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 September 30, 2023 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 October 31, 2023, the registrant had 29,524,189 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	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	42
	Signatures	43

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 facts 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 COVID-19 on our business, financial results and financial position, prospective products, international product approvals and commercialization, 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, human capital initiatives, environmental, social, and governance reporting, 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 COVID-19, or any other pandemic, epidemic or outbreak of an infectious disease;

•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, 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;

•the risk that we may be deemed to be an investment company under the Investment Company Act of 1940;

•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 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, 2022, as updated by “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q.

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)

	September 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	329,897	$	441,592
Investments, short-term	134,317		9,821
Accounts receivable, net of allowance for credit losses of     $1,376 and $36, respectively	71,460		61,228
Inventories, net	26,115		11,886
Prepaid expenses and other current assets	7,802		5,505
Total current assets	569,591		530,032
Investments, long-term	2,961		—
Property and equipment, net	32,249		17,249
Operating lease right-of-use assets	23,081		6,880
Other non-current assets	11,612		10,715
Total assets	$	639,494	$	564,876
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	40,031	$	26,847
Accrued expenses	29,964		34,339
Total current liabilities	69,995		61,186
Operating lease liabilities, non-current portion	25,173		7,536
Other non-current liabilities	146		146
Total liabilities	95,314		68,868
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; 29,403,189 and 29,008,368 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	29		29
Additional paid-in capital	904,293		820,335
Accumulated other comprehensive income (loss)	44		(86)
Accumulated deficit	(360,186)		(324,270)
Total stockholders' equity	544,180		496,008
Total liabilities and stockholders' equity	$	639,494	$	564,876

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	153,302	$	109,188	$	432,291	$	269,956
Cost of goods sold	24,382		19,786		68,522		43,963
Gross profit	128,920		89,402		363,769		225,993
Operating expenses:
Research and development	29,144		20,993		85,484		47,397
Selling, general and administrative	113,247		85,603		327,853		225,853
Total operating expenses	142,391		106,596		413,337		273,250
Operating loss	(13,471)		(17,194)		(49,568)		(47,257)
Other (income) expense:
Interest and dividend income	(5,495)		(1,350)		(14,690)		(1,681)
Interest expense	—		656		—		1,677
Other expense, net	224		101		268		290
Total other (income) expense	(5,271)		(593)		(14,422)		286
Loss before income taxes	(8,200)		(16,601)		(35,146)		(47,543)
Income taxes	340		246		770		488
Net loss	(8,540)		(16,847)		(35,916)		(48,031)
Other comprehensive loss:
Foreign currency translation loss	(181)		(148)		(4)		(106)
Unrealized gain (loss) on investments	122		(14)		134		(202)
Total comprehensive loss	$	(8,599)	$	(17,009)	$	(35,786)	$	(48,339)
Net loss per share, basic and diluted	$	(0.29)	$	(0.60)	$	(1.23)	$	(1.73)
Weighted average common shares used to    compute net loss per share, basic and diluted	29,365,968		28,226,345		29,229,626		27,782,093

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

6

Inspire Medical Systems, Inc.

Consolidated Statements of Stockholders' Equity (unaudited)

(in thousands, except share amounts)

	Nine Months Ended September 30, 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	—		—		—		—		—
Withholding taxes on net share settlement of restricted stock units	(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
Stock options exercised	143,693	—		13,113		—		—		13,113
Vesting of restricted stock units	9,349	—		—		—		—		—
Withholding taxes on net share settlement of restricted stock units	(3,237)	—		(971)		—		—		(971)
Issuance of common stock	390	—		91		—		—		91
Issuance of common stock for employee stock purchase plan	12,983	—		2,792		—		—		2,792
Stock-based compensation expense	—	—		21,567		—		—		21,567
Other comprehensive income	—	—		—		71		—		71
Net loss	—	—		—		—		(11,952)		(11,952)
Balance at June 30, 2023	29,326,179	29		880,873		103		(351,646)		529,359
Stock options exercised	72,632	—		4,016		—		—		4,016
Vesting of restricted stock units	6,272	—		—		—		—		—
Issuance of common stock	279	—		91		—		—		91
Withholding taxes on net share settlement of restricted stock units	(2,173)	—		(516)		—		—		(516)
Stock-based compensation expense	—	—		19,829		—		—		19,829
Other comprehensive loss	—	—		—		(59)		—		(59)
Net loss	—	—		—		—		(8,540)		(8,540)
Balance at September 30, 2023	29,403,189	$	29	$	904,293	$	44	$	(360,186)	$	544,180

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

7

Inspire Medical Systems, Inc.

Consolidated Statements of Stockholders' Equity (unaudited)

(in thousands, except share amounts)

	Nine Months Ended September 30, 2022
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
Balance at December 31, 2021	27,416,106	$	27	$	508,465	$	(55)	$	(279,389)	$	229,048
Stock options exercised	151,186	1		3,086		—		—		3,087
Vesting of restricted stock units	569	—		—		—		—		—
Withholding taxes on net share settlement of restricted stock units	(205)	—		(43)		—		—		(43)
Issuance of common stock	348	—		79		—		—		79
Stock-based compensation expense	—	—		9,721		—		—		9,721
Other comprehensive loss	—	—		—		(143)		—		(143)
Net loss	—	—		—		—		(16,694)		(16,694)
Balance at March 31, 2022	27,568,004	28		521,308		(198)		(296,083)		225,055
Stock options exercised	52,383	—		1,549		—		—		1,549
Issuance of common stock	314	—		80		—		—		80
Issuance of common stock for employee stock purchase plan	13,743	—		2,134		—		—		2,134
Stock-based compensation expense	—	—		12,659		—		—		12,659
Other comprehensive loss	—	—		—		(3)		—		(3)
Net loss	—	—		—		—		(14,490)		(14,490)
Balance at June 30, 2022	27,634,444	28		537,730		(201)		(310,573)		226,984
Stock options exercised	35,826	—		1,760		—		—		1,760
Issuance of common stock	410	—		79		—		—		79
Sale of common stock from follow-on public offering, net of offering expenses	1,150,000	1		243,800		—		—		243,801
Stock-based compensation expense	—	—		14,589		—		—		14,589
Other comprehensive loss	—	—		—		(162)		—		(162)
Net loss	—	—		—		—		(16,847)		(16,847)
Balance at September 30, 2022	28,820,680	$	29	$	797,958	$	(363)	$	(327,420)	$	470,204

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

8

Inspire Medical Systems, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Nine Months Ended September 30,
	2023		2022
Operating activities
Net loss	$	(35,916)	$	(48,031)
Adjustments to reconcile net loss:
Depreciation and amortization	2,029		1,289
Non-cash lease expense	986		778
Stock-based compensation expense	59,621		36,969
Non-cash stock issuance for services rendered	272		238
Other, net	1,271		(553)
Changes in operating assets and liabilities:
Accounts receivable	(11,588)		(14,395)
Inventories	(14,228)		2,086
Prepaid expenses and other current assets	(2,947)		(1,712)
Accounts payable	11,075		8,601
Accrued expenses and other liabilities	(3,189)		7,030
Net cash provided by (used in) operating activities	7,386		(7,700)
Investing activities
Purchases of property and equipment	(15,596)		(6,146)
Purchases of investments	(137,253)		—
Proceeds from sales or maturities of investments	10,000		—
Purchases of strategic investments	(250)		(10,500)
Net cash used in investing activities	(143,099)		(16,646)
Financing activities
Payments on long-term debt obligation	—		(24,500)
Proceeds from sale of common stock	—		243,801
Proceeds from the exercise of stock options	24,506		6,396
Taxes paid on net share settlement of restricted stock units	(3,233)		(43)
Proceeds from issuance of common stock from employee stock purchase plan	2,792		2,134
Net cash provided by financing activities	24,065		227,788
Effect of exchange rate on cash	(47)		(101)
(Decrease) increase in cash and cash equivalents	(111,695)		203,341
Cash and cash equivalents at beginning of period	441,592		214,467
Cash and cash equivalents at end of period	$	329,897	$	417,808
Supplemental cash flow information
Cash paid for interest	$	—	$	2,321
Property and equipment included in accounts payable and accrued expenses	3,499		1,332

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

9

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. Japan's Ministry of Health, Labour and Welfare ("MLHW") approved Inspire therapy to treat moderate to severe OSA in 2018 and was formally added to the Japan National Health Insurance Payment Listing in 2021. In 2020, the Australian Therapeutic Goods Administration approved Inspire therapy to treat moderate to severe OSA, and we are currently seeking reimbursement coverage in Australia.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying 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, 2022.

Follow-On Public Offering

On August 15, 2022, we completed a follow-on offering that included our offer and sale of 1,150,000 shares of common stock at a public offering price of $215.00 per share. We received net proceeds of $243.8 million after deducting underwriting discounts, commissions, and offering expenses.

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 and corporate debt securities, 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

10

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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 September 30, 2023 and 2022, we recognized $0.2 million and $0.1 million of gains, net, respectively. For both of the nine-month periods ended September 30, 2023 and 2022, we recognized $0.3 million of gains, net. 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 of unrecognized gain in our accumulated other comprehensive income (loss) balance as of both September 30, 2023 and December 31, 2022.

Investments

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

	September 30, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,907	$	—	$	(1)	$	2,906
Corporate debt securities	29,182		1		(25)		29,158
Certificates of deposit	2,953		—		—		2,953
U.S. treasury debt securities	99,317		1		(18)		99,300
Short-term investments	$	134,359	$	2	$	(44)	$	134,317
Long-Term:
Corporate debt securities	$	1,930	$	—	$	(1)	$	1,929
Asset-backed securities	1,031		1		—		1,032
Long-term investments	$	2,961	$	1	$	(1)	$	2,961

	December 31, 2022
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
U.S. treasury debt securities	$	9,998	$	—	$	(177)	$	9,821
Short-term investments	$	9,998	$	—	$	(177)	$	9,821

As of September 30, 2023 and December 31, 2022, we had no investments with a contractual maturity of greater than three years.

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 $0.2 million of unrecognized loss in our accumulated other comprehensive income (loss) balance at September 30, 2023 and December 31, 2022, 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 the three and nine months ended September 30, 2023 and 2022, we recognized $0 of realized losses, net.

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

11

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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 September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

12

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
	September 30, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	284,353	$	284,353	$	—	$	—
Corporate debt securities	2,923		—		2,923		—
Total cash equivalents	287,276		284,353		2,923		—
Investments:
Commercial paper	2,906		—		2,906		—
Corporate debt securities	31,087		—		31,087		—
Certificates of deposit	2,953		—		2,953		—
Asset-backed securities	1,032		—		1,032		—
U.S. government securities	99,300		99,300		—		—
Total investments	137,278		99,300		37,978		—
Total cash equivalents and investments	$	424,554	$	383,653	$	40,901	$	—

	Fair Value Measurements as of
	December 31, 2022
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	390,846	$	390,846	$	—	$	—
Total cash equivalents	390,846		390,846		—		—
Investments:
U.S. government securities	9,821		9,821		—		—
Total investments	9,821		9,821		—		—
Total cash equivalents and investments	$	400,667	$	400,667	$	—	$	—

There were no transfers between levels during the periods ended September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022, we limited our credit risk associated with cash equivalents by placing investments with banks we believe are highly creditworthy.

13

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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).

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:

	September 30, 2023		December 31, 2022
Raw materials	$	4,381	$	5,645
Finished goods	21,734		6,241
Total inventories, net of reserves	$	26,115	$	11,886

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. At both September 30, 2023 and December 31, 2022, there was $0 included in inventory related to prelaunch inventory.

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 $3.5 million and $2.7 million as of September 30, 2023 and December 31, 2022, respectively.

Property and Equipment

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

14

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

	September 30, 2023		December 31, 2022
Computer equipment and software	$	2,152	$	1,729
Manufacturing equipment	7,105		5,974
Other equipment	1,847		535
Leasehold improvements	2,136		2,064
Construction in process	25,948		11,857
Property and equipment, cost	39,188		22,159
Less: accumulated depreciation and amortization	(6,939)		(4,910)
Property and equipment, net	$	32,249	$	17,249

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 $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $2.0 million and $1.3 million for the nine months ended September 30, 2023 and 2022, 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 $10.8 million and $10.5 million as of September 30, 2023 and December 31, 2022, respectively. There were no adjustments to the carrying amount during either of the nine months ended September 30, 2023 or 2022.

Impairment of Long-lived Assets

Long-lived assets consist primarily of property and equipment and operating lease right-of-use asset and 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 nine months ended September 30, 2023 or 2022.

Accrued Expenses

Accrued expenses consisted of the following:

	September 30, 2023		December 31, 2022
Payroll related	$	26,218	$	30,398
Product warranty liability	805		920
Operating lease liabilities, current portion	—		1,336
Other accrued expenses	2,941		1,685
Total accrued expenses	$	29,964	$	34,339

15

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance at beginning of period	$	760	$	488	$	920	$	468
Provisions for warranty	174		201		457		322
Settlements of warranty claims	(129)		(61)		(572)		(162)
Balance at the end of the period	$	805	$	628	$	805	$	628

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 8 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.

16

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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. Prelaunch inventory expenses were $1.7 million and $0.0 million during the three months ended September 30, 2023 and 2022, respectively and $4.7 million and $0.0 million during the nine months ended September 30, 2023 and 2022, respectively.

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 $25.5 million and $20.1 million during the three months ended September 30, 2023 and 2022, respectively, and $74.3 million and $53.6 million during the nine months ended September 30, 2023 and 2022, respectively.

Leases

Operating leases are included in operating lease right-of-use ("ROU") asset, accrued expenses, and operating lease liability – 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

17

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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 (loss) 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

We have reviewed and considered all 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, resulting in a non-cash increase in the associated right-of-use asset and lease liability of $15.1 million. 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, resulting in an associated right-of-use asset and lease liability of $2.3 million. 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.

18

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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:

	September 30, 2023		December 31, 2022
Right-of-use assets:
Operating lease right-of-use assets	$	23,081	$	6,880
Operating lease liabilities:
Accrued expenses	—		1,336
Operating lease liabilities, non-current portion	25,173		7,536
Total operating lease liabilities	$	25,173	$	8,872

Maturities of our lease liability for our operating lease are as follows as of September 30, 2023:

2023 (remaining)	$	633
2024	(3,582)
2025	3,056
2026	3,313
2027	3,416
Thereafter	28,887
Total undiscounted lease payments	35,723
Less: imputed interest	(10,550)
Present value of lease liability	$	25,173

As of September 30, 2023, the remaining lease terms were 11.7 years and the weighted average discount rate was 4.9%. The operating cash outflows from our operating leases were $0.6 million and $0.2 million for the three-month periods ended September 30, 2023 and 2022, respectively, and $1.5 million and $0.3 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

4. Long-Term Debt

In March 2019 we amended our $24.5 million term loan and security agreement, which we refer to as our former credit facility. The debt was interest only until April 1, 2022 and was scheduled to mature on March 1, 2024. The basic interest rate was the 30-day U.S. LIBOR rate, subject to a floor of 7.60%. In addition to the principal and interest payments, we were required to pay a final payment fee of 3.50% on all amounts outstanding, which was accreted using the effective interest rate method over the term of the credit facility and was to be due at the earlier of maturity or prepayment. Borrowings were prepayable in whole at our option, subject to a prepayment fee of 1.00%.

In August 2022, we prepaid the outstanding principal balance of $19.4 million, the final payment fee of $0.9 million, and the prepayment fee of $0.2 million. As of September 30, 2023 and December 31, 2022, we had no remaining amounts outstanding under our former credit facility.

19

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

5. 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. Beginning January 1, 2022, we elected to begin making voluntary matching contributions to the plan. We match 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. Discretionary contributions to the plan totaled $0.8 million and $0.6 million for the three months ended September 30, 2023 and 2022, respectively, and $3.0 million and $1.9 million for the nine months ended September 30, 2023 and 2022, respectively.

6. Stock-Based Compensation

As of September 30, 2023, there were 4,259,385 shares authorized for issuance under our equity incentive plan, of which 1,537,529 shares were available for future awards.

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 at the exercise price, which is equal to the closing price of our stock on the date of grant. The stock options granted to employees 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

	Nine Months Ended
	September 30,
	2023	2022
Weighted average fair value	$153.59	$119.23
Assumptions:
Expected term (years)	6.25	5.50 - 6.25
Expected volatility	56.4 - 57.4%	56.2 - 57.0%
Risk-free interest rate	3.49 - 4.61%	1.75 - 4.06%
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.

20

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

Expected Volatility — Due to our limited company specific historical and implied volatility data, we have 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 of public companies on which we have based our expected stock price volatility, 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. We will continue to analyze the historical stock price volatility assumption as more historical data for our common stock becomes available.

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, 2022	2,660,734		$	112.19	6.9	$372,068
Granted	409,977		$	264.13
Exercised	(358,492)		$	68.64		$72,896
Forfeited/expired	(40,404)		$	206.10
Outstanding at September 30, 2023	2,671,815		$	139.93	6.8	$196,553
Exercisable at September 30, 2023	1,699,560		$	90.47	5.7	$188,465

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 September 30, 2023, the amount of unearned stock-based compensation to be expensed from now through the year 2027 related to unvested employee and non-employee director stock options is $111.1 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 employment terminates prior to the release of the vesting restrictions. The RSUs include three- or four-year service periods and vest in equal installments on each anniversary of the date of grant, provided the employee remains continuously employed with the Company. 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, 2022	124,680		$	213.97	$	31,404
Granted	112,076		$	262.87
Vested	(34,473)		$	211.04	$	9,168
Forfeited	(8,940)		$	237.12
Unvested at September 30, 2023	193,343		$	241.77	$	38,367

21

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

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 September 30, 2023, there was $37.1 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted average period of 2.0 years.

Performance Stock Units

During each of the quarters ended March 31, 2022 and 2023, 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 and December 31, 2025, 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 grants 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, 2022	77,472		$	227.53	$	19,514
Granted	95,994		$	264.59
Forfeited	(2,897)		$	241.54
Unvested at September 30, 2023	170,569		$	248.15	$	33,848

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 September 30, 2023, there was $31.1 million of unrecognized stock-based compensation expense related to outstanding PSUs that is expected to be recognized over a weighted-average period of approximately 2.0 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 1,077,720 shares available for future issuance under the ESPP as of September 30, 2023. The current purchase period under the ESPP began on July 1, 2023 and ends December 31, 2023.

7. Income Taxes

At both September 30, 2023 and December 31, 2022, a valuation allowance was recorded against all deferred tax assets due to our cumulative net loss position. We recorded income tax expense of $0.3 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $0.8 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. The nominal income tax expense reflects minimal state and foreign income tax expense in the nine months ended September 30, 2023, and minimal state income tax expense and an accrual for uncertain tax positions in the three and nine months ended September 30, 2022.

We filed our 2022 U.S. federal income tax return during the third quarter of 2023. Considering the provision to return true-ups, our gross federal net operating loss carryforward as of December 31, 2022 was $274.4 million, which will expire at various dates beginning in 2031. In addition, net operating loss carryforwards for state income tax

22

Inspire Medical Systems, Inc. 

Notes to Consolidated Financial Statements (unaudited) 

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

purposes of $183.3 million that include net operating losses will begin to expire in 2028. We also have gross research and development credit carryforwards of $9.7 million as of December 31, 2022, which will expire at various dates beginning in 2033.

Utilization of the net operating loss carryforwards and 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 Internal Revenue Code of 1986 and similar state provisions. During the three months ended March 31, 2023, we finalized a detailed analysis to determine whether an ownership change has occurred 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 federal net operating losses and $1.7 million of federal R&D credits that were accumulated on December 11, 2018, will expire unused solely due to the limitations under Section 382 and 383.

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 each of September 30, 2023 and December 31, 2022.

We file income tax returns in the applicable jurisdictions. The 2019 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.

8. 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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
United States	$	147,514	$	106,279	$	416,748	$	260,581
All other countries	5,788		2,909		15,543		9,375
Total revenue	$	153,302	$	109,188	$	432,291	$	269,956

All of our long-lived assets are located in the U.S.

9. 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

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INSPIRE MEDICAL SYSTEMS, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 

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

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 anti-dilutive:

	September 30,
	2023	2022
Common stock options outstanding	2,671,815	2,788,306
Unvested restricted stock units	193,343	107,930
Shares issuable under the ESPP	6,319	5,706
Total	2,871,477	2,901,942

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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 consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited financial statements and the related notes thereto, and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, 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 "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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 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 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. 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 November 7, 2023, 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.

In November 2023, the final 2024 Medicare reimbursement payments were announced. The 2024 rate for our hospital customers is $29,617 per implantation of a hypoglossal nerve stimulator, an increase of 1% over the 2023 rate. The ASC reimbursement for 2024 is $24,870 per implantation, a decrease of 1% over the 2023 rate. The 2024 physician payment is $823 for implantation, a 6% decrease over the 2023 payment. The 2024 national average drug-induced sleep endoscopy ("DISE") procedure reimbursement to ASCs increased 714% to $757 per procedure over the 2023 rate, while the reimbursement to hospitals for the DISE procedure increased by 806% to $1,619.

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For the nine months ended September 30, 2023, 96.4% of our revenue was derived in the U.S. and 3.6% was derived outside of the U.S. No single customer accounted for more than 10% of our revenue during the nine months ended September 30, 2023.

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 any delay in implant procedures due to those issues. During the third quarter of 2023, we began experiencing 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") in December 2021, which we expect to obtain in the first quarter of 2024, following delays in the process. In the interim, we received a derogation from the Dutch national competent authority allowing us to place the silicone-based leads on the market until April 1, 2024 or until we receive certification under the EU MDR, whichever occurs first. We are also pursuing derogation in several other EU member states. However, such derogations are granted at the national level only and we cannot be certain that national competent authorities of the other EU member states will grant a derogation similar to the Dutch authority. Until we obtain certification under the EU MDR or these derogations are received, we may only sell our polyurethane-based leads in the EU, where the stimulation lead is in low supply. During the fourth quarter of 2023 and possibly extending into early 2024, we expect that the delay in certification and the shortage of polyurethane-based stimulation leads may cause delays to implant procedures which may adversely affect our business in the EU, including a reduction in our European revenue, and thereby our consolidated revenue, of up to $4 million during the fourth quarter of 2023.

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. For example, during the three months ended September 30, 2022, we recorded a charge of $2.8 million for obsolete inventory and component parts related to product introductions which were completed in October 2022, including the new silicone leads and the Bluetooth®-enabled patient remote.

In the U.S., our products are shipped directly to our U.S. customers and are shipped 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 September 30, 2023, we generated revenue of $153.3 million with a gross margin of 84.1% and had a net loss of $8.5 million compared to revenue of $109.2 million with a gross margin of 81.9% and a net loss of $16.8 million for the three months ended September 30, 2022. For the nine months ended September 30, 2023, we generated revenue of $432.3 million with a gross margin of 84.1% and had a net loss of $35.9 million compared to revenue of $270.0 million with a gross margin of 83.7% and a net loss of $48.0 million for the nine months ended September 30, 2022. Our accumulated deficit as of September 30, 2023 was $360.2 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

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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 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 early 2024. In March 2023, we received FDA approval to offer Inspire therapy to certain pediatric patients with Down syndrome, and in 2022, we received FDA approval for additional magnetic resonance imaging ("MRI") scan conditions for use with Inspire therapy. This full-body MRI approval expands the Inspire use labeling that previously allowed only head, neck, and extremity MRI scans. Also in 2022, the FDA approved silicone-based stimulation and sensing leads, which provides improved manufacturability, easier system implantation, increased long-term performance, and enhanced reliability.

Our direct-to-consumer marketing includes the use of social media platforms such as Facebook, Google ad placements, and radio and television commercials. In January 2022, we purchased our first national television advertising spots and began airing new TV commercials, and in March 2023, we began airing additional new 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 expect to maintain or increase 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 plan to continue to expand this scheduling capability during the remainder of 2023 and 2024.

We also continue to make significant investments to build our sales and marketing organization by increasing the number of U.S. and European sales representatives and continuing our direct-to-consumer marketing efforts in existing and new markets throughout the U.S. and in Europe. During the three months ended September 30, 2023, we created 13 new U.S. sales territories, bringing the total to 274 U.S. territories as of September 30, 2023. During that same period, we activated 62 new centers, bringing the total to 1,107 U.S. medical centers implanting Inspire therapy as of September 30, 2023. At both of September 30, 2023 and December 31, 2022, ASCs made up 23% of our total U.S. implanting centers.

During 2023, 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. 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 which is detected during a DISE procedure. Inspire is contraindicated for complete concentric collapse. While weight loss may help reduce a patient’s Apnea-Hypopnea Index and other OSA symptoms, we have seen from numerous studies that weight loss alone will not resolve OSA for the vast majority of patients. We expect GLP-1s will help patients address their lateral wall collapse, potentially bringing them into our indication. As shown in 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, there is not a significant overlap in in the Inspire patient population with the GLP-1s today. While we cannot quantify the impact, we believe that there could be a benefit to our business as a result of the GLP-1s, although there can be no assurance of such benefit.

Because of these and other factors, we may incur net losses for the next several years and require substantial additional funding, which may include future equity and debt financings.

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Macroeconomic Environment

The global economy is experiencing increased inflationary pressures in part due to global supply chain disruptions, labor shortages, and other impacts from COVID-19 and the current macroeconomic environment which we anticipate will continue. 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.

Our operations have been adversely impacted by the inflationary pressures primarily related to labor, raw materials, and component parts. 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. As mentioned above, the delay on EU MDR approval of our silicone-based leads and the shortage of polyurethane-based stimulation leads may cause delays to implant procedures and a reduction in our European revenue.

COVID-19 Update

Our business, operations, and financial condition and results have been and may continue to be impacted by COVID-19. During the first quarter of 2022, resurgences of COVID-19 in various U.S. and international regions impacted our revenue slightly, although surgical volumes had generally returned to pre-pandemic levels by the end of the first quarter, and therefore the impact on the remainder of 2022 was less significant. As discussed above, we have also experienced, and continue to experience, COVID-19-related supply chain issues which has negatively impacted our inventory levels. The extent to which COVID-19 continues to impact our results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity and longevity of COVID-19 and its variants, the resurgence of COVID-19 in regions that have begun to recover from the initial impact of the pandemic, the impact of COVID-19 on economic activity, and the actions to contain its impact on public health and the global economy.

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., select countries in Europe, Japan, Singapore, and Hong Kong. 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 COVID-19 pandemic and foreign currency exchange rates. In addition, in the three months ended September 30, 2023, we believe our revenue growth was adversely impacted by certain changes to our prior authorization support, as well as lack of ENT surgeon capacity. While we believe the impact of the prior authorizations support has improved, the ENT surgeon capacity challenges remain. 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 recently, 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

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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.

Our gross margin in the second half of 2022 was lower than in previous periods primarily due to inventory obsolescence charges associated with product introductions, additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads, and higher costs of certain component parts which were impacted by inflation and supply chain issues. In 2023, we expect gross margins to be in the range of 83% to 85%.

Research and Development Expenses

Research and development 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. These expenses include employee compensation, 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 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 we also expect future economic benefit from the sales of the product candidate to be realized.

We expect research and development expenses to increase in the future as we develop next generation versions of our Inspire system 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 research and development 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

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support our growth and operations as a public company including finance 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, interest expense under our former credit facility, 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.

Results of Operations

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
	(in thousands, except percentages)
Revenue	$	153,302	$	109,188	$	44,114	40.4	%	$	432,291	$	269,956	$	162,335	60.1	%
Cost of goods sold	24,382		19,786		4,596		23.2	%	68,522		43,963		24,559		55.9	%
Gross profit	128,920		89,402		39,518		44.2	%	363,769		225,993		137,776		61.0	%
Gross margin	84.1%		81.9%						84.1%		83.7%
Operating expenses:
Research and development	29,144		20,993		8,151		38.8	%	85,484		47,397		38,087		80.4	%
Selling, general and administrative	113,247		85,603		27,644		32.3	%	327,853		225,853		102,000		45.2	%
Total operating expenses	142,391		106,596		35,795		33.6	%	413,337		273,250		140,087		51.3	%
Operating loss	(13,471)		(17,194)		3,723		(21.7)	%	(49,568)		(47,257)		(2,311)		4.9	%
Other (income) expense, net	(5,271)		(593)		(4,678)		789	%	(14,422)		286		(14,708)		(5,143)	%
Loss before income taxes	(8,200)		(16,601)		8,401		(50.6)	%	(35,146)		(47,543)		12,397		(26.1)	%
Income taxes	340		246		94		38.2	%	770		488		282		57.8	%
Net loss	$	(8,540)	$	(16,847)	$	8,307	(49.3)	%	$	(35,916)	$	(48,031)	$	12,115	(25.2)	%

Comparison of the Three Months Ended September 30, 2023 and 2022

Revenue

Revenue increased $44.1 million, or 40.4%, to $153.3 million for the three months ended September 30, 2023 compared to $109.2 million for the three months ended September 30, 2022. These results reflect an increase in sales of our Inspire system of $41.2 million in the U.S. and an increase of $2.9 million outside of the U.S. Overall

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revenue growth was primarily due to increased utilization, increased market penetration in existing territories, expansion into new territories, increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022, partially offset by the factors described under "Components of our Results of Operations - Revenue" above.

Revenue information by region is summarized as follows:

	Three Months Ended September 30,
	2023				2022				Change
	Amount		% of Revenue		Amount		% of Revenue		$		%
	(in thousands, except percentages)
United States	$	147,514	96.2	%	$	106,279	97.3	%	$	41,235	38.8	%
All other countries	5,788		3.8	%	2,909		2.7	%	2,879		99.0	%
Total revenue	$	153,302	100.0	%	$	109,188	100.0	%	$	44,114	40.4	%

Revenue generated in the U.S. was $147.5 million for the three months ended September 30, 2023, an increase of $41.2 million, or 38.8%, compared to the three months ended September 30, 2022. Overall revenue growth was primarily due to increased utilization, increased market penetration in existing territories, expansion into new territories, increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022.

Revenue generated outside of the U.S. was $5.8 million in the three months ended September 30, 2023, an increase of $2.9 million, or 99.0%, compared to the three months ended September 30, 2022. Revenue growth was primarily due to increased market penetration in existing territories, 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 $4.6 million, or 23.2%, to $24.4 million for the three months ended September 30, 2023 compared to $19.8 million for the three months ended September 30, 2022. The increase was primarily due to product costs associated with higher sales volume of our Inspire system and additional costs associated with an isolated production issue at a supplier which has since been resolved.

Gross margin increased to 84.1% for the three months ended September 30, 2023 from 81.9% for the three months ended September 30, 2022. Gross margin for the three months ended September 30, 2023 was higher primarily due to $2.8 million of inventory obsolescence charges taken during the third quarter of 2022 associated with new product introductions, which lowered the gross margin during that period.

Research and Development Expenses

Research and development expenses increased $8.2 million, or 38.8%, to $29.1 million for the three months ended September 30, 2023 compared to $21.0 million for the three months ended September 30, 2022. This change was primarily due to an increase of $3.9 million of compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense. The change also includes an increase of $4.6 million for incremental ongoing research and development costs, including ongoing development of the SleepSync™ platform, the next generation Inspire neurostimulator and physician programmer, and $1.7 million of prelaunch inventory related to our next generation Inspire neurostimulator. These increases were partially offset by a decrease of $0.3 million for clinical and regulatory submissions expenses.

Selling, General and Administrative Expenses

SG&A expenses increased $27.6 million, or 32.3%, to $113.2 million for the three months ended September 30, 2023 compared to $85.6 million for the three months ended September 30, 2022. The primary driver of this change

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was an increase of $16.3 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 $7.0 million, primarily consisting of direct-to-consumer initiatives, including new national TV advertisements, which began airing in the first quarter of 2023, and the expansion of our ACP call center. Other drivers of the change to SG&A expenses included an increase in travel expenses of $1.4 million and an increase in general corporate costs of $2.9 million primarily due to consulting fees, legal fees, bank fees, and rent expense.

Other (Income) Expense

Other (income) expense changed by $4.7 million, or 788.9%, to $5.3 million of income, net for the three months ended September 30, 2023 compared to $0.6 million of expense, net for the three months ended September 30, 2022. The change was primarily due to an increase of $4.1 million in interest and dividend income due to higher interest rates on our higher cash, cash equivalents, and investment balances, a decrease of $0.7 million in interest expense due to the August 2022 early termination of our credit facility, and 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 $0.3 million and $0.2 million for the three months ended September 30, 2023 and September 30, 2022, respectively.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Revenue

Revenue increased $162.3 million, or 60.1%, to $432.3 million for the nine months ended September 30, 2023 compared to $270.0 million for the nine months ended September 30, 2022. The increase was attributable to a $156.2 million increase in sales of our Inspire system in the U.S and an increase of $6.2 million outside of the U.S. Overall revenue growth was primarily due to increased market penetration in existing territories, expansion into new territories, and increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some customers in May 2022, partially offset by the factors described under "Components of our Results of Operations - Revenue" above.

Revenue information by region is summarized as follows:

	Nine Months Ended September 30,
	2023				2022				Change
	Amount		% of Revenue		Amount		% of Revenue		$		%
	(in thousands, except percentages)
United States	$	416,748	96.4	%	$	260,581	96.5	%	$	156,167	59.9	%
All other countries	15,543		3.6	%	9,375		3.5	%	6,168		65.8	%
Total revenue	$	432,291	100.0	%	$	269,956	100.0	%	$	162,335	60.1	%

Revenue generated in the U.S. was $416.7 million for the nine months ended September 30, 2023, an increase of $156.2 million, or 59.9%, compared to the nine months ended September 30, 2022. Revenue growth in the U.S. was primarily due to increased market penetration in existing territories, the expansion into new territories, and, we believe, increased physician and patient awareness of our Inspire system, and to a lesser extent, a list price increase that began to impact some U.S. customers in May 2022. As noted above, U.S. revenue during the three months ended March 31, 2022 was slightly negatively impacted by COVID-19.

Revenue generated outside of the U.S. was $15.5 million for the nine months ended September 30, 2023, an increase of $6.2 million, or 65.8%, compared to the nine months ended September 30, 2022. Revenue growth was primarily due to increased market penetration in existing territories, the expansion of our European sales

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representatives into new territories, increased sales in the Asia Pacific region, and, we believe, increased physician and patient awareness of our Inspire system. As noted above, revenue generated outside the U.S. during the three months ended March 31, 2022 was slightly negatively impacted by COVID-19.

Cost of Goods Sold and Gross Margin

Cost of goods sold increased $24.6 million, or 55.9%, to $68.5 million for the nine months ended September 30, 2023 compared to $44.0 million for the nine months ended September 30, 2022. The increase was primarily due to product costs associated with higher sales volume of our Inspire system, additional costs associated with the transition of manufacturing lines to produce our new silicone-based leads, and higher costs of certain component parts that were impacted by inflation and supply chain issues.

Gross margin increased to 84.1% for the nine months ended September 30, 2023 from 83.7% for the nine months ended September 30, 2022. Gross margin for the nine months ended September 30, 2023 was higher primarily due to $2.8 million of inventory obsolescence charges taken during the third quarter of 2022 associated with new product introductions, which lowered the gross margin during that period. Gross margin for the nine months ended September 30, 2023 was negatively impacted by additional manufacturing costs of sensors and lower yields prior to process enhancements, additional costs associated with an isolated production issue at a supplier, and higher costs of certain component parts, partially offset by the price increase that began taking effect for some U.S. customers in May 2022.

Research and Development Expenses

Research and development expenses increased $38.1 million, or 80.4%, to $85.5 million for the nine months ended September 30, 2023 compared to $47.4 million for the nine months ended September 30, 2022. This change was primarily due to an increase of $21.0 million of incremental ongoing research and development costs, including ongoing development of the SleepSync™ platform, the next generation Inspire neurostimulator and physician programmer. The change also includes an increase of $17.1 million of compensation and employee-related expenses, mainly as a result of increased headcount and stock-based compensation expense, and $4.7 million of prelaunch inventory related to our next generation Inspire neurostimulator.

Selling, General and Administrative Expenses

SG&A expenses increased $102.0 million, or 45.2%, to $327.9 million for the nine months ended September 30, 2023 compared to $225.9 million for the nine months ended September 30, 2022. The primary driver of this change was an increase of $59.1 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 $28.5 million, primarily consisting of direct-to-consumer initiatives, including new national TV advertisements, which began airing in March 2023, and the expansion of our Advisor Care Program call center. Other drivers of the change to SG&A expenses included an increase in travel expenses of $6.3 million and an increase in general corporate costs of $8.1 million primarily due to bank fees, consulting fees, legal fees, computer equipment and software, and office rent expense.

Other (Income) Expense, Net

Other (income) expense, net changed by $14.7 million, to $14.4 million of income, net for the nine months ended September 30, 2023 compared to $0.3 million of expense for the nine months ended September 30, 2022. This change was primarily due to an increase of $13.0 million in interest and dividend income due to higher interest rates on our higher cash, cash equivalents and investment balances, somewhat offset by a decrease of $1.7 million in interest expense due to the early termination of our credit facility.

Income Taxes

We recorded a provision for income taxes of $0.8 million and $0.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

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Liquidity and Capital Resources

As of September 30, 2023, we had cash, cash equivalents, and available-for-sale debt securities of $467.2 million, an increase of $15.8 million from $451.4 million as of December 31, 2022. Working capital totaled $499.6 million as of September 30, 2023, an increase of $30.8 million from December 31, 2022. We define working capital as current assets less current liabilities. The increase in working capital was primarily due to the following factors:

•an increase of $124.5 million in short-term investments;

•an increase of $14.2 million in inventory balances which increased as supply chain issues ease;

•an increase of $10.2 million in accounts receivable due to higher sales which occurred during the third quarter of 2023;

•a decrease of $4.4 million in accrued expenses which decreased primarily due to the payment of year-end bonuses and commissions; and

•an increase of $2.3 million in prepaid expense and other current assets which increased primarily due to prepaid insurance and other prepaid expenses.

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

•a $111.7 million decrease in cash and cash equivalents, primarily due to the purchase of short- and long-term available for sale investments, offset somewhat by sales of the Inspire system and proceeds from the exercise of stock options; and

•a $13.2 million increase in accounts payable, generally due to our business volume and headcount growth from the prior year.

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. In August 2022, we completed a follow-on offering that included our offer and sale of 1,150,000 shares of common stock at a public offering price of $215.00 per share. We received net proceeds of approximately $243.8 million after deducting underwriting discounts, commissions, and offering expenses. During the quarter ended September 30, 2022, we repaid all amounts outstanding under our former credit facility. See Note 4 in this Quarterly Report on Form 10-Q for additional information on our previous credit facility.

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 September 30, 2023, we had $284.4 million in money market funds, $99.3 million in U.S. government securities, and $40.9 million in corporate debt securities, certificates of deposit, and asset-asset-backed securities. See Note 2 in this Quarterly Report on Form 10-Q for additional information on our investments.

In the nine months ended September 30, 2023, our R&D and SG&A expenditures increased significantly over the prior year levels, and we anticipate further increases during the remainder of 2023 and 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 2023 and 2024, primarily related to the ongoing development of the SleepSync™ platform and the next generation Inspire neurostimulator.

We spent $15.6 million on purchases of property and equipment in the nine months ended September 30, 2023, mainly on testing systems and production equipment for our next generation Inspire system as well as our SleepSync™ platform. We anticipate further capital expenditures in 2023 and 2024, primarily for additional production equipment and, to a lesser extent, leasehold improvements on our corporate office buildings.

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As of September 30, 2023, 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 $467.2 million as of September 30, 2023, together with cash flow from operations, will provide liquidity sufficient to meet our cash needs and fund 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 Hong Kong and 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 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:

	Nine Months Ended
	September 30,
	2023		2022
	(in thousands)
Net cash provided by (used in):
Operating activities	$	7,386	$	(7,700)
Investing activities	(143,099)		(16,646)
Financing activities	24,065		227,788
Effect of exchange rate on cash	(47)		(101)
Net (decrease) increase in cash and cash equivalents	$	(111,695)	$	203,341

Operating Activities

The net cash provided by operating activities was $7.4 million for the nine months ended September 30, 2023 and consisted of a net loss of $35.9 million, non-cash charges of $64.2 million, and a decrease in net operating assets of $20.9 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 a greater number of employees at a higher fair market value. The remainder of the non-cash charges included depreciation and amortization expense, non-cash lease expense, stock issued for services rendered, and other, net. Operating assets include inventories, which increased as supply chain constraints eased, and prepaid expenses and other current assets, which increased primarily due to prepaid insurance and other prepaid expenses. Operating assets also include accounts receivable, which increased due to higher sales volume. 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 $7.7 million for the nine months ended September 30, 2022 and consisted of a net loss of $48.0 million, non-cash charges of $38.7 million, and a decrease in net operating assets of $1.6 million. The non-cash charges consisted primarily of stock-based compensation, which increased mainly as a result of granting more stock options and restricted stock to a greater number of employees at a higher fair market

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value, as well as the introduction of performance stock unit grants. The remainder of the non-cash charges included depreciation and amortization, non-cash lease expense, stock issued for services rendered, and other, net. Operating assets include accounts receivable which increased due to higher sales, and prepaid expenses and other current assets which increased primarily due to prepaid insurance. Operating assets also include inventories, which decreased primarily due to sales demand. 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 increased primarily due to compensation and personnel-related costs and the accrual of R&D and inventory related costs.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 was $143.1 million and consisted primarily of the purchase of investments of $137.3 million, the purchases of property and equipment of $15.6 million, and the purchase of strategic investments of $0.3 million, partially offset by the proceeds from sales or maturities of investments of $10.0 million.

Net cash used in investing activities for the nine months ended September 30, 2022 was $16.6 million and consisted of purchases of property and equipment of $6.1 million and the purchase of strategic investments of $10.5 million.

Financing Activities

Net cash provided by financing activities was $24.1 million for the nine months ended September 30, 2023 and consisted of $24.5 million in proceeds from the exercise of stock options and $2.8 million in proceeds from the issuance of common stock from our ESPP, somewhat offset by $3.2 million of taxes paid on net share settlement of RSUs.

Net cash provided by financing activities was $227.8 million for the nine months ended September 30, 2022 and consisted primarily of proceeds from the offering of common stock of $243.8 million, as well as proceeds from the exercise of stock options of $6.4 million, and proceeds from the issuance of common stock from our ESPP of $2.1 million, partially offset by $24.5 million in payments on our long-term debt obligation, which we prepaid in August 2022, and less than $0.1 million of taxes paid to net share settlement of RSUs.

Contractual Obligations and Commitments

There have been no material changes to our short-term and long-term anticipated cash requirements under contractual obligations, other than as described in Note 3 in this Quarterly Report on Form 10-Q, from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Other than the addition of prelaunch inventory described in Note 2 in this Quarterly Report on Form 10-Q and below, no material changes were made to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Prelaunch inventory

We capitalize prelaunch inventory prior to receiving regulatory approval if regulatory approval and subsequent commercialization of a product is probable and we also expect future economic benefit from the sales of the product to be realized. Prior to this, we expense prelaunch inventory as research and development expense in the period incurred. For prelaunch inventory that is capitalized, we consider a number of specific facts and circumstances, including the product’s historical shelf life, the product's current status in the development and regulatory approval

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process, results from related clinical trials, results from meetings with relevant regulatory agencies prior to the filing of regulatory applications, potential obstacles to the approval process, historical experience, viability of commercialization and market trends. If either the regulatory approval or market acceptance post-approval do not occur at all or on a timely basis prior to the inventory shelf-life expiration, we may be required to write-off some or all prelaunch inventory, which could affect our financial condition and financial results.

Recent Accounting Pronouncements

We have reviewed all recently issued standards and have determined that such standards will not have a significant impact on our consolidated financial statements or do not otherwise apply to our operations.

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% increase in interest rates during the nine months ended September 30, 2023 would have impacted interest income on our consolidated financial statements by approximately $16.2 million.

Credit Risk, Foreign Currency Risk, and Inflation Risk

For market risks related to changes in credit, foreign currency, and inflation, reference is made to Item 7A “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Our exposure to these risks has not materially changed from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, other than as described below.

As of September 30, 2023 and December 31, 2022, 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 on Form 10-Q. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and

37

procedures were effective, at the reasonable assurance level, as of the end of the period covered by this Quarterly Report on Form 10-Q.

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 September 30, 2023 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 course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not party to any material legal proceedings.

Item 1A.    Risk Factors.

For a discussion of our potential risks and uncertainties, see the information in "Part I, Item IA. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, other than the following:

We may not receive the necessary approvals or certifications for our future products or expanded indications, and failure to timely obtain necessary approvals or certifications for our future products or expanded indications would adversely affect our ability to grow our business.

An element of our strategy is to continue to upgrade our products, add new features and expand the indications and uses for our current products. In the U.S., before we can market a new medical device, or a new use of, or claim for, or significant modification to, an existing product, we must first receive PMA from the FDA. In the process of obtaining PMA, which was required for our Inspire system, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical study, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.

Modifications to products that are approved through a PMA application generally require FDA approval. PMA can be expensive, lengthy and uncertain. The process of obtaining a PMA is costly and more uncertain than the 510(k) clearance process used for lower risk devices. Despite the time, effort and cost, a device may not be approved by the FDA. Any delay or failure to obtain necessary regulatory approvals could harm our business. Furthermore, even if we are granted regulatory approval, it may include significant limitations on the indicated uses for the device, which may limit the market for the device.

The FDA and other regulatory authorities or notified bodies outside the U.S. can delay, limit or deny approval or certification of a device for many reasons, including:

•our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory entity or notified body that our products are safe or effective for their intended uses;

•the disagreement of the FDA or the applicable foreign regulatory authority or notified body with the design or implementation of our clinical studies or the interpretation of data from pre-clinical studies or clinical studies;

•serious and unexpected adverse device effects experienced by participants in our clinical studies;

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•the data from our pre-clinical studies and clinical studies may be insufficient to support approval or certification, where required;

•our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;

•the manufacturing process or facilities we use may not meet applicable requirements; and

•the potential for approval policies or regulations of the FDA or applicable foreign regulatory authorities to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance, approval or certification.

In addition, the FDA or other regulatory authorities or notified bodies outside the U.S. may change their approval or certification policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or certification of our future products under development or impact our ability to modify our currently cleared or certified products on a timely basis. Such policy or regulatory changes could impose additional requirements or time delays upon us that could delay our ability to obtain new approvals or certifications, increase the costs of compliance, adversely impact our revenues or inventory forecasting or restrict our ability to maintain our current approval or certification.

Subject to the transitional provisions, in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces EU Medical Devices Directive and the AIMDD. Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU. To demonstrate compliance with the general safety and performance requirements, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification. Except for low risk medical devices (Class I), where the manufacturer can self-assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body. The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU. If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU. The aforementioned EU rules are generally applicable in the EEA, and non-compliance with the above requirements would also prevent us from selling our products in these three countries.

Once devices are certified under the EU Medical Devices Regulation, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked. The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity with the EU Medical Devices Regulation. If the assessment is favorable, the notified body will issue a new certificate of conformity or an addendum to the existing certificate attesting compliance with the general safety and performance requirements and quality system requirements laid down in the Annexes to the EU Medical Devices Regulation. The notified body may disagree with our proposed changes or take more time than anticipated to review and assess applications resulting in regulatory delays (See Part I., "Item 1A. Risk Factors — Risks Related to Government Regulation” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for additional information regarding disruptions faced by notified bodies). As a consequence, product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business. For example, we applied for certification of silicone-based leads under the EU Medical Devices Regulation in December 2021 in order to replace the polyurethane-based leads, two components of the Inspire system currently used only in the European market. However, designated notified bodies currently have severe capacity constraints, and review times have lengthened significantly, including for our certification application. We forecasted our polyurethane-based leads inventory based on our notified body’s original lead-time for certification of the silicone-based leads, and we now expect to obtain certification of our silicone-based leads in the first quarter of 2024. Because of these

39

unanticipated delays, we began experiencing an inventory issue related to our polyurethane-based stimulation leads during the third quarter of 2023. In the interim, we received a derogation from the Dutch national competent authority allowing us to place the silicone-based leads on the market until April 1, 2024 or until we receive certification under the EU Medical Devices Regulation, whichever occurs first. We are also pursuing similar derogations in several other EU member states. However, such derogations are only granted at the national level, and we cannot be certain that national competent authorities of the other EU member states will grant a derogation similar to the Dutch authority. Until we obtain certification under the EU Medical Devices Regulation or these derogations are received, we may only sell our polyurethane-based leads in the EU where the stimulation lead is in low supply. During the fourth quarter of 2023 and possibly extending into early 2024, we expect that the delay in certification and the shortage of polyurethane-based stimulation leads may cause delays to implant procedures which may adversely affect our business in the EU, including a reduction in our European and, thereby, our consolidated revenue.

Item 2.    Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

None.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

(a) None.

(b) None.

(c) On August 10, 2023, Philip J. Ebeling, Chief Operating Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 21,600 shares of the Company’s common stock until August 9, 2024.

On August 15, 2023, Randall Ban, Chief Commercialization Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to16,339 shares of the Company’s common stock until February 22, 2024.

On August 17, 2023, Steven Jandrich, Vice President, Human Resources, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 10,000 shares of the Company’s common stock until March 29, 2024.

On August 28, 2023, Timothy P. Herbert, Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 40,000 shares of the Company’s common stock until June 30, 2024. This trading arrangement was adopted by the Timothy P. Herbert 2018 Family Continuation Trust, of which Mr. Herbert is a trustee.

On August 29, 2023, Georgia Garinois-Melenikiotou, Director, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 3,225 shares of the Company’s common stock until August 29, 2024.

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On August 31, 2023, Richard J. Buchholz, Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 15,000 shares of the Company’s common stock until August 30, 2024.

There were no other Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements adopted, modified or terminated by the Company’s directors and executive officers during the quarter ended September 30, 2023.

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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	Employment Agreement between the Company and Charisse Sparks dated July 27, 2023					*
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:	November 7, 2023	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert
			President, Chief Executive Officer and Director
			(principal executive officer)
Date:	November 7, 2023	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

US.358543369.01 Exhibit 10.1 EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of July 27, 2023 (the “Effective Date”), by and between Inspire Medical Systems, Inc. (“Inspire” or the “Company”), a Delaware corporation, and Charisse Y. Sparks, M.D. (“Executive”). WHEREAS, Executive currently serves as a member of the Company’s Board of Directors (the “Board”); WHEREAS, the Company desires to employ Executive as its Chief Medical Officer and to enter into this Agreement to set forth the terms and conditions of such employment; WHEREAS, Executive desires to accept such employment pursuant to the terms and conditions set forth herein; and WHEREAS, as a condition to Executive’s acceptance of such employment, Executive agrees that she shall resign from the Board, which resignation shall be effective simultaneous with the commencement of her employment under this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations of this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Employment; Resignation from Board. Subject to the terms and conditions of this Agreement, Inspire agrees to employ Executive, and Executive agrees to accept employment with Inspire, as the Company’s Chief Medical Officer, reporting to the Company’s President and Chief Executive Officer. Except as otherwise specifically provided in this Agreement, it is understood that Executive’s employment with Inspire will be subject to the Company’s policies and such other terms (as they may be amended from time to time by Inspire) as may be adopted by the Board, including without limitation, Inspire’s employee handbook and other policies in effect for salaried employees of Inspire. Executive’s employment with the Company shall commence immediately upon the signing of this Agreement, and simultaneously therewith, Executive shall, and hereby does, resign from the Board and from any and all committees of the Board on which Executive serves (such that there is no lapse in service to the Company as she will simultaneously commence employment after such resignation and any outstanding stock awards previously granted to Executive during her service as a member of the Board will continue to vest in accordance with the terms and conditions set forth in the applicable agreement governing each such award). 2. Duties. The services of Executive shall be exclusive to Inspire, except as otherwise agreed to in writing by Inspire. Executive shall assume primary responsibility for and perform the duties of the Executive’s position and such other duties as may be mutually agreed upon by Executive and the Company’s President and Chief Executive Officer, shall exert Executive’s energy and full business time to the prosecution of Executive’s duties, and shall promptly and faithfully perform all these duties which pertain to that employment. Executive

2 will perform Executive’s obligations in a competent and professional manner, consistent with the expectations of Inspire’s Board and its President and Chief Executive Officer. Executive may serve on outside boards of directors or committees of public or private organizations if the outside activities are first disclosed to and approved in writing by Inspire’s Board or its President and Chief Executive Officer. That approval will not be granted if the outside activities are deemed by the Board or Inspire’s President and Chief Executive Officer to conflict in any way with the provisions of this Agreement, to impair Executive’s ability to perform Executive’s duties under this Agreement, or to otherwise conflict in any way with business interests of Inspire. Notwithstanding the foregoing, the Executive may participate in the activities set forth on Exhibit A and may without advance approval participate in charitable activities (including, but not limited to, service on the boards of charitable or nonprofit organizations), and engage in personal investment activities, in each case, to the extent that such activities, individually or in the aggregate, do not materially interfere with the performance of the Executive’s duties under this Agreement, create a conflict of interest or violate any provision of this Agreement. 3. Term of Employment. This Agreement is not intended to establish any minimum or maximum period for Executive’s employment. Executive and Inspire have an “at-will” employment relationship, which means that either party has the right to terminate the employment relationship at any time and for any reason, with or without Cause. The reason for and timing of the termination, as set forth in Paragraph 5, will determine the amount of post- termination payments and benefits, if any, as set forth in Paragraph 6. 4. Compensation, Reimbursement and Benefits. As compensation for all of Executive’s services under this Agreement, the Company agrees to provide Executive the following compensation, reimbursements and benefits: a. Base Salary. The Company will pay Executive a base salary, payable in accordance with Inspire’s standard payroll practices. The annualized Base Salary shall be in the gross amount of $450,000. The Base Salary shall be subject to annual performance review and possible adjustments as determined by Inspire’s Compensation Committee or Board in its discretion (as increased, from time to time, the “Base Salary”). b. Incentive Awards. As additional compensation, Executive will be eligible to receive discretionary annual bonuses and/or long term incentive compensation (“Incentive Awards”) pursuant to the terms and conditions of Inspire’s management incentive program (the “MIP”) and/or Inspire’s long term incentive plan (jointly, “Incentive Plans”) which may be adopted, amended, supplemented, terminated and/or replaced by Inspire from time to time. With reference to the Incentive Plans, the parties understand as follows: i. Annual Bonus Compensation. For each fiscal year completed during the Executive’s employment under this Agreement, Executive will be eligible to earn an annual bonus (each, an “Annual Bonus”) under the MIP, or such other successor plan or program as may be in effect from time to time. The Executive’s target Annual Bonus shall be 50% of the Base Salary (the “Target Bonus Amount”), provided that Executive and Inspire have achieved certain performance goals and objectives. Any Annual Bonus for the Executive’s initial year of employment with the Company shall be prorated based on the Effective Date. Except as

3 otherwise set forth in Paragraph 6(c), to be eligible for an Incentive Award, the employee must be employed on the last day of the calendar year. ii. Initial Equity Awards. On the last trading date in the month of following the commencement of Executive’s employment with the Company (the “Grant Date”), Executive will be granted the following stock awards: (A) an option to acquire shares of the Company’s common stock (the “Option”) having a fair value of $800,000 (determined using the Company’s black- scholes valuation methodology). The Option (i) will have an exercise price equal to the fair market value of the Company’s common stock on the Grant Date, (ii) will vest over four years, with 25% of the Option vesting on the first anniversary of the Grant Date and the remaining 75% vesting on a pro rata monthly basis thereafter, subject to Executive’s continuous employment through such dates, and (iii) shall be subject to the terms and conditions of the Company’s 2018 Incentive Award Plan (the “2018 Plan”) and the applicable standard form of award agreement. (B) an award of performance stock units (“PSUs”) under the Company’s fiscal 2023-25 performance stock unit program (the “2023 PSP”), the target number of shares provided in such award having a value equal to $800,000 (based on the fair market value of the Company’s common stock on the Grant Date). Vesting under the 2023 PSP will occur following the completion of the three-year period ending on December 31, 2025, and will be based on the Company’s achievement during such three-year period of certain performance objectives that were approved by the Board’s Organization and Compensation Committee. The number of shares that may vest under the plan, if any, can range from 50% to 200% of the target number of shares. iii. General Terms. (A) Executive’s eligibility to receive Incentive Awards will be determined by the Board or such other committee as may have responsibility for making that determination, in its sole discretion. (B) The Initial Equity Awards set forth in Section 4(b)(ii) shall be subject to change of control provisions as set forth in the applicable form of award agreement for each such award. (C) The Incentive Plans are not necessarily all-inclusive because circumstances which Inspire has not anticipated may arise. Inspire may interpret or vary from the Incentive Plans if, in its opinion, the circumstances warrant it. Further, Executive’s eligibility to receive Incentive Awards may be affected in the event Inspire has determined that such Incentive Awards would be in violation of law or reasonably create an adverse effect on Inspire or its obligations or agreements including, without limitation, leaving Inspire with insufficient liquidity (including adequate reserves) to carry on its business and pay its debt in the ordinary course. (D) Inspire reserves the right to make any changes at any time to the Incentive Plans by adding to, deleting from or otherwise amending any portion of them,

4 with or without notice to Executive, provided, however, that if Executive has been awarded non- cash compensation pursuant to such plans, then Executive shall receive notice of any changes to the plan as may be required by applicable law, and provided, further, that any such changes are applicable to participants in the Incentive Plans generally and not specific to Executive. (E) Any questions regarding the computation of Incentive Awards under the Incentive Plans will be conclusively determined by the Incentive Plan administrator, as defined therein, pursuant to the terms and conditions of the Incentive Plans. c. Expenses. Inspire will reimburse Executive for any and all ordinary, necessary and reasonable business expenses that Executive incurs in connection with the performance of Executive’s duties under this Agreement, including entertainment, telephone, travel and miscellaneous expenses. Executive must obtain proper approval for such expenses pursuant to the Company’s policies and procedures and Executive must provide the Company with documentation for such expenses in a form sufficient to sustain Inspire’s deduction for such expenses under the Internal Revenue Code of 1986, as amended (the “Code”). d. Time Off. Executive will be entitled to time off with or without pay in accordance with Inspire’s policies in effect at any particular time. e. Principal Work Location. During the term of Executive’s employment, Executive’s “Principal Work Location” will be defined as the Company’s Corporate Office Headquarters located in the Golden Valley, Minneapolis. Executive will be allowed to work remotely from Executive’s primary residence or in other locations as agreed to by the Company’s Chief Executive Officer; provided, that Executive will be expected to be present in the Corporate Office Headquarters as requested by the CEO or the Board to meet business needs, but in no event, less than one time per month. Executive hereby acknowledges and agrees that such remote work is available based upon business needs and conditions and is not guaranteed. f. Health, Disability and Life Insurance, and Other Executive Benefit Plans. Inspire will provide Executive with the same health, disability, and life insurance coverage provided generally to other full-time salaried employees of Inspire, and with other employee benefit plans which are presently existing or which may be established in the future by Inspire for its full-time salaried employees, subject to the terms and conditions of the applicable benefit plans. g. Indemnification. Inspire will defend, indemnify and hold Executive harmless from costs, expenses, damages and other liability incurred by Executive as a result of performing services to Inspire, subject to the limitations and other terms and conditions of applicable Delaware statutes and Inspire’s Articles of Incorporation or Bylaws. h. Changes in Benefit Plans. It is understood that no references in this Agreement to particular employee benefit plans established or maintained by Inspire are intended to change the terms and conditions of these plans or to preclude Inspire from amending or terminating any such benefit plans.

5 i. Withholding; Taxes. Inspire may withhold from any compensation, reimbursements and benefits payable to Executive all federal, state, city and other taxes as shall be required pursuant to any law or governmental regulation or ruling, as well as other standard withholdings and deductions. Executive recognizes that some of the payments and some of the benefits which Executive receives under this Agreement will constitute compensation, and will be fully taxable to Executive. Executive agrees to properly report such payments and benefits on Executive’s applicable income tax returns and to pay all appropriate taxes. 5. Termination. Executive’s employment may be terminated at any time as follows: a. Death. Executive’s employment shall automatically terminate upon Executive’s death. b. Disability. Either party may terminate Executive’s employment at any time, upon written notice to the other party if Executive sustains a disability which precludes Executive from performing the essential functions of Executive’s job, with or without reasonable accommodations, as defined by applicable state and federal disability laws. Executive shall be presumed to have such a disability for purposes of this Agreement if Executive qualifies, because of illness or incapacity, to begin receiving disability income insurance payments under any long term disability income insurance policy that Inspire maintains for the benefit of Executive. If Executive does not qualify for such payments, Executive shall nevertheless be presumed to have such a disability if Executive is substantially incapable of performing the essential functions of Executive’s job for a period of more than twenty six (26) consecutive weeks, with or without a reasonable accommodation, or for shorter non-consecutive periods aggregating thirty six (36) weeks in any twelve (12) month period. c. With Cause. Inspire may terminate Executive’s employment at any time, with “Cause”, upon written notice to Executive. “Cause” shall be defined as: i. Executive’s material breach of any of Executive’s obligations under this Agreement, or Executive’s repeated failure or refusal to perform or observe Executive’s duties, responsibilities and obligations as an Executive of Inspire, for reasons other than disability; ii. Any material dishonesty or other breach of the duty of loyalty of Executive affecting Inspire or any customer, vendor or employee of Inspire; iii. Use of alcohol or other drugs in a manner which affects the performance of Executive’s duties, responsibilities and obligations as an employee of Inspire; iv. Conviction of, or a plea of guilty or nolo contendere to, a charge of commission of a felony or of any crime involving misrepresentation, moral turpitude or fraud; v. Commission by Executive of any other willful or intentional act which injures the reputation, business or business relationships of Inspire; or

6 vi. The existence of any court order or settlement agreement prohibiting Executive’s continued employment with Inspire. A matter of the type described in this Paragraph 5(c) shall be “material” if such matter, alone or together with other such matters, is material. d. Without Cause. Inspire may terminate Executive’s employment at any time, without Cause, upon one (1) month’s written notice to Executive. Inspire may, in its sole discretion, opt not to have Executive provide active employment services during some or all of the notice period, and place Executive on a paid leave of absence for some or all of the notice period. e. Voluntary Resignation. Executive may, upon two (2) weeks’ written notice to Inspire, terminate Executive’s employment at any time for no reason. In addition, Executive may terminate Executive’s employment for Good Reason. For purposes of this Agreement, “Good Reason” shall mean: i. A material reduction, without Executive’s consent, in Executive’s duties or responsibilities; ii. A material reduction, without Executive’s consent, of the Base Salary, unless such reduction is part of an overall reduction in salary for executive employees and Executive’s reduction is proportionate to the overall reduction in salary; iii. The Company’s moving Executive’s place of employment, without Executive’s consent, more than fifty (50) miles from the place of Executive’s employment prior to such move, although business travel shall not be deemed to be a move of Executive’s place of employment; or iv. The Company’s material breach of this Agreement. Notwithstanding the foregoing, Executive may only terminate Executive’s employment for Good Reason following the occurrence of one or more of the foregoing conditions, subject to Executive first providing written notice of Executive’s claimed Good Reason to the Company within ninety (90) days after the initial existence of such condition and the Company failing to cure the basis for such claimed Good Reason within thirty (30) days following such notice. 6. Payments and Benefits Upon Termination. Upon the termination of Executive’s employment, Executive shall only be entitled to the following payments and benefits: a. Disability; Death. If Executive’s employment is terminated due to the disability or death of Executive, regardless of the date of termination, Executive or Executive’s estate or heirs, as appropriate, shall be paid (i) any portion of Base Salary through the date of termination not theretofore paid; (ii) any cash bonus either accrued in accordance with the terms of the relevant plan or previously awarded but not yet paid to Executive at the time of Executive’s death or disability; (iii) any benefits payable under any disability or life insurance policy maintained by Inspire for the benefit of Executive at the time of the termination of employment,

7 subject to the terms and conditions of such policies; (iv) any unpaid expense reimbursement; and (v) Executive’s or Executive’s estate or heirs, as appropriate, other vested benefits, if any, under any of Inspire’s Incentive Plans or any of Inspire’s other employee benefit plans (e.g., 401(k) plan), subject to the terms and conditions of those plans. b. Termination by Inspire For Cause; Voluntary Resignation. If Inspire terminates Executive’s employment for Cause, or if Executive resigns without Good Reason, regardless of the date of termination, Executive shall be paid (i) any portion of Base Salary through the date of termination not theretofore paid; (ii) any unpaid expense reimbursement; and (iii) Executive’s other vested benefits, if any, under any of Inspire’s Incentive Plans or any of Inspire’s other employee benefit plans (e.g., 401(k) plan), subject to the terms and conditions of those plans. c. Termination by Inspire Without Cause. In the event of any termination of Executive’s employment by the Company without Cause under Section 5(d) or by Executive for Good Reason under 5(e), regardless of the date of termination, Executive shall be paid the same payments and benefits as set forth in Paragraph 6(a) above. In addition, Inspire shall, subject to Paragraph 10 and subject to Executive’s execution and non-revocation of a release of claims, to the full extent permitted by law, in a form reasonably satisfactory to Inspire in accordance with Paragraph 10(c) (the “Release”), which assures, among other things, that Executive will not commence any type of litigation or assert other claims as a result of the termination (except to enforce Executive’s rights under this Agreement): i. Pay to the Executive an amount equal to the sum of (A) nine (9) months of the Base Salary as of the date of termination and (B) a prorated portion of the Target Bonus Amount based on the ratio of the number of days during the period commencing on the first day of the fiscal year and ending on the date of termination to 365, in substantially equal installments during the period beginning on the date of termination and ending on the nine (9)- month anniversary of the date of termination in accordance with the Company’s regular payroll practice as of the date of termination; provided that, notwithstanding anything to the contrary in this Paragraph 6(c)(i), if such termination of employment occurs within the twelve (12)-month period immediately following a Change of Control (as defined below) (such period, the “COC Period”), then, in lieu of the foregoing payments set forth in this Paragraph 6(c)(i), Inspire shall pay to the Executive the sum of (A) twelve (12) months of the Base Salary and (B) the Target Bonus Amount, in substantially equal installments during the period beginning on the date of termination and ending on the (12) twelve-month anniversary of the date of termination in accordance with the Company’s regular payroll practice as of the date of termination; ii. Continue to provide, subject to the Executive’s valid election to continue healthcare coverage under COBRA, the Executive and the Executive’s eligible dependents with payment of premiums for any COBRA benefits during the period commencing on the date of termination and ending on the nine (9)-month anniversary of the date of termination (if such termination of employment occurs within the COC Period, the twelve (12)- month anniversary of the date of termination). iii. In the event that such termination of employment occurs within the COC Period, cause each of Executive’s equity awards that are granted on or following the

8 Effective Date shall immediately become fully vested. For the avoidance of doubt, the foregoing shall not apply to any of Executive’s equity awards that were granted prior to the Effective Date. iv. Change of Control Definition. For purposes of this Agreement, “Change of Control” means the occurrence of any of the following: (1) a sale by shareholders of the Company of a substantial portion of their stock in the Company, or a merger, reorganization or consolidation, whereby the Company’s equity holders existing immediately prior to such sale, merger, reorganization or consolidation do not, immediately after consummation of such sale, reorganization, merger or consolidation, own more than fifty percent (50%) of the combined voting power of the surviving entity’s then outstanding voting securities entitled to vote generally in the election of directors, but only if such event results in a change in Board composition such that the directors immediately preceding such events do not comprise a majority of the Board following such event; or (2) the sale or other disposition of all or substantially all of the Company’s assets to an entity in which the Company, any subsidiary of the Company, or the Company’s equity holders existing immediately prior to such sale beneficially own less than fifty percent (50%) of the combined voting power of such acquiring entity’s then outstanding voting securities entitled to vote generally in the election of directors but only if such event results in a change in Board composition such that the directors immediately preceding such events do not comprise a majority of the Board following such event. 7. Business Protections. Inspire has many confidential and proprietary business interests and other information relating to its products, services and customers, which it needs to adequately protect. For this reason, its willingness to enter into this Agreement is contingent upon Executive’s acceptance of the covenants set forth in Paragraph 8 below. Executive understands that the business protections in Paragraph 8 will apply throughout Executive’s employment, and will continue to apply thereafter even if Executive’s employment is terminated under Paragraph 5 of this Agreement, regardless of the reason for or timing of the termination. 8. Restrictive Covenants. a. Restrictions on Competition. Executive agrees that while employed by Inspire, Executive will not be employed by or otherwise perform services for an organization which is engaged in the research and development, marketing, or distribution of a product or treatment which is the same as or which competes with any product or treatment offered or being developed by Inspire during, or as of the date of termination of, Executive’s employment with Inspire. b. Prohibition on Solicitation of Inspire Employees. Executive agrees that at all times while employed by Inspire, and for twelve (12) months thereafter, Executive will not solicit, cause to be solicited, or participate in or promote the solicitation of any person to terminate that person’s employment with Inspire or to breach that person’s employment agreement with Inspire. c. Prohibition on Interference With Relationships. Executive agrees that at all times while employed by Inspire, and for twelve (12) months thereafter, Executive will not (A) call on or solicit any customers of Inspire, including but not limited to any customers of

9 Inspire with which Executive had contact during the then-prior twenty-four (24) month period or about which Executive had Confidential Information, for the purpose of marketing or selling any products or services competitive with or otherwise substantially similar to the then-current businesses of Inspire, or for the purpose of diverting any business away from Inspire; (B) persuade or attempt to persuade, or induce or attempt to induce, any actual or prospective customer, client, vendor, service provider, supplier, contractor or any other person having business dealings with Inspire to cease doing business or otherwise transacting business with Inspire or to reduce the amount of business it conducts or will conduct with Inspire; (C) call on or solicit any suppliers or vendors of Inspire in any manner adverse to Inspire’s business interests; (D) accept business from any actual or prospective customer, client, vendor, service provider, supplier, contractor or any other person having business dealings with Inspire; or (E) otherwise disrupt, damage or interfere in any manner with the relationship between Inspire and any of their actual or prospective customers, clients, vendors, service providers, or suppliers. d. Post-Employment Disclosure. In the event Executive’s employment with Inspire terminates, Executive agrees that during the term of the restrictions described in Paragraphs 8(b) and 8(c) above, Executive will promptly inform any new employer of Executive’s restrictions under this Agreement. In addition, Executive agrees that during the term of the restrictions described in Paragraphs 8(b) and 8(c) above Executive will respond within ten (10) days to any written request from Inspire for further information concerning Executive’s work activities sufficient to provide Inspire with assurances that Executive is not violating any of the obligations Executive has undertaken in this Agreement. e. Prohibition on Disclosure of Confidential Information. Executive shall hold the “Confidential Information”, as defined in Paragraph 8(f), including trade secrets and/or data, in the strictest confidence and will never, without prior written consent of the Company, directly or indirectly disclose, assign, transfer, convey, communicate to or use for Executive’s own or another’s benefit, or directly or indirectly disclose, assign, transfer, convey, communicate to or use by a competitor of the Company or any other person or entity, including, but not limited to, the press, other professionals, corporations, partnerships or the public, at any time during Executive’s employment with the Company or at any time after Executive’s termination of employment with the Company, regardless of the reason for the Executive’s termination, whether voluntary or involuntary. Executive further promises and agrees that she will faithfully abide by any rules, policies, practices or procedures existing or which may be established by the Company for insuring the confidentiality of the Confidential Information, including, but not limited to, rules, policies, practices or procedures: i. Limiting access to authorized personnel; ii. Limiting copying of any writing, data or recording; iii. Requiring storage of property, documents or data in secure facilities provided by the Company and limiting safe or vault lock combinations or keys to authorized personnel; and/or iv. Checkout and return or other procedures promulgated by the Company from time to time.

10 The Executive acknowledges that the Company has provided the Executive with the following notice of immunity rights in compliance with the requirements of the Defend Trade Secrets Act of 2016: (A) the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of Confidential Information that is made in confidence to a federal, state or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, (B) the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of Confidential Information that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and (C) if the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Confidential Information to the Executive’s attorney and use the Confidential Information in the court proceeding, if the Executive files any document containing the Confidential Information under seal, and does not disclose the Confidential Information, except pursuant to court order. f. Definition of Confidential Information. For the purposes of this Agreement, “Confidential Information” means any information not generally known to the public and proprietary to or in the possession of the Company and includes, without limitation, trade secrets, inventions, and information pertaining to research, development, purchasing, marketing, selling, accounting, licensing, business systems, business techniques, customer lists, prospective customer lists, price lists, business strategies and plans, pending patentable materials and/or designs, design documentation, documentation of meetings, tests and/or test standards, or manuals whether in document, electronic, computer or other form. For example, Confidential Information may be contained in the Company’s customer lists, prospective customer lists, the particular needs and requirements of customers, the particular needs and requirements of prospective customers, and the identity of customers or prospective customers. Information shall be treated as Confidential Information irrespective of its source and any information which is labeled or marked as being “confidential” or “trade secret” shall be presumed to be Confidential Information. The definition of “Confidential Information” as set forth in this paragraph is not intended to be complete. From time to time during the term of Executive’s employment, Executive may gain access to other information not generally known to the public and proprietary to or in the possession of the Company concerning the Company’s businesses that is of commercial value to the Company, which information shall be included in the definition in this paragraph, even though not specifically listed above. The definition of Confidential Information applies to any form in which the subject information, trade secrets, or data may appear, whether written, oral, or any other form of recording or storage. g. Restrictions. The restrictions herein provided shall not apply with respect to “Confidential Information” which: (A) is or becomes a part of the public domain without breach of this Agreement by the Executive; or (B) is disclosed pursuant to judicial action or government regulations, provided the Executive notifies the Company prior to such disclosure and cooperates with the Company in the event the Company elects to legally contest and avoid such disclosure. h. Certain Company Remedies. The Executive acknowledges that the Company will suffer irreparable harm if the Executive breaches Paragraphs 8(a), 8(b), 8(c) and/or 8(e). Accordingly, the Company shall be entitled to equitable relief, including but not

11 limited to, an injunction, enjoining or restraining Executive from any violation of Paragraphs 8(a), 8(b), 8(c) and/or 8(e) of this Agreement, in addition to any other remedies the Company is entitled to at law or in equity. In the event the Company pursues any remedies pursuant to this Paragraph 8(h) and prevails in such a proceeding, the Executive shall pay the Company’s reasonable attorneys’ fees in connection with such proceeding. Should the Company not prevail in such a proceeding, the Company shall pay the Executive’s reasonable attorneys’ fees in connection with such proceeding. Furthermore, should a court of competent jurisdiction determine that the Executive has breached Paragraphs 8(a), 8(b), 8(c) and/or 8(e), the restrictions in such Paragraphs will be extended by the period during which the Executive was in breach. 9. Parachute Payments. a. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefits under Paragraph 6 above, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (in the order provided in Paragraph 9(b) below) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of the Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). b. The Total Payments shall be reduced in the following order: (i) reduction on a pro-rata basis of any cash severance payments that are exempt from Section 409A of the Code (“Section 409A”), (ii) reduction on a pro-rata basis of any non-cash severance payments or benefits that are exempt from Section 409A, (iii) reduction on a pro-rata basis of any other payments or benefits that are exempt from Section 409A, and (iv) reduction of any payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A; provided, in case of subclauses (ii), (iii) and (iv), that reduction of any payments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. c. The Company will select an adviser with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax, provided that the adviser’s determination shall be made based upon “substantial authority” within the meaning of Section 6662 of the Code, (the “Independent Advisors”) to make determinations regarding the application of this Paragraph 9. The Independent Adviser shall provide its determination, together with detailed supporting calculations and documentation, to

12 the Executive and the Company within fifteen (15) business days following the date on which the Executive’s right to the Total Payments is triggered, if applicable, or such other time as requested by the Executive (provided, that the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax) or the Company. The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company. Any good faith determinations of the Independent Adviser made hereunder shall be final, binding and conclusive upon the Company and the Executive. d. In the event it is later determined that to implement the objective and intent of this Paragraph 9, (i) a greater reduction in the Total Payments should have been made, the excess amount shall be returned promptly by the Executive to the Company or (ii) a lesser reduction in the Total Payments should have been made, the excess amount shall be paid or provided promptly by the Company to the Executive, except to the extent the Company reasonably determines would result in imposition of an excise tax under Section 409A. 10. Section 409A. a. General. The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be immediately taxable to the Executive under Section 409A, the Company reserves the right (without any obligation to do so or to indemnify the Executive for failure to do so) to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions as the Company determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its affiliates, employees or agents. b. Separation from Service under Section 409A. Notwithstanding any provision to the contrary in this Agreement: (i) no amount that constitutes “nonqualified deferred compensation” under Section 409A shall be payable pursuant to Paragraph 6 unless the termination of the Executive’s employment constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) for purposes of Section 409A, any right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments; and (iii) to the extent that any reimbursement of expenses or in-kind benefits constitutes “deferred compensation” under Section 409A, such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses

13 reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in- kind benefits provided in any other year. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at the time of Executive’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six-month period measured from the date of the Executive’s “separation from service” with the Company (as such term is defined in the Treasury Regulations issued under Section 409A of the Code) or (B) the date of the Executive’s death; upon the earlier of such dates, all payments deferred pursuant to this sentence shall be paid in a lump sum to the Executive, and any remaining payments due under the Agreement shall be paid as otherwise provided herein. c. Release. Notwithstanding anything to the contrary in this Agreement, to the extent that any payments of “nonqualified deferred compensation” (within the meaning of Section 409A) due under this Agreement as a result of the Executive’s termination of employment are subject to the Executive’s execution and delivery of a Release, (i) the Company shall deliver the Release to the Executive within seven (7) days following the date of termination, and (ii) if the Executive fails to execute the Release on or prior to the Release Expiration Date (as defined below) or timely revokes Executive’s acceptance of the Release thereafter, the Executive shall not be entitled to any payments or benefits otherwise conditioned on the Release. For purposes of this Paragraph 10(c), “Release Expiration Date” shall mean the date that is twenty-one (21) days following the date upon which the Company timely delivers the Release to the Executive, or, in the event that the Executive’s termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967), the date that is forty-five (45) days following such delivery date. To the extent that any payments of nonqualified deferred compensation (within the meaning of Section 409A) due under this Agreement as a result of the Executive’s termination of employment are delayed pursuant to this Paragraph 10(c), such amounts shall be paid in a lump sum on the first payroll date to occur on or after the 60th day following the date of Executive’s termination of employment, provided that Executive executes and does not revoke the Release prior to such 60th day (and any applicable revocation period has expired). 11. Compensation Recovery. The Executive acknowledges and agrees that, to the extent the Company adopts any clawback or similar policy in connection with or otherwise as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and any rules and regulations promulgated thereunder (including, without limitation, any listing rules or standards resulting therefrom), he or she shall, during the Executive’s term of employment and thereafter, take all action necessary or appropriate to comply with such policy, as may be amended from time to time in the Company’s sole discretion (including, without limitation, entering into any further agreements, amendments or policies necessary or appropriate to implement and/or enforce such policy). The Executive’s obligations under this Paragraph 11 shall survive the termination of this Agreement.

14 12. Inventions. “Inventions” shall mean any and all inventions, discoveries, ideas, processes, writings, works of authorship, designs, developments and improvements, whether or not protectable under the applicable patent, trademark or copyright statutes, generated, conceived or reduced to practice by the Executive, alone or in conjunction with others, while employed by Inspire. a. Disclosure. Executive agrees to promptly disclose to Inspire in writing all Inventions. b. Ownership, Assignment and Recordkeeping. All Inventions shall be the exclusive property of Inspire. Executive hereby assigns all Inventions to Inspire. Executive agrees to keep accurate, complete and timely records of Executive’s Inventions, which records shall be the property of Inspire and shall be retained on Inspire’s premises. c. Cooperation. During and after the termination of Executive’s employment, Executive agrees to give Inspire all cooperation and assistance necessary to perfect, protect, and use its rights to Inventions. Without limiting the generality of the foregoing, Executive agrees to sign all documents, do all things, and supply all information that Inspire may deem necessary to (i) transfer or record the transfer of Executive’s entire right, title and interest in Inventions, and (ii) enable Inspire to obtain patent, copyright or trademark protection for Inventions anywhere in the world. d. Attorney-in-Fact. Executive irrevocably designates and appoints Inspire and its duly authorized officers and agents as attorney-in-fact to act for and in Executive’s behalf and stead to execute and file any lawful and necessary documents, and to do all other lawfully permitted acts, required for the assignment of, application for, or prosecution of any United States or foreign application for letters patent, copyright or trademark with the same legal force and effect as if executed by Executive. e. Waiver. Executive hereby waives and quitclaims to Inspire any and all claims, or any nature whatsoever, which Executive may now have or may hereafter have for infringement of any patent, copyright, or trademark resulting from any Inventions. f. Future Patents. Any Invention relating to the business of Inspire with respect to which Executive files a patent application within one (1) year following termination of Executive’s employment shall be presumed to cover Inventions conceived by Executive during the term of Executive’s employment, subject to proof to the contrary by Executive by good faith, contemporaneous, written and duly corroborated records establishing that such Invention was conceived and made following termination of employment and without using Confidential Information. g. Release or License. If an Invention does not relate to the existing or reasonable foreseeable business interests of Inspire, Inspire may, in its sole and unreviewable discretion, release or license the Invention to the Executive upon written request by the Executive. No release or license shall be valid unless in writing signed by Inspire’s general counsel.

15 h. Notice. Executive is hereby notified that this Agreement and this Paragraph 12 do not apply to any Invention for which no equipment, supplies, facility or trade secret information of Inspire was used and which was developed entirely on the Executive’s own time, and (1) which does not relate (i) directly to the business of Inspire or (ii) to Inspire’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the Executive for Inspire. 13. Miscellaneous. a. Entire Agreement. The terms of this Agreement (together with any other agreements and instruments contemplated by this Agreement or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of Executive by the Company, and supersedes and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement. b. Construction. Each provision of this Agreement shall be interpreted so that it is valid and enforceable under applicable law. If any provision of this Agreement is to any extent invalid or unenforceable under applicable law, that provision will still be effective to the extent it remains valid and enforceable. The remainder of this Agreement also will continue to be valid and enforceable, and the entire Agreement will continue to be valid and enforceable in other jurisdictions. In the event that a court of competent jurisdiction determines that any of the provisions of Paragraphs 8 or 12 of this Agreement are not enforceable for any reason, such court shall reform such provisions to the minimum extent necessary to make them enforceable, it being the intention of the parties that such provisions be enforced to the maximum extent permitted by applicable law. c. Waivers. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against who enforcement of the waiver or estoppel is sought. A waiver shall operate only as to the specific term or condition waived. No waiver shall constitute a continuing waiver or a waiver of such term or condition for the future unless specifically stated. No single or partial exercise of any right or remedy under this Agreement shall preclude any party from otherwise or further exercising such rights or remedies, or any other rights or remedies granted by law or any other document. d. Captions. The headings in this Agreement are for convenience of reference only and do not affect the interpretation of this Agreement. e. Modifications. This Agreement may not be altered, modified or amended except by an instrument in writing signed by each of the parties hereto. f. Governing Law. The laws of the State of Minnesota shall govern the validity, construction and performance of this Agreement, to the extent not pre-empted by

16 federal law. Any legal proceeding related to this Agreement shall be brought in an appropriate Minnesota court, and each of the parties hereto hereby consents to the exclusive jurisdiction of the courts of the State of Minnesota for this purpose. g. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and provided to the other party either in person, by fax, or by certified mail. Notices to Inspire must be provided or sent to its President and Chief Executive Officer; notices to Executive must be provided or sent to Executive in person or at Executive’s home. h. Survival. Notwithstanding the termination of Executive’s employment and the termination of this Agreement, the terms of this Agreement which relate to periods, activities, obligations, rights or remedies of the parties upon or subsequent to such termination shall survive such termination and shall govern all rights, disputes, claims or causes of action arising out of or in any way related to this Agreement. i. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of Inspire’s successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. INSPIRE MEDICAL SYSTEMS, INC. /s/ Charisse Y. Sparks, M.D. /s/ Timothy P. Herbert By: Charisse Y. Sparks, M.D. By: Timothy P. Herbert President and Chief Executive Officer

17 Exhibit A: Outside Activities Board Advisor NuShores Biosciences Board Advisor Digital Health Portugal Board member non-profit (unpaid) Sparkle Peach, Inc. Steering Committee Chair – AvaMed, MedTech Color Collaborative Community

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:	November 7, 2023	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert President, Chief Executive Officer and Director (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:	November 7, 2023	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 of Inspire Medical Systems, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2023 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:	November 7, 2023	By:	/s/ TIMOTHY P. HERBERT
			Timothy P. Herbert President, Chief Executive Officer and Director (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 of Inspire Medical Systems, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2023 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:	November 7, 2023	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	9 Months Ended
	Sep. 30, 2023	Oct. 31, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
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)		29,524,189
Entity Central Index Key	0001609550
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 329,897	$ 441,592
Investments, short-term	134,317	9,821
Accounts receivable, net of allowance for credit losses of $1,376 and $36, respectively	71,460	61,228
Inventories, net	26,115	11,886
Prepaid expenses and other current assets	7,802	5,505
Total current assets	569,591	530,032
Investments, long-term	2,961	0
Property and equipment, net	32,249	17,249
Operating lease right-of-use assets	23,081	6,880
Other non-current assets	11,612	10,715
Total assets	639,494	564,876
Current liabilities:
Accounts payable	40,031	26,847
Accrued expenses	29,964	34,339
Total current liabilities	69,995	61,186
Operating lease liabilities, non-current portion	25,173	7,536
Other non-current liabilities	146	146
Total liabilities	95,314	68,868
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; 29,403,189 and 29,008,368 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	29	29
Additional paid-in capital	904,293	820,335
Accumulated other comprehensive income (loss)	44	(86)
Accumulated deficit	(360,186)	(324,270)
Total stockholders' equity	544,180	496,008
Total liabilities and stockholders' equity	$ 639,494	$ 564,876

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Allowance for credit loss	$ 1,376	$ 36
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)	29,403,189	29,008,368
Common stock, outstanding (in shares)	29,403,189	29,008,368

XML

Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Revenue	$ 153,302	$ 109,188	$ 432,291	$ 269,956
Cost of goods sold	24,382	19,786	68,522	43,963
Gross profit	128,920	89,402	363,769	225,993
Operating expenses:
Research and development	29,144	20,993	85,484	47,397
Selling, general and administrative	113,247	85,603	327,853	225,853
Total operating expenses	142,391	106,596	413,337	273,250
Operating loss	(13,471)	(17,194)	(49,568)	(47,257)
Other (income) expense:
Interest and dividend income	(5,495)	(1,350)	(14,690)	(1,681)
Interest expense	0	656	0	1,677
Other expense, net	224	101	268	290
Total other (income) expense	(5,271)	(593)	(14,422)	286
Loss before income taxes	(8,200)	(16,601)	(35,146)	(47,543)
Income taxes	340	246	770	488
Net loss	(8,540)	(16,847)	(35,916)	(48,031)
Other comprehensive loss:
Foreign currency translation loss	(181)	(148)	(4)	(106)
Unrealized gain (loss) on investments	122	(14)	134	(202)
Total comprehensive loss	$ (8,599)	$ (17,009)	$ (35,786)	$ (48,339)
Net loss per share, basic (in dollars per share)	$ (0.29)	$ (0.60)	$ (1.23)	$ (1.73)
Net loss per share, diluted (in dollars per share)	$ (0.29)	$ (0.60)	$ (1.23)	$ (1.73)
Weighted average common shares used to compute net loss per share, basic (in shares)	29,365,968	28,226,345	29,229,626	27,782,093
Weighted average common shares used to compute net loss per share, diluted (in shares)	29,365,968	28,226,345	29,229,626	27,782,093

XML

Consolidated Statements of Stockholders' Equity (unaudited) - USD ($) $ in Thousands	Total	Follow-on Offering	Common Stock	Common Stock Follow-on Offering	Additional Paid-In Capital	Additional Paid-In Capital Follow-on Offering	Accumulated Other Comprehensive (Loss) Income	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2021			27,416,106
Beginning balance at Dec. 31, 2021	$ 229,048		$ 27		$ 508,465		$ (55)	$ (279,389)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)			151,186
Stock options exercised	3,087		$ 1		3,086
Vesting of restricted stock units (in shares)			569
Withholding taxes on net share settlement of restricted stock units (in shares)			(205)
Withholding taxes on net share settlement of restricted stock units	(43)				(43)
Issuance of common stock (in shares)			348
Issuance of common stock	79				79
Stock-based compensation expense	9,721				9,721
Other comprehensive income (loss)	(143)						(143)
Net loss	(16,694)							(16,694)
Ending balance (in shares) at Mar. 31, 2022			27,568,004
Ending balance at Mar. 31, 2022	225,055		$ 28		521,308		(198)	(296,083)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)			52,383
Stock options exercised	1,549				1,549
Issuance of common stock (in shares)			314
Issuance of common stock	80				80
Issuance of common stock for employee stock purchase plan (in shares)			13,743
Issuance of common stock for employee stock purchase plan	2,134				2,134
Stock-based compensation expense	12,659				12,659
Other comprehensive income (loss)	(3)						(3)
Net loss	(14,490)							(14,490)
Ending balance (in shares) at Jun. 30, 2022			27,634,444
Ending balance at Jun. 30, 2022	226,984		$ 28		537,730		(201)	(310,573)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)			35,826
Stock options exercised	1,760				1,760
Issuance of common stock (in shares)			410	1,150,000
Issuance of common stock	79	$ 243,801		$ 1	79	$ 243,800
Stock-based compensation expense	14,589				14,589
Other comprehensive income (loss)	(162)						(162)
Net loss	(16,847)							(16,847)
Ending balance (in shares) at Sep. 30, 2022			28,820,680
Ending balance at Sep. 30, 2022	$ 470,204		$ 29		797,958		(363)	(327,420)
Beginning balance (in shares) at Dec. 31, 2022	29,008,368		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		$ 0		7,377
Vesting of restricted stock units (in shares)			18,852
Withholding taxes on net share settlement of restricted stock units (in shares)			(6,750)
Withholding taxes on net share settlement of restricted stock units	(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 income (loss)	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, 2022	29,008,368		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)	358,492
Ending balance (in shares) at Sep. 30, 2023	29,403,189		29,403,189
Ending balance at Sep. 30, 2023	$ 544,180		$ 29		904,293		44	(360,186)
Beginning balance (in shares) at Mar. 31, 2023			29,163,001
Beginning balance at Mar. 31, 2023	504,648		$ 29		844,281		32	(339,694)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)			143,693
Stock options exercised	13,113				13,113
Vesting of restricted stock units (in shares)			9,349
Withholding taxes on net share settlement of restricted stock units (in shares)			(3,237)
Withholding taxes on net share settlement of restricted stock units	(971)				(971)
Issuance of common stock (in shares)			390
Issuance of common stock	91				91
Issuance of common stock for employee stock purchase plan (in shares)			12,983
Issuance of common stock for employee stock purchase plan	2,792				2,792
Stock-based compensation expense	21,567				21,567
Other comprehensive income (loss)	71						71
Net loss	(11,952)							(11,952)
Ending balance (in shares) at Jun. 30, 2023			29,326,179
Ending balance at Jun. 30, 2023	529,359		$ 29		880,873		103	(351,646)
Stockholders' Equity [Roll Forward]
Stock options exercised (in shares)			72,632
Stock options exercised	4,016				4,016
Vesting of restricted stock units (in shares)			6,272
Withholding taxes on net share settlement of restricted stock units (in shares)			(2,173)
Withholding taxes on net share settlement of restricted stock units	(516)				(516)
Issuance of common stock (in shares)			279
Issuance of common stock	91				91
Stock-based compensation expense	19,829				19,829
Other comprehensive income (loss)	(59)						(59)
Net loss	$ (8,540)							(8,540)
Ending balance (in shares) at Sep. 30, 2023	29,403,189		29,403,189
Ending balance at Sep. 30, 2023	$ 544,180		$ 29		$ 904,293		$ 44	$ (360,186)

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Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Operating activities
Net loss	$ (35,916)	$ (48,031)
Adjustments to reconcile net loss:
Depreciation and amortization	2,029	1,289
Non-cash lease expense	986	778
Stock-based compensation expense	59,621	36,969
Non-cash stock issuance for services rendered	272	238
Other, net	1,271	(553)
Changes in operating assets and liabilities:
Accounts receivable	(11,588)	(14,395)
Inventories	(14,228)	2,086
Prepaid expenses and other current assets	(2,947)	(1,712)
Accounts payable	11,075	8,601
Accrued expenses and other liabilities	(3,189)	7,030
Net cash provided by (used in) operating activities	7,386	(7,700)
Investing activities
Purchases of property and equipment	(15,596)	(6,146)
Purchases of investments	(137,253)	0
Proceeds from sales or maturities of investments	10,000	0
Purchases of strategic investments	(250)	(10,500)
Net cash used in investing activities	(143,099)	(16,646)
Financing activities
Payments on long-term debt obligation	0	(24,500)
Proceeds from sale of common stock	0	243,801
Proceeds from the exercise of stock options	24,506	6,396
Taxes paid on net share settlement of restricted stock units	(3,233)	(43)
Proceeds from issuance of common stock from employee stock purchase plan	2,792	2,134
Net cash provided by financing activities	24,065	227,788
Effect of exchange rate on cash	(47)	(101)
(Decrease) increase in cash and cash equivalents	(111,695)	203,341
Cash and cash equivalents at beginning of period	441,592	214,467
Cash and cash equivalents at end of period	329,897	417,808
Supplemental cash flow information
Cash paid for interest	0	2,321
Property and equipment included in accounts payable and accrued expenses	$ 3,499	$ 1,332

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Organization	9 Months Ended
	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization	OrganizationDescription of BusinessInspire 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. Japan's Ministry of Health, Labour and Welfare ("MLHW") approved Inspire therapy to treat moderate to severe OSA in 2018 and was formally added to the Japan National Health Insurance Payment Listing in 2021. In 2020, the Australian Therapeutic Goods Administration approved Inspire therapy to treat moderate to severe OSA, and we are currently seeking reimbursement coverage in Australia.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying 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, 2022.

Follow-On Public Offering

On August 15, 2022, we completed a follow-on offering that included our offer and sale of 1,150,000 shares of common stock at a public offering price of $215.00 per share. We received net proceeds of $243.8 million after deducting underwriting discounts, commissions, and offering expenses.

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 and corporate debt securities, 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 September 30, 2023 and 2022, we recognized $0.2 million and $0.1 million of gains, net, respectively. For both of the nine-month periods ended September 30, 2023 and 2022, we recognized $0.3 million of gains, net. 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 of unrecognized gain in our accumulated other comprehensive income (loss) balance as of both September 30, 2023 and December 31, 2022.

Investments

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

	September 30, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,907	$	—	$	(1)	$	2,906
Corporate debt securities	29,182		1		(25)		29,158
Certificates of deposit	2,953		—		—		2,953
U.S. treasury debt securities	99,317		1		(18)		99,300
Short-term investments	$	134,359	$	2	$	(44)	$	134,317
Long-Term:
Corporate debt securities	$	1,930	$	—	$	(1)	$	1,929
Asset-backed securities	1,031		1		—		1,032
Long-term investments	$	2,961	$	1	$	(1)	$	2,961

	December 31, 2022
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
U.S. treasury debt securities	$	9,998	$	—	$	(177)	$	9,821
Short-term investments	$	9,998	$	—	$	(177)	$	9,821

As of September 30, 2023 and December 31, 2022, we had no investments with a contractual maturity of greater than three years.

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 $0.2 million of unrecognized loss in our accumulated other comprehensive income (loss) balance at September 30, 2023 and December 31, 2022, 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 the three and nine months ended September 30, 2023 and 2022, we recognized $0 of realized losses, net.

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 September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022. 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
	September 30, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	284,353	$	284,353	$	—	$	—
Corporate debt securities	2,923		—		2,923		—
Total cash equivalents	287,276		284,353		2,923		—
Investments:
Commercial paper	2,906		—		2,906		—
Corporate debt securities	31,087		—		31,087		—
Certificates of deposit	2,953		—		2,953		—
Asset-backed securities	1,032		—		1,032		—
U.S. government securities	99,300		99,300		—		—
Total investments	137,278		99,300		37,978		—
Total cash equivalents and investments	$	424,554	$	383,653	$	40,901	$	—

	Fair Value Measurements as of
	December 31, 2022
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	390,846	$	390,846	$	—	$	—
Total cash equivalents	390,846		390,846		—		—
Investments:
U.S. government securities	9,821		9,821		—		—
Total investments	9,821		9,821		—		—
Total cash equivalents and investments	$	400,667	$	400,667	$	—	$	—

There were no transfers between levels during the periods ended September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022, 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).

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:

	September 30, 2023		December 31, 2022
Raw materials	$	4,381	$	5,645
Finished goods	21,734		6,241
Total inventories, net of reserves	$	26,115	$	11,886

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. At both September 30, 2023 and December 31, 2022, there was $0 included in inventory related to prelaunch inventory.

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 $3.5 million and $2.7 million as of September 30, 2023 and December 31, 2022, respectively.

Property and Equipment

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

	September 30, 2023		December 31, 2022
Computer equipment and software	$	2,152	$	1,729
Manufacturing equipment	7,105		5,974
Other equipment	1,847		535
Leasehold improvements	2,136		2,064
Construction in process	25,948		11,857
Property and equipment, cost	39,188		22,159
Less: accumulated depreciation and amortization	(6,939)		(4,910)
Property and equipment, net	$	32,249	$	17,249

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 $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $2.0 million and $1.3 million for the nine months ended September 30, 2023 and 2022, 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 $10.8 million and $10.5 million as of September 30, 2023 and December 31, 2022, respectively. There were no adjustments to the carrying amount during either of the nine months ended September 30, 2023 or 2022.

Impairment of Long-lived Assets

Long-lived assets consist primarily of property and equipment and operating lease right-of-use asset and 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 nine months ended September 30, 2023 or 2022.

Accrued Expenses

Accrued expenses consisted of the following:

	September 30, 2023		December 31, 2022
Payroll related	$	26,218	$	30,398
Product warranty liability	805		920
Operating lease liabilities, current portion	—		1,336
Other accrued expenses	2,941		1,685
Total accrued expenses	$	29,964	$	34,339

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance at beginning of period	$	760	$	488	$	920	$	468
Provisions for warranty	174		201		457		322
Settlements of warranty claims	(129)		(61)		(572)		(162)
Balance at the end of the period	$	805	$	628	$	805	$	628

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 8 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. Prelaunch inventory expenses were $1.7 million and $0.0 million during the three months ended September 30, 2023 and 2022, respectively and $4.7 million and $0.0 million during the nine months ended September 30, 2023 and 2022, respectively.

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 $25.5 million and $20.1 million during the three months ended September 30, 2023 and 2022, respectively, and $74.3 million and $53.6 million during the nine months ended September 30, 2023 and 2022, respectively.

Leases

Operating leases are included in operating lease right-of-use ("ROU") asset, accrued expenses, and operating lease liability – 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 (loss) 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

We have reviewed and considered all 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

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Leases

LeasesWe 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, resulting in a non-cash increase in the associated right-of-use asset and lease liability of $15.1 million. 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, resulting in an associated right-of-use asset and lease liability of $2.3 million. 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 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:

	September 30, 2023		December 31, 2022
Right-of-use assets:
Operating lease right-of-use assets	$	23,081	$	6,880
Operating lease liabilities:
Accrued expenses	—		1,336
Operating lease liabilities, non-current portion	25,173		7,536
Total operating lease liabilities	$	25,173	$	8,872

Maturities of our lease liability for our operating lease are as follows as of September 30, 2023:

2023 (remaining)	$	633
2024	(3,582)
2025	3,056
2026	3,313
2027	3,416
Thereafter	28,887
Total undiscounted lease payments	35,723
Less: imputed interest	(10,550)
Present value of lease liability	$	25,173

As of September 30, 2023, the remaining lease terms were 11.7 years and the weighted average discount rate was 4.9%. The operating cash outflows from our operating leases were $0.6 million and $0.2 million for the three-month periods ended September 30, 2023 and 2022, respectively, and $1.5 million and $0.3 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

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Long-Term Debt

9 Months Ended

Sep. 30, 2023

Long-Term Debt, by Current and Noncurrent [Abstract]

Long-Term Debt

Long-Term Debt

In March 2019 we amended our $24.5 million term loan and security agreement, which we refer to as our former credit facility. The debt was interest only until April 1, 2022 and was scheduled to mature on March 1, 2024. The basic interest rate was the 30-day U.S. LIBOR rate, subject to a floor of 7.60%. In addition to the principal and interest payments, we were required to pay a final payment fee of 3.50% on all amounts outstanding, which was accreted using the effective interest rate method over the term of the credit facility and was to be due at the earlier of maturity or prepayment. Borrowings were prepayable in whole at our option, subject to a prepayment fee of 1.00%.

In August 2022, we prepaid the outstanding principal balance of $19.4 million, the final payment fee of $0.9 million, and the prepayment fee of $0.2 million. As of September 30, 2023 and December 31, 2022, we had no remaining amounts outstanding under our former credit facility.

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Employee Retirement Plan	9 Months Ended
	Sep. 30, 2023
Retirement Benefits [Abstract]
Employee Retirement Plan	Employee Retirement PlanWe 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. Beginning January 1, 2022, we elected to begin making voluntary matching contributions to the plan. We match 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. Discretionary contributions to the plan totaled $0.8 million and $0.6 million for the three months ended September 30, 2023 and 2022, respectively, and $3.0 million and $1.9 million for the nine months ended September 30, 2023 and 2022, respectively.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

As of September 30, 2023, there were 4,259,385 shares authorized for issuance under our equity incentive plan, of which 1,537,529 shares were available for future awards.

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 at the exercise price, which is equal to the closing price of our stock on the date of grant. The stock options granted to employees 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

	Nine Months Ended
	September 30,
	2023	2022
Weighted average fair value	$153.59	$119.23
Assumptions:
Expected term (years)	6.25	5.50 - 6.25
Expected volatility	56.4 - 57.4%	56.2 - 57.0%
Risk-free interest rate	3.49 - 4.61%	1.75 - 4.06%
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 — Due to our limited company specific historical and implied volatility data, we have 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 of public companies on which we have based our expected stock price volatility, 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. We will continue to analyze the historical stock price volatility assumption as more historical data for our common stock becomes available.

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, 2022	2,660,734		$	112.19	6.9	$372,068
Granted	409,977		$	264.13
Exercised	(358,492)		$	68.64		$72,896
Forfeited/expired	(40,404)		$	206.10
Outstanding at September 30, 2023	2,671,815		$	139.93	6.8	$196,553
Exercisable at September 30, 2023	1,699,560		$	90.47	5.7	$188,465

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 September 30, 2023, the amount of unearned stock-based compensation to be expensed from now through the year 2027 related to unvested employee and non-employee director stock options is $111.1 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 employment terminates prior to the release of the vesting restrictions. The RSUs include three- or four-year service periods and vest in equal installments on each anniversary of the date of grant, provided the employee remains continuously employed with the Company. 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, 2022	124,680		$	213.97	$	31,404
Granted	112,076		$	262.87
Vested	(34,473)		$	211.04	$	9,168
Forfeited	(8,940)		$	237.12
Unvested at September 30, 2023	193,343		$	241.77	$	38,367

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 September 30, 2023, there was $37.1 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted average period of 2.0 years.

Performance Stock Units

During each of the quarters ended March 31, 2022 and 2023, 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 and December 31, 2025, 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 grants 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, 2022	77,472		$	227.53	$	19,514
Granted	95,994		$	264.59
Forfeited	(2,897)		$	241.54
Unvested at September 30, 2023	170,569		$	248.15	$	33,848

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 September 30, 2023, there was $31.1 million of unrecognized stock-based compensation expense related to outstanding PSUs that is expected to be recognized over a weighted-average period of approximately 2.0 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 1,077,720 shares available for future issuance under the ESPP as of September 30, 2023. The current purchase period under the ESPP began on July 1, 2023 and ends December 31, 2023.

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Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At both September 30, 2023 and December 31, 2022, a valuation allowance was recorded against all deferred tax assets due to our cumulative net loss position. We recorded income tax expense of $0.3 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $0.8 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. The nominal income tax expense reflects minimal state and foreign income tax expense in the nine months ended September 30, 2023, and minimal state income tax expense and an accrual for uncertain tax positions in the three and nine months ended September 30, 2022.

We filed our 2022 U.S. federal income tax return during the third quarter of 2023. Considering the provision to return true-ups, our gross federal net operating loss carryforward as of December 31, 2022 was $274.4 million, which will expire at various dates beginning in 2031. In addition, net operating loss carryforwards for state income tax

purposes of $183.3 million that include net operating losses will begin to expire in 2028. We also have gross research and development credit carryforwards of $9.7 million as of December 31, 2022, which will expire at various dates beginning in 2033.

Utilization of the net operating loss carryforwards and 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 Internal Revenue Code of 1986 and similar state provisions. During the three months ended March 31, 2023, we finalized a detailed analysis to determine whether an ownership change has occurred 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 federal net operating losses and $1.7 million of federal R&D credits that were accumulated on December 11, 2018, will expire unused solely due to the limitations under Section 382 and 383.

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 each of September 30, 2023 and December 31, 2022.

We file income tax returns in the applicable jurisdictions. The 2019 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

9 Months Ended

Sep. 30, 2023

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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
United States	$	147,514	$	106,279	$	416,748	$	260,581
All other countries	5,788		2,909		15,543		9,375
Total revenue	$	153,302	$	109,188	$	432,291	$	269,956

All of our long-lived assets are located in the U.S.

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Loss Per Share

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Loss Per Share

Loss Per ShareBasic 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 anti-dilutive:

	September 30,
	2023	2022
Common stock options outstanding	2,671,815	2,788,306
Unvested restricted stock units	193,343	107,930
Shares issuable under the ESPP	6,319	5,706
Total	2,871,477	2,901,942

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
Pay vs Performance Disclosure
Net loss	$ (8,540)	$ (11,952)	$ (15,424)	$ (16,847)	$ (14,490)	$ (16,694)

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Insider Trading Arrangements

3 Months Ended

9 Months Ended

Sep. 30, 2023

shares

Sep. 30, 2023

shares

Trading Arrangements, by Individual

Material Terms of Trading Arrangement

On August 10, 2023, Philip J. Ebeling, Chief Operating Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 21,600 shares of the Company’s common stock until August 9, 2024.

On August 15, 2023, Randall Ban, Chief Commercialization Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to16,339 shares of the Company’s common stock until February 22, 2024.

On August 17, 2023, Steven Jandrich, Vice President, Human Resources, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 10,000 shares of the Company’s common stock until March 29, 2024.

On August 28, 2023, Timothy P. Herbert, Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 40,000 shares of the Company’s common stock until June 30, 2024. This trading arrangement was adopted by the Timothy P. Herbert 2018 Family Continuation Trust, of which Mr. Herbert is a trustee.

On August 29, 2023, Georgia Garinois-Melenikiotou, Director, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 3,225 shares of the Company’s common stock until August 29, 2024.

On August 31, 2023, Richard J. Buchholz, Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 15,000 shares of the Company’s common stock until August 30, 2024.

Rule 10b5-1 Arrangement Adopted

true

Non-Rule 10b5-1 Arrangement Adopted

false

Rule 10b5-1 Arrangement Terminated

false

Non-Rule 10b5-1 Arrangement Terminated

false

Philip J. Ebeling [Member]

Trading Arrangements, by Individual

Name

Philip J. Ebeling

Title

Chief Operating Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

August 10, 2023

Aggregate Available

21,600

21,600

Randall Ban [Member]

Trading Arrangements, by Individual

Name

Randall Ban

Title

Chief Commercialization Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

August 15, 2023

Arrangement Duration

191 days

Aggregate Available

16,339

16,339

Steven Jandrich [Member]

Trading Arrangements, by Individual

Name

Steven Jandrich

Title

Vice President, Human Resources

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

August 17, 2023

Arrangement Duration

225 days

Aggregate Available

10,000

10,000

Timothy P. Herbert [Member]

Trading Arrangements, by Individual

Name

Timothy P. Herbert

Title

Chief Executive Officer

Adoption Date

August 28, 2023

Arrangement Duration

307 days

Aggregate Available

40,000

40,000

Georgia Garinois-Melenikiotou [Member]

Trading Arrangements, by Individual

Name

Georgia Garinois-Melenikiotou

Title

Director

Adoption Date

August 29, 2023

Arrangement Duration

366 days

Aggregate Available

3,225

3,225

Richard J. Buchholz [Member]

Trading Arrangements, by Individual

Name

Richard J. Buchholz

Title

Chief Financial Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

August 31, 2023

Arrangement Duration

365 days

Aggregate Available

15,000

15,000

John C Rondoni [Member]

Trading Arrangements, by Individual

Arrangement Duration

365 days

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying 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, 2022.

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 and corporate debt securities, 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 September 30, 2023 and 2022, we recognized $0.2 million and $0.1 million of gains, net, respectively. For both of the nine-month periods ended September 30, 2023 and 2022, we recognized $0.3 million of gains, net. 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 of unrecognized gain in our accumulated other comprehensive income (loss) balance as of both September 30, 2023 and December 31, 2022.

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 $0.2 million of unrecognized loss in our accumulated other comprehensive income (loss) balance at September 30, 2023 and December 31, 2022, 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 the three and nine months ended September 30, 2023 and 2022, we recognized $0 of realized losses, net.

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.

Fair Value of Financial Instruments

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.

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 September 30, 2023 and December 31, 2022, 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 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.

Impairment of Long-lived Assets

Impairment of Long-lived AssetsLong-lived assets consist primarily of property and equipment and operating lease right-of-use asset and 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. Prelaunch inventory expenses were $1.7 million and $0.0 million during the three months ended September 30, 2023 and 2022, respectively and $4.7 million and $0.0 million during the nine months ended September 30, 2023 and 2022, respectively.

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

Leases

Leases

Operating leases are included in operating lease right-of-use ("ROU") asset, accrued expenses, and operating lease liability – 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 (loss) 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

We have reviewed and considered all 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)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Components of Investments Available-for-sale

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

	September 30, 2023
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
Commercial paper	$	2,907	$	—	$	(1)	$	2,906
Corporate debt securities	29,182		1		(25)		29,158
Certificates of deposit	2,953		—		—		2,953
U.S. treasury debt securities	99,317		1		(18)		99,300
Short-term investments	$	134,359	$	2	$	(44)	$	134,317
Long-Term:
Corporate debt securities	$	1,930	$	—	$	(1)	$	1,929
Asset-backed securities	1,031		1		—		1,032
Long-term investments	$	2,961	$	1	$	(1)	$	2,961

	December 31, 2022
	Amortized		Unrealized Gross				Aggregate
	Cost		Gains		Losses		Fair Value
Short-Term:
U.S. treasury debt securities	$	9,998	$	—	$	(177)	$	9,821
Short-term investments	$	9,998	$	—	$	(177)	$	9,821

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

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 September 30, 2023 and December 31, 2022. 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
	September 30, 2023
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	284,353	$	284,353	$	—	$	—
Corporate debt securities	2,923		—		2,923		—
Total cash equivalents	287,276		284,353		2,923		—
Investments:
Commercial paper	2,906		—		2,906		—
Corporate debt securities	31,087		—		31,087		—
Certificates of deposit	2,953		—		2,953		—
Asset-backed securities	1,032		—		1,032		—
U.S. government securities	99,300		99,300		—		—
Total investments	137,278		99,300		37,978		—
Total cash equivalents and investments	$	424,554	$	383,653	$	40,901	$	—

	Fair Value Measurements as of
	December 31, 2022
	Estimated Fair Value		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	390,846	$	390,846	$	—	$	—
Total cash equivalents	390,846		390,846		—		—
Investments:
U.S. government securities	9,821		9,821		—		—
Total investments	9,821		9,821		—		—
Total cash equivalents and investments	$	400,667	$	400,667	$	—	$	—

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:

	September 30, 2023		December 31, 2022
Raw materials	$	4,381	$	5,645
Finished goods	21,734		6,241
Total inventories, net of reserves	$	26,115	$	11,886

Schedule of property and equipment

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

	September 30, 2023		December 31, 2022
Computer equipment and software	$	2,152	$	1,729
Manufacturing equipment	7,105		5,974
Other equipment	1,847		535
Leasehold improvements	2,136		2,064
Construction in process	25,948		11,857
Property and equipment, cost	39,188		22,159
Less: accumulated depreciation and amortization	(6,939)		(4,910)
Property and equipment, net	$	32,249	$	17,249

Schedule of accrued expenses

Accrued expenses consisted of the following:

	September 30, 2023		December 31, 2022
Payroll related	$	26,218	$	30,398
Product warranty liability	805		920
Operating lease liabilities, current portion	—		1,336
Other accrued expenses	2,941		1,685
Total accrued expenses	$	29,964	$	34,339

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance at beginning of period	$	760	$	488	$	920	$	468
Provisions for warranty	174		201		457		322
Settlements of warranty claims	(129)		(61)		(572)		(162)
Balance at the end of the period	$	805	$	628	$	805	$	628

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Leases (Tables)

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Lease Balances within the Balance Sheets

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

	September 30, 2023		December 31, 2022
Right-of-use assets:
Operating lease right-of-use assets	$	23,081	$	6,880
Operating lease liabilities:
Accrued expenses	—		1,336
Operating lease liabilities, non-current portion	25,173		7,536
Total operating lease liabilities	$	25,173	$	8,872

Maturity of Operating Lease Liability

Maturities of our lease liability for our operating lease are as follows as of September 30, 2023:

2023 (remaining)	$	633
2024	(3,582)
2025	3,056
2026	3,313
2027	3,416
Thereafter	28,887
Total undiscounted lease payments	35,723
Less: imputed interest	(10,550)
Present value of lease liability	$	25,173

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

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

	Nine Months Ended
	September 30,
	2023	2022
Weighted average fair value	$153.59	$119.23
Assumptions:
Expected term (years)	6.25	5.50 - 6.25
Expected volatility	56.4 - 57.4%	56.2 - 57.0%
Risk-free interest rate	3.49 - 4.61%	1.75 - 4.06%
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, 2022	2,660,734		$	112.19	6.9	$372,068
Granted	409,977		$	264.13
Exercised	(358,492)		$	68.64		$72,896
Forfeited/expired	(40,404)		$	206.10
Outstanding at September 30, 2023	2,671,815		$	139.93	6.8	$196,553
Exercisable at September 30, 2023	1,699,560		$	90.47	5.7	$188,465

Schedule of restricted stock units activity

	Restricted Stock Units	Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value (in thousands)
Unvested at December 31, 2022	124,680		$	213.97	$	31,404
Granted	112,076		$	262.87
Vested	(34,473)		$	211.04	$	9,168
Forfeited	(8,940)		$	237.12
Unvested at September 30, 2023	193,343		$	241.77	$	38,367

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, 2022	77,472		$	227.53	$	19,514
Granted	95,994		$	264.59
Forfeited	(2,897)		$	241.54
Unvested at September 30, 2023	170,569		$	248.15	$	33,848

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Segment Reporting and Revenue Disaggregation (Tables)

9 Months Ended

Sep. 30, 2023

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Region

Revenue by geographic region is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
United States	$	147,514	$	106,279	$	416,748	$	260,581
All other countries	5,788		2,909		15,543		9,375
Total revenue	$	153,302	$	109,188	$	432,291	$	269,956

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Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2023

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 anti-dilutive:

	September 30,
	2023	2022
Common stock options outstanding	2,671,815	2,788,306
Unvested restricted stock units	193,343	107,930
Shares issuable under the ESPP	6,319	5,706
Total	2,871,477	2,901,942

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Summary of Significant Accounting Policies - Follow-On Public Offering (Details) $ / shares in Units, $ in Millions	Aug. 15, 2022 USD ($) $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Sale of stock, price per share (in dollars per share) | $ / shares	$ 215.00
Proceeds from sale of stock | $	$ 243.8
Follow-on Offering
Subsidiary, Sale of Stock [Line Items]
Shares sold (in shares) | shares	1,150,000

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Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Accounting Policies [Abstract]
Foreign currency gains	$ 0.2	$ 0.1	$ 0.3	$ 0.3
Foreign currency gains included in accumulated other comprehensive loss	$ (0.1)	$ (0.1)	$ (0.1)	$ (0.1)

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Summary of Significant Accounting Policies - Components of Investments Classified as Available-for-Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Short-Term:
Amortized Cost	$ 134,359	$ 9,998
Aggregate Fair Value	134,317	9,821
Long-Term:
Amortized Cost	2,961
Aggregate Fair Value	2,961
Short-term
Short-Term:
Unrealized Gross Gains	2	0
Unrealized Gross Losses	(44)	(177)
Long-Term:
Unrealized Gross Gains	2	0
Unrealized Gross Losses	(44)	(177)
Long-term
Short-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	(1)
Long-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	(1)
Commercial paper
Short-Term:
Amortized Cost	2,907
Aggregate Fair Value	2,906
Commercial paper | Short-term
Short-Term:
Unrealized Gross Gains	0
Unrealized Gross Losses	(1)
Long-Term:
Unrealized Gross Gains	0
Unrealized Gross Losses	(1)
Corporate debt securities
Short-Term:
Amortized Cost	29,182
Aggregate Fair Value	29,158
Long-Term:
Amortized Cost	1,930
Aggregate Fair Value	1,929
Corporate debt securities | Short-term
Short-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	(25)
Long-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	(25)
Corporate debt securities | Long-term
Short-Term:
Unrealized Gross Gains	0
Unrealized Gross Losses	(1)
Long-Term:
Unrealized Gross Gains	0
Unrealized Gross Losses	(1)
Certificates of deposit
Short-Term:
Amortized Cost	2,953
Aggregate Fair Value	2,953
Certificates of deposit | Short-term
Short-Term:
Unrealized Gross Losses	0
Long-Term:
Unrealized Gross Losses	0
U.S. treasury debt securities
Short-Term:
Amortized Cost	99,317	9,998
Aggregate Fair Value	99,300	9,821
U.S. treasury debt securities | Short-term
Short-Term:
Unrealized Gross Gains	1	0
Unrealized Gross Losses	(18)	(177)
Long-Term:
Unrealized Gross Gains	1	0
Unrealized Gross Losses	(18)	$ (177)
Asset-backed securities
Long-Term:
Amortized Cost	1,031
Aggregate Fair Value	1,032
Asset-backed securities | Long-term
Short-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	0
Long-Term:
Unrealized Gross Gains	1
Unrealized Gross Losses	$ 0

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Summary of Significant Accounting Policies - Investments (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Investments with maturity greater than one year	$ 0		$ 0				$ 0
Stockholders' equity	544,180,000	$ 470,204,000	544,180,000	$ 470,204,000	$ 529,359,000	$ 504,648,000	496,008,000	$ 226,984,000	$ 225,055,000	$ 229,048,000
Realized losses, net	0	$ 0	0	$ 0
Allowance for credit losses	0		0				0
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Including Noncontrolling Interest
Debt Securities, Available-for-sale [Line Items]
Stockholders' equity	$ 0		$ 0				$ 200,000

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Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - Recurring basis - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Cash equivalents:
Total cash equivalents	$ 287,276	$ 390,846
Investments:
Total investments	137,278	9,821
Total cash equivalents and investments	424,554	400,667
Commercial paper
Investments:
Total investments	2,906
Corporate debt securities
Investments:
Total investments	31,087
Certificates of deposit
Investments:
Total investments	2,953
Asset-backed securities
Investments:
Total investments	1,032
U.S. government securities
Investments:
Total investments	99,300	9,821
Money market funds
Cash equivalents:
Total cash equivalents	284,353	390,846
Corporate debt securities
Cash equivalents:
Total cash equivalents	2,923
Level 1
Cash equivalents:
Total cash equivalents	284,353	390,846
Investments:
Total investments	99,300	9,821
Total cash equivalents and investments	383,653	400,667
Level 1 | Commercial paper
Investments:
Total investments	0
Level 1 | Corporate debt securities
Investments:
Total investments	0
Level 1 | Asset-backed securities
Investments:
Total investments	0
Level 1 | U.S. government securities
Investments:
Total investments	99,300	9,821
Level 1 | Money market funds
Cash equivalents:
Total cash equivalents	284,353	390,846
Level 1 | Corporate debt securities
Cash equivalents:
Total cash equivalents	0
Level 2
Cash equivalents:
Total cash equivalents	2,923	0
Investments:
Total investments	37,978	0
Total cash equivalents and investments	40,901	0
Level 2 | Commercial paper
Investments:
Total investments	2,906
Level 2 | Corporate debt securities
Investments:
Total investments	31,087
Level 2 | Certificates of deposit
Investments:
Total investments	2,953
Level 2 | Asset-backed securities
Investments:
Total investments	1,032
Level 2 | U.S. government securities
Investments:
Total investments	0	0
Level 2 | Money market funds
Cash equivalents:
Total cash equivalents	0	0
Level 2 | Corporate debt securities
Cash equivalents:
Total cash equivalents	2,923
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
Level 3 | Corporate debt securities
Investments:
Total investments	0
Level 3 | Asset-backed securities
Investments:
Total investments	0
Level 3 | U.S. government securities
Investments:
Total investments	0	0
Level 3 | Money market funds
Cash equivalents:
Total cash equivalents	0	$ 0
Level 3 | Corporate debt securities
Cash equivalents:
Total cash equivalents	$ 0

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Summary of Significant Accounting Policies - Inventories (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Raw materials	$ 4,381,000	$ 5,645,000
Finished goods	21,734,000	6,241,000
Total inventories, net of reserves	26,115,000	11,886,000
Pre-launch, research and development inventory	0	0
Reserve for excess and obsolete inventory	$ 3,500,000	$ 2,700,000

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Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Property and Equipment
Property and equipment, cost	$ 39,188		$ 39,188		$ 22,159
Less: accumulated depreciation and amortization	(6,939)		(6,939)		(4,910)
Property and equipment, net	32,249		32,249		17,249
Depreciation and amortization expenses	800	$ 500	2,000	$ 1,300
Computer equipment and software
Property and Equipment
Property and equipment, cost	2,152		2,152		1,729
Manufacturing equipment
Property and Equipment
Property and equipment, cost	7,105		7,105		5,974
Other equipment
Property and Equipment
Property and equipment, cost	1,847		1,847		535
Leasehold improvements
Property and Equipment
Property and equipment, cost	2,136		2,136		2,064
Construction in process
Property and Equipment
Property and equipment, cost	$ 25,948		$ 25,948		$ 11,857
Minimum
Property and Equipment
Estimated useful lives	3 years		3 years
Maximum
Property and Equipment
Estimated useful lives	5 years		5 years

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Summary of Significant Accounting Policies - Strategic Investments (Details) - USD ($) $ in Millions	Sep. 30, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Equity securities without readily determinable fair value	$ 10.8	$ 10.5

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Summary of Significant Accounting Policies - Impairment of Long-lived Assets (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Accounting Policies [Abstract]
Impairment charges	$ 0	$ 0

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Summary of Significant Accounting Policies - Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Payroll related	$ 26,218	$ 30,398
Product warranty liability	805	920
Operating lease liabilities, current portion	0	1,336
Other accrued expenses	2,941	1,685
Total accrued expenses	$ 29,964	$ 34,339

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Summary of Significant Accounting Policies - Product Warranty Accrual (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 760	$ 488	$ 920	$ 468
Provisions for warranty	174	201	457	322
Settlements of warranty claims	(129)	(61)	(572)	(162)
Balance at the end of the period	$ 805	$ 628	$ 805	$ 628

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Summary of Significant Accounting Policies - Research and Development (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Research and development	$ 29,144	$ 20,993	$ 85,484	$ 47,397
Regulatory Pre-Launch of Product Inventory
Disaggregation of Revenue [Line Items]
Research and development	$ 1,700	$ 0	$ 4,700	$ 0

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Summary of Significant Accounting Policies - Advertising Expenses (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Advertising Expenses
Advertising expenses	$ 25.5	$ 20.1	$ 74.3	$ 53.6

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Leases - Narrative (Details) ft² in Thousands, $ in Millions		1 Months Ended	3 Months Ended		9 Months Ended
	May 10, 2023 USD ($) ft² renewal_option	Aug. 31, 2023 USD ($) ft² renewal_option	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)
Leases [Abstract]
Operating lease, office space (square feet) | ft²	106	22
Right-of-use asset obtained in exchange for operating lease liability	$ 15.1	$ 2.3
Number of renewal options | renewal_option	2	2
Renewal term	5 years	5 years
Remaining lease term			11 years 8 months 12 days		11 years 8 months 12 days
Discount rate			4.90%		4.90%
Operating lease payments			$ 0.6	$ 0.2	$ 1.5	$ 0.3

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Leases - Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Right-of-use assets:
Operating lease right-of-use assets	$ 23,081	$ 6,880
Operating lease liabilities:
Accrued expenses	0	1,336
Operating lease liabilities, non-current portion	25,173	7,536
Total operating lease liabilities	$ 25,173	$ 8,872
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued expenses	Accrued expenses

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Leases - Maturity of Operating Lease Liability (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Leases [Abstract]
2023 (remaining)	$ 633,000
2024	(3,582,000)
2024	0
2025	3,056,000
2026	3,313,000
2027	3,416,000
Thereafter	28,887,000
Total undiscounted lease payments	35,723,000
Less: imputed interest	(10,550,000)
Present value of lease liability	$ 25,173,000	$ 8,872,000

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Long-Term Debt (Details) - Term loan facility - March 2019 Amendment to Loan and Security Agreement - USD ($)	1 Months Ended
	Aug. 31, 2022	Mar. 31, 2019	Sep. 30, 2023	Dec. 31, 2022
Credit Facility
Maximum borrowing amount under credit facility		$ 24,500,000
Final payment percentage		3.50%
Prepayment fee		1.00%
Prepayment of outstanding principal	$ 19,400,000
Payment for final fee	900,000
Prepayment fee	$ 200,000
Outstanding under credit facility			$ 0	$ 0
Minimum
Credit Facility
Basic interest rate		7.60%

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Employee Retirement Plan (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Jan. 01, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
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 discretionary contribution		$ 0.8	$ 0.6	$ 3.0	$ 1.9

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Stock-Based Compensation - Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 30, 2023 USD ($) shares
Stock Options
Unearned stock-based compensation | $	$ 111.1
Weighted average recognition period	2 years 6 months
Options
Stock Options
Service period	4 years
Contractual life of stock options	10 years
Options | Directors | Minimum
Stock Options
Service period	1 year
Options | Directors | Maximum
Stock Options
Service period	3 years
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 | $	$ 37.1
Weighted average recognition period	2 years
Restricted Stock Units (RSUs) | Minimum
Stock Options
Service period	3 years
Restricted Stock Units (RSUs) | Maximum
Stock Options
Service period	4 years
Equity Incentive Plan
Stock Options
Shares authorized (in shares) | shares	4,259,385
Number of shares available for future awards (in shares) | shares	1,537,529

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Stock-Based Compensation - Assumptions Used to Calculate Fair Value of Options (Details) - Options - $ / shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Weighted average assumptions
Weighted average fair value (in dollars per share)	$ 153.59	$ 119.23
Expected term (years)	6 years 3 months
Expected dividend yield	0.00%	0.00%
Minimum
Weighted average assumptions
Expected term (years)		5 years 6 months
Expected volatility	56.40%	56.20%
Risk-free interest rate	3.49%	1.75%
Maximum
Weighted average assumptions
Expected term (years)		6 years 3 months
Expected volatility	57.40%	57.00%
Risk-free interest rate	4.61%	4.06%

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Stock-Based Compensation - Stock Option Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023 USD ($) $ / shares shares	Dec. 31, 2022 USD ($) $ / shares shares
Options
Outstanding at beginning of the year (in shares) | shares	2,660,734
Granted (in shares) | shares	409,977
Exercised (in shares) | shares	(358,492)
Forfeited/expired (in shares) | shares	(40,404)
Outstanding at ending of the year (in shares) | shares	2,671,815	2,660,734
Exercisable (in shares) | shares	1,699,560
Weighted Average Exercise Price
Outstanding, beginning of the period (in dollars per share) | $ / shares	$ 112.19
Granted (in dollars per share) | $ / shares	264.13
Exercised (in dollars per share) | $ / shares	68.64
Forfeited/expired (in dollars per share) | $ / shares	206.10
Outstanding, end of the period (in dollars per share) | $ / shares	139.93	$ 112.19
Exercisable (in dollars per share) | $ / shares	$ 90.47
Weighted Average Remaining Contractual Term (years)
Outstanding	6 years 9 months 18 days	6 years 10 months 24 days
Exercisable	5 years 8 months 12 days
Aggregate Intrinsic Value
Outstanding, beginning of period | $	$ 196,553	$ 372,068
Exercised | $	72,896
Outstanding, end of period | $	196,553	$ 372,068
Exercisable at end of period | $	$ 188,465

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Stock-Based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023
Restricted Stock Units
Forfeited (in shares)	(2,897)
Weighted Average Grant Date Fair Value
Forfeited (in dollars per share)	$ 241.54
Aggregate Intrinsic Value
Unearned stock-based compensation	$ 111,100
Weighted average recognition period	2 years 6 months
Restricted Stock Units (RSUs)
Restricted Stock Units
Unvested at beginning of period (in shares)	124,680
Granted (in shares)	112,076
Vested (in shares)	(34,473)
Forfeited (in shares)	(8,940)
Unvested at end of period (in shares)	193,343
Weighted Average Grant Date Fair Value
Unvested at beginning of period (in dollars per share)	$ 213.97
Granted (in dollars per share)	262.87
Vested (in dollars per share)	211.04
Forfeited (in dollars per share)	237.12
Unvested at end of period (in dollars per share)	$ 241.77
Aggregate Intrinsic Value
Unvested at beginning of period	$ 31,404
Vested	9,168
Unvested at end of period	38,367
Unearned stock-based compensation	$ 37,100
Weighted average recognition period	2 years

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Stock-Based Compensation - Performance Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2023
Restricted Stock Units
Forfeited (in shares)			(2,897)
Weighted Average Grant Date Fair Value
Forfeited (in dollars per share)			$ 241.54
Aggregate Intrinsic Value
Unearned stock-based compensation			$ 111,100
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	3 years
Restricted Stock Units
Unvested at beginning of period (in shares)	77,472		77,472
Granted (in shares)			95,994
Unvested at end of period (in shares)			170,569
Weighted Average Grant Date Fair Value
Unvested at beginning of period (in dollars per share)	$ 227.53		$ 227.53
Granted (in dollars per share)			264.59
Unvested at end of period (in dollars per share)			$ 248.15
Aggregate Intrinsic Value
Unvested at beginning of period	$ 19,514		$ 19,514
Unvested at end of period			33,848
Unearned stock-based compensation			$ 31,100
Weighted average recognition period			2 years
Performance stock units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target, percentage	0.00%	0.00%
Performance stock units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target, percentage	200.00%	200.00%

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Stock-Based Compensation - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan	9 Months Ended
	Sep. 30, 2023 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)	1,077,720

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Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Mar. 31, 2023	Dec. 31, 2022
Operating Loss Carryforwards [Line Items]
Income tax expense	$ 340,000	$ 246,000	$ 770,000	$ 488,000
Significant change to unrecognized tax benefits over the next 12 months	0		0
Unrecognized tax benefits	$ 100,000		$ 100,000			$ 100,000
R&D credit
Operating Loss Carryforwards [Line Items]
Credit carryforwards					$ 1,700,000	9,700,000
Federal
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards					$ 126,500,000	274,400,000
State
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards						$ 183,300,000

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Segment Reporting and Revenue Disaggregation (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) segment	Sep. 30, 2022 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			1
Revenue by Geographic Region
Revenue	$ 153,302	$ 109,188	$ 432,291	$ 269,956
United States
Revenue by Geographic Region
Revenue	147,514	106,279	416,748	260,581
All other countries
Revenue by Geographic Region
Revenue	$ 5,788	$ 2,909	$ 15,543	$ 9,375

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Loss Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	2,871,477	2,901,942
Common stock options outstanding
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	2,671,815	2,788,306
Unvested restricted stock units
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	193,343	107,930
Shares issuable under the ESPP
Loss Per Share
Antidilutive securities excluded from computation of diluted weighted average shares outstanding (in shares)	6,319	5,706