10-Q

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 March 31, 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 May 1, 2024, the registrant had 29,711,048 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
	Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION	5
Item 1.	Consolidated Financial Statements	5
	Balance Sheets	5
	Statements of Operations and Comprehensive Loss	6
	Statements of Stockholders' Equity	7
	Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	39

2

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;

3

•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, including our next generation Inspire therapy 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" 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.

4

PART I—FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements.

Inspire Medical Systems, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	March 31, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	175,416	$	185,537
Investments, short-term	265,945		274,838
Accounts receivable, net of allowance for credit losses of     $256 and $1,648, respectively	72,333		89,884
Inventories, net	48,974		33,885
Prepaid expenses and other current assets	9,546		9,595
Total current assets	572,214		593,739
Investments, long-term	27,803		9,143
Property and equipment, net	52,281		39,984
Operating lease right-of-use assets	22,248		22,667
Other non-current assets	11,296		11,278
Total assets	$	685,842	$	676,811
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	43,802	$	38,839
Accrued expenses	28,370		39,266
Total current liabilities	72,172		78,105
Operating lease liabilities, non-current portion	24,500		24,846
Other non-current liabilities	146		1,346
Total liabilities	96,818		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; 29,676,095 and 29,560,464 issued and outstanding at March 31, 2024 and December 31, 2023, respectively	30		30
Additional paid-in capital	944,298		917,107
Accumulated other comprehensive income	124		800
Accumulated deficit	(355,428)		(345,423)
Total stockholders' equity	589,024		572,514
Total liabilities and stockholders' equity	$	685,842	$	676,811

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

5

Inspire Medical Systems, Inc.

Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2024		2023
Revenue	$	164,010	$	127,897
Cost of goods sold	24,757		19,888
Gross profit	139,253		108,009
Operating expenses:
Research and development	28,850		25,519
Selling, general and administrative	125,621		101,988
Total operating expenses	154,471		127,507
Operating loss	(15,218)		(19,498)
Other (income) expense:
Interest and dividend income	(5,923)		(4,273)
Other expense (income), net	60		(17)
Total other income	(5,863)		(4,290)
Loss before income taxes	(9,355)		(15,208)
Income taxes	650		216
Net loss	(10,005)		(15,424)
Other comprehensive loss:
Foreign currency translation (loss) gain	(134)		105
Unrealized (loss) gain on investments	(542)		13
Total comprehensive loss	$	(10,681)	$	(15,306)
Net loss per share, basic and diluted	$	(0.34)	$	(0.53)
Weighted average common shares used to    compute net loss per share, basic and diluted	29,615,166		29,089,950

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)

	Three Months Ended March 31, 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

	Three Months Ended March 31, 2023
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Equity
Balance at December 31, 2022	29,008,368	$	29	$	820,335	$	(86)	$	(324,270)	$	496,008
Stock options exercised	142,167	—		7,377		—		—		7,377
Vesting of restricted stock units	18,852	—		—		—		—		—
Shares held for tax withholdings	(6,750)	—		(1,746)		—		—		(1,746)
Issuance of common stock	364	—		90		—		—		90
Stock-based compensation expense	—	—		18,225		—		—		18,225
Other comprehensive income	—	—		—		118		—		118
Net loss	—	—		—		—		(15,424)		(15,424)
Balance at March 31, 2023	29,163,001	$	29	$	844,281	$	32	$	(339,694)	$	504,648

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

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Inspire Medical Systems, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Three Months Ended March 31,
	2024		2023
Operating activities
Net loss	$	(10,005)	$	(15,424)
Adjustments to reconcile net loss:
Depreciation and amortization	839		593
Accretion of investment discount	(2,469)		(1)
Non-cash lease expense	418		265
Stock-based compensation expense	26,322		18,225
Non-cash stock issuance for services rendered	101		90
Provision (benefit) for estimated credit losses	(1,392)		—
Changes in operating assets and liabilities:
Accounts receivable	18,962		1,489
Inventories	(15,089)		(3,777)
Prepaid expenses and other current assets	13		(579)
Accounts payable	3,558		8,390
Accrued expenses and other liabilities	(12,398)		(10,615)
Net cash provided by (used in) operating activities	8,860		(1,344)
Investing activities
Purchases of property and equipment	(11,696)		(3,753)
Purchases of investments	(55,739)		—
Proceeds from sales or maturities of investments	47,900		—
Net cash used in investing activities	(19,535)		(3,753)
Financing activities
Proceeds from the exercise of stock options	3,616		7,377
Payment of taxes on net share settlement of equity awards	(2,848)		(1,746)
Net cash provided by financing activities	768		5,631
Effect of exchange rate on cash	(214)		6
(Decrease) increase in cash and cash equivalents	(10,121)		540
Cash and cash equivalents at beginning of period	185,537		441,592
Cash and cash equivalents at end of period	$	175,416	$	442,132
Supplemental cash flow information
Property and equipment included in accounts payable and accrued expenses	$	5,458	$	2,577

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

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Inspire Medical Systems, Inc.

Notes to Consolidated Financial Statements (Unaudited) 

(Table amounts in thousands, except share and per share amounts)

1. Organization

Description of Business

Inspire Medical Systems, Inc. is a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea ("OSA"). Our proprietary Inspire system is the first and only United States ("U.S.") Food and Drug Administration ("FDA") approved neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA. Inspire therapy received premarket approval ("PMA") from the FDA in 2014 and has been commercially available in certain European markets since 2011 and certain Asia Pacific markets since 2021.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial reporting and as required by the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, the results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. All intercompany accounts and transactions have been eliminated in consolidation.

For a complete discussion of our significant accounting policies and other information, the unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Cash and Cash Equivalents

We consider all highly liquid securities, readily convertible to cash, that have original maturities of 90 days or less from the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents, which consist of money market funds, are stated at fair value.

Foreign Currency

Our functional and reporting currency is the U.S. dollar. Our subsidiaries have functional currency in Euro and Yen. The consolidated financial statements are translated to U.S. dollars. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Sales and expenses denominated in foreign currencies are translated at exchange rates in effect on the date of the transaction. Foreign currency transaction gains and losses and the impacts of foreign currency remeasurement are recognized in other expense, net in the consolidated statements of operations and comprehensive loss. For the three-month periods ended March 31, 2024 and 2023, we recognized $0.1 million and $0.0 million of loss, net, respectively. Any unrealized gains and losses due to translation adjustments are included in accumulated other comprehensive income (loss) within stockholders' equity in the consolidated balance sheets. We had $0.1 million and $0.2 million of unrecognized gain in our accumulated other comprehensive income (loss) balance as of March 31, 2024 and December 31, 2023, respectively.

9

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

Investments

Our investments are classified as available-for-sale and consisted of the following:

	March 31, 2024
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	5,402	$	—	$	(8)	$	5,394
Corporate debt securities	28,719		26		—		28,745
Certificates of deposit	7,643		6		(2)		7,647
U.S. treasury debt securities	224,085		76		(2)		224,159
Short-term investments	$	265,849	$	108	$	(12)	$	265,945
Long-Term:
Corporate debt securities	$	1,166	$	5	$	—	$	1,171
Certificates of deposit	2,994		6		—		3,000
Asset-backed securities	911		—		(1)		910
U.S. treasury debt securities	22,801		—		(79)		22,722
Long-term investments	$	27,872	$	11	$	(80)	$	27,803

	December 31, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,950	$	1	$	—	$	2,951
Corporate debt securities	30,154		61		—		30,215
Certificates of deposit	2,953		15		—		2,968
U.S. treasury debt securities	238,237		467		—		238,704
Short-term investments	$	274,294	$	544	$	—	$	274,838
Long-Term:
Corporate debt securities	$	3,109	$	13	$	—	$	3,122
Asset-backed securities	1,170		1		—		1,171
U.S. treasury debt securities	4,838		12		—		4,850
Long-term investments	$	9,117	$	26	$	—	$	9,143

Investments are classified as available-for-sale and are reported at their estimated fair market values which are based on quoted, active or inactive market prices when available. Any unrealized gains and losses due to interest rate fluctuations and other external factors are reported as a separate component of accumulated other comprehensive loss within stockholders' equity. We had $0.0 million and $0.6 million of unrecognized gain in our accumulated other comprehensive income (loss) balance at March 31, 2024 and December 31, 2023, respectively. Any realized gains and losses are calculated on the specific identification method and reported net in other expense, net in the consolidated statements of operations and comprehensive loss. For both of the three months ended March 31, 2024 and 2023, we recognized $0 of realized gain or loss.

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Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

As of March 31, 2024 and December 31, 2023, we had no investments with a contractual maturity of greater than three years. Currently, we do not intend to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. We do not consider those investments to be other-than-temporarily impaired as of March 31, 2024. Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses, not to exceed the amount of the unrealized loss, are recorded as an allowance through other expense, net in the consolidated statements of operations and comprehensive loss. The total allowance for credit losses was $0 at both March 31, 2024 and December 31, 2023.

Fair Value of Financial Instruments

We measure certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents and investments. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1: Observable inputs, such as quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs that are supported by little or no market activities, which would require us to develop our own assumptions.

We classify instruments within Level 1 if quoted prices are available in active markets for identical assets, which include our money market funds and U.S. treasury securities. We classify instruments in Level 2 if the instruments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or an income approach, such as a discounted cash flow pricing model that calculates values from observable inputs such as quoted interest rates, yield curves and other observable market information. These instruments include our commercial paper, certificates of deposit, corporate debt securities and asset-backed securities. The available-for-sale securities are held by a custodian who obtains investment prices from a third-party pricing provider that uses standard inputs (observable in the market) to models which vary by asset class.

The following tables set forth by level within the fair value hierarchy our assets that are measured on a recurring basis and reported at fair value as of March 31, 2024 and December 31, 2023. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

	Fair Value Measurements as of
	March 31, 2024
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	141,547	$	141,547	$	—	$	—
Total cash equivalents	141,547		141,547		—		—
Investments:
Commercial paper	5,394		—		5,394		—
Corporate debt securities	29,916		—		29,916		—
Certificates of deposit	10,647		—		10,647		—
Asset-backed securities	910		—		910		—
U.S. government securities	246,881		246,881		—		—
Total investments	293,748		246,881		46,867		—
Total cash equivalents and investments	$	435,295	$	388,428	$	46,867	$	—

	Fair Value Measurements as of
	December 31, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	146,217	$	146,217	$	—	$	—
Total cash equivalents	146,217		146,217		—		—
Investments:
Commercial paper	2,951		—		2,951		—
Corporate debt securities	33,337		—		33,337		—
Certificates of deposit	2,968		—		2,968		—
Asset-backed securities	1,171		—		1,171		—
U.S. government securities	243,554		243,554		—		—
Total investments	283,981		243,554		40,427		—
Total cash equivalents and investments	$	430,198	$	389,771	$	40,427	$	—

There were no transfers between levels during the periods ended March 31, 2024 and December 31, 2023.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash equivalents, investments, and accounts receivable. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Our investment policy limits investments to certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. We place restrictions on maturities and concentration by type and issuer. We are exposed to credit risk in the event of a default by the issuers of these securities to the

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Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

extent recorded on the consolidated balance sheets. However, as of March 31, 2024 and December 31, 2023, we limited our credit risk associated with cash equivalents by placing investments with banks we believe are highly creditworthy.

We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and dispersion of our customer base. We generally do not require collateral, and losses on accounts receivable have historically not been significant.

Accounts Receivable and Allowance for Expected Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Customer credit terms are established prior to shipment with the general standard being net 30 days. Collateral or any other security to support payment of these receivables generally is not required.

Each reporting period, we estimate the credit loss related to accounts receivable based on a migration analysis of accounts grouped by individual receivables delinquency status and apply our historic loss rate adjusted for management's assumption of future market conditions. Any change in the allowance from new receivables acquired or changes due to credit deterioration on previously existing receivables is recorded in selling, general and administrative expenses. Write-offs of receivables considered uncollectible are deducted from the allowance. Specific accounts receivable are written-off once a determination is made that the amount is uncollectible. The write-off is recorded in the period in which the account receivable is deemed uncollectible. Recoveries are recognized when received and as a direct credit to earnings or as a reduction to the allowance for credit losses (which would indirectly reduce the loss by decreasing bad debt expense).

The following table presents the changes in the allowance for credit losses related to accounts receivable:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,648	$	36
Charges (credits) to the allowance, net	76		—
Accounts written off, net of recoveries	(1,468)		—
Balance at the end of the period	$	256	$	36

The increase in accounts written off, net of recoveries during the three months ended March 31, 2024 related primarily to accounts receivable with two healthcare systems.

Inventories

Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first-out basis and consisted of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	8,303	$	6,115
Finished goods	40,671		27,770
Total inventories, net of reserves	$	48,974	$	33,885

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized. The balance of inventory related to our next generation Inspire system was $2.6 million and $0.9 million as of March 31, 2024 and December 31, 2023, respectively.

13

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write down inventories to their net realizable value. The determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products, and current market conditions. The reserve for excess and obsolete inventory was $3.1 million and $2.4 million as of March 31, 2024 and December 31, 2023, respectively.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization and consisted of the following:

	March 31, 2024		December 31, 2023
Computer equipment and software	$	4,267	$	2,601
Manufacturing equipment	7,845		7,245
Other equipment	1,353		1,842
Leasehold improvements	2,356		2,356
Construction in process	44,570		33,211
Property and equipment, cost	60,391		47,255
Less: accumulated depreciation and amortization	(8,110)		(7,271)
Property and equipment, net	$	52,281	$	39,984

Construction in process is comprised primarily of production equipment. Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Depreciation and amortization expense was $0.8 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively.

Strategic Investments

For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These securities are presented within other non-current assets on the consolidated balance sheets. The balance of equity securities without readily determinable fair values was $10.4 million as of both March 31, 2024 and December 31, 2023, respectively. There were no adjustments to the carrying amount during either of the three months ended March 31, 2024 or 2023.

Impairment of Long-lived Assets

Long-lived assets consist primarily of property and equipment, operating lease right-of-use assets, and strategic investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that an asset be tested for possible impairment, we compare the undiscounted cash flows expected to be generated by the asset to the carrying amount of the asset. If the carrying amount of the asset is not recoverable on an undiscounted cash flow basis, we determine the fair value of the asset and recognize an impairment loss to the extent the carrying amount of the asset exceeds its fair value. We determine fair value using the income approach based on the present value of expected future cash flows or other appropriate measures of estimated fair value. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. We did not record any impairment charges on long-lived assets during either of the three months ended March 31, 2024 or 2023.

14

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

Accrued Expenses

Accrued expenses consisted of the following:

	March 31, 2024		December 31, 2023
Payroll related	$	20,956	$	33,875
Product warranty liability	1,388		1,100
Other accrued expenses	6,026		4,291
Total accrued expenses	$	28,370	$	39,266

The following table shows the changes in our estimated product warranty liability accrual, included in accrued liabilities:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,100	$	920
Provisions for warranty	535		132
Settlements of warranty claims	(247)		(311)
Balance at the end of the period	$	1,388	$	741

Revenue Recognition

We derive our revenue from sales of our products in the U.S. and internationally. Customers are primarily comprised of hospitals and ambulatory surgery centers, with distributors being used in certain international locations where we do not have a direct commercial presence.

Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms. Our standard shipping terms are free on board shipping point, unless the customer requests that control and title to the inventory transfer upon delivery. In those cases where shipping and handling costs are billed to customers, we classify the amounts billed as a component of cost of goods sold.

Revenue is measured as the amount of consideration we expect to receive, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, which is based on the invoiced price, in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. The majority of our contracts have a single performance obligation and are short term in nature.

Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Variable consideration related to certain customer sales incentives is estimated based on the amounts expected to be paid based on the agreement with the customer using probability assessments.

We offer customers a limited right of return for our product in case of non-conformity or performance issues. We estimate the amount of our product sales that may be returned by our customers based on historical sales and returns. As our historical product returns to date have been immaterial, we have not recorded a reduction in revenue related to variable consideration for product returns.

See Note 7 for disaggregated revenue by geographic area.

15

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

Cost of Goods Sold

Cost of goods sold consists primarily of acquisition costs for the components of the Inspire system, overhead costs, scrap and inventory obsolescence, warranty replacement costs, as well as distribution-related expenses such as logistics and shipping costs, net of shipping costs charged to customers. The overhead costs include the cost of material procurement, depreciation expense for production equipment, and operations supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel.

Research and Development

Research and development expenses consist primarily of product development, clinical and regulatory affairs, quality assurance, consulting services, and other costs associated with products and technologies in development. These expenses include employee compensation, including stock-based compensation, supplies, materials, prelaunch inventory, consulting, and travel expenses related to research and development programs. Clinical expenses include clinical study design, clinical site reimbursement, data management, travel expenses, and the cost of manufacturing products for clinical studies.

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized.

Stock-Based Compensation

We maintain an equity incentive plan to provide long-term incentives for eligible employees, consultants, and members of the board of directors. The plan allows for the issuance of restricted stock units ("RSUs"), performance stock units ("PSUs"), and non-statutory and incentive stock options to employees, and RSUs, PSUs, and non-statutory stock options to consultants and directors. We also offer an employee stock purchase plan ("ESPP") which allows participating employees to purchase shares of our common stock at a discount through payroll deductions.

We recognize equity-based compensation expense for awards of equity instruments based on the grant date fair value of those awards as expense in the consolidated statements of operations and comprehensive loss. We estimate the fair value of stock options using the Black-Scholes option pricing model and the fair value of RSUs and PSUs is equal to the closing price of our common stock on the grant date. The fair value of each purchase under the employee stock purchase plan is estimated at the beginning of the offering period using the Black-Scholes option pricing model.

Stock-based compensation expense is recognized on a straight-line basis over the vesting term for stock options and RSUs, and over the vesting and performance period based on the probability of achieving the performance objectives for PSUs. We account for award forfeitures as they occur.

Advertising Expenses

We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $25.6 million and $23.6 million during the three months ended March 31, 2024 and 2023, respectively.

Leases

Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities – non-current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the

16

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments, and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our consolidated balance sheets.

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances against deferred tax assets are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. As we have historically incurred operating losses, we have recorded a full valuation allowance against our net deferred tax assets, and there is no provision for income taxes other than minimal state and foreign taxes, which includes a foreign tax provision relating to uncertain tax positions. Our policy is to record interest and penalties expense related to uncertain tax positions as other expense in the consolidated statements of operations and comprehensive loss.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net loss and changes in unrealized gains and losses due to interest rate fluctuations and other external factors on investments classified as available-for-sale, and foreign currency translation adjustments. Accumulated other comprehensive income is presented in the accompanying consolidated balance sheets as a component of stockholders' equity.

Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all potentially dilutive shares consisting of outstanding stock options, unvested RSUs and PSUs, and shares issuable under our employee stock purchase plan were antidilutive in those periods.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for us in fiscal 2025, with early adoption permitted, and is required to be

17

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

applied prospectively with the option of retrospective application. We are evaluating the impact of the standard on our income tax disclosures.

In March 2024, the SEC issued climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. As a large accelerated filer, we may be required to begin complying with climate-related disclosures as early as with respect to the fiscal year beginning in 2025. We are in the process of analyzing the impact of the rules on our related disclosures.

We have reviewed and considered all other recent accounting pronouncements that have not yet been adopted and believe there are none that could potentially have a material impact on our business practices, financial condition, results of operations, or disclosures.

3. Leases

We lease office space for our corporate headquarters under a non-cancelable operating lease. The corporate office leases were amended in May 2023 to increase the total space leased to approximately 106,000 square feet and to extend the noncancellable lease term through May 31, 2035. We entered into an additional warehouse and office space lease for our corporate headquarters under a non-cancelable operating lease in August 2023. This space includes approximately 22,000 square feet and a noncancellable lease term through May 31, 2035. Each lease includes options to renew for up to two additional periods of five years each at the then-prevailing market rates. The exercises of the lease renewal options are at our sole discretion and were not included in the lease term for the calculation of the ROU assets and lease liabilities as of the lease modification date as they were not reasonably certain of exercise.

In March 2024, we entered into an amendment on our additional warehouse and office space lease which is expected to commence in January 2025. This amendment provides for approximately 18,000 square feet of additional space and follows the lease term and renewal options in the original lease described above.

In addition to base rent in these leases, we also pay our proportionate share of the operating expenses, as defined in the leases. These payments are made monthly and adjusted annually to reflect actual charges incurred for operating expenses, such as common area maintenance, taxes, and insurance.

The following table presents the lease balances within the consolidated balance sheets:

	March 31, 2024		December 31, 2023
Right-of-use assets:
Operating lease right-of-use assets	$	22,248	$	22,667
Operating lease liabilities:
Operating lease liabilities, non-current portion	$	24,500	$	24,846

As of March 31, 2024, the remaining lease terms were 11.2 years and the weighted average discount rate was 4.9%. The operating cash outflows from our operating leases were $0.6 million and $0.4 million for the three-month periods ended March 31, 2024 and 2023, respectively.

4. Employee Retirement Plan

We sponsor a defined contribution employee retirement plan covering all of our full-time employees. The plan allows eligible employees to defer a portion of their eligible compensation up to the maximum allowed by IRS Regulations.

18

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

We make voluntary matching contributions of 50% of the first 6% of each participating employee's contribution, up to 3% of eligible earnings. Our match contributions are made to funds designated by the participant, none of which are based on Inspire common stock. Our matching contributions to the plan totaled $1.5 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively.

5. Stock-Based Compensation

As of March 31, 2024, there were 4,879,073 shares reserved for issuance under our equity incentive plan, of which 1,538,340 shares were available for issuance.

Stock-based compensation expense is recognized on a straight-line basis over the vesting term for stock options and RSUs, and over the performance period based on the probability of achieving the performance objectives for PSUs, and is reduced by actual forfeitures as they occur. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase, or cancel any remaining unearned stock compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock-based awards.

Stock Options

Options are granted with an exercise price, which is equal to the closing price of our stock on the date of grant. Stock options include a four-year service period and 25% vest after the first year of service and the remainder vest in equal installments over the next 36 months of service. The stock options granted to the board of directors vest in one or three equal annual installments, in each case subject to the director's continuous service through the applicable vesting date. The stock options have a contractual life of ten years.

The fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model.

Option Value and Assumptions

	Three Months Ended
	March 31,
	2024	2023
Weighted average fair value	$124.70	$151.88
Assumptions:
Expected term (years)	6.25	6.25
Expected volatility	59.0 - 59.4%	57.2 - 57.4%
Risk-free interest rate	3.95 - 4.28%	3.55 - 4.07%
Expected dividend yield	0.0%	0.0%

Expected Term — Due to our limited amount of historical exercise, forfeiture, and expiration activity, we have opted to use the "simplified method" for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting terms and the original contractual term of the option. We will continue to analyze our expected term assumption as more historical data becomes available.

Expected Volatility — During the three months ended March 31, 2024, we based expected volatility on the historic volatility of our common stock. In prior periods, due to our limited company specific historical and implied volatility data, we incorporated our historical stock trading volatility with those of a group of similar companies that are publicly traded for the calculation of volatility. When selecting this peer group, we generally selected companies with comparable characteristics, including enterprise value, stages of clinical development, risk profiles, position within the industry, and those with historical share price information sufficient to meet the expected life of the stock-based awards.

19

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. government Treasury instruments with maturities similar to the expected term of our stock options.

Expected Dividend Yield — The expected dividend assumption is based on our history of not paying dividends and our expectation that we will not declare dividends for the foreseeable future.

Stock Option Activity

	Options	Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	2,447,141		$	152.17	7.0	$160,691
Granted	158,438		$	196.92
Exercised	(88,310)		$	41.03		$13,707
Forfeited/expired	(15,696)		$	225.17
Outstanding at March 31, 2024	2,501,573		$	158.47	7.0	$166,795
Exercisable at March 31, 2024	1,636,818		$	122.86	6.1	$157,645

The aggregate intrinsic value of options exercised is the difference between the estimated fair market value of our common stock at the date of exercise and the exercise price for those options. The aggregate intrinsic value of outstanding options is the difference between the closing price as of the date outstanding and the exercise price of the underlying stock options. As of March 31, 2024, the amount of unearned stock-based compensation to be expensed from now through the year 2028 related to unvested stock options is $105.9 million, which we expect to recognize over a weighted average period of 2.5 years.

Restricted Stock Units

RSUs are share awards that entitle the holder to receive freely tradable shares of our common stock upon vesting. The RSUs cannot be transferred and the awards are subject to forfeiture if the holder’s service terminates prior to the release of the vesting restrictions. The RSUs granted to employees include three- or four-year service periods and vest in equal installments on each anniversary of the date of grant. The RSUs granted to the board of directors include one-or three-year service periods and vest in equal installments on each anniversary of the date of grant. The fair value of the RSUs is equal to the closing price of our common stock on the grant date. A summary of RSUs and related information is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	201,070		$	235.47	$	40,904
Granted	405,239		$	195.73
Vested	(41,185)		$	247.56	$	8,157
Forfeited	(10,510)		$	207.74
Unvested at March 31, 2024	554,614		$	206.06	$	119,126

The aggregate intrinsic value of unvested RSUs was based on our closing stock price on the last trading day of the period. The aggregate intrinsic value of vested RSUs was based on our closing stock price on the date of vest. As of March 31, 2024, the amount of unearned stock-based compensation currently estimated to be expensed from now through the year 2027 related to unvested RSUs was $103.4 million which we expect to recognize over a weighted average period of 2.6 years.

20

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

Performance Stock Units

During 2022, 2023, and 2024, we granted PSUs to officers and key employees. The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals for the three-year periods ending December 31, 2024, 2025, and 2026, respectively. The expense is recorded on a straight-line basis over the requisite service periods based on an estimate of the number of PSUs expected to vest. Management expectations related to the achievement of the performance goals associated with PSU grants are assessed each reporting period. The number of shares earned at the end of each of the three-year periods will vary based on actual performance, from 0% to 200% of the number of PSUs granted. If the performance conditions are not met or not expected to be met, any compensation expense recognized associated with the grant will be reversed.

A summary of PSUs and related information is as follows:

	Performance Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	168,969		$	248.19	$	34,373
Granted	166,110		$	194.87
Forfeited	(2,278)		$	263.16
Unvested at March 31, 2024	332,801		$	221.47	$	71,482

The fair value of the PSUs is equal to the closing price of our common stock on the grant date. The aggregate intrinsic value of unvested PSUs was based on our closing stock price on the last trading day of the period. As of March 31, 2024, there was $51.1 million of unrecognized stock-based compensation expense related to outstanding PSUs that is expected to be recognized over a weighted-average period of approximately 2.2 years.

Employee Stock Purchase Plan

Employees may participate in our ESPP provided they meet certain eligibility requirements. The purchase price for our common stock under the terms of the ESPP is defined as 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. There were 1,248,131 shares available for future issuance under the ESPP as of March 31, 2024. The current purchase period under the ESPP began on January 1, 2024 and ends June 30, 2024.

6. Income Taxes

At both March 31, 2024 and December 31, 2023, a valuation allowance was recorded against all deferred tax assets due to our cumulative net loss position. We recorded income tax expense of $0.7 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively. Income tax expense consists of minimal state and foreign income taxes in both of the three-month periods ended March 31, 2024 and 2023.

As of December 31, 2023, our gross federal net operating loss carryforwards were $226.1 million, which will expire at various dates beginning in 2034. In addition, net operating loss carryforwards for state income tax purposes of $173.5 million that include net operating losses will begin to expire in 2024. We also have gross research and development credit carryforwards of $14.7 million as of December 31, 2023, which will expire at various dates beginning in 2033.

Utilization of the net operating loss carryforwards and research and development ("R&D") credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Code and similar state provisions. During 2023, we finalized a detailed analysis to determine whether an ownership change has occurred through December 31, 2022, and if a limitation exists. It was determined that December 11, 2018 was the only date that we experienced an ownership change. The study concluded that none of

21

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

(Table amounts in thousands, except share and per share amounts)

the $126.5 million of federal net operating losses nor the $1.7 million of federal R&D credits that were accumulated on December 11, 2018 will expire unused solely due to the limitations under Sections 382 and 383 of the Code. We are in the process of updating the analysis through December 31, 2023. Although unexpected, if we experienced an ownership change during 2023 or 2024, the timing of our ability to utilize the tax attributes may be affected.

Realization of the deferred tax assets is dependent upon the generation of future taxable income, if any, the amount and timing of which are uncertain. Based on available objective evidence and cumulative losses, we believe it is more likely than not that the deferred tax assets are not recognizable and will not be recognizable until we have sufficient book income. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.

We had $0.1 million of tax payable on unrecognized tax positions as of both March 31, 2024 and December 31, 2023.

We file income tax returns in the applicable jurisdictions. The 2020 to 2022 tax years remain open to examination by the major taxing authorities to which we are subject. We do not expect a significant change to our unrecognized tax positions over the next 12 months.

7. Segment Reporting and Revenue Disaggregation

We operate our business as one operating segment. An operating segment is defined as a component of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance.

We sell our Inspire system to hospitals and ambulatory surgery centers in the U.S. and in select countries in Europe and Japan through a direct sales organization, and in Singapore and Hong Kong through distributors. Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2024		2023
United States	$	155,771	$	124,485
All other countries	8,239		3,412
Total revenue	$	164,010	$	127,897

Long-lived tangible assets by geographic location were as follows:

	March 31, 2024		December 31, 2023
United States	$	52,099	$	39,916
All other countries	182		68
Total long-lived tangible assets	$	52,281	$	39,984

8. Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the following potentially dilutive shares were antidilutive in those periods.

22

INSPIRE MEDICAL SYSTEMS, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 

(Table amounts in thousands, except share and per share amounts)

The following common stock-based awards were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive:

	March 31,
	2024	2023
Common stock options outstanding	2,501,573	2,818,389
Unvested restricted stock units	554,614	179,374
Shares issuable under the ESPP	5,872	5,136
Total	3,062,059	3,002,899

9. Related Party Transaction

In December 2023, we entered into an agreement with an entity controlled by our Chief Executive Officer (the "Entity"), pursuant to which we agreed to share the costs of a corporate suite at a sports and entertainment venue (the "Venue") (the “Suite”) (the “Cost Sharing Agreement”). In August 2023, the Entity entered into an agreement with the Venue, pursuant to which the Entity acquired certain rights to use the Suite for specified sporting and other events at the Venue through August 2026. Pursuant to this agreement, the Entity agreed to pay $0.2 million per year, with each year beginning September 1 and ending August 31, and the fee increasing by 5% for each succeeding year. Under the Cost Sharing Agreement, we will reimburse the Entity 50% of the cost of the Suite in exchange for the right to use the Suite for 50% of the specified events at the Venue through August 2026.

10. Commitments and Contingencies

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, Inspire and two of its executive officers were named as defendants in a purported federal securities law class action filed in the United States District Court for the District of Minnesota, captioned City of Hollywood Firefighters’ Pension Fund v. Inspire Medical Systems, Inc., et. al., Court File No. 0:23-cv-03884. The plaintiff filed an amended complaint on April 19, 2024, which alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, which alleged violations relate to certain prior disclosures of Inspire about the effectiveness of a program intended to help certain customers establish independence in seeking prior authorization from payors for our Inspire therapy. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired Inspire common stock between May 3, 2023 and November 7, 2023. The plaintiff seeks damages and other relief, including attorneys' fees and costs. The defendants intend to vigorously defend this lawsuit.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, the discussion under "Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 1. Business” sections included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, such as information with respect to our plans and strategy for our business and the impact of macroeconomic factors on our business, financial results and financial condition includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the "Part I, Item 1A. Risk Factors" section of our Annual Report, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea ("OSA"). Our proprietary Inspire system is the first and only FDA-approved neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA. We have developed a novel, closed-loop solution that continuously monitors a patient’s breathing and delivers mild hypoglossal nerve stimulation to maintain an open airway. Inspire therapy is indicated for patients with moderate to severe OSA who do not have significant central sleep apnea and do not have a complete concentric collapse of the airway at the soft palate level. In addition, patients in the U.S., Japan, Singapore, and Hong Kong must have been confirmed to fail or be unable to tolerate positive airway pressure treatments, such as CPAP, and be 18 years of age or older, though there are no similar requirements for patients in Europe.

We sell our Inspire system to hospitals and ambulatory surgery centers ("ASCs") in the U.S. and in select countries in Europe and Japan through a direct sales organization and we sell our Inspire system in Singapore and Hong Kong through distributors. Our direct sales force engages in sales efforts and promotional activities primarily focused on ENT physicians and sleep centers. In addition, we highlight our compelling clinical data and value proposition to increase awareness and adoption amongst referring physicians. We build upon this top-down approach with strong direct-to-consumer marketing initiatives to create awareness of the benefits of our Inspire system and drive interest through patient empowerment. We believe this outreach helps to educate thousands of patients on our Inspire therapy.

Although our sales and marketing efforts are directed at patients and physicians because they are the primary users of our technology, we consider the hospitals and ASCs where the procedure is performed to be our customers, as they are the purchasing agents of our Inspire system. Our customers are reimbursed the cost required to treat each patient through various third-party payors, such as commercial payors and government agencies. Our Inspire system is currently reimbursed primarily on a per-patient prior authorization basis for patients covered by commercial payors, under Local Coverage Determinations for patients covered by Medicare, and under U.S. government contract for patients who are treated by the Veterans Health Administration. As of May 7, 2024, we have secured positive coverage policies with many U.S. commercial payors, including virtually all large national commercial insurers, covering approximately 260 million lives in the U.S. In addition, all seven Medicare Administrative Contractors published final policies in 2020 that provide coverage of Inspire therapy when certain coverage criteria are met.

Reimbursement in other countries can often be established through a combination of private (commercial insurance) and public funding sources, or at the hospital level through innovation budgets.

For the three months ended March 31, 2024, 95.0% of our revenue was derived in the U.S. and 5.0% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue during the three months ended March 31, 2024.

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We rely on third-party suppliers to manufacture our Inspire system and its components. Many of these suppliers are currently single source suppliers. We have experienced and continue to experience supply disruptions that began during the COVID-19 pandemic, but to date we have managed to avoid major delays in implant procedures due to those issues. During the third quarter of 2023, we experienced an inventory supply issue related to our polyurethane-based stimulation leads, one component of the Inspire system currently used only in the European market. In 2022, the FDA approved our silicone-based stimulation and sensing leads in the U.S., which replaced the polyurethane versions of the leads, and we stopped manufacturing polyurethane leads. We applied for European Union ("EU") Medical Devices Regulation ("MDR") certification in December 2021, which we expect to obtain in 2024, following industry-wide delays in the process. In the interim, we received a derogation pursuant to Article 59 of the EU MDR from the Dutch, German, Swiss, Belgian, and Austrian competent authorities, and the British equivalent, i.e. exceptional use authorization, from the United Kingdom national competent authority. Article 59 derogation is granted when the member state determines that it is in the best interests of patient health and safety, and that there is no adequate alternative to the device. It allows us to place the silicone-based leads on the market in those countries until various dates in 2024 or until we receive certification under the EU MDR, whichever occurs first. We may continue to pursue derogation in other EU member states, however, we cannot be certain that other national competent authorities will grant a derogation similar to the above-mentioned authorities. However, to date, all of our derogation applications have been approved. Until we obtain certification under the EU MDR, silicone leads may only be sold in the EU member states that have granted derogation. Polyurethane-based leads are the only leads that may be sold in the EU member states that have not granted derogation, and the polyurethane stimulation lead is in low supply. During the fourth quarter of 2023 and extending into early 2024, the delay in certification and the shortage of polyurethane-based stimulation leads caused delays to implant procedures which adversely affected our business in Europe, including a reduction in our European revenue, and thereby our consolidated revenue. We estimate the impact during the fourth quarter of 2023 was approximately $4.0 million in lost revenue opportunity, some of which we believe was recovered during the first quarter of 2024. However, if we do not receive EU MDR certification or derogation extensions, we may again experience delays to implant procedures, and therefore adverse impacts to our revenue.

We typically seek to maintain higher levels of inventory to protect ourselves from supply interruptions, and, as a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.

In the U.S., our products are shipped directly to our U.S. customers and to our Singapore and Hong Kong distributors on a purchase order basis, primarily by a third-party vendor with a facility in Tennessee, although we do ship some products from our facility in Minnesota. Warehousing and shipping operations for our European customers are handled by a third-party vendor with a facility located in the Netherlands, and warehousing and shipping operations for our Japanese customers are handled by a third-party with a facility in Japan. Customers do not have the right to return a non-defective product, nor do we place product on consignment. Our sales representatives do not maintain trunk stock.

Since our inception in 2007, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our former credit facility, and equity offerings of our common stock. We have devoted significant resources to research and development activities related to our Inspire system, including clinical and regulatory initiatives to obtain marketing approval, and sales and marketing activities. For the three months ended March 31, 2024, we generated revenue of $164.0 million with a gross margin of 84.9% and had a net loss of $10.0 million compared to revenue of $127.9 million with a gross margin of 84.4% and a net loss of $15.4 million for the three months ended March 31, 2023. Our accumulated deficit as of March 31, 2024 was $355.4 million.

We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our Inspire therapy. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of our Inspire therapy and to support regulatory submissions. We continue to make investments in research and development efforts to develop our next generation Inspire systems and support our future regulatory submissions for expanded indications and for new markets such as additional European countries and the Asia Pacific region. For example, in June 2023, we submitted a premarket approval ("PMA") supplement to the FDA for our next generation Inspire system. Also in June 2023, we received approval

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from the FDA on an expanded indication which includes an increase on the upper limit of the Apnea Hypopnea Index to 100 events per hour from 65, and raises the Body Mass Index ("BMI") warning in the labeling to 40 from 32, and we also received FDA approval of our new physician programmer, called the SleepSync™ programmer, which we expect to formally launch in the U.S. in the second half of 2024. In March 2023, we received FDA approval to offer Inspire therapy to certain pediatric patients with Down syndrome.

Our direct-to-consumer marketing includes the use of social media platforms such as Facebook, Google ad placements, and radio and television commercials. The objective of this outreach is to bring patients to our website, where they can find educational materials and videos on sleep apnea and the use and benefits of our Inspire therapy, contact information for physicians and clinical sites, and information regarding community awareness events. Further, our team leverages the Inspire Sleep app for patient education. We plan to continue to refine our approach to direct-to-consumer outreach, including increasing attention to digital advertising directed towards qualified patients. We expect to maintain our level of direct-to-consumer activities.

We have a call center which we refer to as the Inspire Advisor Care Program ("ACP"). The primary purpose of this program is to assist patients with making a connection with a qualified healthcare provider based on their specific needs. In 2022, we initiated a digital scheduling pilot program to facilitate and streamline patient access to care. We intend to continue to enhance this scheduling capability during the remainder of 2024.

We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S., European, and Japanese sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets. During the three months ended March 31, 2024, we added 11 new U.S. sales territories, bringing our total to 298 U.S. sales territories as of March 31, 2024. During that same period, we activated 66 new U.S. medical centers, bringing the total to 1,246 U.S. medical centers implanting Inspire therapy as of March 31, 2024.

During 2023 and into the first quarter of 2024, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, continued to gain popularity as a weight-loss drug. OSA is a multifactorial disease with many independent factors including age, gender, weight, and neck circumference. Inspire is designed to address anteroposterior airway collapse, also known as tongue-based collapse. Additionally, patients with a higher BMI are subject to a larger neck circumference and present predominantly with lateral-wall collapse. A combination of tongue-based collapse and lateral-wall collapse is identified as a complete concentric collapse of the upper airway. Inspire is contraindicated for complete concentric collapse. On April 17, 2024, Eli Lilly and Company published results from its SURMOUNT-OSA trial demonstrating a 50.7% reduction in Apnea-Hypopnea Index ("AHI") for patients in the therapy arm of the study using tirzepatide, a GLP-1 injection. Given a baseline AHI of 50.3, we believe these results suggest most patients enrolled in the study will continue to have residual moderate OSA that will require treatment and fall within Inspire’s FDA-approved indication. While weight loss may help reduce a patient’s AHI and other OSA symptoms, numerous other studies have shown that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s may help patients address their lateral wall collapse, making them a potential candidate for Inspire therapy to the extent they also have tongue-based collapse. Based on our ongoing ADHERE patient registry, the average BMI of patients treated with Inspire therapy is 29 and the American Academy of Sleep Medicine guidelines recommend weight loss prior to surgery for patients with BMI over 35 and nonsurgical solutions for patients with BMI over 40. Therefore, we believe there is not a notable overlap between the Inspire patient population and the patient population being treated with GLP-1s today. While we cannot quantify the impact, we believe that there could be a benefit to our business as a result of GLP-1s, although there can be no assurance of such benefit at this time.

Macroeconomic Environment

The global economy continues to experience increased inflationary pressures. Higher interest rates and capital costs, higher shipping costs, increased costs of labor, international conflicts and terrorism, and weakening foreign currency exchange rates are creating additional economic challenges. These conditions may cause our customers to decrease or delay orders for our products.

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Our inventory on-hand has been constrained by the continuing supply chain challenges and component shortages, although the supply chain constraints eased somewhat throughout 2023 and into 2024. As mentioned above, not having received EU MDR approval of our silicone-based leads which resulted in shortages of polyurethane-based leads, we have experienced and may continue experience to cause delays to implant procedures and a reduction in our European revenue.

Components of Our Results of Operations

Revenue

We derive primarily all of our revenue from the sale of our Inspire system to hospitals and ASCs in the U.S. and in select countries in Europe and the Asia Pacific region. We recognize revenues from sales of our Inspire system when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms.

Our revenue has fluctuated, and may continue to fluctuate, from quarter to quarter due to a variety of factors. For example, we have historically experienced seasonality in our first and fourth quarters, and have experienced adverse impacts on our revenue due to the delay in obtaining EU MDR approval of our silicone-based leads and foreign currency exchange rates. In addition, we believe our revenue growth has been adversely impacted by lack of ENT surgeon capacity. If such impacts continue, our revenue growth may be further adversely impacted.

Our business has grown rapidly in recent years, resulting in substantially increased revenues, and we expect that our business will continue to grow. However, our revenue growth rate has generally declined in recent periods, and it may continue to do so as a result of the difficulty of maintaining growth rates as our revenues increase to higher levels.

Cost of Goods Sold and Gross Margin

Cost of goods sold consists primarily of acquisition costs for the components of the Inspire system, overhead costs, scrap, and inventory obsolescence, warranty replacement costs, as well as distribution-related expenses such as logistics and shipping costs, net of shipping costs charged to customers. The overhead costs include the cost of material procurement, depreciation expense for production equipment, and operations supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel. We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively.

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and we expect it will continue to be affected by a variety of factors, including manufacturing costs, the average selling price of our Inspire system, the implementation of cost-reduction strategies, inventory obsolescence costs, which generally occur when new generations of our Inspire system are introduced, and to a lesser extent the sales mix between the U.S. and countries outside of the U.S., as our average selling price in the U.S. tends to be higher than in other countries. Our gross margin may increase slightly to the extent our production volumes increase and we receive discounts on the costs charged by our contract manufacturers, thereby reducing our per unit costs, and when we implement price increases on our products, thereby increasing our revenue. On the other hand, our gross margin may decrease slightly to the extent our yields decrease, or materials and labor prices increase due to supply chain issues and inflation, thereby increasing our per unit costs. However, our gross margin may also fluctuate from quarter to quarter due to seasonality and foreign currency exchange rates.

Research and Development Expenses

Research and development ("R&D") expenses consist primarily of product development, engineering, clinical studies to develop and support our products, regulatory expenses, quality assurance, testing, consulting services, prelaunch inventory, and other costs associated with the next generation versions of the Inspire system and SleepSync™, a cloud-based patient management system. These expenses include employee compensation,

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including stock-based compensation, supplies, materials, consulting, and travel expenses related to research and development programs. Additionally, these expenses include clinical study management, payments to clinical investigators, data management and travel expenses for our various clinical studies.

We expense prelaunch inventory as R&D expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and we also expect future economic benefit from the sales of the product candidate to be realized.

We expect R&D expenses to increase in the future as we develop next generation versions of our Inspire system and SleepSync™ and continue to expand our clinical studies to further expand positive coverage policies from private commercial payors in the U.S. and enter into new markets including additional European countries and the Asia Pacific region. We expect R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts and new clinical development activities.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses consist primarily of compensation for personnel, including base salaries, stock-based compensation expense and commissions related to our sales organization, finance, information technology, human resource, and legal functions, as well as spending related to marketing, sales operations, and training and reimbursement personnel. Other SG&A expenses include training physicians, travel expenses, advertising, direct-to-consumer promotional programs, conferences, trade shows and consulting services, professional services fees, audit fees, insurance costs and general corporate expenses, including facilities-related expenses.

We expect SG&A expenses to continue to increase as we expand our commercial infrastructure to both drive and support our planned growth in revenue and as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance, legal, and human resources personnel and information technology services. Additionally, we anticipate an increase in our stock-based compensation expense with grants of stock options, restricted stock units, performance stock units, and shares of our common stock purchased pursuant to our employee stock purchase plan.

Other (Income) Expense

Other (income) expense consists primarily of interest and dividend income, the impacts of foreign currency transactions and remeasurements, and gains and losses on investments.

Seasonality

Historically, we have experienced seasonality in our first and fourth fiscal quarters, and we expect this trend to continue. In the U.S., we have experienced, and may in the future experience, higher sales in the fourth quarter as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs. Conversely, in the first quarter, many U.S. patients' insurance deductibles reset, requiring more out-of-pocket costs, which negatively impacts our sales during this period.

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Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

	Three Months Ended
	March 31,
	2024		2023		$ Change		% Change
	(in thousands, except percentages)
Revenue	$	164,010	$	127,897	$	36,113	28.2	%
Cost of goods sold	24,757		19,888		4,869		24.5	%
Gross profit	139,253		108,009		31,244		28.9	%
Gross margin	84.9%		84.4%
Operating expenses:
Research and development	28,850		25,519		3,331		13.1	%
Selling, general and administrative	125,621		101,988		23,633		23.2	%
Total operating expenses	154,471		127,507		26,964		21.1	%
Operating loss	(15,218)		(19,498)		4,280		(22.0)	%
Other income, net	(5,863)		(4,290)		(1,573)		36.7	%
Loss before income taxes	(9,355)		(15,208)		5,853		(38.5)	%
Income taxes	650		216		434		200.9	%
Net loss	$	(10,005)	$	(15,424)	$	5,419	(35.1)	%

Revenue

Revenue increased $36.1 million, or 28.2%, to $164.0 million for the three months ended March 31, 2024 compared to $127.9 million for the three months ended March 31, 2023. These results reflect an increase in sales of our Inspire system of $31.3 million in the U.S. and an increase of $4.8 million outside of the U.S. compared to the same prior year period. Overall revenue growth was primarily due to increased market penetration in existing centers, expansion into new territories, and, we believe, increased physician and patient awareness of our Inspire system, partially offset by ENT surgeon capacity constraints.

Revenue information by region is summarized as follows:

	Three Months Ended March 31,
	2024				2023				Change
	Amount		% of Revenue		Amount		% of Revenue		$		%
	(in thousands, except percentages)
United States	$	155,771	95.0	%	$	124,485	97.3	%	$	31,286	25.1	%
All other countries	8,239		5.0	%	3,412		2.7	%	4,827		141.5	%
Total revenue	$	164,010	100.0	%	$	127,897	100.0	%	$	36,113	28.2	%

Revenue generated in the U.S. was $155.8 million for the three months ended March 31, 2024, an increase of $31.3 million, or 25.1%, compared to the three months ended March 31, 2023. Revenue growth in the U.S. was primarily due to increased market penetration in existing centers, the expansion into new territories, and, we believe, increased physician and patient awareness of our Inspire system.

Revenue generated outside of the U.S. was $8.2 million in the three months ended March 31, 2024, an increase of $4.8 million, or 141.5%, compared to the three months ended March 31, 2023. As noted above, during the fourth quarter of 2023, not having received EU MDR certification of our silicone-based stimulation lead and the resulting shortage of polyurethane-based stimulation leads had an estimated adverse impact on European revenue during

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that period of approximately $4.0 million. The revenue increase experienced during the first quarter of 2024 was primarily due to the recovery of some of the $4.0 million of revenue opportunity from the fourth quarter of 2023. Other factors contributing to revenue growth were increased market penetration in existing centers, the expansion of our European sales representatives into new territories, increased sales in the Asia Pacific region, and, we believe, increased physician and patient awareness of our Inspire system.

Cost of Goods Sold and Gross Margin

Cost of goods sold increased $4.9 million, or 24.5%, to $24.8 million for the three months ended March 31, 2024 compared to $19.9 million for the three months ended March 31, 2023. The increase was primarily due to product costs associated with the higher sales volume of our Inspire system experienced during the first quarter of 2024. Cost of goods sold for the three months ended March 31, 2023 was negatively impacted by additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads.

Gross margin increased to 84.9% for the three months ended March 31, 2024 from 84.4% for the three months ended March 31, 2023. This increase was primarily due to increased sales volume and manufacturing efficiencies. Gross margin for the three months ended March 31, 2023 was negatively impacted by additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads.

Research and Development Expenses

Research and development expenses increased $3.3 million, or 13.1%, to $28.9 million for the three months ended March 31, 2024 compared to $25.5 million for the three months ended March 31, 2023. This change was primarily due to an increase of $5.1 million of compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and an increase of $0.1 million in clinical studies expenses and quality compliance audit fees, partially offset by a decrease of $1.9 million in ongoing research and development costs compared to the prior year period, primarily with respect to our SleepSync™ platform.

Selling, General and Administrative Expenses

SG&A expenses increased $23.6 million, or 23.2%, to $125.6 million for the three months ended March 31, 2024 compared to $102.0 million for the three months ended March 31, 2023. The primary driver of this change was an increase of $15.4 million in compensation, including salaries, commissions, stock-based compensation, and other employee-related expenses, mainly as a result of increased headcount. In addition, marketing expenses increased $3.3 million, primarily consisting of direct-to-consumer initiatives. Other drivers of the change to SG&A expenses included an increase in general corporate costs of $3.0 million primarily due to legal fees, bank fees, computer equipment and software expense, and office rent expense, as well as an increase in travel expenses of $1.9 million.

Other Income

Other income increased by $1.6 million, or 36.7%, to $5.9 million for the three months ended March 31, 2024 compared to $4.3 million for the three months ended March 31, 2023. The change was primarily due to an increase of $1.7 million in interest and dividend income due to higher interest rates on our higher cash, cash equivalents, and investment balances, partially offset by an increase of $0.1 million in foreign currency translation and remeasurement losses due to exchange rates.

Income Taxes

We recorded a provision for incomes taxes of approximately $0.7 million and $0.2 million for the three months ended March 31, 2024 and March 31, 2023, respectively. This change was primarily due to an increase of $0.4 million in state and local taxes, as well as $0.1 million in foreign taxes.

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Liquidity and Capital Resources

As of March 31, 2024, we had cash, cash equivalents, and available-for-sale debt securities of $469.2 million, a decrease of $0.4 million from $469.5 million as of December 31, 2023. Working capital totaled $500.0 million as of March 31, 2024, a decrease of $15.6 million from December 31, 2023. We define working capital as current assets less current liabilities. The decrease in working capital was primarily due to the following factors:

•a $17.6 million decrease in accounts receivable due to lower sales which occurred during the first quarter of 2024 versus the fourth quarter of 2023;

•a $10.1 million decrease in cash and cash equivalents, primarily due to the purchase of long-term available-for-sale investments and cash to support operations, offset partially by sales of the Inspire system and proceeds from the exercise of stock options;

•an $8.9 million decrease in short-term available-for-sale investments, the proceeds of which were used to purchase long-term available-for-sale investments; and

•a $5.0 million increase in accounts payable, generally due to our business volume and headcount growth from the prior year.

The decrease in working capital was partially offset by the following factors:

•a $15.1 million increase in inventory balances, which increased as supply chain issues eased; and

•a $10.9 million decrease in accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

We proactively manage our access to capital to support liquidity and continued growth. Our sources of capital include sales of our Inspire system and registered offerings of our common stock.

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. At March 31, 2024, we had $141.5 million in money market funds, $246.9 million in U.S. government securities, and $46.9 million in corporate debt securities, certificates of deposit, commercial paper, and asset-backed securities. See Note 2 to our unaudited consolidated financial statements in this Quarterly Report for additional information on our investments.

In the three months ended March 31, 2024, our R&D and SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during the remainder of 2024. Our SG&A expenditures, primarily for increasing headcount and advertising, may exceed any associated increases in revenues, and therefore would reduce our cash flow from operations. We also anticipate R&D expenses will continue to be significant in 2024, primarily related to the ongoing development of the SleepSync™ platform and next generation products.

We spent $11.7 million on purchases of property and equipment in the three months ended March 31, 2024, mainly on testing systems and production equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements. We anticipate further capital expenditures in 2024, primarily for additional production equipment and our SleepSync™ platform, computer hardware and software, and leasehold improvements on our corporate office buildings.

As of March 31, 2024, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

We believe that our existing cash and cash equivalents and investments, which totaled $469.2 million as of March 31, 2024, together with cash flows from operations, will provide liquidity sufficient to meet our cash needs and fund

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our operations and planned capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will continue to generate cash flows at the same levels achieved in prior periods.

Beyond the next 12 months, our cash requirements will depend extensively on the timing of market introduction, and extent of market acceptance of, our Inspire system. Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization, entry and expansion into new markets such as Australia, whether we make strategic acquisitions, and competition. We cannot accurately predict our long-term cash requirements at this time. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition. We may seek additional sources of liquidity and capital resources through equity or debt financings, such as additional securities offerings or through borrowings under a new credit facility. There can be no assurance that such transactions will be available to us on favorable terms, if at all.

Cash Flows

The following table presents a summary of our cash flow for the periods indicated:

	Three Months Ended
	March 31,
	2024		2023
	(in thousands)
Net cash provided by (used in):
Operating activities	$	8,860	$	(1,344)
Investing activities	(19,535)		(3,753)
Financing activities	768		5,631
Effect of exchange rate on cash	(214)		6
Net (decrease) increase in cash and cash equivalents	$	(10,121)	$	540

Operating Activities

The net cash provided by operating activities was $8.9 million for the three months ended March 31, 2024 and consisted of a net loss of $10.0 million, non-cash charges of $23.8 million, and a decrease in net operating assets of $5.0 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more equity awards to a greater number of employees as compared to the same prior-year period. The remainder of the non-cash charges included accretion of investment discount due to higher investment balances, depreciation and amortization expense which increased with additional purchases of property and equipment, non-cash lease expense, stock issued for services rendered, and other, net. Operating assets include inventories, which increased as supply chain constraints eased, and accounts receivable, which decreased due to collections on the higher sales volume we typically experience late in the fourth quarter. Operating assets also include prepaid expenses and other current assets, which decreased slightly compared to the same prior-year period, primarily due to various prepaid expenses and prepaid insurance. Operating liabilities include accounts payable, which increased generally due to our increased business volume year-over-year and the costs to support the growth of our operations, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

The net cash used in operating activities was $1.3 million for the three months ended March 31, 2023 and consisted of a net loss of $15.4 million, non-cash charges of $19.2 million, and a decrease in net operating assets of $5.1 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options, restricted stock units, and performance stock units to more employees at a higher fair market value. The remainder of the non-cash charges included depreciation and amortization expense, non-cash lease expense, and stock issued for services rendered. Operating assets include accounts receivable which decreased due to collections on the higher sales volume we typically experience late in the fourth quarter. Operating assets also include inventories, which increased as supply chain constraints eased, and to a lesser extent prepaid expenses and other current assets. Operating liabilities includes accounts payable, which increased generally due

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to our increased business volume year-over-year and the costs to support the growth of our operations, and accrued expenses, which decreased primarily due to the payment of year-end bonuses and commissions.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 was $19.5 million and consisted primarily of the purchase of investments of $55.7 million, the purchases of property and equipment of $11.7 million, mainly for testing systems and production equipment for our next generation Inspire system, our SleepSync™ platform, computer hardware and software, and leasehold improvements, partially offset by the proceeds from sales or maturities of investments of $47.9 million.

Net cash used in investing activities for the three months ended March 31, 2023 was $3.8 million and consisted of purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $0.8 million for the three months ended March 31, 2024 and consisted of $3.6 million in proceeds from the exercise of stock options, partially offset by $2.8 million of taxes paid on net share settlement of equity awards.

Net cash provided by financing activities was $5.6 million for the three months ended March 31, 2023 and consisted of $7.4 million in proceeds from the exercise of stock options, partially offset by $1.7 million of taxes paid on net share settlement of equity awards.

Contractual Obligations and Commitments

There have been no material changes to our short-term and long-term anticipated cash requirements under contractual obligations from those described in our Annual Report.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" contained in our Annual Report. We have reviewed and determined that those critical accounting policies and estimates discussed in our Annual Report remain our critical accounting policies and estimates as of and for the three months ended March 31, 2024.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

The risk associated with fluctuating interest rates is primarily limited to our cash equivalents which are carried at quoted market prices and our short-term investments. We do not currently use or plan to use financial derivatives in our investment portfolio. A hypothetical 1% change in interest rates would have impacted interest and dividend income on our consolidated financial statements by approximately $1.1 million and $1.0 million during the three months ended March 31, 2024 and 2023, respectively.

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Credit Risk, Foreign Currency Risk, and Inflation Risk

For market risks related to changes in credit, foreign currency, and inflation, refer to Item 7A “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report. Our exposure to these risks has not materially changed from those disclosed in our Annual Report, other than as described below.

As of March 31, 2024 and December 31, 2023, our cash, cash equivalents, and investments were maintained with financial institutions which we believe have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us; however, our cash balances were in excess of insured limits. Market conditions can impact the viability of where our cash is held. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Item 4.    Controls and Procedures.

Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this Quarterly Report.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

From time to time we may be involved in claims and proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain.

The information contained in “Note 10 — Commitments and Contingencies” in the Notes to the Consolidated Financial Statements is incorporated by reference into this Item 1 of this Quarterly Report.

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Item 1A.    Risk Factors.

For a discussion of our potential risks and uncertainties, see the information in "Part I, Item 1A. Risk Factors” in our Annual Report. There have been no material changes to the risk factors disclosed in our Annual Report, other than the following:

We currently compete and will in the future continue to compete against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration and improved operating results.

The medical technology industry is highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants. Our competitors have historically dedicated and will continue to dedicate significant resources to promoting their products or developing new products or methods to treat moderate to severe OSA. We consider our primary competition to be other neurostimulation technologies designed to treat OSA. Though we are currently the only such technology approved for commercialization in the U.S. by the FDA, LivaNova, which produces an open-loop neurostimulation device designed to treat OSA, recently announced completion of clinical trials of its device in the U.S. We compete outside the U.S. with Nyxoah, which markets a bilateral hypoglossal nerve stimulation device in certain countries outside the U.S. and recently announced early conclusion of enrollment in its first pivotal trial as it seeks FDA approval in the U.S. We believe other emerging businesses are in the early stages of developing neurostimulation devices designed to treat OSA. In addition, we also compete, both within and outside of the U.S., with invasive surgical treatment options such as UPPP and MMA and, to a lesser extent, oral appliances, which are primarily used in the treatment of mild to moderate OSA.

In addition, our Inspire therapy is approved for use as a second-line therapy in the treatment of moderate to severe OSA in patients who cannot use or obtain consistent benefit from CPAP. If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other first or second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations. In addition, if other companies are successful in developing neurostimulation devices that are approved for a broader range of indications than our Inspire system, we will be at a further competitive disadvantage, which could also affect our business, financial condition and results of operations.

During 2023 and into the first quarter of 2024, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, continued to gain popularity as a weight-loss drug. Use of GLP-1s, or similar treatments, for these clinical indications may directly or indirectly treat OSA. Additionally, GLP-1s are currently being clinically evaluated as a potential treatment for OSA. Although we believe that there could be a benefit to our business as a result of GLP-1s, there can be no assurance of such benefit at this time. If GLP-1s are successful in treating OSA in an indication for which Inspire therapy is approved, demand for our Inspire system could be reduced.

Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including, for example:

•greater company, product, and brand recognition;

•superior product safety, reliability, and durability;

•better quality and larger volume of clinical data;

•more effective marketing to and education of patients, physicians, and sleep centers;

•greater product ease of use and patient comfort;

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•more sales force experience and greater market access;

•better product support and service;

•more advanced technological innovation, product enhancements, and speed of innovation;

•more effective pricing and revenue strategies;

•lower procedure costs to patients;

•more effective reimbursement teams and strategies;

•dedicated practice development; and

•more effective clinical training teams.

Most of the other OSA treatments against which we compete have a greater penetration into the OSA treatment market. Oral appliances and other surgical treatments are better known to ENT physicians, sleep centers, and the other physicians on whom we rely for referrals.

We also compete with other medical technology companies to recruit and retain qualified sales, training, and other personnel, including members of our in-house prior authorization team.

In addition, though there are currently no pharmacologic therapies approved to treat OSA, we may in the future face competition from pharmaceutical companies that develop such therapies. We also expect to experience increased competition in the future as other companies develop and commercialize competing neurostimulation devices. Any of these companies may also have the competitive advantages described above.

We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition, and results of operations.

We are, and may in the future become, party to litigation, regulatory proceedings or other disputes. In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. These potential claims may include but are not limited to personal injury and class action lawsuits, intellectual property claims and regulatory investigations relating to the advertising and promotional claims about our products and services, and employee claims against us based on, among other things, discrimination, harassment or wrongful termination. Any one of these claims, even those without merit, may divert our financial and management resources that would otherwise be used to benefit the future performance of our operations. Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

Additionally, securities class action litigations are often brought against companies following periods of volatility in the overall market and in the market price of a company’s securities. On December 22, 2023, we and certain of our executive officers were named in a putative class action lawsuit. The plaintiff filed an amended complaint on April 19, 2024, which alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, which alleged violations relate to certain prior disclosures of Inspire about the effectiveness of a program intended to help certain customers establish independence in seeking prior authorization from payors for our Inspire therapy. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired Inspire common stock between May 3, 2023 and November 7, 2023. This lawsuit and any future lawsuits to which

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we may become a party are subject to inherent uncertainties and could result in very substantial costs, divert our management’s attention and resources and materially harm our business, operating results and financial condition.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

(a) None.

(b) None.

(c) Adoption or Termination of Trading Arrangements by Directors and Executive Officers

During the three months ended March 31, 2024, no director or “officer” (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6.    Exhibits.

Exhibit Number	Description	Form	File No.	Exhibit	Filing Date	Filed/ Furnished Herewith
3.1	Seventh Amended and Restated Certificate of Incorporation of Inspire Medical Systems, Inc.	8-K	001-38468	3.1	5/7/2018
3.2	Amended and Restated Bylaws of Inspire Medical Systems, Inc.	8-K	001-38468	3.2	5/7/2018
10.1	Inspire Medical Systems, Inc. Non-Employee Director Compensation Policy	10-Q	001-38468	10.1	5/7/2024
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					*
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					*
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					**
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					**
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document					*
101.SCH	Inline XBRL Taxonomy Extension Schema Document					*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)					*

_______________________________________________________________________________

*    Filed herewith.

**    Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Inspire Medical Systems, Inc.
Date:	May 7, 2024	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert
			President, Chief Executive Officer, and Chairperson
			(principal executive officer)
Date:	May 7, 2024	By:	/s/ RICHARD J. BUCHHOLZ
			Richard J. Buchholz
			Chief Financial Officer
			(principal financial officer and principal accounting officer)

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EX-10.1

NON‐EMPLOYEE DIRECTOR COMPENSATION POLICY  INSPIRE MEDICAL SYSTEMS, INC.  (Last Amended: May 2, 2024)  Non‐employee members of the board of directors (the “Board”) of Inspire Medical Systems, Inc.  (the “Company”) shall be eligible to receive cash and equity compensation as set forth in this Non‐Employee  Director Compensation Policy  (this “Policy”). The cash and equity compensation described  in this Policy  shall be paid or be made, as applicable, automatically and without  further action of the Board, to each  member of the Board who is not an employee of the Company or any parent or subsidiary of the Company  (each, a “Non‐Employee Director”) who may be eligible to receive such cash or equity compensation, unless  such Non‐Employee Director declines the receipt of such cash or equity compensation by written notice to  the Company. This Policy  shall become effective after  the effectiveness of  the Company’s  initial public  offering (the “IPO”) and immediately prior to the establishment of the IPO price of the shares of common  stock of the Company (the “Effective Time”) and shall remain  in effect until  it  is revised or rescinded by  further action of the Board. This Policy may be amended, modified or terminated by the Board at any time  in its sole discretion. The terms and conditions of this Policy shall supersede any prior cash and/or equity  compensation arrangements for service as a member of the Board between the Company and any of its  Non‐Employee  Directors  and  between  any  subsidiary  of  the  Company  and  any  of  its  non‐employee  directors. No Non‐Employee Director shall have any rights hereunder, except with respect to equity awards  granted pursuant to this Policy.   1.0 Cash Compensation.  (a) Annual Retainers. Each Non‐Employee Director shall receive an annual retainer of $50,000 for service on the Board.   (b) Additional Annual Retainers.  In addition, a Non‐Employee Director shall  receive the following annual retainers:  (i) Chairperson  of  the  Board.  A  Non‐Employee  Director  serving  as Chairperson of the Board shall receive an additional annual retainer of $50,000 for such service.  (ii) Independent Director. A Non‐Employee Director serving as Lead Director of the Board shall receive an additional annual retainer of $32,000 for such service.   (iii) Audit Committee. A Non‐Employee Director serving as Chairperson of the Audit Committee shall receive an additional annual retainer of $20,000 for such service. A Non‐Employee  Director  serving  as  a member  of  the  Audit  Committee  (other  than  the  Chairperson)  shall  receive  an  additional annual retainer of $10,000 for such service.  (iv) Compensation  Committee.  A  Non‐Employee  Director  serving  as Chairperson of the Compensation Committee shall receive an additional annual retainer of $15,000  for  such service. A Non‐Employee Director serving as a member of the Compensation Committee (other than  the Chairperson) shall receive an additional annual retainer of $7,500 for such service.  (v) Nominating  and  Corporate  Governance  Committee.  A  Non‐Employee Director serving as Chairperson of the Nominating and Corporate Governance Committee shall receive an  additional annual retainer of $15,000 for such service. A Non‐Employee Director serving as a member of  the Nominating  and  Corporate Governance  Committee  (other  than  the  Chairperson)  shall  receive  an  additional annual retainer of $7,500 for such service.  Exhibit 10.1

Non‐Employee Director Compensation Policy  Inspire Medical Systems, Inc.          (c)  Payment of Retainers.     (i)  Timing. The annual retainers described in Sections 1(a) and 1(b) shall be  earned on a quarterly basis based on a calendar quarter and shall be paid by the Company in arrears on the  tenth business day following the end of each calendar quarter.     (ii)  Form. The annual retainers shall be paid in the form of cash; provided that  the Board may,  in  its discretion, permit a Non‐Employee Director to elect to receive any portion of the  annual retainer in the form of shares of common stock of the Company (“Common Stock”) in lieu of cash.  If such an election is permitted by the Board and made by a Non‐Employee Director, the number of shares  of Common Stock to be paid shall be determined by dividing the portion of the annual retainer payable in  the form of Common Stock by the Fair Market Value (as defined in the Company’s 2018 Incentive Award  Plan or any other applicable Company equity plan then maintained by the Company (such plan, as may be  amended from time to time, the “Equity Plan”)) per share of Common Stock on the date the retainer  is  payable. If the number of shares of Common Stock to be issued from this election is not a whole number  of shares, any remaining portion shall be paid in cash on the date the retainer is payable. Shares issued in  lieu of cash shall be fully vested and unrestricted shares of Common Stock. Any election by a Non‐Employee  Director to receive a portion of the annual retainer in shares of Common Stock must be made prior to the  applicable payment date for such portion of the annual retainer and pursuant to an election form to be  provided by the Company. An election must comply with all rules established  from time to time by the  Board,  including any  insider trading policy or similar policy. A Non‐Employee Director may not make an  election pursuant to this Section 1(c)(ii) during a Company blackout period or when  the Non‐Employee  Director is otherwise in possession of material non‐public information.     (iii)  Termination of Service.  In the event a Non‐Employee Director does not  serve as a Non‐Employee Director, or  in the applicable positions described  in Section 1(b), for an entire  calendar quarter, such Non‐Employee Director shall receive a prorated portion of the retainer(s) otherwise  payable  to  such Non‐Employee Director  for  such  calendar quarter pursuant  to Section 1(b), with  such  prorated  portion  determined  by  multiplying  such  otherwise  payable  retainer(s)  by  a  fraction,  the  numerator of which  is  the number of days during which  the Non‐Employee Director  serves as a Non‐ Employee Director or in the applicable positions described in Section 1(b) during the applicable calendar  quarter and the denominator of which is the number of days in the applicable calendar quarter.    2.0 Equity Compensation.   Non‐Employee Directors shall be granted the equity awards described below. The awards described  below shall be granted under and shall be subject to the terms and provisions of the Equity Plan and shall  be granted  subject  to  the execution and delivery of award agreements,  including attached exhibits,  in  substantially the forms previously approved by the Board. All applicable terms of the Equity Plan apply to  this Policy as if fully set forth herein, and all equity grants hereunder are subject in all respects to the terms  of the Equity Plan.  (a)  Annual Awards. Each Non‐Employee Director who (i) serves on the Board as of the  date of any annual meeting of the Company’s stockholders (an “Annual Meeting”) after the Effective Time  and (ii) will continue to serve as a Non‐Employee Director immediately following such Annual Meeting shall  be automatically granted, on the date of such Annual Meeting, an award of restricted stock units (“RSUs”)  having an aggregate fair value on the date of grant of $180,000 (as determined in accordance with FASB 

Non‐Employee Director Compensation Policy  Inspire Medical Systems, Inc.      Accounting Codification Topic 718 (“ASC 718”) and subject to adjustment as provided in the Equity Plan). If  the number of shares of Common Stock subject to an RSU award granted under this Section 2(a) would  include a fractional share of Common Stock, the value of that fractional share shall instead be paid in cash  at the date of grant. The awards described in this Section 2(a) shall be referred to as the “Annual Awards.”  For the avoidance of doubt, a Non‐Employee Director elected for the first time to the Board at an Annual  Meeting shall receive only an Annual Award  in connection with such election, and shall not receive any  Initial Award on the date of such Annual Meeting as well.  (b)  Initial Awards. Each Non‐Employee Director who is initially elected or appointed to  the Board after the date the IPO price of the shares of Common Stock is established in connection with the  IPO, on any date other than the date of an Annual Meeting, shall be automatically granted, on the date of  such Non‐Employee Director’s initial election or appointment (such Non‐Employee Director’s “Start Date”),  an award of RSUs having an aggregate  fair value on such Non‐Employee Director’s Start Date equal  to  $270,000 (as determined in accordance with ASC 718 and subject to adjustment as provided in the Equity  Plan). If the number of shares of Common Stock subject to an RSU award granted under this Section 2(b)  would include a fractional share of Common Stock, the value of that fractional share shall instead be paid  in cash at the date of grant. The awards described in this Section 2(b) shall be referred to as “Initial Awards.”  For the avoidance of doubt, no Non‐Employee Director shall be granted more than one Initial Award.  (c)  Termination of Employment of Employee Directors. Members of the Board who  are employees of the Company or any parent or subsidiary of the Company who subsequently terminate  their employment with the Company and any parent or subsidiary of the Company and remain on the Board  will not receive an Initial Award pursuant to Section 2(b) above, but to the extent that they are otherwise  eligible, will be eligible  to  receive, after  termination  from service with  the Company and any parent or  subsidiary of the Company, Annual Awards as described in Section 2(a) above.  (d)  Vesting of Awards Granted to Non‐Employee Directors. Each Annual Award shall  vest and become exercisable on the first anniversary of the date of grant and each Initial Award shall vest  and become exercisable in three equal annual installments following the date of grant (such that the Initial  Award shall vest and become exercisable in full on the third anniversary of the date of grant), in each case  subject  to  the Non‐Employee Director  continuing  in  service  through  the  applicable  vesting  dates. No  portion of an Annual Award or Initial Award that is unvested or unexercisable at the time of a Non‐Employee  Director’s termination of service on the Board shall become vested and exercisable thereafter.  All of a Non‐ Employee Director’s Annual Awards and Initial Awards shall vest in full immediately prior to the occurrence  of a Change in Control (as defined in the Equity Plan), to the extent outstanding at such time. 

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Timothy P. Herbert, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Inspire Medical Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 7, 2024	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert President, Chief Executive Officer, and Chairperson (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard J. Buchholz, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Inspire Medical Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 7, 2024	By:	/s/ RICHARD J. BUCHHOLZ
			Richard J. Buchholz Chief Financial Officer (principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Inspire Medical Systems, Inc. (the "Company") for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:	May 7, 2024	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert President, Chief Executive Officer, and Chairperson (principal executive officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Inspire Medical Systems, Inc. (the "Company") for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:	May 7, 2024	By:	/s/ RICHARD J. BUCHHOLZ
			Richard J. Buchholz Chief Financial Officer (principal financial officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2024	May 01, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-38468
Entity Registrant Name	Inspire Medical Systems, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-1377674
Entity Address, Address Line One	5500 Wayzata Blvd.
Entity Address, Address Line Two	Suite 1600
Entity Address, City or Town	Golden Valley
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55416
City Area Code	844
Local Phone Number	672-4357
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	INSP
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		29,711,048
Entity Central Index Key	0001609550
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 175,416	$ 185,537
Investments, short-term	265,945	274,838
Accounts receivable, net of allowance for credit losses of $256 and $1,648, respectively	72,333	89,884
Inventories, net	48,974	33,885
Prepaid expenses and other current assets	9,546	9,595
Total current assets	572,214	593,739
Investments, long-term	27,803	9,143
Property and equipment, net	52,281	39,984
Operating lease right-of-use assets	22,248	22,667
Other non-current assets	11,296	11,278
Total assets	685,842	676,811
Current liabilities:
Accounts payable	43,802	38,839
Accrued expenses	28,370	39,266
Total current liabilities	72,172	78,105
Operating lease liabilities, non-current portion	24,500	24,846
Other non-current liabilities	146	1,346
Total liabilities	96,818	104,297
Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding	0	0
Common Stock, $0.001 par value per share; 200,000,000 shares authorized; 29,676,095 and 29,560,464 issued and outstanding at March 31, 2024 and December 31, 2023, respectively	30	30
Additional paid-in capital	944,298	917,107
Accumulated other comprehensive income	124	800
Accumulated deficit	(355,428)	(345,423)
Total stockholders' equity	589,024	572,514
Total liabilities and stockholders' equity	$ 685,842	$ 676,811

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Allowance for credit loss	$ 256	$ 1,648
Preferred shares, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred shares, authorized (in shares)	10,000,000	10,000,000
Preferred shares, issued (in shares)	0	0
Preferred shares, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	200,000,000	200,000,000
Common stock, issued (in shares)	29,676,095	29,560,464
Common stock, outstanding (in shares)	29,676,095	29,560,464

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Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Revenue	$ 164,010	$ 127,897
Cost of goods sold	24,757	19,888
Gross profit	139,253	108,009
Operating expenses:
Research and development	28,850	25,519
Selling, general and administrative	125,621	101,988
Total operating expenses	154,471	127,507
Operating loss	(15,218)	(19,498)
Other (income) expense:
Interest and dividend income	(5,923)	(4,273)
Other expense (income), net	60	(17)
Total other income	(5,863)	(4,290)
Loss before income taxes	(9,355)	(15,208)
Income taxes	650	216
Net loss	(10,005)	(15,424)
Other comprehensive loss:
Foreign currency translation (loss) gain	(134)	105
Unrealized (loss) gain on investments	(542)	13
Total comprehensive loss	$ (10,681)	$ (15,306)
Net loss per share, basic (in dollars per share)	$ (0.34)	$ (0.53)
Net loss per share, diluted (in dollars per share)	$ (0.34)	$ (0.53)
Weighted average common shares used to compute net loss per share, basic (in shares)	29,615,166	29,089,950
Weighted average common shares used to compute net loss per share, diluted (in shares)	29,615,166	29,089,950

XML

Consolidated Statements of Stockholders' Equity (unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2022		29,008,368
Beginning balance at Dec. 31, 2022	$ 496,008	$ 29	$ 820,335	$ (86)	$ (324,270)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)		142,167
Stock options exercised	7,377		7,377
Vesting of restricted stock units (in shares)		18,852
Shares held for tax withholdings (in shares)		(6,750)
Shares held for tax withholdings	(1,746)		(1,746)
Issuance of common stock (in shares)		364
Issuance of common stock	90		90
Stock-based compensation expense	18,225		18,225
Other comprehensive (loss) income	118			118
Net loss	(15,424)				(15,424)
Ending balance (in shares) at Mar. 31, 2023		29,163,001
Ending balance at Mar. 31, 2023	$ 504,648	$ 29	844,281	32	(339,694)
Beginning balance (in shares) at Dec. 31, 2023	29,560,464	29,560,464
Beginning balance at Dec. 31, 2023	$ 572,514	$ 30	917,107	800	(345,423)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)	88,310	88,276
Stock options exercised	$ 3,616		3,616
Vesting of restricted stock units (in shares)		41,185
Shares held for tax withholdings (in shares)		(14,373)
Shares held for tax withholdings	(2,848)		(2,848)
Issuance of common stock (in shares)		543
Issuance of common stock	101		101
Stock-based compensation expense	26,322		26,322
Other comprehensive (loss) income	(676)			(676)
Net loss	$ (10,005)				(10,005)
Ending balance (in shares) at Mar. 31, 2024	29,676,095	29,676,095
Ending balance at Mar. 31, 2024	$ 589,024	$ 30	$ 944,298	$ 124	$ (355,428)

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Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Operating activities
Net loss	$ (10,005)	$ (15,424)
Adjustments to reconcile net loss:
Depreciation and amortization	839	593
Accretion of investment discount	(2,469)	(1)
Non-cash lease expense	418	265
Stock-based compensation expense	26,322	18,225
Non-cash stock issuance for services rendered	101	90
Provision (benefit) for estimated credit losses	(1,392)	0
Changes in operating assets and liabilities:
Accounts receivable	18,962	1,489
Inventories	(15,089)	(3,777)
Prepaid expenses and other current assets	13	(579)
Accounts payable	3,558	8,390
Accrued expenses and other liabilities	(12,398)	(10,615)
Net cash provided by (used in) operating activities	8,860	(1,344)
Investing activities
Purchases of property and equipment	(11,696)	(3,753)
Purchases of investments	(55,739)	0
Proceeds from sales or maturities of investments	47,900	0
Net cash used in investing activities	(19,535)	(3,753)
Financing activities
Proceeds from the exercise of stock options	3,616	7,377
Payment of taxes on net share settlement of equity awards	(2,848)	(1,746)
Net cash provided by financing activities	768	5,631
Effect of exchange rate on cash	(214)	6
(Decrease) increase in cash and cash equivalents	(10,121)	540
Cash and cash equivalents at beginning of period	185,537	441,592
Cash and cash equivalents at end of period	175,416	442,132
Supplemental cash flow information
Property and equipment included in accounts payable and accrued expenses	$ 5,458	$ 2,577

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Organization

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Description of Business

Inspire Medical Systems, Inc. is a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea ("OSA"). Our proprietary Inspire system is the first and only United States ("U.S.") Food and Drug Administration ("FDA") approved neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA. Inspire therapy received premarket approval ("PMA") from the FDA in 2014 and has been commercially available in certain European markets since 2011 and certain Asia Pacific markets since 2021.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial reporting and as required by the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, the results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. All intercompany accounts and transactions have been eliminated in consolidation.

For a complete discussion of our significant accounting policies and other information, the unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Cash and Cash Equivalents

We consider all highly liquid securities, readily convertible to cash, that have original maturities of 90 days or less from the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents, which consist of money market funds, are stated at fair value.

Foreign Currency

Our functional and reporting currency is the U.S. dollar. Our subsidiaries have functional currency in Euro and Yen. The consolidated financial statements are translated to U.S. dollars. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Sales and expenses denominated in foreign currencies are translated at exchange rates in effect on the date of the transaction. Foreign currency transaction gains and losses and the impacts of foreign currency remeasurement are recognized in other expense, net in the consolidated statements of operations and comprehensive loss. For the three-month periods ended March 31, 2024 and 2023, we recognized $0.1 million and $0.0 million of loss, net, respectively. Any unrealized gains and losses due to translation adjustments are included in accumulated other comprehensive income (loss) within stockholders' equity in the consolidated balance sheets. We had $0.1 million and $0.2 million of unrecognized gain in our accumulated other comprehensive income (loss) balance as of March 31, 2024 and December 31, 2023, respectively.

Investments

Our investments are classified as available-for-sale and consisted of the following:

	March 31, 2024
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	5,402	$	—	$	(8)	$	5,394
Corporate debt securities	28,719		26		—		28,745
Certificates of deposit	7,643		6		(2)		7,647
U.S. treasury debt securities	224,085		76		(2)		224,159
Short-term investments	$	265,849	$	108	$	(12)	$	265,945
Long-Term:
Corporate debt securities	$	1,166	$	5	$	—	$	1,171
Certificates of deposit	2,994		6		—		3,000
Asset-backed securities	911		—		(1)		910
U.S. treasury debt securities	22,801		—		(79)		22,722
Long-term investments	$	27,872	$	11	$	(80)	$	27,803

	December 31, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,950	$	1	$	—	$	2,951
Corporate debt securities	30,154		61		—		30,215
Certificates of deposit	2,953		15		—		2,968
U.S. treasury debt securities	238,237		467		—		238,704
Short-term investments	$	274,294	$	544	$	—	$	274,838
Long-Term:
Corporate debt securities	$	3,109	$	13	$	—	$	3,122
Asset-backed securities	1,170		1		—		1,171
U.S. treasury debt securities	4,838		12		—		4,850
Long-term investments	$	9,117	$	26	$	—	$	9,143

Investments are classified as available-for-sale and are reported at their estimated fair market values which are based on quoted, active or inactive market prices when available. Any unrealized gains and losses due to interest rate fluctuations and other external factors are reported as a separate component of accumulated other comprehensive loss within stockholders' equity. We had $0.0 million and $0.6 million of unrecognized gain in our accumulated other comprehensive income (loss) balance at March 31, 2024 and December 31, 2023, respectively. Any realized gains and losses are calculated on the specific identification method and reported net in other expense, net in the consolidated statements of operations and comprehensive loss. For both of the three months ended March 31, 2024 and 2023, we recognized $0 of realized gain or loss.

As of March 31, 2024 and December 31, 2023, we had no investments with a contractual maturity of greater than three years. Currently, we do not intend to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. We do not consider those investments to be other-than-temporarily impaired as of March 31, 2024. Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses, not to exceed the amount of the unrealized loss, are recorded as an allowance through other expense, net in the consolidated statements of operations and comprehensive loss. The total allowance for credit losses was $0 at both March 31, 2024 and December 31, 2023.

Fair Value of Financial Instruments

We measure certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents and investments. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1: Observable inputs, such as quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs that are supported by little or no market activities, which would require us to develop our own assumptions.

We classify instruments within Level 1 if quoted prices are available in active markets for identical assets, which include our money market funds and U.S. treasury securities. We classify instruments in Level 2 if the instruments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or an income approach, such as a discounted cash flow pricing model that calculates values from observable inputs such as quoted interest rates, yield curves and other observable market information. These instruments include our commercial paper, certificates of deposit, corporate debt securities and asset-backed securities. The available-for-sale securities are held by a custodian who obtains investment prices from a third-party pricing provider that uses standard inputs (observable in the market) to models which vary by asset class.

The following tables set forth by level within the fair value hierarchy our assets that are measured on a recurring basis and reported at fair value as of March 31, 2024 and December 31, 2023. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value Measurements as of
	March 31, 2024
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	141,547	$	141,547	$	—	$	—
Total cash equivalents	141,547		141,547		—		—
Investments:
Commercial paper	5,394		—		5,394		—
Corporate debt securities	29,916		—		29,916		—
Certificates of deposit	10,647		—		10,647		—
Asset-backed securities	910		—		910		—
U.S. government securities	246,881		246,881		—		—
Total investments	293,748		246,881		46,867		—
Total cash equivalents and investments	$	435,295	$	388,428	$	46,867	$	—

	Fair Value Measurements as of
	December 31, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	146,217	$	146,217	$	—	$	—
Total cash equivalents	146,217		146,217		—		—
Investments:
Commercial paper	2,951		—		2,951		—
Corporate debt securities	33,337		—		33,337		—
Certificates of deposit	2,968		—		2,968		—
Asset-backed securities	1,171		—		1,171		—
U.S. government securities	243,554		243,554		—		—
Total investments	283,981		243,554		40,427		—
Total cash equivalents and investments	$	430,198	$	389,771	$	40,427	$	—

There were no transfers between levels during the periods ended March 31, 2024 and December 31, 2023.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash equivalents, investments, and accounts receivable. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Our investment policy limits investments to certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. We place restrictions on maturities and concentration by type and issuer. We are exposed to credit risk in the event of a default by the issuers of these securities to the

extent recorded on the consolidated balance sheets. However, as of March 31, 2024 and December 31, 2023, we limited our credit risk associated with cash equivalents by placing investments with banks we believe are highly creditworthy.

We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and dispersion of our customer base. We generally do not require collateral, and losses on accounts receivable have historically not been significant.

Accounts Receivable and Allowance for Expected Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Customer credit terms are established prior to shipment with the general standard being net 30 days. Collateral or any other security to support payment of these receivables generally is not required.

Each reporting period, we estimate the credit loss related to accounts receivable based on a migration analysis of accounts grouped by individual receivables delinquency status and apply our historic loss rate adjusted for management's assumption of future market conditions. Any change in the allowance from new receivables acquired or changes due to credit deterioration on previously existing receivables is recorded in selling, general and administrative expenses. Write-offs of receivables considered uncollectible are deducted from the allowance. Specific accounts receivable are written-off once a determination is made that the amount is uncollectible. The write-off is recorded in the period in which the account receivable is deemed uncollectible. Recoveries are recognized when received and as a direct credit to earnings or as a reduction to the allowance for credit losses (which would indirectly reduce the loss by decreasing bad debt expense).

The following table presents the changes in the allowance for credit losses related to accounts receivable:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,648	$	36
Charges (credits) to the allowance, net	76		—
Accounts written off, net of recoveries	(1,468)		—
Balance at the end of the period	$	256	$	36

The increase in accounts written off, net of recoveries during the three months ended March 31, 2024 related primarily to accounts receivable with two healthcare systems.

Inventories

Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first-out basis and consisted of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	8,303	$	6,115
Finished goods	40,671		27,770
Total inventories, net of reserves	$	48,974	$	33,885

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized. The balance of inventory related to our next generation Inspire system was $2.6 million and $0.9 million as of March 31, 2024 and December 31, 2023, respectively.

We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write down inventories to their net realizable value. The determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products, and current market conditions. The reserve for excess and obsolete inventory was $3.1 million and $2.4 million as of March 31, 2024 and December 31, 2023, respectively.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization and consisted of the following:

	March 31, 2024		December 31, 2023
Computer equipment and software	$	4,267	$	2,601
Manufacturing equipment	7,845		7,245
Other equipment	1,353		1,842
Leasehold improvements	2,356		2,356
Construction in process	44,570		33,211
Property and equipment, cost	60,391		47,255
Less: accumulated depreciation and amortization	(8,110)		(7,271)
Property and equipment, net	$	52,281	$	39,984

Construction in process is comprised primarily of production equipment. Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Depreciation and amortization expense was $0.8 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively.

Strategic Investments

For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These securities are presented within other non-current assets on the consolidated balance sheets. The balance of equity securities without readily determinable fair values was $10.4 million as of both March 31, 2024 and December 31, 2023, respectively. There were no adjustments to the carrying amount during either of the three months ended March 31, 2024 or 2023.

Impairment of Long-lived Assets

Long-lived assets consist primarily of property and equipment, operating lease right-of-use assets, and strategic investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that an asset be tested for possible impairment, we compare the undiscounted cash flows expected to be generated by the asset to the carrying amount of the asset. If the carrying amount of the asset is not recoverable on an undiscounted cash flow basis, we determine the fair value of the asset and recognize an impairment loss to the extent the carrying amount of the asset exceeds its fair value. We determine fair value using the income approach based on the present value of expected future cash flows or other appropriate measures of estimated fair value. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. We did not record any impairment charges on long-lived assets during either of the three months ended March 31, 2024 or 2023.

Accrued Expenses

Accrued expenses consisted of the following:

	March 31, 2024		December 31, 2023
Payroll related	$	20,956	$	33,875
Product warranty liability	1,388		1,100
Other accrued expenses	6,026		4,291
Total accrued expenses	$	28,370	$	39,266

The following table shows the changes in our estimated product warranty liability accrual, included in accrued liabilities:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,100	$	920
Provisions for warranty	535		132
Settlements of warranty claims	(247)		(311)
Balance at the end of the period	$	1,388	$	741

Revenue Recognition

We derive our revenue from sales of our products in the U.S. and internationally. Customers are primarily comprised of hospitals and ambulatory surgery centers, with distributors being used in certain international locations where we do not have a direct commercial presence.

Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms. Our standard shipping terms are free on board shipping point, unless the customer requests that control and title to the inventory transfer upon delivery. In those cases where shipping and handling costs are billed to customers, we classify the amounts billed as a component of cost of goods sold.

Revenue is measured as the amount of consideration we expect to receive, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, which is based on the invoiced price, in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. The majority of our contracts have a single performance obligation and are short term in nature.

Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Variable consideration related to certain customer sales incentives is estimated based on the amounts expected to be paid based on the agreement with the customer using probability assessments.

We offer customers a limited right of return for our product in case of non-conformity or performance issues. We estimate the amount of our product sales that may be returned by our customers based on historical sales and returns. As our historical product returns to date have been immaterial, we have not recorded a reduction in revenue related to variable consideration for product returns.

See Note 7 for disaggregated revenue by geographic area.

Cost of Goods Sold

Cost of goods sold consists primarily of acquisition costs for the components of the Inspire system, overhead costs, scrap and inventory obsolescence, warranty replacement costs, as well as distribution-related expenses such as logistics and shipping costs, net of shipping costs charged to customers. The overhead costs include the cost of material procurement, depreciation expense for production equipment, and operations supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel.

Research and Development

Research and development expenses consist primarily of product development, clinical and regulatory affairs, quality assurance, consulting services, and other costs associated with products and technologies in development. These expenses include employee compensation, including stock-based compensation, supplies, materials, prelaunch inventory, consulting, and travel expenses related to research and development programs. Clinical expenses include clinical study design, clinical site reimbursement, data management, travel expenses, and the cost of manufacturing products for clinical studies.

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized.

Stock-Based Compensation

We maintain an equity incentive plan to provide long-term incentives for eligible employees, consultants, and members of the board of directors. The plan allows for the issuance of restricted stock units ("RSUs"), performance stock units ("PSUs"), and non-statutory and incentive stock options to employees, and RSUs, PSUs, and non-statutory stock options to consultants and directors. We also offer an employee stock purchase plan ("ESPP") which allows participating employees to purchase shares of our common stock at a discount through payroll deductions.

We recognize equity-based compensation expense for awards of equity instruments based on the grant date fair value of those awards as expense in the consolidated statements of operations and comprehensive loss. We estimate the fair value of stock options using the Black-Scholes option pricing model and the fair value of RSUs and PSUs is equal to the closing price of our common stock on the grant date. The fair value of each purchase under the employee stock purchase plan is estimated at the beginning of the offering period using the Black-Scholes option pricing model.

Stock-based compensation expense is recognized on a straight-line basis over the vesting term for stock options and RSUs, and over the vesting and performance period based on the probability of achieving the performance objectives for PSUs. We account for award forfeitures as they occur.

Advertising Expenses

We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $25.6 million and $23.6 million during the three months ended March 31, 2024 and 2023, respectively.

Leases

Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities – non-current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the

rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments, and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our consolidated balance sheets.

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances against deferred tax assets are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. As we have historically incurred operating losses, we have recorded a full valuation allowance against our net deferred tax assets, and there is no provision for income taxes other than minimal state and foreign taxes, which includes a foreign tax provision relating to uncertain tax positions. Our policy is to record interest and penalties expense related to uncertain tax positions as other expense in the consolidated statements of operations and comprehensive loss.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net loss and changes in unrealized gains and losses due to interest rate fluctuations and other external factors on investments classified as available-for-sale, and foreign currency translation adjustments. Accumulated other comprehensive income is presented in the accompanying consolidated balance sheets as a component of stockholders' equity.

Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all potentially dilutive shares consisting of outstanding stock options, unvested RSUs and PSUs, and shares issuable under our employee stock purchase plan were antidilutive in those periods.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for us in fiscal 2025, with early adoption permitted, and is required to be

applied prospectively with the option of retrospective application. We are evaluating the impact of the standard on our income tax disclosures.

In March 2024, the SEC issued climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. As a large accelerated filer, we may be required to begin complying with climate-related disclosures as early as with respect to the fiscal year beginning in 2025. We are in the process of analyzing the impact of the rules on our related disclosures.

We have reviewed and considered all other recent accounting pronouncements that have not yet been adopted and believe there are none that could potentially have a material impact on our business practices, financial condition, results of operations, or disclosures.

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Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Leases

We lease office space for our corporate headquarters under a non-cancelable operating lease. The corporate office leases were amended in May 2023 to increase the total space leased to approximately 106,000 square feet and to extend the noncancellable lease term through May 31, 2035. We entered into an additional warehouse and office space lease for our corporate headquarters under a non-cancelable operating lease in August 2023. This space includes approximately 22,000 square feet and a noncancellable lease term through May 31, 2035. Each lease includes options to renew for up to two additional periods of five years each at the then-prevailing market rates. The exercises of the lease renewal options are at our sole discretion and were not included in the lease term for the calculation of the ROU assets and lease liabilities as of the lease modification date as they were not reasonably certain of exercise.

In March 2024, we entered into an amendment on our additional warehouse and office space lease which is expected to commence in January 2025. This amendment provides for approximately 18,000 square feet of additional space and follows the lease term and renewal options in the original lease described above.

In addition to base rent in these leases, we also pay our proportionate share of the operating expenses, as defined in the leases. These payments are made monthly and adjusted annually to reflect actual charges incurred for operating expenses, such as common area maintenance, taxes, and insurance.

The following table presents the lease balances within the consolidated balance sheets:

	March 31, 2024		December 31, 2023
Right-of-use assets:
Operating lease right-of-use assets	$	22,248	$	22,667
Operating lease liabilities:
Operating lease liabilities, non-current portion	$	24,500	$	24,846

As of March 31, 2024, the remaining lease terms were 11.2 years and the weighted average discount rate was 4.9%. The operating cash outflows from our operating leases were $0.6 million and $0.4 million for the three-month periods ended March 31, 2024 and 2023, respectively.

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Employee Retirement Plan

3 Months Ended

Mar. 31, 2024

Retirement Benefits [Abstract]

Employee Retirement Plan

Employee Retirement Plan

We sponsor a defined contribution employee retirement plan covering all of our full-time employees. The plan allows eligible employees to defer a portion of their eligible compensation up to the maximum allowed by IRS Regulations.

We make voluntary matching contributions of 50% of the first 6% of each participating employee's contribution, up to 3% of eligible earnings. Our match contributions are made to funds designated by the participant, none of which are based on Inspire common stock. Our matching contributions to the plan totaled $1.5 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

As of March 31, 2024, there were 4,879,073 shares reserved for issuance under our equity incentive plan, of which 1,538,340 shares were available for issuance.

Stock-based compensation expense is recognized on a straight-line basis over the vesting term for stock options and RSUs, and over the performance period based on the probability of achieving the performance objectives for PSUs, and is reduced by actual forfeitures as they occur. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase, or cancel any remaining unearned stock compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock-based awards.

Stock Options

Options are granted with an exercise price, which is equal to the closing price of our stock on the date of grant. Stock options include a four-year service period and 25% vest after the first year of service and the remainder vest in equal installments over the next 36 months of service. The stock options granted to the board of directors vest in one or three equal annual installments, in each case subject to the director's continuous service through the applicable vesting date. The stock options have a contractual life of ten years.

The fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model.

Option Value and Assumptions

	Three Months Ended
	March 31,
	2024	2023
Weighted average fair value	$124.70	$151.88
Assumptions:
Expected term (years)	6.25	6.25
Expected volatility	59.0 - 59.4%	57.2 - 57.4%
Risk-free interest rate	3.95 - 4.28%	3.55 - 4.07%
Expected dividend yield	0.0%	0.0%

Expected Term — Due to our limited amount of historical exercise, forfeiture, and expiration activity, we have opted to use the "simplified method" for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting terms and the original contractual term of the option. We will continue to analyze our expected term assumption as more historical data becomes available.

Expected Volatility — During the three months ended March 31, 2024, we based expected volatility on the historic volatility of our common stock. In prior periods, due to our limited company specific historical and implied volatility data, we incorporated our historical stock trading volatility with those of a group of similar companies that are publicly traded for the calculation of volatility. When selecting this peer group, we generally selected companies with comparable characteristics, including enterprise value, stages of clinical development, risk profiles, position within the industry, and those with historical share price information sufficient to meet the expected life of the stock-based awards.

Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. government Treasury instruments with maturities similar to the expected term of our stock options.

Expected Dividend Yield — The expected dividend assumption is based on our history of not paying dividends and our expectation that we will not declare dividends for the foreseeable future.

Stock Option Activity

	Options	Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	2,447,141		$	152.17	7.0	$160,691
Granted	158,438		$	196.92
Exercised	(88,310)		$	41.03		$13,707
Forfeited/expired	(15,696)		$	225.17
Outstanding at March 31, 2024	2,501,573		$	158.47	7.0	$166,795
Exercisable at March 31, 2024	1,636,818		$	122.86	6.1	$157,645

The aggregate intrinsic value of options exercised is the difference between the estimated fair market value of our common stock at the date of exercise and the exercise price for those options. The aggregate intrinsic value of outstanding options is the difference between the closing price as of the date outstanding and the exercise price of the underlying stock options. As of March 31, 2024, the amount of unearned stock-based compensation to be expensed from now through the year 2028 related to unvested stock options is $105.9 million, which we expect to recognize over a weighted average period of 2.5 years.

Restricted Stock Units

RSUs are share awards that entitle the holder to receive freely tradable shares of our common stock upon vesting. The RSUs cannot be transferred and the awards are subject to forfeiture if the holder’s service terminates prior to the release of the vesting restrictions. The RSUs granted to employees include three- or four-year service periods and vest in equal installments on each anniversary of the date of grant. The RSUs granted to the board of directors include one-or three-year service periods and vest in equal installments on each anniversary of the date of grant. The fair value of the RSUs is equal to the closing price of our common stock on the grant date. A summary of RSUs and related information is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	201,070		$	235.47	$	40,904
Granted	405,239		$	195.73
Vested	(41,185)		$	247.56	$	8,157
Forfeited	(10,510)		$	207.74
Unvested at March 31, 2024	554,614		$	206.06	$	119,126

The aggregate intrinsic value of unvested RSUs was based on our closing stock price on the last trading day of the period. The aggregate intrinsic value of vested RSUs was based on our closing stock price on the date of vest. As of March 31, 2024, the amount of unearned stock-based compensation currently estimated to be expensed from now through the year 2027 related to unvested RSUs was $103.4 million which we expect to recognize over a weighted average period of 2.6 years.

Performance Stock Units

During 2022, 2023, and 2024, we granted PSUs to officers and key employees. The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals for the three-year periods ending December 31, 2024, 2025, and 2026, respectively. The expense is recorded on a straight-line basis over the requisite service periods based on an estimate of the number of PSUs expected to vest. Management expectations related to the achievement of the performance goals associated with PSU grants are assessed each reporting period. The number of shares earned at the end of each of the three-year periods will vary based on actual performance, from 0% to 200% of the number of PSUs granted. If the performance conditions are not met or not expected to be met, any compensation expense recognized associated with the grant will be reversed.

A summary of PSUs and related information is as follows:

	Performance Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	168,969		$	248.19	$	34,373
Granted	166,110		$	194.87
Forfeited	(2,278)		$	263.16
Unvested at March 31, 2024	332,801		$	221.47	$	71,482

The fair value of the PSUs is equal to the closing price of our common stock on the grant date. The aggregate intrinsic value of unvested PSUs was based on our closing stock price on the last trading day of the period. As of March 31, 2024, there was $51.1 million of unrecognized stock-based compensation expense related to outstanding PSUs that is expected to be recognized over a weighted-average period of approximately 2.2 years.

Employee Stock Purchase Plan

Employees may participate in our ESPP provided they meet certain eligibility requirements. The purchase price for our common stock under the terms of the ESPP is defined as 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. There were 1,248,131 shares available for future issuance under the ESPP as of March 31, 2024. The current purchase period under the ESPP began on January 1, 2024 and ends June 30, 2024.

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Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At both March 31, 2024 and December 31, 2023, a valuation allowance was recorded against all deferred tax assets due to our cumulative net loss position. We recorded income tax expense of $0.7 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively. Income tax expense consists of minimal state and foreign income taxes in both of the three-month periods ended March 31, 2024 and 2023.

As of December 31, 2023, our gross federal net operating loss carryforwards were $226.1 million, which will expire at various dates beginning in 2034. In addition, net operating loss carryforwards for state income tax purposes of $173.5 million that include net operating losses will begin to expire in 2024. We also have gross research and development credit carryforwards of $14.7 million as of December 31, 2023, which will expire at various dates beginning in 2033.

Utilization of the net operating loss carryforwards and research and development ("R&D") credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Code and similar state provisions. During 2023, we finalized a detailed analysis to determine whether an ownership change has occurred through December 31, 2022, and if a limitation exists. It was determined that December 11, 2018 was the only date that we experienced an ownership change. The study concluded that none of

the $126.5 million of federal net operating losses nor the $1.7 million of federal R&D credits that were accumulated on December 11, 2018 will expire unused solely due to the limitations under Sections 382 and 383 of the Code. We are in the process of updating the analysis through December 31, 2023. Although unexpected, if we experienced an ownership change during 2023 or 2024, the timing of our ability to utilize the tax attributes may be affected.

Realization of the deferred tax assets is dependent upon the generation of future taxable income, if any, the amount and timing of which are uncertain. Based on available objective evidence and cumulative losses, we believe it is more likely than not that the deferred tax assets are not recognizable and will not be recognizable until we have sufficient book income. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.

We had $0.1 million of tax payable on unrecognized tax positions as of both March 31, 2024 and December 31, 2023.

We file income tax returns in the applicable jurisdictions. The 2020 to 2022 tax years remain open to examination by the major taxing authorities to which we are subject. We do not expect a significant change to our unrecognized tax positions over the next 12 months.

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Segment Reporting and Revenue Disaggregation

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Reporting and Revenue Disaggregation

Segment Reporting and Revenue Disaggregation

We operate our business as one operating segment. An operating segment is defined as a component of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance.

We sell our Inspire system to hospitals and ambulatory surgery centers in the U.S. and in select countries in Europe and Japan through a direct sales organization, and in Singapore and Hong Kong through distributors. Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2024		2023
United States	$	155,771	$	124,485
All other countries	8,239		3,412
Total revenue	$	164,010	$	127,897

Long-lived tangible assets by geographic location were as follows:

	March 31, 2024		December 31, 2023
United States	$	52,099	$	39,916
All other countries	182		68
Total long-lived tangible assets	$	52,281	$	39,984

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Loss Per Share

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Loss Per Share

Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the following potentially dilutive shares were antidilutive in those periods.

The following common stock-based awards were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive:

	March 31,
	2024	2023
Common stock options outstanding	2,501,573	2,818,389
Unvested restricted stock units	554,614	179,374
Shares issuable under the ESPP	5,872	5,136
Total	3,062,059	3,002,899

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Related Party Transaction

3 Months Ended

Mar. 31, 2024

Related Party Transactions [Abstract]

Related Party Transaction

Related Party Transaction

In December 2023, we entered into an agreement with an entity controlled by our Chief Executive Officer (the "Entity"), pursuant to which we agreed to share the costs of a corporate suite at a sports and entertainment venue (the "Venue") (the “Suite”) (the “Cost Sharing Agreement”). In August 2023, the Entity entered into an agreement with the Venue, pursuant to which the Entity acquired certain rights to use the Suite for specified sporting and other events at the Venue through August 2026. Pursuant to this agreement, the Entity agreed to pay $0.2 million per year, with each year beginning September 1 and ending August 31, and the fee increasing by 5% for each succeeding year. Under the Cost Sharing Agreement, we will reimburse the Entity 50% of the cost of the Suite in exchange for the right to use the Suite for 50% of the specified events at the Venue through August 2026.

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Commitment and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, Inspire and two of its executive officers were named as defendants in a purported federal securities law class action filed in the United States District Court for the District of Minnesota, captioned City of Hollywood Firefighters’ Pension Fund v. Inspire Medical Systems, Inc., et. al., Court File No. 0:23-cv-03884. The plaintiff filed an amended complaint on April 19, 2024, which alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, which alleged violations relate to certain prior disclosures of Inspire about the effectiveness of a program intended to help certain customers establish independence in seeking prior authorization from payors for our Inspire therapy. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired Inspire common stock between May 3, 2023 and November 7, 2023. The plaintiff seeks damages and other relief, including attorneys' fees and costs. The defendants intend to vigorously defend this lawsuit.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net loss	$ (10,005)	$ (15,424)

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial reporting and as required by the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, the results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. All intercompany accounts and transactions have been eliminated in consolidation.

For a complete discussion of our significant accounting policies and other information, the unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid securities, readily convertible to cash, that have original maturities of 90 days or less from the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents, which consist of money market funds, are stated at fair value.

Foreign Currency

Foreign Currency

Our functional and reporting currency is the U.S. dollar. Our subsidiaries have functional currency in Euro and Yen. The consolidated financial statements are translated to U.S. dollars. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Sales and expenses denominated in foreign currencies are translated at exchange rates in effect on the date of the transaction. Foreign currency transaction gains and losses and the impacts of foreign currency remeasurement are recognized in other expense, net in the consolidated statements of operations and comprehensive loss. For the three-month periods ended March 31, 2024 and 2023, we recognized $0.1 million and $0.0 million of loss, net, respectively. Any unrealized gains and losses due to translation adjustments are included in accumulated other comprehensive income (loss) within stockholders' equity in the consolidated balance sheets. We had $0.1 million and $0.2 million of unrecognized gain in our accumulated other comprehensive income (loss) balance as of March 31, 2024 and December 31, 2023, respectively.

Investments

Investments are classified as available-for-sale and are reported at their estimated fair market values which are based on quoted, active or inactive market prices when available. Any unrealized gains and losses due to interest rate fluctuations and other external factors are reported as a separate component of accumulated other comprehensive loss within stockholders' equity. We had $0.0 million and $0.6 million of unrecognized gain in our accumulated other comprehensive income (loss) balance at March 31, 2024 and December 31, 2023, respectively. Any realized gains and losses are calculated on the specific identification method and reported net in other expense, net in the consolidated statements of operations and comprehensive loss. For both of the three months ended March 31, 2024 and 2023, we recognized $0 of realized gain or loss.

As of March 31, 2024 and December 31, 2023, we had no investments with a contractual maturity of greater than three years. Currently, we do not intend to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. We do not consider those investments to be other-than-temporarily impaired as of March 31, 2024. Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses, not to exceed the amount of the unrealized loss, are recorded as an allowance through other expense, net in the consolidated statements of operations and comprehensive loss. The total allowance for credit losses was

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash equivalents, investments, and accounts receivable. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Our investment policy limits investments to certain types of debt securities issued by the U.S. government and its agencies, corporations with investment-grade credit ratings, or commercial paper and money market funds issued by the highest quality financial and non-financial companies. We place restrictions on maturities and concentration by type and issuer. We are exposed to credit risk in the event of a default by the issuers of these securities to the

extent recorded on the consolidated balance sheets. However, as of March 31, 2024 and December 31, 2023, we limited our credit risk associated with cash equivalents by placing investments with banks we believe are highly creditworthy.

We believe that the credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms, and dispersion of our customer base. We generally do not require collateral, and losses on accounts receivable have historically not been significant.

Accounts Receivable and Allowance for Expected Credit Losses

Accounts Receivable and Allowance for Expected Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Customer credit terms are established prior to shipment with the general standard being net 30 days. Collateral or any other security to support payment of these receivables generally is not required.

Each reporting period, we estimate the credit loss related to accounts receivable based on a migration analysis of accounts grouped by individual receivables delinquency status and apply our historic loss rate adjusted for management's assumption of future market conditions. Any change in the allowance from new receivables acquired or changes due to credit deterioration on previously existing receivables is recorded in selling, general and administrative expenses. Write-offs of receivables considered uncollectible are deducted from the allowance. Specific accounts receivable are written-off once a determination is made that the amount is uncollectible. The write-off is recorded in the period in which the account receivable is deemed uncollectible. Recoveries are recognized when received and as a direct credit to earnings or as a reduction to the allowance for credit losses (which would indirectly reduce the loss by decreasing bad debt expense).

Inventories

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized. The balance of inventory related to our next generation Inspire system was $2.6 million and $0.9 million as of March 31, 2024 and December 31, 2023, respectively.

We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write down inventories to their net realizable value. The determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products, and current market conditions

Property and Equipment

Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease.

Strategic Investments

Strategic Investments

For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These securities are presented within other non-current assets on the consolidated balance sheets.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

Long-lived assets consist primarily of property and equipment, operating lease right-of-use assets, and strategic investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that an asset be tested for possible impairment, we compare the undiscounted cash flows expected to be generated by the asset to the carrying amount of the asset. If the carrying amount of the asset is not recoverable on an undiscounted cash flow basis, we determine the fair value of the asset and recognize an impairment loss to the extent the carrying amount of the asset exceeds its fair value. We determine fair value using the income approach based on the present value of expected future cash flows or other appropriate measures of estimated fair value. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors.

Revenue Recognition

Revenue Recognition

We derive our revenue from sales of our products in the U.S. and internationally. Customers are primarily comprised of hospitals and ambulatory surgery centers, with distributors being used in certain international locations where we do not have a direct commercial presence.

Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, either upon shipment of the product or receipt of the product, depending on shipment terms. Our standard shipping terms are free on board shipping point, unless the customer requests that control and title to the inventory transfer upon delivery. In those cases where shipping and handling costs are billed to customers, we classify the amounts billed as a component of cost of goods sold.

Revenue is measured as the amount of consideration we expect to receive, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, which is based on the invoiced price, in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. The majority of our contracts have a single performance obligation and are short term in nature.

Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Variable consideration related to certain customer sales incentives is estimated based on the amounts expected to be paid based on the agreement with the customer using probability assessments.

We offer customers a limited right of return for our product in case of non-conformity or performance issues. We estimate the amount of our product sales that may be returned by our customers based on historical sales and returns. As our historical product returns to date have been immaterial, we have not recorded a reduction in revenue related to variable consideration for product returns.

Cost of Goods Sold

Cost of Goods Sold

Cost of goods sold consists primarily of acquisition costs for the components of the Inspire system, overhead costs, scrap and inventory obsolescence, warranty replacement costs, as well as distribution-related expenses such as logistics and shipping costs, net of shipping costs charged to customers. The overhead costs include the cost of material procurement, depreciation expense for production equipment, and operations supervision and management personnel, including employee compensation, stock-based compensation, supplies, and travel.

Research and Development

Research and Development

Research and development expenses consist primarily of product development, clinical and regulatory affairs, quality assurance, consulting services, and other costs associated with products and technologies in development. These expenses include employee compensation, including stock-based compensation, supplies, materials, prelaunch inventory, consulting, and travel expenses related to research and development programs. Clinical expenses include clinical study design, clinical site reimbursement, data management, travel expenses, and the cost of manufacturing products for clinical studies.

We expense prelaunch inventory as research and development expense in the period incurred unless objective and persuasive evidence exists that regulatory approval and subsequent commercialization of a product candidate is probable and where we also expect the future economic benefit from the sales of the product candidate to be realized.

Stock-Based Compensation

Stock-Based Compensation

We maintain an equity incentive plan to provide long-term incentives for eligible employees, consultants, and members of the board of directors. The plan allows for the issuance of restricted stock units ("RSUs"), performance stock units ("PSUs"), and non-statutory and incentive stock options to employees, and RSUs, PSUs, and non-statutory stock options to consultants and directors. We also offer an employee stock purchase plan ("ESPP") which allows participating employees to purchase shares of our common stock at a discount through payroll deductions.

We recognize equity-based compensation expense for awards of equity instruments based on the grant date fair value of those awards as expense in the consolidated statements of operations and comprehensive loss. We estimate the fair value of stock options using the Black-Scholes option pricing model and the fair value of RSUs and PSUs is equal to the closing price of our common stock on the grant date. The fair value of each purchase under the employee stock purchase plan is estimated at the beginning of the offering period using the Black-Scholes option pricing model.

Stock-based compensation expense is recognized on a straight-line basis over the vesting term for stock options and RSUs, and over the vesting and performance period based on the probability of achieving the performance objectives for PSUs. We account for award forfeitures as they occur.

Advertising Expenses

Advertising Expenses

We expense the costs of advertising, including promotional expenses, as incurred.

Leases

Leases

Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses, and operating lease liabilities – non-current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date as the

rate implicit in the lease is not readily determinable. The determination of our incremental borrowing rate requires management judgment based on information available at lease commencement. The operating lease ROU assets also include adjustments for prepayments, accrued lease payments, and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on our consolidated balance sheets.

Income Taxes

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances against deferred tax assets are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. As we have historically incurred operating losses, we have recorded a full valuation allowance against our net deferred tax assets, and there is no provision for income taxes other than minimal state and foreign taxes, which includes a foreign tax provision relating to uncertain tax positions. Our policy is to record interest and penalties expense related to uncertain tax positions as other expense in the consolidated statements of operations and comprehensive loss.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net loss and changes in unrealized gains and losses due to interest rate fluctuations and other external factors on investments classified as available-for-sale, and foreign currency translation adjustments. Accumulated other comprehensive income is presented in the accompanying consolidated balance sheets as a component of stockholders' equity.

Loss Per Share

Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all potentially dilutive shares consisting of outstanding stock options, unvested RSUs and PSUs, and shares issuable under our employee stock purchase plan were antidilutive in those periods.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for us in fiscal 2025, with early adoption permitted, and is required to be

applied prospectively with the option of retrospective application. We are evaluating the impact of the standard on our income tax disclosures.

In March 2024, the SEC issued climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. As a large accelerated filer, we may be required to begin complying with climate-related disclosures as early as with respect to the fiscal year beginning in 2025. We are in the process of analyzing the impact of the rules on our related disclosures.

We have reviewed and considered all other recent accounting pronouncements that have not yet been adopted and believe there are none that could potentially have a material impact on our business practices, financial condition, results of operations, or disclosures.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Components of Investments Available-for-sale

Our investments are classified as available-for-sale and consisted of the following:

	March 31, 2024
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	5,402	$	—	$	(8)	$	5,394
Corporate debt securities	28,719		26		—		28,745
Certificates of deposit	7,643		6		(2)		7,647
U.S. treasury debt securities	224,085		76		(2)		224,159
Short-term investments	$	265,849	$	108	$	(12)	$	265,945
Long-Term:
Corporate debt securities	$	1,166	$	5	$	—	$	1,171
Certificates of deposit	2,994		6		—		3,000
Asset-backed securities	911		—		(1)		910
U.S. treasury debt securities	22,801		—		(79)		22,722
Long-term investments	$	27,872	$	11	$	(80)	$	27,803

	December 31, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,950	$	1	$	—	$	2,951
Corporate debt securities	30,154		61		—		30,215
Certificates of deposit	2,953		15		—		2,968
U.S. treasury debt securities	238,237		467		—		238,704
Short-term investments	$	274,294	$	544	$	—	$	274,838
Long-Term:
Corporate debt securities	$	3,109	$	13	$	—	$	3,122
Asset-backed securities	1,170		1		—		1,171
U.S. treasury debt securities	4,838		12		—		4,850
Long-term investments	$	9,117	$	26	$	—	$	9,143

Schedule of assets and liabilities measured at fair value on a recurring basis

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value Measurements as of
	March 31, 2024
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	141,547	$	141,547	$	—	$	—
Total cash equivalents	141,547		141,547		—		—
Investments:
Commercial paper	5,394		—		5,394		—
Corporate debt securities	29,916		—		29,916		—
Certificates of deposit	10,647		—		10,647		—
Asset-backed securities	910		—		910		—
U.S. government securities	246,881		246,881		—		—
Total investments	293,748		246,881		46,867		—
Total cash equivalents and investments	$	435,295	$	388,428	$	46,867	$	—

	Fair Value Measurements as of
	December 31, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	146,217	$	146,217	$	—	$	—
Total cash equivalents	146,217		146,217		—		—
Investments:
Commercial paper	2,951		—		2,951		—
Corporate debt securities	33,337		—		33,337		—
Certificates of deposit	2,968		—		2,968		—
Asset-backed securities	1,171		—		1,171		—
U.S. government securities	243,554		243,554		—		—
Total investments	283,981		243,554		40,427		—
Total cash equivalents and investments	$	430,198	$	389,771	$	40,427	$	—

Schedule of changes in allowance for credit losses

The following table presents the changes in the allowance for credit losses related to accounts receivable:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,648	$	36
Charges (credits) to the allowance, net	76		—
Accounts written off, net of recoveries	(1,468)		—
Balance at the end of the period	$	256	$	36

Schedule of inventory

Inventories are valued at the lower of cost or net realizable value, computed on a first-in, first-out basis and consisted of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	8,303	$	6,115
Finished goods	40,671		27,770
Total inventories, net of reserves	$	48,974	$	33,885

Schedule of property and equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization and consisted of the following:

	March 31, 2024		December 31, 2023
Computer equipment and software	$	4,267	$	2,601
Manufacturing equipment	7,845		7,245
Other equipment	1,353		1,842
Leasehold improvements	2,356		2,356
Construction in process	44,570		33,211
Property and equipment, cost	60,391		47,255
Less: accumulated depreciation and amortization	(8,110)		(7,271)
Property and equipment, net	$	52,281	$	39,984

Schedule of accrued expenses

Accrued expenses consisted of the following:

	March 31, 2024		December 31, 2023
Payroll related	$	20,956	$	33,875
Product warranty liability	1,388		1,100
Other accrued expenses	6,026		4,291
Total accrued expenses	$	28,370	$	39,266

Schedule of product warranty liability

The following table shows the changes in our estimated product warranty liability accrual, included in accrued liabilities:

	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	1,100	$	920
Provisions for warranty	535		132
Settlements of warranty claims	(247)		(311)
Balance at the end of the period	$	1,388	$	741

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Leases (Tables)

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Lease Balances within the Balance Sheets

The following table presents the lease balances within the consolidated balance sheets:

	March 31, 2024		December 31, 2023
Right-of-use assets:
Operating lease right-of-use assets	$	22,248	$	22,667
Operating lease liabilities:
Operating lease liabilities, non-current portion	$	24,500	$	24,846

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Summary of weighted average assumptions for fair value of options granted

The fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model.

Option Value and Assumptions

	Three Months Ended
	March 31,
	2024	2023
Weighted average fair value	$124.70	$151.88
Assumptions:
Expected term (years)	6.25	6.25
Expected volatility	59.0 - 59.4%	57.2 - 57.4%
Risk-free interest rate	3.95 - 4.28%	3.55 - 4.07%
Expected dividend yield	0.0%	0.0%

Summary of the company's stock option activity and related information

Stock Option Activity

	Options	Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	2,447,141		$	152.17	7.0	$160,691
Granted	158,438		$	196.92
Exercised	(88,310)		$	41.03		$13,707
Forfeited/expired	(15,696)		$	225.17
Outstanding at March 31, 2024	2,501,573		$	158.47	7.0	$166,795
Exercisable at March 31, 2024	1,636,818		$	122.86	6.1	$157,645

Schedule of restricted stock units activity

The fair value of the RSUs is equal to the closing price of our common stock on the grant date. A summary of RSUs and related information is as follows:

	Restricted Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	201,070		$	235.47	$	40,904
Granted	405,239		$	195.73
Vested	(41,185)		$	247.56	$	8,157
Forfeited	(10,510)		$	207.74
Unvested at March 31, 2024	554,614		$	206.06	$	119,126

Summary of PSU's and related information

A summary of PSUs and related information is as follows:

	Performance Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2023	168,969		$	248.19	$	34,373
Granted	166,110		$	194.87
Forfeited	(2,278)		$	263.16
Unvested at March 31, 2024	332,801		$	221.47	$	71,482

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Segment Reporting and Revenue Disaggregation (Tables)

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Region

Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2024		2023
United States	$	155,771	$	124,485
All other countries	8,239		3,412
Total revenue	$	164,010	$	127,897

Long-Lived Assets by Geographic Areas

Long-lived tangible assets by geographic location were as follows:

	March 31, 2024		December 31, 2023
United States	$	52,099	$	39,916
All other countries	182		68
Total long-lived tangible assets	$	52,281	$	39,984

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Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Dilutive Securities Excluded from Computations of Diluted Weighted Average Shares Outstanding

The following common stock-based awards were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive:

	March 31,
	2024	2023
Common stock options outstanding	2,501,573	2,818,389
Unvested restricted stock units	554,614	179,374
Shares issuable under the ESPP	5,872	5,136
Total	3,062,059	3,002,899

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Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Accounting Policies [Abstract]
Foreign currency loss, net	$ 0.1	$ 0.0
Foreign currency gains included in accumulated other comprehensive loss	$ (0.1)	$ (0.2)

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Summary of Significant Accounting Policies - Components of Investments Classified as Available-for-Sale (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Short-Term:
Amortized Cost	$ 265,849	$ 274,294
Aggregate Fair Value	265,945	274,838
Long-Term:
Amortized Cost	27,872	9,117
Aggregate Fair Value	27,803	9,143
Short-term
Short-Term:
Unrealized Gross Gains	108	544
Unrealized Gross Losses	(12)	0
Long-Term:
Unrealized Gross Gains	108	544
Unrealized Gross Losses	(12)	0
Long-term
Short-Term:
Unrealized Gross Gains	11	26
Unrealized Gross Losses	(80)	0
Long-Term:
Unrealized Gross Gains	11	26
Unrealized Gross Losses	(80)	0
Commercial paper
Short-Term:
Amortized Cost	5,402	2,950
Aggregate Fair Value	5,394	2,951
Commercial paper | Short-term
Short-Term:
Unrealized Gross Gains	0	1
Unrealized Gross Losses	(8)	0
Long-Term:
Unrealized Gross Gains	0	1
Unrealized Gross Losses	(8)	0
Corporate debt securities
Short-Term:
Amortized Cost	28,719	30,154
Aggregate Fair Value	28,745	30,215
Long-Term:
Amortized Cost	1,166	3,109
Aggregate Fair Value	1,171	3,122
Corporate debt securities | Short-term
Short-Term:
Unrealized Gross Gains	26	61
Unrealized Gross Losses	0	0
Long-Term:
Unrealized Gross Gains	26	61
Unrealized Gross Losses	0	0
Corporate debt securities | Long-term
Short-Term:
Unrealized Gross Gains	5	13
Unrealized Gross Losses	0	0
Long-Term:
Unrealized Gross Gains	5	13
Unrealized Gross Losses	0	0
Certificates of deposit
Short-Term:
Amortized Cost	7,643	2,953
Aggregate Fair Value	7,647	2,968
Certificates of deposit | Short-term
Short-Term:
Unrealized Gross Gains	6	15
Unrealized Gross Losses	(2)	0
Long-Term:
Unrealized Gross Gains	6	15
Unrealized Gross Losses	(2)	0
U.S. treasury debt securities
Short-Term:
Amortized Cost	224,085	238,237
Aggregate Fair Value	224,159	238,704
Long-Term:
Amortized Cost	22,801	4,838
Aggregate Fair Value	22,722	4,850
U.S. treasury debt securities | Short-term
Short-Term:
Unrealized Gross Gains	76	467
Unrealized Gross Losses	(2)	0
Long-Term:
Unrealized Gross Gains	76	467
Unrealized Gross Losses	(2)	0
U.S. treasury debt securities | Long-term
Short-Term:
Unrealized Gross Gains	0	12
Unrealized Gross Losses	(79)	0
Long-Term:
Unrealized Gross Gains	0	12
Unrealized Gross Losses	(79)	0
Certificates of deposit
Long-Term:
Amortized Cost	2,994
Aggregate Fair Value	3,000
Certificates of deposit | Long-term
Short-Term:
Unrealized Gross Gains	6
Unrealized Gross Losses	0
Long-Term:
Unrealized Gross Gains	6
Unrealized Gross Losses	0
Asset-backed securities
Long-Term:
Amortized Cost	911	1,170
Aggregate Fair Value	910	1,171
Asset-backed securities | Long-term
Short-Term:
Unrealized Gross Gains	0	1
Unrealized Gross Losses	(1)	0
Long-Term:
Unrealized Gross Gains	0	1
Unrealized Gross Losses	$ (1)	$ 0

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Summary of Significant Accounting Policies - Investments (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Accounting Policies [Abstract]
Unrecognized loss in accumulated other comprehensive income (loss)	$ 0	$ (600,000)
Realized losses	0	$ 0
Investments with maturity greater than one year	0		$ 0
Allowance for credit losses	$ 0		$ 0

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Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - Recurring basis - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Cash equivalents:
Total cash equivalents	$ 141,547	$ 146,217
Investments:
Total investments	293,748	283,981
Total cash equivalents and investments	435,295	430,198
Commercial paper
Investments:
Total investments	5,394	2,951
Corporate debt securities
Investments:
Total investments	29,916	33,337
Certificates of deposit
Investments:
Total investments	10,647	2,968
Asset-backed securities
Investments:
Total investments	910	1,171
U.S. government securities
Investments:
Total investments	246,881	243,554
Money market funds
Cash equivalents:
Total cash equivalents	141,547	146,217
Level 1
Cash equivalents:
Total cash equivalents	141,547	146,217
Investments:
Total investments	246,881	243,554
Total cash equivalents and investments	388,428	389,771
Level 1 | Commercial paper
Investments:
Total investments	0	0
Level 1 | Corporate debt securities
Investments:
Total investments	0	0
Level 1 | Certificates of deposit
Investments:
Total investments	0	0
Level 1 | Asset-backed securities
Investments:
Total investments	0	0
Level 1 | U.S. government securities
Investments:
Total investments	246,881	243,554
Level 1 | Money market funds
Cash equivalents:
Total cash equivalents	141,547	146,217
Level 2
Cash equivalents:
Total cash equivalents	0	0
Investments:
Total investments	46,867	40,427
Total cash equivalents and investments	46,867	40,427
Level 2 | Commercial paper
Investments:
Total investments	5,394	2,951
Level 2 | Corporate debt securities
Investments:
Total investments	29,916	33,337
Level 2 | Certificates of deposit
Investments:
Total investments	10,647	2,968
Level 2 | Asset-backed securities
Investments:
Total investments	910	1,171
Level 2 | U.S. government securities
Investments:
Total investments	0	0
Level 2 | Money market funds
Cash equivalents:
Total cash equivalents	0	0
Level 3
Cash equivalents:
Total cash equivalents	0	0
Investments:
Total investments	0	0
Total cash equivalents and investments	0	0
Level 3 | Commercial paper
Investments:
Total investments	0	0
Level 3 | Corporate debt securities
Investments:
Total investments	0	0
Level 3 | Certificates of deposit
Investments:
Total investments	0	0
Level 3 | Asset-backed securities
Investments:
Total investments	0	0
Level 3 | U.S. government securities
Investments:
Total investments	0	0
Level 3 | Money market funds
Cash equivalents:
Total cash equivalents	$ 0	$ 0

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Summary of Significant Accounting Policies - Changes in the Allowance for Credit Losses Related to Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at beginning of period	$ 1,648	$ 36
Charges (credits) to the allowance, net	76	0
Accounts written off, net of recoveries	(1,468)	0
Balance at end of period	$ 256	$ 36

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Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Accounting Policies [Abstract]
Raw materials	$ 8,303	$ 6,115
Finished goods	40,671	27,770
Total inventories, net of reserves	48,974	33,885
Next generation pre-launch research and development inventory	2,600	900
Reserve for excess and obsolete inventory	$ 3,100	$ 2,400

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Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Property and Equipment
Property and equipment, cost	$ 60,391		$ 47,255
Less: accumulated depreciation and amortization	(8,110)		(7,271)
Property and equipment, net	52,281		39,984
Depreciation and amortization expenses	800	$ 600
Computer equipment and software
Property and Equipment
Property and equipment, cost	4,267		2,601
Manufacturing equipment
Property and Equipment
Property and equipment, cost	7,845		7,245
Other equipment
Property and Equipment
Property and equipment, cost	1,353		1,842
Leasehold improvements
Property and Equipment
Property and equipment, cost	2,356		2,356
Construction in process
Property and Equipment
Property and equipment, cost	$ 44,570		$ 33,211
Minimum
Property and Equipment
Estimated useful lives	3 years
Maximum
Property and Equipment
Estimated useful lives	5 years

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Summary of Significant Accounting Policies - Strategic Investments (Details) - USD ($) $ in Millions	Mar. 31, 2024	Dec. 31, 2023
Accounting Policies [Abstract]
Equity securities without readily determinable fair value	$ 10.4	$ 10.4

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Summary of Significant Accounting Policies - Impairment of Long-lived Assets (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Accounting Policies [Abstract]
Impairment charges	$ 0	$ 0

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Summary of Significant Accounting Policies - Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Accounting Policies [Abstract]
Payroll related	$ 20,956	$ 33,875
Product warranty liability	1,388	1,100
Other accrued expenses	6,026	4,291
Total accrued expenses	$ 28,370	$ 39,266

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Summary of Significant Accounting Policies - Product Warranty Accrual (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 1,100	$ 920
Provisions for warranty	535	132
Settlements of warranty claims	(247)	(311)
Balance at the end of the period	$ 1,388	$ 741

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Summary of Significant Accounting Policies - Advertising Expenses (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Advertising Expenses
Advertising expenses	$ 25.6	$ 23.6

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Leases - Narrative (Details) ft² in Thousands, $ in Millions	1 Months Ended		3 Months Ended
	Aug. 31, 2023 ft² renewal_option	May 31, 2023 ft² renewal_option	Mar. 31, 2024 USD ($) ft²	Mar. 31, 2023 USD ($)
Leases [Abstract]
Operating lease, office space (square feet) | ft²	22	106	18
Number of renewal options | renewal_option	2	2
Renewal term	5 years	5 years
Remaining lease term			11 years 2 months 12 days
Discount rate			4.90%
Operating lease payments | $			$ 0.6	$ 0.4

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Leases - Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Right-of-use assets:
Operating lease right-of-use assets	$ 22,248	$ 22,667
Operating lease liabilities:
Operating lease liabilities, non-current portion	$ 24,500	$ 24,846

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Employee Retirement Plan (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Retirement Benefits [Abstract]
Employer matching contribution, percent of employees' contribution	50.00%
Employee contribution, maximum eligible for employer match, percent	6.00%
Employer matching contribution, percent of employees' earnings	3.00%
Employer matching contribution	$ 1.5	$ 1.2

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Stock-Based Compensation - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 31, 2024 USD ($) installment shares
Stock Options
Unearned stock-based compensation | $	$ 105.9
Weighted average recognition period	2 years 6 months
Options
Stock Options
Service period	4 years
Contractual life of stock options	10 years
Options | Maximum
Stock Options
Vesting annual installments | installment	3
Options | Directors | Minimum
Stock Options
Vesting annual installments | installment	1
Options | Vesting after first year of service
Stock Options
Percentage of shares to vest	25.00%
Options | Vesting in years two through four
Stock Options
Vesting period	36 months
Restricted Stock Units (RSUs)
Stock Options
Unearned stock-based compensation | $	$ 103.4
Weighted average recognition period	2 years 7 months 6 days
Restricted Stock Units (RSUs) | Minimum
Stock Options
Service period	3 years
Restricted Stock Units (RSUs) | Maximum
Stock Options
Service period	4 years
Restricted Stock Units (RSUs) | Directors | Minimum
Stock Options
Service period	1 year
Restricted Stock Units (RSUs) | Directors | Maximum
Stock Options
Service period	3 years
Equity Incentive Plan
Stock Options
Shares authorized (in shares) | shares	4,879,073
Number of shares available for future awards (in shares) | shares	1,538,340

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Stock-Based Compensation - Assumptions Used to Calculate Fair Value of Options (Details) - Options - $ / shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Weighted average assumptions
Weighted average fair value (in dollars per share)	$ 124.70	$ 151.88
Expected term (years)	6 years 3 months
Expected dividend yield	0.00%	0.00%
Minimum
Weighted average assumptions
Expected term (years)		6 years 3 months
Expected volatility	59.00%	57.20%
Risk-free interest rate	3.95%	3.55%
Maximum
Weighted average assumptions
Expected volatility	59.40%	57.40%
Risk-free interest rate	4.28%	4.07%

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Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2024	Dec. 31, 2023
Options
Outstanding at beginning of the year (in shares)	2,447,141
Granted (in shares)	158,438
Exercised (in shares)	(88,310)
Forfeited/expired (in shares)	(15,696)
Outstanding at ending of the year (in shares)	2,501,573	2,447,141
Exercisable (in shares)	1,636,818
Weighted Average Exercise Price
Outstanding, beginning of the period (in dollars per share)	$ 152.17
Granted (in dollars per share)	196.92
Exercised (in dollars per share)	41.03
Forfeited/expired (in dollars per share)	225.17
Outstanding, end of the period (in dollars per share)	158.47	$ 152.17
Exercisable (in dollars per share)	$ 122.86
Weighted Average Remaining Contractual Term (years)
Outstanding	7 years	7 years
Exercisable	6 years 1 month 6 days
Aggregate Intrinsic Value
Outstanding, beginning of period	$ 166,795	$ 160,691
Exercised	13,707
Outstanding, end of period	166,795	$ 160,691
Exercisable at end of period	$ 157,645

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Stock-Based Compensation - Restricted Stock Units (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($) $ / shares shares
Restricted Stock Units
Forfeited (in shares) | shares	(2,278)
Weighted Average Grant Date Fair Value
Forfeited (in dollars per share) | $ / shares	$ 263.16
Restricted Stock Units (RSUs)
Restricted Stock Units
Unvested at beginning of period (in shares) | shares	201,070
Granted (in shares) | shares	405,239
Vested (in shares) | shares	(41,185)
Forfeited (in shares) | shares	(10,510)
Unvested at end of period (in shares) | shares	554,614
Weighted Average Grant Date Fair Value
Unvested at beginning of period (in dollars per share) | $ / shares	$ 235.47
Granted (in dollars per share) | $ / shares	195.73
Vested (in dollars per share) | $ / shares	247.56
Forfeited (in dollars per share) | $ / shares	207.74
Unvested at end of period (in dollars per share) | $ / shares	$ 206.06
Aggregate Intrinsic Value
Unvested at beginning of period | $	$ 40,904
Vested | $	8,157
Unvested at end of period | $	$ 119,126

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Stock-Based Compensation - Performance Stock Units (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($) $ / shares shares
Restricted Stock Units
Forfeited (in shares) | shares	(2,278)
Weighted Average Grant Date Fair Value
Forfeited (in dollars per share) | $ / shares	$ 263.16
Aggregate Intrinsic Value
Unearned stock-based compensation | $	$ 105,900
Weighted average recognition period	2 years 6 months
Performance stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Revenue goal, performance period	3 years
Restricted Stock Units
Unvested at beginning of period (in shares) | shares	168,969
Granted (in shares) | shares	166,110
Unvested at end of period (in shares) | shares	332,801
Weighted Average Grant Date Fair Value
Unvested at beginning of period (in dollars per share) | $ / shares	$ 248.19
Granted (in dollars per share) | $ / shares	194.87
Unvested at end of period (in dollars per share) | $ / shares	$ 221.47
Aggregate Intrinsic Value
Unvested at beginning of period | $	$ 34,373
Unvested at end of period | $	71,482
Unearned stock-based compensation | $	$ 51,100
Weighted average recognition period	2 years 2 months 12 days
Performance stock units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target, percentage	0.00%
Performance stock units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target, percentage	200.00%

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Stock-Based Compensation - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan	3 Months Ended
	Mar. 31, 2024 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee stock purchase plan, percent	85.00%
Number of shares reserved for issuance (in shares)	1,248,131

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Income Taxes (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023	Dec. 11, 2018
Operating Loss Carryforwards [Line Items]
Income tax expense	$ 650,000	$ 216,000	$ 200,000
Significant change to unrecognized tax benefits over the next 12 months	0
Unrecognized tax benefits	$ 100,000		100,000
R&D credit
Operating Loss Carryforwards [Line Items]
Credit carryforwards			14,700,000	$ 1,700,000
Federal
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards			226,100,000	$ 126,500,000
State
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards			$ 173,500,000

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Segment Reporting and Revenue Disaggregation - Revenue by Geographic Region (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($) segment	Mar. 31, 2023 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment	1
Revenue by Geographic Region
Revenue	$ 164,010	$ 127,897
United States
Revenue by Geographic Region
Revenue	155,771	124,485
All other countries
Revenue by Geographic Region
Revenue	$ 8,239	$ 3,412

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Segment Reporting and Revenue Disaggregation - Long-lived Tangible Assets by Geographic Location (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Revenue by Geographic Region
Property and equipment, net	$ 52,281	$ 39,984
United States
Revenue by Geographic Region
Property and equipment, net	52,099	39,916
All other countries
Revenue by Geographic Region
Property and equipment, net	$ 182	$ 68

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Loss Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	3,062,059	3,002,899
Common stock options outstanding
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	2,501,573	2,818,389
Unvested restricted stock units
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	554,614	179,374
Shares issuable under the ESPP
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	5,872	5,136

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Related Party Transaction (Details) - Related Party $ in Millions	1 Months Ended
	Dec. 31, 2023 USD ($)
Related Party Transaction [Line Items]
Cost Sharing Agreement, for corporate suite annual amount due from other party	$ 0.2
Cost Sharing Agreement, corporate suite annual fee increase, percentage	5.00%
Cost Sharing Agreement, reimbursement payable in exchange for use, of suite, percent	50.00%
Cost Sharing Agreement, right to use suite, percentage	50.00%