Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Inspire Medical Systems Fourth Quarter and Full Year 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question-and-answer session. I'll now hand the call over to your first speaker to Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference.

Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, President and Chief Executive Officer; and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the 3 and 12 months ended December 31, 2023. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including, without limitation, those relating to our operations, financial results and financial condition, investments in our business, full year 2024 financial and operational outlook and changes in market access are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. Please see our filings with the Securities and Exchange Commission including our Form 10-K, which we plan to file with the SEC on February 9, 2024, for a description of these risks and uncertainties. Inspire disclaims any intention or obligation except as required by law, to update or revise any financial projections of forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, February 6, 2024. With that, it is my pleasure to turn the call over to Tim Herbert. Tim?

Thank you, Ezgi. And thanks, everyone, for joining our business update call for the fourth quarter of 2023. We are excited to report our first quarter with operating income and a very strong finish to the year. We know our focus and discipline on patient outcomes and ensuring that each patient has the best possible experience with Inspire therapy is the foundation of our business and we remain committed to this as our top priority. During today's call, we will highlight many accomplishments from 2023 that demonstrate our ongoing focus on the patients, including improvements in access to the therapy, technology advancements and planned activities to broaden the population that can benefit from Inspire. We will also discuss our outlook for full year 2024. We would like to take a moment to recognize two very special individuals, who recently announced the retirement from the Inspire Board following many years of service. Last week, we announced that Dr. Jerry Griffin, who after 16 years on the Inspire Board is planning to retire, following the conclusion of our 2024 Annual Meeting of Stockholders. Dr. Griffin is one of our original directors having joined the Board back in 2008 and has been an inspirational leader throughout our development and commercialization. To maintain the important medical influence on our Board, we recently announced that Myriam Curet, a medical doctor with extensive business and med tech industry experience was appointed to our Board of Directors. Secondly, and just yesterday, we announced the retirement of Marilyn Carlson Nelson from our Board of Directors. Marilyn joined the Board as Chair in 2018, following the passing of husband, Dr. Glen Nelson, Inspire's original Chair. Marilyn has had a profound impact on our business and team members during her time on the Board, and serve as a great leader…

Thank you, Tim, and good afternoon, everyone. Total revenue for the fourth quarter was $192.5 million, a 40% increase from the $137.9 million generated in the fourth quarter of 2022. US revenue in the fourth quarter was $189.4 million, an increase of 41% from the $134.3 million in the prior year period. The primary growth driver in the US was higher utilization at existing centers. Other growth drivers include the addition of new implanting centers, our continuing direct-to-consumer marketing and a higher number of territory managers. Revenue outside the US was $3.1 million, which is a 16% decrease year-over-year. As Tim noted, this was due to the delay of the EU MDR approval that impeded our ability to ship silicon based leads in Europe during the fourth quarter. The US average selling price in the fourth quarter was $25,000 compared to $24,900 in the prior year period. We expect the US ASP to remain steady at the current level. The ASP outside the US was $19,900 during the quarter compared to $20,400 in the fourth quarter of 2022. Gross margin in the fourth quarter was 85.4% compared to 83.9% in the prior year period. The year-over-year increase was driven by improved manufacturing yields and higher volumes. Total operating expenses for the fourth quarter were $155.2 million, an increase of 34% as compared to $116.1 million in the fourth quarter of 2022. This planned increase was due to the expansion of our sales organization, increased direct-to-consumer marketing programs, continued product development efforts and general corporate costs. Interest and dividend income totaled $5.9 million in the fourth quarter compared to $3.4 million in the prior year period. This higher income was driven by higher interest rates on our increased cash and investment balances compared to a year ago. Net income for the…

Thank you, sir. [Operator Instructions] And I show our first question comes from the line of Adam Maeder from Piper Sandler. Please go ahead.

Hi, Tim and Rick, I hope you can hear me okay. And congrats on a nice finish to the year and great to see the leverage in the quarter. Maybe just to start on the guidance for 2024 for the $775 million to $785 million, can you just maybe go into a little bit more detail there? How are you thinking about utilization or same-store sales growth? What's assumed in the guidance around label expansion, the Gen 5 launch? Just walk us through some of those puts and takes and then I have a follow-up. Thanks.

Sure. Hi. Adam, I think, number one, I think we're seeing a trend that same-store sales or the increased utilization at existing centers is the primary driver of our growth in 2023 and we expect that to continue into 2024. We certainly are going to complement that with opening new centers, and we provided the guide on what we expect to open new centers as we get on to the first quarter. But again, we're going to continue to focus on building ENT capacity and increasing the number of procedures done at existing centers.

And any comment, Tim, around the label expansion or the Gen 5 impact in those figures?

Sure. I don't think that Gen 5 will have a big play because we'll be doing a limited launch of our plan in 2024, and we're planning for a full launch in 2025. So we'll have time to talk about that further on. I do think the indication expansions will start to show in 2024, primarily with the high AHI and the pediatric population with Down Syndrome is getting some strong awareness right now. Remember, the high BMI is really driven by mechanism of action, and we use sleep endoscopy today to treat those patients that have tongue-based obstruction and a high BMI with patients who have lateral wall obstructions. That's where we're having trouble. In fact, that's where we're targeting some of those patients may benefit from a GLP-1.

That's good color. Thank you. And I feel like I have to ask about the leverage this quarter, the positive operating income. I know there's some seasonal variability to models, but Rick, any constructs or framework you can give to us as we think about 2024 and potential leverage this year. And I heard the commentary earlier, it sounds like that is a focus in 2024, and I think I heard the phrase move towards steady profitability over the course of the year. But I was hoping you could just flesh that out for us in a little bit more detail. Thanks again for getting the questions.

Sure. Thanks, Adam. Yeah, our focus does remain on driving top line growth as we grow the therapy adoption. And we did demonstrate strengthening of our operating leverage in the model. We definitely saw that in the fourth quarter. And we expect to see that. We do have seasonality, which we can touch on later, I guess. But we do have seasonality in the first quarter. But we expect that leverage to improve, and that's why we stated that we expect that we plan to be profitable for the second half of 2024.

Thank you.

Thank you. And I show our next question comes from the line of Travis Steed from Bank of America Securities. Please go ahead.

Hi, this is Caroline [ph] on for Travis. Thanks for taking my question, and congrats on the quarter. I had a follow-up on the revenue guidance for 2024. If you could just talk about what's baked into that guidance for the battery replacements that you expect to start coming through this year. So I'll follow up on the first question. And then a second question here, I heard the reiteration of the limited market release in 2024 and then full launch in 2025 for Inspire V and I wanted to see if you could also give us an update on where you're at with the submission to the FDA? Thank you.

Thank you. Battery replacement is still going to be limited in 2024. We will start to see some of the early commercial patients coming through. We are still seeing patients who participated in the STAR trial still coming through today. But the first year of commercialization was 2014 and add 10.5 years, 11 years, battery life, puts us at 2024 to 2025. So we'll start to see that coming through in this coming year, but really won't have a significant impact for a couple more years until we get to larger volumes, but it's still very promising. As far as Inspire V submission, team is doing a great job. We're going through just the final testing and documentation to be able to provide that information to the FDA, and we're targeting the approval for later in the year to provide opportunity to do the limited launch later in 2024, and the team is working hard to be ready to do a full commercial launch in 2025.

Thank you.

Thank you.

Thank you. And I show our next question comes from the line of Robbie Marcus from JPMorgan. Please go ahead.

Hi. This is actually Lilly [ph] on for Robbie. Thanks for taking the question. On the international business, how should we be thinking about that growing this year in light of some of the supply challenges? And is there a time line that we should be keeping in mind for when you can return to normal levels of revenue and supply?

Very good question. Thank you very much. We had our challenges with getting derogation approval, primarily in Germany in 2023. While that approval comes through the derogation does require us to do some labeling changes to identify that product being shipped in advance of EU MDR. So we are shipping product today in Germany, and that's coming back up. But it's probably going to take a couple of quarters to get them back to a steady state, but we are very promising movement, both with derogation in those countries we identified but also making progress getting the full EU MDR. And hopefully, we can get that done in the year to be able to provide silicon leads for the rest of Europe.

Thank you. And our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead.

Hey good afternoon and thanks for taking my questions.

Hey Michael.

Just wanted to start. Maybe you can just give us an update, if possible, on how activity is trending so far through the first quarter? And then maybe elaborate somewhat on how you're thinking about Seasonality this year and quarterly sales cadence?

Absolutely. Well, I think the -- we felt very comfortable with the strength of the organization as we're exiting the fourth quarter, be able to set our guide or reconfirm the guide that we initially preannounced at the JPMorgan Conference. But the progress continues to be steady. That's why we're comfortable with the guidance going forward. I'll let Rick touch a little bit about cadence of quarters, specifically of seasonality here in the first quarter.

Right. Thanks for the question. So, as I mentioned in the prepared remarks, we do have a stronger commercial mix with the high deductible plans in the fourth quarter. So, we generally see that seasonality in the first quarter, but also, we did see a little recovery from the third quarter into the fourth quarter. So we had a very strong fourth quarter, and that's where we mentioned we might have some more pronounced seasonality. And so given the typical seasonality plus the stronger Q4, our seasonality into Q1, it could range from the mid to high teens sequentially. And then from there, we expect it to return and grow, and you've seen our guidance is to have between 24% and 26% growth, $780 million at the midpoint.

Got it. Thanks Rick. And then just, I guess, 1 follow-up on profitability. Again, just a clarification really, the hitting profitability in the second half of 2024, is that a bolt on operating income and net profitability basis?

Yes. As we sit here today, yes, that is the case, and that will be for the second half of the year.

Right. All right. Great. Thank you.

Thanks Michael.

Thank you. And I show our next question comes from the line of Danielle Antalffy from UBS. Please go ahead.

Hey, good afternoon guys. Thanks so much for taking the question. Congrats on a strong end to 2023 and looking forward to 2024. So I guess, Tim, the one question I wanted to -- I have two questions. Just first on sleep centers and I know getting patients through sleep centers, that's going to bottleneck, you've made some investments there. Just curious to see what -- how those investments have been panning out? And do sleep centers still represent a bottleneck? Or is that starting to ease? And then I would just love ahead of SERMELT-OSA coming at some point, maybe mid-year-ish. Any more thoughts on how we should think about the impact of the funnel for Inspire in 20 and 2025, assuming that they do get coverage for obstructive sleep apnea patients. Thanks so much.

Thank you very much, Danielle. Good to hear from you. As far as sleep centers go, it's taking that even a step higher. We're spending a lot of time even educating and involving sleep physicians to be more involved with the patients and specifically with the longitudinal management. So while the focus today remains on building the capacity of the ENT, we know that the next challenge will be building enough capacity with the sleep physicians and specifically around the sleep centers. A lot of payers require sleep studies to be performed at – in a sleep lab for a polysomnography. But we do talk to them and show the value of home sleep testing and we've had opportunities to work with different parties to be able to provide home sleep testing or different areas to be able to help assess sleeping. That's going to continue to be a focus going forward into 2024 and beyond. And we're trying to make sure that that's not going to be a challenge going forward, because we can get those patients properly diagnosed. And we do know, most of the payers require a current sleep study within two years prior to moving on with Inspire. As far as the SURMOUNT-OSA trial, yes, hopefully, that data will come out earlier in the year. We would like to hope it's successful and can show a 50% reduction in AHI. We know that's going to be a little bit of a challenge for the drug, as long as the compliance and the weight loss is there to support that. But with the demographics of that study having a BMI of on average 40 and AHI, an average of 50, we really need to see a 50% reduction to have those patients move into the approved Inspire indication and the majority of the patients in that study when we look at the demographics, they really won't qualify for Inspire today anyways, because of the lateral wall collapse associated with a high BMI. So we look forward to seeing that data, but we do not believe it's going to have any impact on our patient flow this year and will tend to be positive as we kind of move forward after 2024.

Thank you so much.

Thank you.

And I show our next question comes from the line of Richard Newitter from Truist Securities. Please go ahead.

Hi. Thanks for taking the question. Congrats on the quarter and the profitability as well. So maybe two questions for me. The first, just with Inspire V coming, you have a preliminary launch, hopefully, an approval later this year. I guess what, if anything, is contemplating the outlook for people potentially delaying or wanting the next-generation device, if they know that it's coming, doctors and patients alike. I'm just curious how you've contemplated that. Should we be expecting any impact there and if it is in the guide at all?

We don't believe there will be a delay. We know that patients are motivated to receive therapy. Those patients who are untreated with moderate to severe sleep apnea have a significant challenge with quality of life, and they are motivated to receive therapy. Remember, we're talking about the device replacement. And so the Inspire IV system is a very strong system, provides very strong outcomes. And also, you're talking later in the year when we're dealing with the high deductible insurance plans as well. So we haven't built in any patient therapy delay into the model. We believe that the patients will continue on with therapy, and this is consistent with prior launches when we went from the Inspire II device to the Inspire IV device and, to a lesser extent, with the new remote and going from polyurethane to silicon lead. So we are aware of that. We track that. We make sure we educate the patients appropriately, but we don't expect to see any delay and have not built that into our guidance.

Great. And maybe just one more, Tim, you have a number of initiatives that hopefully looking to unlock some of the bottlenecks that exist and also some throughput areas, Inspire V will be one of them. We're removing the DISE necessarily where possible with the PREDICTOR trial. It feels like a lot of those though won't kick in or have their intended impact really more so into the 2025 onward time frame. I'm just curious what kind of threshold do you think there is? Or can you talk to us about -- to give us confidence that you won't potentially run into capacity issues before that 2025 time frame. Is there a utilization level where capacity could become a problem? And how do we think about that within the context of your initial guidance?

Sure. I think the real thing is to keep it simple, and let's talk about the ENT service today. And as we progressed over the last several years, it's just a very step-wise increase in utilization and the number one method to increase capacity is ENT confidence. And it's the ENT having gained additional experience and having a strong team. So the ENT is able to do more cases to become more proficient. It takes less time to do the procedure, they gain confidence in the procedure, but it's essential that they have a strong partnership with sleep physicians to be able to manage the patients longitudinally. Therefore, the team all know their roles at the centers and the centers that are progressing quickest with utilization are those centers that have a strong team of ENT who performs the procedure, a sleep physician who can help diagnose but can also manage the longitudinal management of patients, thereby keeping the ENTs available to do more implant procedures. We don't necessarily have challenges getting operating room time. We have challenges getting enough ENT time to be in the operating room to do the procedures. And we certainly don't have challenges with patient flow. We know our direct-to-consumer bring patients to the ENTs. So we're going to refine our programs a little bit, including the website to make sure that patients have the best opportunity and can go to centers that have the ability to take care of them and have positive outcomes and really focus on utilization, because we know the centers with the highest utilization, get the best patient outcomes. They're more experienced. So it's the simple things that are going to drive us in 2024, not to mention what we mentioned slightly in the call about our technology development with our SleepSync system to help the patient throughput and help the patients get appointments. So there's multiple avenues we're going to go down in 2024 to continue to grow utilization. And then as we mentioned, a couple of key items later on will be removal of DISE with PREDICTOR and Inspire V with reduced OR time. But there is a lot of basic work we need to perform here in 2024 to continue success.

Okay. Thank you very much.

Thank you, Rich.

Thank you. And I show our next question comes from the line of David Rescott from Baird. Please go ahead.

Hey, guys. Thanks for taking the question and congrats on the strong finish to the year here. I wanted to start off by diving in a little bit into the -- clarifying the comments you made around international. Kind of played in the guide this year. I know you mentioned that you take a couple of quarters to get back to some of these normalized growth levels. But I'm just wondering if growth in 2024 international markets would be accretive to the total company growth just given some of the commentary around where you are with derogation and then returning to growth levels.

Absolutely. That's a good question. I think Germany is really coming back strong now that we're able to start shipping product after the relabeling effort. And we know the Netherlands and Belgium are strong because they had derogation earlier in 20023 in the fourth quarter that allowed us to start shipping product there. We're excited. We believe that France is going to announce the new coding along with full countrywide reimbursement in 2024 to be able to realize some growth in that country. So we're excited about the lags coming up in France. We do have some polyurethane leads that we can now help deliver into the UK and Australia to continue doing implants in those countries. So we're going to be able to get back online in those countries as well. And then we're going to continue to work in Singapore and Japan. So we do see positive growth in the year and Rick, any more comments on that?

Yes. Hey, David, I'd just further comment on a quarterly basis, given the dynamics of 2023, our growth rates have been a little lumpy, if you will, in the international markets. But on an overall basis, as we go forward, we still expect outside the US revenue to be right around 3% roughly of our overall worldwide revenue.

Okay. That's helpful. And then just maybe on the profit piece. I know I appreciate the kind of commentary around second half 2024 being this sustained profit level. When you think about where you are from a penetration standpoint and then some of the investments over the next several years, DTC getting more targeted, is there any reason to think that this sustained level of profit in the second half of 2024 shouldn't be kind of a jumping off point as you go into 2025 and beyond?

Yes. I mean we provide guidance on an annual basis, but we're excited about the leverage that we demonstrated in the fourth quarter and the confidence we have in our revenue number for 2024. We have demonstrated leverage. We're going to lose some of that leverage with our more pronounced seasonality in Q1, but then we'll return to that. And our comment was that we'll be profitable for the second half of 2024 but we're not giving any long-term guidance, but we're continuing to build leverage on an annual basis, as you've seen.

All right. Thanks for taking the questions.

Thank you.

Thank you. And I show our next question comes from the line of Anthony Petrone from Mizuho Group. Please go ahead.

Thanks. Tim and Rick, congrats to the strong start -- strong end to the year and solid guidance that you put out earlier at JPMorgan. Maybe one just on utilization, tackling it a different way. Our math shows that you got to just north of two implants per center per quarter here exiting December. So just wondering, is two a right number now to jump off for the rest of the year? Or will that just remain a little bit lumpy depending how patient flow comes in? And then I'll have one quick follow-up on UnitedHealthcare.

Sure. Thanks for the question. So just over two, just to clarify that, that's two procedures per center per month.

That's correct, yes. Sorry.

Yeah, we just had just over two and just under two a year ago in the fourth quarter. Again, as we continue to add more centers, we're up to 1,180 centers, it gets more difficult to move the needle on utilization, but we've continued to do that on a year-over-year basis. If you look at each quarter, that's one of -- that's our goal for 2024 and beyond. We think there's a lot of room to improve that utilization, but it does -- it's more difficult to move the needle on that. On an annual basis, if you look at our growth, 70% of our growth came from existing centers and 30% of our growth came from new centers. So that kind of signifies a healthy business, and that's consistent with 2022. So if we can maintain that, continue to add new implanting centers, move that utilization. If you look at our top quartile, they're doing well north of two procedures per month. And so we want to move all those buckets up if you will. So that's a real focus for us.

And the follow-up was on United. Positive announcement earlier in the year, Jan 1. They're basically in line with FDA on AHI and BMI thresholds, but they put the Mandibular turn style in there, if you will, maybe to slow it down a bit. But net-net, it looks like a huge positive. So maybe what do we expect from UnitedHealthcare patient flow, and is there anything from other payers that you're hearing out there? Thanks.

Yeah. Thank you very much. We don't think it's going to really affect UnitedHealthcare. They had some regional policies to actually deal with Mandibular devices or oral appliances in the past. We're very careful to educate the centers when the physicians are preparing their notes and the sites prepared their prior authorization documentation, that they include information and there in regards to the patient's qualifications, and if they have the right anatomy or severity to be able to qualify for our oral appliance. So we have a little bit of practice dealing with UnitedHealthcare on this subject. All the patients are prior authorized, so we make sure that we put the necessary information are provided from the centers into the submissions such that when we get the prior authorization approvals, we can just move forward. So we don't see that from any other payers that's kind of a unique UnitedHealthcare. But to your point, it is a significant win for the patients in that the expansion to a high AHI to 100 and the BMI warning to 40, and let's make sure we highlight the pediatric population with Down Syndrome. So, it's in there, we continue to work with UnitedHealthcare and we'll continue to push back on them on that. But we don't see it being really disruptive in the year.

Thank you.

Thank you.

Thank you. And I show our next question comes from the line of Brett Fishman from KeyBanc. Please go ahead.

Hey Tim and Rick, thank you so much for taking the questions. Just like to start off over the past month, we had a competitor announced their objective to launch a competitive Hypoglossal nerve stem device later in 2024. So, I was just hoping for a bit of an update from you guys about how you're thinking about potential future competition in the US market? And then if you think you might have to do anything outside of the normal practices, just to protect that market share in the event that this does actually happen on time?

We watch everybody. We know that the market that we have created and the market that we are developing, both in the US and international is quite attractive. We know it's one of the largest markets available in the medical technology industry. And of course, we're going to give people pursuing different approaches. And while you mentioned one company coming up, there are several others who are in very early stages of development. We're not resting on what we currently have as technology. And we've already mentioned a little bit about Inspire V here on this call. But in past, we've talked about Inspire VI and VII and continuing to grow the indications and be able to treat other groups with obstructive sleep apnea. Not to mention our ability to manage these patients longitudinally through our SleepSync Digital Health system. So, yes, we're very well aware of all the competition out there. We know the challenges with some of the technology out there today. We know some may be putting out some data, and we don't rest on our clinical evidence. In fact, the clinical evidence of our product today is superior to the evidence that we were approved on with the STAR trial. So, we'll continue to take care of our patients and continue to do everything to grow the adoption of Inspire.

All right. Great. Thanks for the color there. And then just for my follow-up. You talked about France a little bit on the call today. And I know part of the 2024 plan is potentially securing reimbursement in that territory. Just curious if you could provide a little bit more detail on how you view the market opportunity and how reimbursement potentially accelerate commercialization into that region? And thanks so much for taking the questions.

All right. Thank you very much, Brett. I think that in France, last year, they announced countrywide reimbursement has been approved in France. And it went to the next step, which was developing the coding criteria for physicians to implement the reimbursement, and that is progressing through the system. It has not yet been formally announced yet. We expect that to happen in the very near future. We do have a country manager that we have hired. We do have a team in France that is preparing for the launch and we hope to be able to report some positive progress with that yet in 2024. So, pretty excited about France is a very significant opportunity for sleep apnea and for the Inspire technology. And with what we've been able to demonstrate in our growth in Germany, we believe that we're going to have a significant ramp in France. And then the other key area to look at ramping again, is going to be in Japan. So very excited about France, and we're going to keep working with the authorities to get the announcement made and for our team to be able to launch that.

Thank you.

One moment for the next question. And I show our next question comes from the line of Mike Kratky from Leerink Partners. Please go ahead.

Hi, everyone. Thanks for taking the question. Regarding the recent policy changes by United, specifically on the new requirement of oral appliance therapy, do you have a sense of what portion of patients getting Inspire therapy today have not already tried and failed oral appliance therapy? And then I have a follow-up.

I think the majority of them. I think that most patients, well most patients, if not all of them have been introduced to or attempted CPAP, but oral appliances haven't been well documented for successful use with severe obstructive sleep apnea. In fact, it is most beneficial with snoring or mild, maybe slightly moderate. So I don't -- I think the majority of our patients have not been introduced to oral appliance and probably based on their anatomy, wouldn't qualify for it anyways or have a desire to start that because of the severity of their obstructive sleep apnea.

Got it. Understood. And then just as a quick follow-up. Are most patients able to get oral appliance therapy without going to the dentist to get custom fitted? Or is that a necessary part of the process?

That's part of the experience is going to your to the dentist because you need to be properly fitted to be able to make sure that if you're going to get an oral appliance, it will have enough forward movement of the lower jaw to be able to create sufficient volume behind the base of the tongue to be able to effectively address obstructive sleep apnea. In some cases with moderate to severe sleep apnea, you may have to move that lower jaw forward as much as 10 millimeters. And you can imagine that's a pretty uncomfortable forward movement therefore, it's pretty limited when you get to the more severe cases.

Got it. Okay. Thanks for taking the questions.

Thanks, Mike.

Thank you. And I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead. Q –Unidentified Analyst : Hi. It's Lei [ph] calling in for Larry. Thanks for taking my question. First, just a clarification on Q4, please. You mentioned there was some catch-up in Q4, the strength because of delays in the Q3 procedures. Are you to quantify how much of that catch-up was? Maybe $5 million, $10 million kind of number. And related to that, you also talked about headwind outside of the U.S. now. Derogation kind of and perhaps a little bit later. So obviously, that had some impact in Q4. Are you able to quantify that number? And I have a follow-up.

Yes. Hi, Lei. Sure. First, we haven't quantified the strength in Q4. We've mentioned before some of the procedures did not get scheduled or completed in Q3, but we haven't quantified it. There's some procedures done in the fourth quarter, and some will carry into first and second quarter of 2024. Regarding the outside the U.S., we had mentioned before that we would -- we could see a $4 million headwind in the fourth quarter. That's about what we saw, roughly in the fourth quarter. Will we see that come through in the first quarter? Probably not. That will be -- that will take a few quarters to clear that. So there won't be a bolus in the first or second quarter. But we'll work through that. As Tim mentioned, most recently, we did get Germany derogation. We had to work through some logistics and on the labeling for that. And so that really started in late January, but we are now shipping there. But again, we won't see that come through in a bolus amount.

Okay. That's super helpful. Thank you. And my follow-up question relates to Inspire V. Can you clarify, are you still planning to file in early 2024, so tapped in Q1? Is that how you think about early 2024? And talk about your confidence level in getting it approved in 2024. Are we still talking Q2, Q3? I think I heard the comment about later 2024. Thank you.

Yeah. Thanks, Lei. I think that we have confidence in our development of the technology and the team is working on the final submissions. We're not putting out the specific data on when that submission is going in as we work with the FDA, but the submission will include both the Inspire V neurostimulator, the patient program or software changes, the physician program or software changes, it's a full system-level submission and we do not only want to have approval in 2024, but we want to do a limited launch in 2024 as well. So our -- we're pretty consistent with the targets that we laid out previously.

Okay. Thank you. So no additional color on the Q3 versus -- sorry, Q2 versus Q3 timing on the approval, whether how the clock is reset?

Yeah, we're going to continue to work with the FDA to drive the review process and FDA has their time to review. So yeah, we'll be careful about putting any more color into that.

Fair enough. Thank you.

Thank you.

Thank you. And I show our next question comes from the line of Jon Block from Stifel. Please go ahead.

Thanks, guys and solid quarter, Rick and Tim. Maybe just two for me. Rick, for 1Q 2024 US revs to be down mid- to high teens Q-over-Q, I need to get 1Q 2024 year-over-year utilization down 2% to 3% year-over-year. And that would be the first down year-over-year utilization since arguably the throes of COVID, and now you've got broader labels, you've got the pediatric opportunity in some of those facilities. I think you said you could even see some 3Q 2023 ongoing flop into 1Q 2024. So can you just explain why we would see sort of that level of a falloff in utilization, the down low single digits, again, to sort of put back to your sequential decline of down mid- to high teens?

Yeah. I mean, you have to look back -- thanks for the question, Jon. You have to look back in the first quarter of 2023, remember, we had a 400 basis point benefit in our growth last year from the delayed orders that when we introduced the siliconeleads in the US last year. So there's some of that at play. But we are excited for 2024 with the guidance that we set forth and we're going to strive to increase utilization. And we talked about a lot of the different areas that we're going to focus on. So that's our plan -- is to achieve that.

Okay. That's helpful. Thank you. And then to shift gears, Tim, just for a small amount of us say, I think I heard you correctly before, where it seems to be like a 50% AHI reduction, you think could be beneficial for the business. And I believe you laid out the reasons why. Just to push you there, like what's not beneficial. In other words, is it a 60% reduction? Is it 65%, 60%, rough numbers, your AHI goes from 50 down to 20? United's cutoff is 20 not 15. Just to take a step back, are there any levels of AHI reduction where you step away and say this might not be a TAM expander at the end of the day. Thanks for your time guys.

In the end, Jon, we don't care about AHI. What we care about is mechanism of action. And what we believe the mechanism that the GLP act upon is reducing the lateral wall collapse. And we know that we stimulate the hypoglossal nerve that moves the base of the tongue forward, that's very difficult for our patients to be able to get that level of reduction in AHI, but we want the patient to lose weight, have relaxation of the lateral wall. So that is not a contributing factor to AHI and a patient with a higher AHI can obviously get a higher percent reduction because they can lose weight, lose neck circumference and have a relaxation of the lateral wall collapse, thereby, presenting as tongue-based collapse, which is the majority of the lower BMI patients. If you're a low BMI, it's very difficult to have a significant AHI reduction. So I think you're going to see a variable reduction in AHI, as you go from low BMI to high BMI. Again, we're more focused on the GLP-1s, helping the patients lose weight, reduce their neck circumference and relieve the lateral wall collapse, thereby, presenting as a tongue-based colapse for which Inspire can treat them.

Thanks for the time guys.

Thanks, Jon.

Thank you. And I show our last question comes from the line of Suraj Kalia from Oppenheimer & Co. Please go ahead.

Gentlemen, can you hear me all right?

Yes, Suraj. How are you?

Tim, congrats on a nice quarter. So Tim -- I guess, the first question for Rick. Rick, you mentioned 70/30 split between same-store new store sales? If you could just refine it a little further, maybe in terms of implants per quarter per site. Should I think about FY 2023 exiting, let's say, round numbers, $6 million, $20 million, give or take, there was a $200 million year-over-year pop. 70% of it comes from same site. Is that the right way to think about it? Or is some other math that you're applying to 70/30 split?

Yeah, Suraj, thanks for the question. What I'm talking about is the percentage of our growth, not of the composition of our revenue, but more of the growth came from 70% from our existing centers and the remaining 30% from new centers.

Okay. Fair enough. And Tim, just more on a pedantic level. The average number of days of CPAP usage that is documented by a potential patient, let's say Suraj comes in, he's either failed or intolerant of CPAP. When you file the documentation, what are the average number of days of failure or intolerance shown for getting a GNS authorization? Thank you for taking my questions.

Thanks, Suraj. Suraj, I think that that's all over the place, that last number. For the most part, the patients who come in to receive Inspire therapy are not tolerant to Inspire -- I'm sorry, are not tolerant to CPAP, therefore, they have zero utilization. And very few come in, if they are using CPAP to the numbers, what is it four nights -- four hours a night for five of seven nights, and if they're compliant to that, it's kind of difficult to get insurance approval because they're compliance to CPAP. So, the majority of our patients, they've been introduced to CPAP. They've tried CPAP. Maybe they've had some benefit with it, but they are not using CPAP, they're not tolerant to it. And so it's really not a big barrier for the physicians to document that those patients are unable to benefit from CPAP and are able to move forward with therapy.

So, thank you very much, Suraj. Just want to make one last note to everybody. I want to thank everybody for joining the call today. As always, I'm grateful to the growing team of dedicated Inspire employees for their enthusiasm, hard work, and continued motivation to achieve successful and consistent patient outcomes. The team's commitment to patients remains unmatched and is the most important element to our success. I wish to thank all of our employees as well as the health care teams for their continued efforts as we remain focused on further expanding our business in the United States, in Europe, and in Asia. For all of you on the call, we appreciate your continued interest and support of Inspire and look forward to providing you with further updates in the months ahead.

This concludes today's conference call. You may now disconnect.