have a follow-up. Yep. I understand, Richard. Thanks for that. A category three code, if applied for and awarded, could take effect on January 1st, 2027. And the word I would remove from your description is the word stable. And what we would enter into at that point is an environment where we would not have defined reimbursement, and that would be variable across the board, introducing a new category three code similar to if we were to use a miscellaneous code. So we made the choice to stay the course with a category one code long-term.

We know that we have clarity on facility reimbursement, that if we went to a category three code, we would not have that clarity. That’s the most important part because that’s how we get paid, and the facilities get the reimbursement from those centers. And we’re looking at a range of reimbursement for the professional fee. And again, we’re targeting to minimize that risk in the short term that will carry us through 2027. Okay. Thanks for that. And then just did you guys provide a US/OUS breakout? I may have just missed it. I couldn’t find it in the press release. For the numbers. It should be in the press release, but I’ll have to check. It’ll be in the K when we file later this week if it’s not in the press release. Next question. Thank you.

Our next question comes from the line of Shagun Singh from RBC. Please go ahead. Thank you so much for taking the question. Just one from me. Do you think we could see a broader negative impact from this WISeR program? It does focus on wasteful and inappropriate service reduction that HNS is now a part of. Thank you. Yeah. I think that we have a long history working with Medicare. And there’s a parallel program with RAC audits. I think you maybe heard that term, where there are third parties that will come into facilities, and they will audit their Medicare cases to make sure that they have the proper documentation, and those patients that have received treatment are on label. So over the years, we’ve been very diligent at training all centers to make sure that they’re prepared for RAC audits.

And so while the WISeR program has a little bit of a challenge getting started, we believe we will be in good shape because we’ve already had facilities that are very diligent in making sure they have proper documentation and proper patient selection to make sure that they are on-label candidates for Inspire. Thank you. One moment while we compile the Q&As. And I show our next question comes from the line of Danielle Antalffy from UBS. Please go ahead. Danielle, are you there? I think she fell off the line now, so. All right. We’ll see if she comes back on. So let’s go to the next question. Thank you. And I show our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead. Hey. Good afternoon, and thanks for taking the questions. Really, just one from me.

Maybe you can give us the latest and greatest on what you’re seeing in terms of GLP-1s and what, if any, headwinds you have baked into the guide. Absolutely. We do put a little basis into the guide if we track. As we talked before, we had our survey from last year, and we look to continue to expand that knowledge. But we do know patients are trying GLP-1s for multiple reasons. The high BMI patients, we think that’s a really important step because they can lose weight and qualify for Inspire. And the data’s coming in a little bit to see what percentage actually resolves their sleep apnea.

So we still believe that GLP-1s will be a tailwind for us, and we work with our centers to make sure that they are taking care of their patients, keeping in contact with the patients, and, if appropriate, putting them on a GLP-1 to lose weight with a secondary benefit, which is a reduction in sleep apnea. Thanks, Tim. Good. Thank you. Thank you. And our next question comes from the line of Danielle Antalffy from UBS. Please go ahead. Hi. Is this working now? Yes, it is, Danielle. Okay. Sorry. I don’t know what’s going on today, but technology is not my friend, so I am sorry about that. Thank you guys so much for taking the question.

appreciate a lot of this call has been about reimbursement and impact there, but I’m actually curious about, because this seems like an unfortunate situation to me where you’ve got what seems like a growing funnel of patients that want to get this procedure. And now, if you don’t have doctors that are as willing to do it, I’m just curious how you guys are working with whether it’s your centers, the patients, to manage these patients who are coming into the system but maybe are finding this bottleneck of physicians that actually want to treat the patients because it feels like the front of the funnel is not necessarily slowing. So I’m just sorry. That’s a kind of convoluted question, but I’m just curious if you can comment on that. Got it. Okay.

So what drives us at Inspire is Inspire 5 is a rock-solid product, and we show the clinical evidence to it. We know the benefits that patients can have because we have clinical data both from Singapore as well as from our new product launch in the U.S. And so that’s what drives the employees here in that we know that we have an ability to help patients with their disease. Secondly, that we do know there’s variability in the professional fee reduction with any -52 modifier. So as that transitions into the program, with the strength of the Inspire 5 data and with the experience of having 10,000 procedures performed with Inspire 5 in the year 2025, we have very good experience to work with the payers to minimize that reduction, but we need to put that in play.

Even though we do have Inspire 4 units available for those centers, we will continue to push 5. That being said, going back a little bit to a previous question, we do know centers that are able to continue to move forward, and so we will focus and lean in on those centers while we work with payers at some of the private practice to minimize the impact from the professional fee reductions. Yeah. Danielle, we keep up the fight. What works is we have strength on the front end of the funnel, and we got a really good product to be able to work with. Yeah. Okay. I mean, is there a scenario where you have centers that are willing to take more patients?

I mean, I guess I’m just trying to understand what happens to the patient that gets referred to a physician, and they’re like, "Oh, we’re not doing that anymore because we don’t get paid enough." I mean, I know that wouldn’t be the conversation, actually, but where does the patient go? That’s a valid statement because what’s clear here with the clarity, we got clarity of coding, and we got clarity in the facility reimbursement. And the reimbursement for the facility actually increased $1,000 from last year. So the reimbursement is strong at facilities. So in those centers where we may be a salary-based surgery, we believe that we can bring more patients to those facilities if some of the private practice physicians are more challenged based on the economics. But we’re going to work all avenues very diligently. Okay. Thank you so much. Thank you.

Our next question comes from the line of Danielle Mattiussi from Evercore ISI. Please go ahead. Oh, no. Danielle, do we lose you? If you have your phone on mute, it’s on mute. Hey. Sorry. Can you hear me all right? Yep. Yep. Sorry about that. Sorry about that. Thanks for taking my questions. I had two. The first is on the math. I’m curious the exercise you’re running on the physician fee and how that could impact the business. Is it mostly survey work, or how do you do this? I guess I’m just curious, with the revenue guidance, there’s a 6% delta between the low versus high end compared to, on the physician fee, 10%-50%, a potential 40% delta.

So I guess how do you run the exercise of figuring out what physician fee cut leads to what type of impact on your business? Sure. There’ll be continuation and expansion of the last question. And, Danielle, so we look at this saying we know there are centers that will remain consistent, and we may be able to drive more patients to those centers because, as an example, the surgeon may be salary-based, if you will. Academic centers aren’t affected so much by the professional fee because they’re salary-based, so we can continue working in those areas. In some of the ASCs, if a surgeon is a partial owner, they are less dependent on the professional fee than they are the set-of-service fee. So there’s avenues in there that we can continue to pursue.

The area that the surgeons that are at the greatest challenge are those private practice physicians who get their operating rights or privileges and get OR time from a large hospital, but they get paid on their own professional fee. Those are the surgeons that are at the most risk because we’re asking them to do a procedure that doesn’t pay them for their time spent on it. Now, that’s why we have good argument and rationale to justify a lower reduction from the professional fee to be able to support those physicians. So it’s not just a straight math equation across a reduction. The professional fee does not have the same impact across all centers.

The other thing I’d add to that, Danielle, is we called out that there is an impact on Q1 just for some of the coding uncertainty that we’ve seen that’s compounding the range as well and making that a little bit wider. Got it. That’s helpful. And then my follow-up, as I look at the high end of the revenue guidance, can you help me understand what the cadence would look like in that scenario? Is it fair to assume we’d be exiting the year at something like mid-teens% growth? And would that contemplate some sort of catch-up, as you said, that some of the patients might be redirected to other centers? Or can you just help us understand how we get to the high end of the guidance? Yeah. I think you described it pretty good. Maybe we describe it more as comfort.

I think as we get additional clarity and it minimizes the risk of reimbursement of what they’re going to be paid once we have data, then we can get back into leaning in harder. We would expect acceleration in the second half of the year. We believe that if we can get the data of that, we’ll be able to show improved reimbursement. Then the surgeons will be more comfortable making the determination to commit more of their time and more of their operating room time for Inspire. Helpful. Thank you. Thanks, Danielle. Thank you. Our next question comes from the line of Patrick Wood from Morgan Stanley. Please go ahead. Beautiful. Thanks. Just two quick ones from me. First one, I know you guys don’t guide to it, but just a sense for OUS.

I understand why we’ve all been focused, obviously, on the US at the moment, but the relative guide going forward and the sense of the contribution in 2026 that you guys expect from OUS would be helpful. Thank you. I know that go ahead. You want to jump in? So actually, I have the numbers for Rich’s earlier question. To answer your question, Patrick, 4%-5% OUS contribution, roughly, for the full year 2026. Q4, US revenue was $256.9 million, 95% of revenue OUS, $12.1 million, and full year was $872.1 million US, $39.9 million OUS. Share growth. Amazing. Thank you.

And then just really quickly, I know we sort of touched on the commitment to moving to Inspire 5, but if you wanted to switch back a little more durably to Inspire 4, let’s say, for a little longer period of time, do you have things like the contract set up, the manufacturing supply chain bits enabling you to do that if you chose to go down that pathway, or is there something preventing you from doing that? Well, I think that as you looked at our inventory numbers on the tables that you see, we do carry a significant inventory, and the majority of that is Inspire 4. So we have the ability to carry forward with 4, and in the time, it’ll take us to get to the new CPT code. But we don’t believe centers in the U.S. will really go back to Inspire 4.

I think once physicians and centers experience Inspire 5, they are comfortable with the procedure, not putting in the pressure-sensing lead, the reduced work to do the Inspire 5 procedure, and then the outcomes associated with Inspire 5, I think people are going to be careful about going back to Inspire 4. But that being said, there were centers that are high volume that were doing Inspire 4 late in the year. To answer your other question, our ability to go back and fire up the line and restart making piece parts associated with Inspire 4, it does get a little bit limited on parts obsolescence as we transition to 5. So we do have inventory to carry us forward, but yeah, we want to transition over to full production on Inspire 5. Totally got it. Thanks, guys. Thank you. Thank you.

And our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets. Please go ahead. All right, guys. Thanks for taking the questions, and welcome, Matt. Just maybe switching gears a little bit here. Just on the fourth-quarter earnings number, I think maybe a little bit lost. You guys grew EPS over 40%, and it was really well above expectations and the implied guidance coming out of last quarter. So curious where you saw incremental expense leverage relative to what you were planning on with the full-year guidance coming out of 3Q. Yeah. I’ll start, and as you might add in here, so I think what you saw in the fourth quarter was a beat in expectations kind of throughout the P&L. Revenue was better than we expected. Gross profit margin was better than we expected as we had a higher percentage of Inspire 5.

And then, as Tim said in his prepared remarks, we did have good cost discipline. We were thoughtful about our spending and spent less than we had anticipated. So compile all that. Obviously, we’ve got the significant tax benefit, but even you adjust that out, all of those contributed to the beat in Q4. All right. Cool. And then just one follow-up on expenses for 2026. Just curious how you’re thinking about overall direct-to-consumer marketing this year relative to 2025. I’m sure as the year progresses, there may be some change based on the reimbursement status, but just in terms of a base case, how you’re thinking about that at this point and then where you’re targeting the advertising in 2026 compared to 2025. Thank you. Brett, thanks for the question.

Our current thinking is that it’ll still be flat to slightly up, but we’re going to take a look at that as we go forward here. Advertising mix will be mostly similar to what you’ve seen in the past, but I think greater focus on social media and more of those types of platforms. We’ll still continue to run our TV advertising, but more focus on social media and digital. I think Tim said it earlier. We know we’ve got a wide range of outcomes on the top line. We’re going to be thoughtful and flexible about our spending and just make sure that we’re tracking that based on where we see revenue coming in. All right. Awesome. Thank you so much. Thank you. And I show our last question in the queue comes from the line of Mike Kratky from Leerink Partners. Please go ahead. Hi, everyone.

Thanks for fitting me in. So for instances where the MACs announced the removal of the 64568 code for OSA back in December and then implants subsequently happened in January, can you quantify what portion of the claims you’ve seen so far come in have been rejected versus not? Yes. Little unknown. We have had procedures paid on 64568. We’ve had procedures paid on 64582. We’ve had some procedures actually get denied and require clarification. We’ve had notifications of centers receiving notification of payment at 64568 only to be followed up with an adjustment to the payment level of 64582. So bottom line, it’s all over the place. And I think now this is the good this is the good news as we close the call here is we have the clarity of the code, and so facilities and ASCs know what the reimbursement’s going to be.

It’s no longer the unknown if it’s going to be the new reimbursement is going to be to the improved 64582 with a $1,000 increase. So again, so I think having clarity of the code, having consistency with reimbursement at the centers is really the solid thing. And then our next step is to really lock down on minimizing the professional fee. And we think that we’re going to have a good audience, specifically with the MACS, to discuss that with us. Understood. Thanks, Tim. Very good. Thanks very much. Hey, as always, I’m grateful to the growing team of dedicated Inspire employees for their enthusiasm, hard work, and continued motivation to achieve successful and consistent patient outcomes. The team’s commitment to the patient remains unmatched and is the most important element of our success.

I wish to thank all of our employees as well as the healthcare teams for their continued efforts as we remain focused on further expanding our business in the US, Europe, and Asia. For all you on the call, we really appreciate your continued interest and support of Inspire and look forward to providing you with further updates in the months ahead. So thanks very much, and Dillon, back to you. Thank you, sir. This concludes today’s conference call. You may now disconnect.